We always emphasize the importance of saving and preparing for the future. After all, you can never be an OFW forever, which is why it is important to strike while the iron is hot and make the most out of your stay abroad, especially when it comes to boosting your savings.
Before you increase your savings and set aside a portion of your salary for investment, you need to start with the most basic: budgeting.
Budgeting is a process of allocating funds on specific expenses. This helps you get the most out of your money because you were able to specify how much goes where. This will help you make the most out of your money and ensure that a portion of your monthly income will also go to savings, which might come in handy in the future.
Sit tight and find out the how, what, and why of budgeting for better savings.
Step 1: Know your numbers.
Before you start budgeting, you need to know how much you are earning. In fact, this is the first thing you need to do before you create a budget plan.
What exactly do we mean by numbers? This should include your net monthly income, expenses, and any existing debts. If you are earning something extra, then make sure you include it too. Be honest to yourself when it comes to numbers then move on to the next step.
Step 2: List and then create your budget plan.
Now that you know where you stand in the money scale, the next thing you should do is to list all of your expenses every month – and make sure you use accurate descriptions for them.
There are two types of expenses:
- Fixed or Non-Negotiable – These are expenses that don’t change every month such as rent, transportation costs (in case you ride the same bus everyday), and amortization.
- Flexible – This type of expense vary every month such as food, utilities, and amount of remittance you send back home.
Income for the month
Be realistic as possible and allocate the portion of your salary for corresponding expense to help you check how much is left. This will be your guide as you go through your day.
You might ask, “how can I make sure that this budget plan will be properly implemented?” Don’t worry. The next step is the answer.
Step 3: Determine your budget strategy.
There are many ways to help you stick to your budget. You can try the following strategies:
- Percentage system – This is where you use percentage as a guide. For instance, you can try 60-20-10-10 wherein you break down your salary according to that allocation.
- Envelope system – The concept is the same with percentage system, but this time, you use envelopes to set aside a portion of your salary for each expense. One envelope is assigned for each expense to make tracking easier.
- Pen and paper – This is the old-school-but-still-effective way of budgeting. To make it easier for you to budget, you can use columnar notebook and list down how much money you have at the start of the month versus the expenses for every month.
- Budgeting tools – If you want flexibility in tracking your budget, you can use budgeting tools like mobile apps or even Microsoft Excel to help you create a budget plan. The good thing about going digital is that it is easier for you to adjust your monthly budget, which leads you to the next step.
Step 4: Keep it flexible.
We understand that you want to stick to your budget as strictly as possible. In fact, that is the whole essence of budgeting because it makes it easier and more possible for you to increase your savings.
Still, leave room for some flexibility; hence the column for flexible expenses. Someone back home will celebrate birthday or you will need to send money because of an emergency, which is why it is important that your budget can accommodate those sudden expenses.
Step 5: Stay on track and keep it updated.
It’s not enough that you create a budget plan. It’s just one part of the entire budgeting process. The key here is how you stick to it by keeping your budget plan updated.
Set aside a certain time of the day, say few minutes before you go to bed, and list down everything you earned and spent. Make sure you include ALL, no matter how small or big the amount is. This way, you can easily track expenses you can forego and there is a lower possibility that you might forget something, which could affect the credibility of your budget plan.
Budgeting can be tedious in the beginning, but the return is worth it. Take time to sit down and assess your budget. This will make it easier for you to determine whether you can accommodate a loan in case you need to get one.