16 Budgeting Tips: How to Budget Your Income and Expenses Effectively – Grit PH (2024)

Last Updated on – Feb 6, 2024 @ 1:10 pm

Back in 2018, NEDA drew the ire of the Filipino public when it stated that a family of 5 members can survive on a budget of 10,000 pesos a month.

And while they tried to clarify that it was simply a hypothetical figure meant to show how a monthly budget of 10,000 pesos will be affected by inflation (which was still at 4.6% back then), a lot of people were offended and took to social media and made the following remarks:

I wonder what NEDA’s recommended budget will be for the upcoming Christmas season?

NEDA issues aside, this article will show you actionable tips to help you budget your money. I hope you find these useful, especially during the upcoming holidays.

What is a Budget?

It’s a spending plan. A “framework” to guide you on how money should be spent on a particular project, item, or time frame.

Your family’s monthly budget, for example, allows you to allocate your cash according to your monthly expenses.

A travel budget, on the other hand, accomplishes the same goal but is meant for funding your trip and how much to spend for each entry in the itinerary.

Why is it important to budget your monthly expenses?

It ensures that all important expenses will be paid for.

Food, housing, medicine, school, are the basics. Then you have Meralco, water, gas, cable, Internet and credit card bills next.

Through budgeting, you make sure all essentials and non-essential expenditures will be covered.

What is Discretionary and Non-Discretionary spending?

Let’s keep things simple:

Non-Discretionary spending refers to paying for essentials like food, housing, medicine, and educational expenses. In short, absolute must-haves.

Discretionary spending refers to paying for stuff that we can technically live without but still consider important. Gadgets, travel, dining out, watching movies, trips to the mall, are some examples.

Budget Tracker Spreadsheet Samples and Templates

Don’t let the title intimidate you. A budget worksheet is merely a record of your monthly income and expenses. It can be as simple as a 3-column table. However, as basic as it may seem, using it has plenty of benefits.

Here’s a sample worksheet from Randell Tiongson’s book –No Nonsense Personal Finance:

It will give you an idea of how much you’re really spending on a recurring basis. Help you plan your expenditures, making sure you’re not short on money and go into debt.

Think of it as a tool for helping you cover your monthly expenses and financial goals.

We’ve collated a list of some of the best and most effective budget tracker spreadsheets and templates from the Web to give you more options to try out. Feel free to try each one out to see which one best matches your budgeting style.

Tiller Free Monthly Budget Template

This free budget spreadsheet from Tiller comes with a monthly and yearly “budget view” for a quick insight on your cash flow. Easily input your transactions, categories, and balances.

Smartsheet Top Excel Budgets

Their free and downloadable spreadsheets range from simple budget trackers up to business and construction expense templates.`

Vertex42 Personal Budget Spreadsheet

This free to use budget tracker from Vertex42 is perfect for those who want a simple and straightforward budget spreadsheet. It gives you a full annual view of your cash flow in each category and automatically calculates the rolling average.

MoneyUnder30 Free Monthly Budget Spreadsheet

With this free budget template, you can input both your earnings and expenses in their corresponding categories and it will automatically calculate how much you’ll have left at the end of each month.

It will also let you know through data if you are getting close to your ideal income allocation.

Google Sheets Free Budget Templates

Google has included a monthly and annual budget template in Google Docs’ Template Gallery. The monthly version is your best bet if you want a no-frills budget spreadsheet for your daily transactions.

Go for the annual version if you want better tracking for savings and income and ability to input more details related to your cash flow.

16 Budgeting Tips for Filipinos

Here are 16 practical tips for budgeting your money.

1. Cultivate the right mindset

I’ve mentioned above that it’s not the method that counts, it’s the habit.

Before you can turn budgeting into a habit though, you have to employ the right mindset so you won’t end up losing momentum in the long run.

And it’s not as complicated as you think. The right mindset on this case simply means looking at budgeting as a tool to manage your money and not as a task that feels like a burden.

A simple switch in this outlook will enable you to sustain the activity and turn it into a habit.

2. Pay Yourself First

It is said that some of the most powerful individuals today owe their success to one change they made in their lives: They chose to pay themselves first.

