By Francisco J. ColaycoWe continue our discussion for your Family Budget for 2017. If you have not done so, you have to start now.
If you are not covered by SSS, Philhealth, Pag-ibig and the like, you need to make arrangements to cover yourself. These are very helpful especially for sickness and emergencies. If you are self-employed, make sure you pay yourself a salary and cover yourself properly. If you have children who are working or are self-employed, they should also apply for all these coverages.
We talked about computing your take-home pay after-tax and other deductions which is the easy part.
Now you have to determine your cash outflow or expenses. As we discussed before, you need to involve your family. You have to agree on the amount of your most important regular or recurring expense, your payment to yourself or your savings. Your savings is your expense for the future. Write down all your other monthly expenses that are recurring. For example, loan installment payments, electricity, phones, water, TV cable access, normal credit card charges, food, transportation, grocery, marketing, househelpers pay, and general miscellaneous. You should have been keeping copies of your past bills and receipts to be able to check on the actual amounts paid. If you didn’t, just give yourself a good estimate and keep your bills and receipts from now on.
After you have calculated your regular monthly expenses, you now have to compute the non-recurring expenses during the year that do not happen every month. For example, taxes related to your house and other real estate properties, car insurance, home insurance, and life insurance, Christmas, vacations, birthdays, and an emergency fund. Get a total of these expenses and divide the total by twelve. With this, you will have a good estimate of the monthly amount you should budget for these non-recurring expenses.
Set aside the amount for the non-recurring monthly expenses. Open a separate account for this in a savings account, and you should pay all these expenses from that account. Each month you should deposit the monthly amount for these non-recurring expenses in an interest earning account, no matter how small the interest rate is. In this way, you will keep them segregated and will be better able to determine if you are properly funding for them.
Add both the recurring and non-recurring monthly expenses and subtract the total outflow from the inflow. In this manner, you can really understand how much money is coming in and where it is going. If you are over or under estimating your expenses, you should immediately make the necessary adjustments. If your inflow exceeds your outflow, you have additional cash to increase your personal payment to yourself that we talked about in this article or to add to emergency fund. If you are spending more than you are earning, you are either going to have to increase your regular revenue or decrease your expenses. Borrowing money to accommodate your recurring and non-recurring expenses will only bring you disaster.
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Francisco J. Colayco is an entrepreneur, a venture developer and financial advisor. He is the Author of Seven Bestsellers in the Pera Palaguin Series, the latest of which is now available in bookstores: “Wealth Reached. Money Worked. Pera Mo, Pinalago Mo!” Find his works and catch him on TV and radio. Check out: www.colaycofinancialeducation.com, www.franciscocolayco.com, www.kskcoop.com, FaceBook and Instagram.
