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So, we already know how much our target is. The next step is to know how to get it.

Sabi nga nila, The journey of a thousand miles begins with a single step.

In financial planning, that first step is called Budgeting. And one of the basics of budgeting is income allocation.

She shared with us an Ideal Income Allocation table to show us the best way to use our income. Una, maiisip mo parang mahirap siyang gawin. I mean, 40% lang yung needs? Eh paano kung need ko ng milk tea?

My friend assured us na it might look intimidating and impossible to do, pero kaya siya. And nag-explain na siya how to better understand the table.

Needs are for those na you need to survive. Yung kailangan bayaran monthly or else! Examples niya are Meralco bills, Water utility bills, Rent/Mortgage, internet, loans. There are also Needs na hindi naman monthly binabayaran like tuition fees. For those expenses, it is best to get the annual amount and divide it by 12 to know how much to set aside for it.

She also explained that ordering out or having food delivered is not considered a need kahit weekly or monthly naming ginagawa.

What made us happy is that she informed us that we don’t need to deprive ourselves just because we’ve started to save and invest.

She then pointed to the Wants part. So that we’ll feel happy about saving and investing, we should also allocate part of our budget for our wants. It can be dining out, online shopping, milk tea, coffee. It doesn’t matter! You have the budget for it!

Savings and Investment was also placed in the budget. It also helped that she defined for us what savings and investments are. Marami kasi tayong Pinoy na medyo nalilito when it comes sa definition ng investment. All along, I thought yung house naming was our biggest investment for our kids. Until she informed us na unless it will generate income like for rent, buying a house is an expense and not an investment.

And of course, last but not the least, is for Giving/Tithes. We are happy that we are blessed by God, so we also have to be a blessing to others. The best way to show that is to allocate a part of our budget to give back to him.

The best part of this is she guided us every step of the way. It wasn’t a simple overview. She helped us discuss every aspect of our finances para malaman namin kung saan siya dapat sa income allocation and what we need to adjust in our budget.

Having a hard time saving? Need help budgeting? Want a personalized budgeting plan? Talk to my financial consultant, Viv.