It means keeping a portion of your earnings for yourself before you start budgeting the money. No matter how little your income might be, you should try to save at least 10% for yourself.

What will you do with the 10%? You can save it up for an emergency fund, use it for buying books and courses to improve and learn new skills, use it for building assets via investments like stocks, mutual funds, UITF, or funding your online business.

In the book, “The Richest Man in Babylon”, paying yourself first is crucial if you want to build wealth. You can’t simply start accumulating assets if all of it goes into paying bills and debt.

“But I can’t save, I don’t even have enough to begin with!”, you might say.

Try it first. You’ll be surprised when you realize that you still have enough even after keeping some for yourself. How could this happen?

Here’s the answer: This act forces you to be disciplined in spending your money.

Here’s a scenario. Say you want to open a mutual fund account. It costs 5,000 minimum.

You get 10,000 pesos each paycheck (bi-monthly). You decide to keep 500 each time and then budget the remaining 9,500.

Will you really miss the Php 500 every 15 days?

Unless you’re really cash-strapped, I don’t think you would. Often, this Php 500 will simply get spent without you knowing where it went.

Why does this happen? Simple. Because the Php 500 is “there”. It’s available for you to spend.

So you end up buying that powerbank in Lazada, “because it’s on flash sale”. Or eating out during the weekend because you scored a voucher.

While these are valid ways to spend your money (it’s yours after all), the point is, we usually spend the money we have simply because we can. And this can work against us if we’re trying to stick to a budget.

A great principle to follow in managing your money:

• Step 1: Save
• Step 2: Invest
• Step 3: Spend

3. Create a Budget Worksheet

One of the easiest ways to get you started on budgeting is to create a budget worksheet. Using the examples we showed earlier, start by listing down your monthly income and expenses.

The goal is to determine which items cost you money and exactly how much.

After running it for a month or two, you’ll get a good idea on how much things actually cost and be able to budget accordingly.

Here’s a quick sample from one of our editors (supporting a family of four):

4. Break down expenses into Discretionary and Non-discretionary

The first thing you need to do in the worksheet is to separate Discretionary and Non-discretionary expenses.

The goal is to identify which Discretionary expenses are causing some of your budgeting leaks.

It will vary from one person to another, but usually, it’s here where you can make the adjustment and save more money.

5. Be Realistic

Remember, budgeting does not need to be a ruthless cost-cutting activity. Forget those episodes of “Extreme Cheapskates”.

It’s not like that at all. Being smart about your money is different from being a cheapskate.

So shed all those negative beliefs about budgeting and think of it as a tool that helps you save money, not a dogma that determines how you should spend it.

When you budget, try to provide some buffer for the actual cost. More importantly, try to be accurate and honest about the items you list down on your budget.

The more transparent you are in using it, the more value you can get out of it.

6. Try the 50/20/30 Plan

This is a formula for allocating your income. The rule states that 50% of your income goes to the essentials or non-discretionary stuff like food, housing, education, etc.

The 30% goes to wants or discretionary expenses.

The last 20% goes to savings. Simple yet effective.

What’s great about it is that it takes discretionary expenses into consideration, which means you still get to spend items on stuff that you enjoy.

7. Track your spending

“What gets measured, gets managed”, says one popular productivity quote. Just like measuring something, tracking is the first step to laying down the details of your monthly expenses.

Try this: Whenever you’re shopping for grocery items, list down the price of each item before putting it on your cart.

Use your phone’s notepad app (or a dedicated program) to do this. Or you can go old school and write them down using pen and paper.

By doing this, you are able to get the necessary data for your budgeting.

This enables you to make near-accurate estimates. Also, it lets you be more conscious and mindful of your expenses.

You’ll realize that those daily lattes from Starbucks, for example, is costing you thousands of pesos a month.

Not that it’s a bad thing, but it goes to show you how effective tracking can be if your goal is to be more conscious of your spending.

8. Use apps and tools

There are plenty of apps and programs out there that help make budgeting easy. Mint, YNAB, PocketGuard, are some of the most popular ones. Choose one that suits you and fits your needs.

It’s not about being the most feature-packed. It’s about choosing the one that matches your style.

And of course, worksheets like the ones we provided above works as well.

