It was swimming around my head like a mantra last week: follow your budget, follow your budget! As I tested this very common financial tip for Money Myth Busters, I came too close to becoming unglued. I couldn’t make it work.
It felt like my gym membership. I bought gym shoes, gym clothes, an MP3 player so I could focus on something else aside from my complaining muscles while on the treadmill. I will lose 10 pounds before you know it, I chortled to my husband. Before I knew it, my excitement lost steam.
I already tried this last year. Somewhere in the maze of zeroes and ones in my computer is an excel file that recorded my budget and actual spending for February, March, then half of April. Started again in August, halfheartedly did it in September and threw up my hands in despair in October.
I told myself that just because it’s hard to do doesn’t mean I shouldn’t do it. Every expert says budgeting is the most important part of personal finance. It is the foundation. It is the mother lode of all personal finance gold mines. Has anybody ever been financially successful even if they didn’t use a budget? I wonder if Bill Gates and Warren Buffet use a budget? Henry Sy and the Ayala brothers?
For me, this tip is so busted. Just the word “budgeting” sounds so painful. Plus, even if you make a foolproof budget, what use will it be if you don’t track your spending? I can just imagine myself after I check out of the grocery. “Did I pay P35 for that loaf of bread or P35.50? Or was it P35.75?” Gives me an ache at the back of my neck. And some people even use sophisticated software for budgeting!
Would it really matter where I put every centavo if I make sure that for every P100 peso I earn, I give P10 for tithing, then save and invest P25? As long as I pay all my bills and househelp’s salaries, settle all credit cards in full every month and have a little bit of fun money set aside for the kids, maybe I can give that excel file some rest? Then if I have extra, I may add that to my mutual fund. That has got to save me the aggravation of tracking every peso and centavo that I spend, which really sucks out the joy in doing things. “Hey everyone, let’s watch a movie this weekend! Ooops that will cost P1,000.”
Having said that let me stress that this tip is not totally busted. If you keep wondering at the end of the month where your money went but have a hazy recollection that you went to the spa, bought an expensive gift for a friend who’s migrating and that’s all, you seriously need to keep track of your spending pattern.
If you are trying to trim some fat in your finances so that you can save more, or you honestly have no idea where you are financially and want to start being responsible for your financial future – taking a look at your expenses is crucial.
However, I still believe that you don’t really have to track down every peso. Round it up if it makes it easier to stick to your routine. That way, you’ll even get a nice surprise at the end of the month finding more money than you thought you had.
Keep it simple and more importantly — fast! If things don’t add up or go as you planned, don’t feel guilty! It’s your money. You decide what to do with it. If you want, call it a spending plan rather than a budget. Yeah, its the same but its sounds better, doesn’t it?
Ok, I’m expecting some virtual crucifixion from the personal finance experts now. Let the comments begin (dodging). 
August 9th, 2007 at 9:28 am
hi emmerdale, when money disappear without a trace, look in your closet or at the weighing scale hehe. Its better if you install the software in your mobile phone or blackberry instead of the computer. Some experts recommend a “jot it down while you shop” strategy. Let us know how it goes!
August 7th, 2007 at 2:49 pm
this budgeting stuff is really close to my heart. i used to try taking down every expense i made, to the last extra peso i spent on the jeepney fare. i soon realized it was taxing and dropped it. now, i also do the excel spreadsheets of my cash flows, divided by paydays. the expenses i keep track of are my card charges, which accumulate at the end of the billing cycle, and my atm withdrawals for daily expenses. but maybe i will try that software rico recommended.
i still occassionally list down all expenses when i see danger signs, like when i blew 2,500 bucks last week without a trace. hehehe.
July 6th, 2007 at 5:28 am
Aarya…
I realy enjoyed reading your blog, i needed some info on this subject for my new study economimy in the USA and your post helped me out a lot thank you for that …
June 11th, 2007 at 10:58 am
[...] for me. I’m not a fan of painful budgets for the Duplito household. I wrote all about that in an earlier post. But I do know life will be miserable if I blow money monthly on each little whim. I need to find [...]
April 4th, 2007 at 5:46 am
Hi, can you guys tell me how the software you mentioned helps in your budgeting? Right now, what i do is just keep track of my expenses. I write a jornal of all of my daily expenses and just input it to excel at the end of each month. i find it hard to update the excel file everyday. do you guys think what i’m doing is enough?
March 29th, 2007 at 2:17 pm
Thanks for the tip Rico. By the way for those who want to track their expenses using a Nokia smartphone (ex. 6630, N70), i got XS Finance software, you might wanna try them..
March 29th, 2007 at 12:23 pm
Does MS Money have a PDA version? I’m still stuck with Pocket Excel with regards to my budgeting.
March 29th, 2007 at 5:43 am
I just wanted to recommend a free alternative to MS Money, Money Manager Ex. I have been using it for a year now and have been financially healthy ever since. I can really say that budgeting and keeping track of your expenses helps a lot in achieving financial success. I have grown my net worth to 6 figures and is looking at 7 figures at the end of the year with this software and a bit of self discipline.
You can download the software from the authors’ website http://www.thezeal.com. It’s really easy to use but if you need help in using the software I’d be happy to help out.
