In a previous post, I discussed the basic budget strategy I used when I started working and earning money.
It is a good starting point, but maybe you can try my budgeting method if you want to be more specific.
From the basic 50-30-10-10 Budgeting Method, I switched to a category-based budgeting system.
I focused less on the percentages. Instead, I prioritized, compromised, and rebalanced my budget priorities and split them into categories.
These budget categories reflect my current needs, wants, and responsibilities.
Why do you need to be more specific?
Since our personal goals and responsibilities will differ, it is critical to prioritize your needs first.
Once they are taken care of, then you can proceed to the second-tier liabilities, and lastly, the wants. (Hopefully, you follow that order.)
Also, I don’t have any debt (and avoid debt like the plague), so I can fully allocate my entry-level teacher salary to these categories.
My income is low. I will just make a budget if I have a higher salary.
It is vital to establish the habit of budgeting, not because your salary is low, but especially since it is low.
If you learn how to allocate your funds when you have a lower salary, you will not be a victim of lifestyle inflation when it gets higher.
Disclaimer: This post is primarily written for single young professionals. I don’t want to sound like I’m invalidating other people’s financial struggles.
Here are the 13 categories in my budget:
1. Tithes and Charity Fund
As a Christian, I practice tithing or giving at least 10% of whatever I receive to God.
I acknowledge that everything I receive is a blessing from Him and should be the first thing that I allocate in my budget.
It also wouldn’t hurt to allot a certain amount to give to charity.
Adulting is fun – said no one ever. Utilities are one category that takes a big slice of our monthly paycheck.
Utilities include rent or mortgage, electricity, water, Internet, car and gas, and other recurring bills.
I also include my subscriptions like Spotify, Netflix, and Office 365 in the Utility category.
3. Grocery Fund
I don’t mix my grocery fund with utilities so I can have a clearer view of my expenses.
Having a separate grocery fund gives me more control over what I need to buy, where I can cut back, and where I can save.
Living with my senior citizen parents also helps, since we get a weekly grocery discount.
4. Emergency Fund
I’ve already written a more comprehensive take about an emergency fund.
My target Emergency Fund is 6x my monthly expenses, but I will just re-allocate and rebalance my budget once it is filled.
5. Responsibility Fund
For many young Filipino adults, we have different family responsibilities that may take a big chunk of our budget.
So it is critical to talk it out with the people involved so you’ll have a clearer picture of your family’s financial situation.
Include this in your recurring expenses to see if there is more wiggle room in your budget.
6. Personal/Professional Growth Fund
It is also important to allocate a personal and professional development fund.
I use this fund to buy books, attend paid seminars, pay my tuition fees, and other related activities.
7. Guilt-Free Spending Fund
Budgeting should be fun. So, allocating a guilt-free spending fund helps you to avoid feeling deprived.
You may use this to buy clothes and shoes, shop online, or eat out.
Just be careful in allocating the right amount to avoid splurging.
My rule of thumb is the amount should not be more than my monthly allowance.
So, if I need to buy a more expensive item, I will need to wait longer.
8. Monthly Allowance
The monthly allowance is used to pay my day-to-day expenses, like fares and food.
I only allot a small portion of my salary to my monthly allowance since I usually ride my bike to work and eat at home.
9. Special Occasions
Christmas, birthdays, and anniversaries have fixed dates, so it is never a surprise.
So, I advise you to save a fixed amount every month to pool in time for special occasions.
By doing this, you can allocate your Christmas Bonus and 13th Month Pay to other expenses.
Just make sure that it is in another container to avoid mix-ups.
10. Travel Fund
It is also wise to save a fixed amount every month for travel expenses because it benefits personal development.
Depending on where you want to go, you may need to re-adjust your other budget categories or find other means of income.
11. Investment Fund
It is advantageous to begin investing when you’re younger, even if you have a small income.
There are investment funds that let you start for as low as P1,000.
You may also read this as a reference before investing.
12. Insurance Fund
Insurance is vital for everyone, and it is cheaper when we are younger.
I allot a portion of my salary in paying for my monthly premium, which I consider an essential investment.
13. Pet Fund
Lastly, our pets need food and other necessities. I’m sure there are pet owners who are willing to sacrifice their monthly allowance for their pets.
So for pet owners, making a separate pet fund will help your budget.
If you still have debt, I strongly advise that you replace the investment fund with a debt-payment fund.
You may also reduce your travel fund, special occasions fund, guilt-free spending fund, and personal/professional growth fund.
Paying-off any existing debt should be the priority since paying it faster will open up other opportunities for your budget.
One important reminder when budgeting is to make it liquid or can be adjusted accordingly.
You may use an Excel or Google Sheet to make a budget ledger.
It is also crucial that you respect your budget. Budgeting takes a lot of discipline and practice.
Eventually, it will be second-nature to you.