Also Read:

9. Make discretionary spending hard

In his book, Atomic Habits, James Clear shares that the key to breaking bad habits is “increasing the friction” between you and the action that you want to break.

For example, if you want to make sure you sleep by 10PM, install a cheap power trigger (I forgot what’s it’s called) that automatically cuts off the power to your router, shutting off the internet (no more Netflix and social media).

Sure, you can get up and turn it on again. If you’re not feeling lazy that is.

The point is that you’ve made it more difficult to continue using the internet.

That barrier you created (the need to stand up and turn the router on again) helps you fulfill your goal of going to sleep by 10 PM.

When it comes to discretionary spending, I give myself the “1-month rule”.

If it’s a big purchase (e.g laptop, new phone, etc.,) I let the idea sit for a month. If 1-month passes and I still want it, I go ahead and buy it.

My reasoning behind it is simple. I want to prevent any “spur of the moment” purchases. If it’s not expensive, perhaps a day or two of waiting will suffice.

Sometimes we think we need something really bad, only to realize a few days later that it was probably just a surge of dopamine in your brain (“That new iPhone looks so sexy! I want it!”).

I know some people who open bank accounts but forego the ATM card option.

They say it makes spending their savings harder since they have to physically visit the bank if they want to make a withdrawal.

10. Make the process of saving easy

I can attest to the effectivity of this one. Saving money became much easier after employing the use of certain strategies envelope method, apps, and online services.

Before, I had to go and physically deposit cash at the bank. Most days I’m either too busy or sometimes just plain lazy.

I end up not depositing the money and which leads to it being spent for discretionary expense since it just sits there at home, available (goes back to our “Pay yourself first” explanation).

Think of ways to increase the likelihood of sticking to your budgeting routine. The next tip, for example, is one that I recommend.

Read Next: How to Save More Money [Ultimate Guide]

11. Use cashless payment methods

These online payment systems take convenience to new levels.

Why waste 30 minutes standing in line just to pay your credit card bill when you can do it at the comfort of your own home within seconds?

Saves you time, money, and effort. It also makes saving and taking care of payables easy, which helps in turning it into a habit.

12. Create an Emergency Fund

Part of a good budgeting plan should involve some sort of emergency fund. It will act as a safety net should the unfortunate financial issue arise.

For example, if the breadwinner loses his or her job or there are some unexpected medical expenses, an emergency fund will give you that cushion to minimize the impact on your family.

The 50-30-20 rule will be effective in this case since 20 percent will be allocated to savings.

Perhaps you can save a portion of that for building an emergency fund.

Or better yet, take out the 10 percent from your discretionary spending budget at least until you build up a decent emergency fund.

13. Improve your Cashflow (Get a side hustle)

I know–it’s not exactly a budgeting tip. But I think this one deserves a spot in our list because income-generation is a huge part of budgeting.

Think about it–if you and your family don’t have sufficient income on a monthly basis, no amount of budgeting will help. It will always fall short. No worksheet or app will improve the situation.

It may sound too much of a hassle, but this works surprisingly well for a lot of people.

In fact, I did it years ago.

articles for 2-3 hours during weekends for a few extra thousand pesos not only helped me financially, but it also helped develop my writing skills which allowed me to turn it into a full-time, work-from-home job.

There are plenty of opportunities out there, especially online. Check out our “Best Sidelines” and “20 High-Paying Remote Jobs” articles for some tips.

14. Less but better

There’s this video I saw on Facebook (you’ve probably seen it too) entitled “Why I Don’t Buy Things”.

It’s an extreme example of a decision-making process when buying stuff. And while the guy’s “Mountain Test” philosophy is clearly not for anyone, it’s the logic behind it that makes it worth considering.

The lesson is, let’s try to be more mindful of the things we purchase.

On the video he explains, “There’s a lot of things that we don’t need to have whether living on top of a mountain or inside a house or really anywhere in our lives. The fewer objects we have in our lives, the closer we will be to reaching the peak of freedom.”

Reminds of me of that Fight Club quote, “The things you own end up owning you”. I guess that’s the “Freedom” that the guy in the video is talking about. Should we sell all our stuff and live like a monk?

Nope.

