Question: Hi, in a few months I will be getting married. One of my major concerns is budgeting. I am used to a happy-go-lucky lifestyle. I know, when I am married I need to change. How can I really get started in properly budgeting our finances, knowing it would now be for the two of us? Second, what is the right mindset I need for following the defined rules and staying on course? Question through our FB page from Lenram Tapa.
Budgeting is not easy but truly it is fun when you dedicate your effort to it, and a self-fulfilling task when you do it for others like your wife and kids.
If you don’t have the right mindset everything will not fall into rightful place. To have the right mindset, let us consider an important observation of Aristotle that he concluded: That all human beings are teleological organism, which means we are all purposeful. We are only happy when we are doing something that is moving us towards something that we want. In short, goals!
Our minds must focus on what we would want to happen to our lives. Try to see your family’s future 5, 10, or even 20 years from now. What do you want to be by that time? Ask yourself, what is the one thing that you value most for you family? When you have the answer to the question, you will be able to determine your goal and make sure it is congruent with your values. When you set your goal, you can determine where you set your mind. Maintaining your mindset would just follow once you know what you really want. It will be stimulated with your desire in achieving it.
Now, budgeting. First examine where you and your wife are right now, financially. You can make your cash flow. Start daily, then weekly, monthly, and compute the average. In this way you would know how much both of you are earning and how much exactly is the outflow. Segregate your outflow into two; your fixed expenses like your rentals, electricity bills, food and so forth, and your discretionary expenses like watching movies, dining out, etc.
Next, check your net worth. This is your total asset minus your total liabilities. Knowing all these would help you realize where you are right now. You can now decide the pace, as you already know where you want to go. It is your road map.
When budgeting, segregate your expenses properly. Since you have done your cash flow, you already know how much your weekly and monthly expenses are. In this way, you can now set aside your fixed and discretionary expenses.
Live within your means. Live below your income for you to be able to save and invest for your future goals that you have set. As a guide, it is advisable to follow the 70:30 rule. That is, limit the total expenses to 70 percent of your income and invest the remaining 30 percent.
Another way is to follow the envelope concept in budgeting. This has helped many people already. Make a list of your priorities and write each of them on separate envelopes. So each envelope has its own purpose.
Example of the name of envelopes: financial peace fund, emergency fund, investment fund, education for your kid fund, and any fund that you can name. You can make as many envelopes as you can as long each one represents your goal.
Serge Barcenas Bargayo is a Registered Financial Planner of RFP Philippines from Cebu City. To learn more about personal financial planning, attend the third batch of RFP Cebu Program on Sept 28-Oct 1, 2016.To inquire, e-mail firstname.lastname@example.org or text <name><e-mail><RFP>at 0917-9689774.