March 28th, 2007 at 10:50 pm
Hi Salve, it’s really not time consuming especially if you have defined your expenses already just plug-in the amount (estimate for future) particularly those with fixed monthly payments (e.g. insurance premium, kid’s allowance, rent, etc).
I just keep a general record of my everyday expenses. Everyday tracking doesn’t work for me so what I did is I established my weekly/monthly personal spending and just stay within that budget
March 28th, 2007 at 9:23 pm
Salve, I assure I am not that OC (you should see my work desk), but when it comes to personal finance, let us say I am a different person when it comes to MS Money. I just have to discipline myself every day to input my expenses at the end of the day so as not lose track. I do track the expenses up to the peso (if I am OC, it should be up to the centavo but I don’t want to kill myself). I recommend you try it for the next 21 days straight using MS Money. You just might like it hehehehe….
March 28th, 2007 at 5:20 pm
hi rico, i searched for your first comment but didn’t see it. perhaps you could post it again? im sorry for the inconvenience.
March 28th, 2007 at 5:19 pm
nina, that should be another good motivation for me to make a spending plan. gotta do it, gotta do it! aaaarg.
March 28th, 2007 at 5:18 pm
hi anna, great work on your spending plan hehe. isama ako dyan para sa pasalubong hahaha. kahit isang candy lang
March 28th, 2007 at 5:16 pm
jasprene and richardson, idol ko kayo. :), but i still have to get over that feeling that it’s not worth my time. siguro if i’m OC enough, i will have a bit more money at the end of the year to buy me a little treat, sigh.
March 28th, 2007 at 12:39 pm
How come I can’t see my comment? Was it rejected?
March 28th, 2007 at 3:51 am
An excel spreadsheet works fine for my monthly budget. Actually, I do a yearly budget
- it allows me to see clearly which months I’ll have extra expenses (i.e. christmas or birthday of someone special).
March 27th, 2007 at 10:32 pm
hey Ambe !
Congratulations on your new blog ! I try to log in as often as i could. Your entries are so informative yet entertaining to read.
I like this particular entry, I have been doing my “spending plan” ( yeah… sounds better ) on and off for two years now.. i hope this year i will be more successful. =)
Congrats uli ! So proud of you…
Anna
March 27th, 2007 at 10:08 pm
One habit espoused in F Colayco’s book is regularly making regular savings / investments in a good mutual fund / UITF. Here’s an illustration on how a yuppie can build up his first million using this principle. Assumptions:
Joe started work 1/1/1999 with a take-home monthly pay of P 8,000, increasing to P 11,000 in 2000, P 14,000 in 2001, then 14% henceforth. He regularly saves 20% of his 13-month salary and buys Philequity Fund shares. For credibility I based Net Asset Value, gross of fees, on actual historical data. The results:
Year….Salary….Savings….NAV….# shares
1999….8,000/m…20,800/y..3.20….6,500
2000….11,000….28,600….3.69….7,751
2001….14,000….36,400….3.99….9,123
2002….15,960….41,496….4.03….10,297
2003….18,194….47,305….4.45….10,630
2004….20,742….53,928….5.83….9,250
2005….23,645….61,478….7.39….8,319
2006….26,956….70,085….9.55….7,339
Total…………360,093………..69,209
P 360,093 saved, 69,209 shares bought. At Philequity’s NAV of P 12.4065 as of 3/27, Joe’s savings are now worth P 858,641. Just P 80,000 more in savings plus 6% more in capital gains and Joe will be a millionaire by yearend! He’ll be a millionaire now if he increased his savings to 25%.
Interesting, no? Try plugging in your actual savings experience and see if you should be a millionaire by now (oui, Salve?). Hope this gets yuppies interested in savings thru balanced or equity funds. Au revoir!
March 27th, 2007 at 9:22 pm
I’m guilty of not being one of those strict budgeting types - it just doesn’t work for me. What does work for me is to allot a portion of earnings automatically as savings (yes, it’s “pay yourself first”), have a figure allotted for monthly expenses, and then be free to use the rest as my discretionary income. It works well enough given that you’re not too loose on credit card spending!
March 27th, 2007 at 2:46 pm
Hi Jasprene, you’re right. using a financial software really helps. I am also using Money 2007 but before that, I had a software installed in my cellphone to keep track of my expenses. The great thing about it is that it can forecast my cash flow when I will be able to finally join in on investing in UITF or Mutual Funds. And it says after March 31, I already can. by the way, i’m only 21.
March 27th, 2007 at 7:04 am
For those who are diligent in keeping to a budget, I recommend using a financial software like Quicken or MS Money. Started using Money 2002 five years ago to track my expenses, and I am currently using the latest release Money 2007. It is true on what they say that before you could even start investing your money, you should know where your money are going. After two months of tracking money in 2002, I was able to create my budget and has basically sticked to it as much as I can. A few months after this, I played around with mutual funds and stock investment and I also use the investment tracking of said software. Could not believe it that from a 4 figure net asset in 2002, I was able to grow my net asset to it’s current 7 figures with various placements in stocks, mutual funds and real estate assets. Right now I am looking to open a franchise business to further diversify. And it all started because I took the initiative of creating a budget and sticking to it. Oh by the way, I have been working in the Philippines since I graduated. It has been my personal creed that I could make it in our own country without deciding to go abroad.