But we should definitely try to be more mindful of our purchases.

As best-selling minimalism author Marie Kondo recommends, ask yourself if the item will “spark joy” in your heart. In more practical terms, I’d just ask myself, “Do I really need this now?”.

Important: One of the keys to getting rich is living a simple life (live below your means).

15. Review your budget and revisit goals

On a regular basis (monthly, quarterly, annual), review your worksheet.

A periodic review will help assess if your budget remains effective in your current situation. We know that our circ*mstances change and our needs will vary at different periods in our lives.

Through constant re-evaluation, we can iron out any kinks brought about by changes and apply a fix to make sure everything is accounted for.

I hope you find these 16 budgeting tips useful.

The key takeaway from all of this? Let’s all try to be better at handling our finances. There’s no better time than now to be financially responsible.

With all these news of inflation and rising prices for basic commodities, we should look for ways to make our daily living more bearable.

16. Consolidate bills payment due date

Missing bill due dates is a big hassle because it can make way for huge penalties and interests. Consolidating bills is a great solution for people who are overwhelmed with keeping track of numerous dates.

Thankfully, there are tons of bill assist options you can enroll in so you only have to worry about one due date.

For instance, when you enroll in Security Bank’s Bills Assist, you can automatically consolidate payments like:

• Globe
• PLDT
• Meralco
• Sun Cellular
• Cablelink
• SkyCare
• Innove
• Maynilad

Paying your bills through Security Bank’s Bills Assist will also enable you to gain rewards points, except for PLDT and Meralco transactions, and bills paid with the complete cashback card.

You can check out the full list of Bill Payment Merchants that you can pay through Bills Assist here. To enroll, simply fill out their online form.

Related: Big Money Mistakes Filipinos Make and How to Avoid them

10 Best Budgeting Methods

1. The Traditional Budget

The old school way of managing your expenses. Simply grab a pen and paper and start listing down your income and expenses.

Entries for food, gas, education, and the like should be detailed so you can get a clearer picture of your budget.

For example, for the “Food” category you can break it down further into, “Groceries, dine-out, take-out, etc., while “Education” can be further classified into “Tuition, baon, books, etc..”

You can use a spreadsheet too so you can carry it with you (a copy on your phone) at all times and ready to be updated.

2. The 50/30/20 Budget

We’ve already covered this earlier, but we’re including it here again because it’s one of the most popular budgeting strategies out there. Using this technique, you divide your income like this:

• Needs = 50% (Food, shelter, Utilities, Insurance, Education, etc.)
• Wants = 30% (Shopping, Hobbies, Dine-out, travel, etc.)
• Savings = 20% (Long term and short term, investments, etc.)

It’s pretty easy to follow and doesn’t demand too much micro-management.

Related: 40+ Travel Saving Tips

3. The Pay Yourself First Budget

When you get your salary, save a portion right away (10-20%) before you start budgeting it.

This way, you can always make sure you’re building up your savings, no matter what purpose you decide to use it for.

Note that anything you’ll skim off your salary is excluded from the budgeting, which means this 10-20% amount can’t be categorized as “savings.”

This method emphasizes the use of discipline to ensure you’re building assets and don’t end up with zero savings at the end of each month.

It can be difficult at first, but once you get the hang of it and realize its importance, you’ll appreciate the value it provides.

4. The Divide & Conquer Budget

Who says you should only have 1-2 savings accounts? Why not open several accounts each one for building up funds for a specific goal?

Say you want to make home improvements next year and you estimate you’ll need Php50,000 for everything.

Instead of putting all your savings into one bank, you should consider opening another one where you can deposit your home repair savings.

And if you also want to upgrade to a bigger car in the next few years, you can open dedicated savings account for it too.

Why bother doing this?

Not only will it make saving more organized, but it also makes the act of saving more goal-oriented.

Think about it: when you can easily see how much you still need to save to meet a specific goal, you’ll be more inclined to keep adding funds to it, as if your brain is wired to complete the goal ASAP.

It’s worth noting that some banks may offer “sub-account” types of accounts that mimic having multiple accounts.

If your bank has it, then that makes this whole strategy easier as you won’t have to open multiple accounts with other banks.

