Household budgeting 101; How to manage the family fund

Let’s shift to money matters this time. I realized my posts have been so much about malling and shopping, you might think my financial IQ is way down low and I'm a bad influence. To think Daddy A and I are CPAs, and that our everyday jobs immensely relate to finance, you might say we don’t practice what we preach.

To start off, before we got married, we could say (and even our parents would attest) that we were both financially savvy individuals. I was a heavy saver since I was a kid. I would always save a part of my allowance and I rarely buy anything from toy stores. I just wait for occasions such as birthdays, Christmas or good grades for gifts/rewards. From my alkansya (piggy bank), bank account, and wallet, I well-accounted for those until the last centavo, maybe that's the reason I became an accountant. Daddy A on the other hand is maipon din, and "kuripot" hehe. He won't buy new stuff unless laspag na ung mga dati niya. It helped pa na scholar yan before kaya anlaki ng natitipid niya.

When we got married we merged our financial principles and agreed what to apply with our own family. And here are those financial principles we actually try to live by:

1. Any financial guru has already said this equation time and again: Income – Savings = Expenses
2. Ask yourself before buying, is it a need or a want? Hokey honestly, yung mga ibang nabibili ko lately ay tawag lang ng sale at retail therapy dala ng stress. But I make sure we allot some for savings.
3. Try to be debt free as much as possible. We rarely use our credit cards, only for big transactions and we pay the full amount when the bill comes. Meaning if we can't afford to pay it in a month's time, we won't buy it yet. Exception to the rules are taking out a housing loan or car loan, which to us are basic necessities. We just have to make sure we could afford the monthly amortizations.
4. When helping others such as family or friends, set a manageable amount (that in case they can't pay up, it won't hurt your budget that much)
5. Live within your means. Period.

So how do we manage the household budget? Open a MS Excel worksheet and here's a template you may use:

List down your sources of income and add them up, e.g.:

1. Daddy's monthly net pay (When I say net pay, this is what you see in your payslip, net of taxes and other standard deductions. This basically is your active income)
2. Mommy's monthly net pay (if the wife works as well)
3. Extra racket - average per month (This is your passive income from your sidelines)

List down your savings and investment contributions broken down per month, into 3 categories, e.g.:

1. Long term - Pension/retirement fund/life insurance contributions; stocks/bonds/mutual funds; college fund contributions; downpayment for a house/investment property
2. Medium term - travel/vacation fund; downpayment for a car; puhunan (investment) for a business; new baby (hospital, baby gear, clothes etc.)
3. Short term - Emergency fund (once it exceeds 6 months worth of monthly expenses you could transfer the excess to medium and long term investments); tuition fee; big occasions/celebrations
4. Tithes - Investment niyo 'to sa heaven. Never forget to thank the Lord for all His blessings. It's up to you how much. Basta I learned that whatever you give back to Him, it comes back a tenfold or even a hundredfold.

List down your regular monthly expenses according to the hierarchy of needs:

1. Food - sometimes buying in bulk doesn't save you a lot. Just make sure you buy what your family can actually consume.
2. Medicines/vaccines
3. Rent or housing loan amortization
4. Utilities (electricity, water, communications)
5. Transportation or car loan amortization
6. Clothes
7. Househelp
8. Other daily personal expenses (e.g. lunches, parking)
9. Dates
10. Family day/malling (weekends)
11. Other personal expenses (e.g. salon, massage, personal shopping)

Equals (negative Php) hehe. Joke! This is where the principle of living within your means applies. Try to cut down on some costs at the bottom part of your expense list. A little sacrifice here and there makes a big difference (say instead of weekly, make it every two weeks or once a month). 

For your savings/investment list naman, try to set reasonable amounts of how much you can allot. It doesn't have to be huge immediately, maybe when you get a promotion or salary increase nalang. Pangit din naman yung you'll scrimp and save tapos your kids are getting malnourished or "aircool" (butas-butas) na ung mga damit niyo. I would also advise that you read a lot of financial books from authors that are easy to understand like Bo Sanchez and Francisco Colayco.

It's all about discussing with your family your priorities and just sticking to it. Involve the kids in the discussion as well. And always be honest with them about how much you are actually making.