5. Digital Budgeting

Not exactly another strategy for budgeting, but simply to highlight the fact that there are plenty of apps and programs right now that offer comprehensive tools for budgeting your money.

YNAB and Mint are some of the more popular ones, but a quick search at the Google Playstore or Apple Store for budget apps will yield hundreds of choices. Just choose your own poison.

Related: 10 Best Online Banking Services in the Philippines

6. The Envelope System

I personally tried this a couple of years ago at the suggestion of a colleague. I liked the manual approach of stuffing cash into specific envelopes marked according to their use.

For example, one envelope will be marked, “Rent,” another will be for “Gas,” one will be for “Groceries,” and so on.

After withdrawing your salary, you start budgeting it by stuffing them into their respective envelopes. Voila — a quick and easy way of managing your money.

7. Snowball Budget

This method of budgeting focuses on clearing away debt. “Snowball” in this context means building up momentum by starting with your smaller debts then moving on to the bigger ones.

That feeling of “Success!” as you pay off one debt after another will give you the momentum to tackle everything until you are debt-free.

For this budgeting technique, you should start by listing all your debts from smallest to biggest.

The idea is to put in as many payments as you can on the smallest debts (to clear them off the list ASAP) then continue paying the minimum on the biggest ones. So let’s say I have 3 outstanding payables:

• Home credit loan: 5,000
• Credit Card: 10,000
• Personal loan (at work): 20,000

Say your budget allows you to spend 5,000 per month for paying debt. With the Snowball Method, you should allocate 2,000 to your Home Credit loan and then spend the rest paying minimums for the other larger loans.

This will allow you to finish off one of your loans faster and give you a sense of accomplishment and (hopefully) give you enough motivation and momentum to do the same for the rest.

8. Aggressive Savings

Sometimes the simplest approach works best. Instead of coming up with complex tracking systems and budgeting techniques, your focus will be on saving as much as you can.

This budgeting method consists of only one thing: savings goals. To use this technique, instead of setting up categories to analyze spending, create aggressive savings goals.

As long as you contribute to the goals you’ve set, the rest is a gray area. This type of budgeting is only focused on one thing, which is hitting savings targets.

9. The 60% Budget

Are you the type of person who doesn’t really like spending too much time and effort budgeting but still want control over your monthly finances? Then the 60% budgeting method might be for you.

Think of it as a simpler 50-20-30 budget method. Because instead of breaking down your money in 3 chunks, you’ll be doing it in just two using this approach.

The 60% portion of your income will go to your non-discretionary expenses like food, housing, bills, insurance, etc., The remaining 40% will go to various types of savings.

To give you an idea of how the 40% looks like, here’s a breakdown:

• Short term (Emergency funds, travel funds, etc.,)
• Long term savings (e.g Retirement funds): 10%
• Investments (stocks, mutual funds, etc.,): 10%
• Discretionary expenses: (Recreational activities, dining out, etc.,): 10%

But what if my non-discretionary expenses are worth more than 60% of my income?

Then simply adjust it to accommodate all your essential payables. What were trying to highlight here is the fact that you’re essentially making sure your long term and short term savings goals are met while still having enough to cover all your regular expenses.

If you think about it, it works similarly with our Pay Yourself First method but with a slightly more aggressive approach towards savings.

10. The Zero-Sum Budget

If you want complete control over your spending (each peso is accounted for), then this might just be the perfect budgeting strategy for you.

You’re basically budgeting your income to the last peso, resulting in a net-zero total every month.

So if you earn 10k per month, the entries in your budget should “eat up” everything down to the last centavo. This will ensure you have nothing left over for each month.

Does this mean you’ll have no savings? No! Part of your budget should have an entry for that, for both long and short term savings goals.

This is exactly what it sounds like. At the end of the month, your budget should equal zero.

That means that if you have $300 left at the end of the month, you need to give that $300 a job. Every dollar needs to be accounted for.

This budgeting method is good for those who often have money left at the end of the month, but end up thinking of it as the money they’re free to spend.

While this might seem like the opposite of the pay yourself first method, it can be used similarly if you budget based on last month’s income.

It forces you to plan ahead and think strategically about how you want to spend your money.