Showing posts with label finance & entrepreneurship. Show all posts
Showing posts with label finance & entrepreneurship. Show all posts

Easy Budgeting for Families

Friday, March 19, 2021

This is the second part of my post from previous month regarding finance management for families. I aim to help people like me, to get in control with their finances because once upon a time, I suffered with money management too. I relied so much on credit cards until I find myself sinking slowly in financial quicksand.

It's very stressful. So I've developed a system to manage our income (this is particularly helpful for low and middle income earners who struggle with making ends meet). Anyway, if you haven't read my previous post, it's essential that you browse through it because this post is just the second step. 

To do the first step, head over to Practical Money Management for Everyone.

Disclaimer: I am not a finance expert. I'm just sharing what I learned after I read the Barefoot Investor by Scott Pape. I recommend you buy the book too. What I'm sharing is not 100% taken from the book but this is what's working for me now.

First of all, you need to fill out the budgeting spreadsheet. You can make your own or download this template I created HERE.

Why you need to put into spreadsheet your income and expense

The spreadsheet helped me see where we currently stand and what we can afford. Before, I used to give in to all whims because as a parent, I felt guilty not being able to buy this or afford that for my children. When you have a credit card, it's easy to say "I can afford this." In reality, I was already spending more than my means.

I didn't get buried in debts immediately but that meant, I did not have enough savings for emergency. That emergency hit when I got pregnant with our 3rd child. Going on maternity leave, we had to live off on one income. Without enough buffer, we ended up with maxed out credit cards.

No more skimping to save

Anyway, I don't agree with skimping to the point of depriving the children. But a disciplined kind of splurging is what I'm after and filling out the spreadsheet helped a lot. 

Now, I don't have to spend hours per week to manage the finances. I just go into my bank account and I can see right away if we have enough to splurge on something or for family holidays. I've also included "GIVING" in the spreadsheet because the Filipino culture is heavy on this. 

It's not a bad thing. But you also have to watch out that you aren't eating up the money intended for your utilities and other necessities. You have to give with a happy heart and the only way to do this is to make sure that you are not abandoning your other responsibilities. 

Most people were shocked to hear that Filipino families send financial support to their families of origin. Especially since they understand how hard it is to work for money here. But with disciplined budgeting, it's possible - without being detrimental.

Zero out your credit cards

This exercise also helped me zero out all my credit cards. And I'm happy to say, that only last month, I have finally gotten rid off all of them - TOTALLY. Yes, ZERO balances in all credit cards since last month. It's such 

Anyway, without further ado, let's dive in to step 2.

Set up your bank accounts

Scott Pape recommended ING in his book but even before I've read this book, I have been using ING. I have already set up an Everyday Orange Account and Savings Maximiser for each of us since around 2016.

Three reasons: 

  1. I wanted to benefit from their referral codes. For setting up both accounts, I was rewarded $100. That was in 2016. Now they pay only $50. If you want to enjoy this referral bonus too, you can use this code when prompted: EXO285 - they don't hold this bonus constantly now but currently, there is one running until 31st of March 2021.
  2. They don't have bank fees for withdrawing at other ATMs. Initially, you will be charged, but the withdrawal fees are reimbursed in your bank account. In saying that, there are criteria to benefit from this feature. I think you need to deposit at least $1000 monthly and then spend 5 transactions. I've never had issues because I use both accounts regularly anyway. But please read the fine prints so you're not missing the advantages.
  3. Savings maximiser, as the name depicts, offers a higher interest rate than most savings account (and even term deposits). It's at 1.35% at the moment. Again there are criteria (like monthly deposits of at least $1,000, 5 settled card transactions, and you also need to outdo your last month's balance - well the idea of savings in the first place is that you top it up. So I don't see an issue with these 3). 
Currently, these are the bank accounts I keep (combined with my husband) and for which purpose:

2 x NAB Everyday Account
  • These were our original bank accounts and this is our usual payroll accounts. Our salaries are deposited here. My account is used for paying the rent and the car loan. Let's call this account as "RENT&CAR."
  • My husband's account is used for groceries. So let's call this account "GROCERIES."
1 x NAB Personal Savings 
  • I keep one for my MOJO account. A MOJO account is like an emergency fund of $2,000. When you have a MOJO account, you can choose to have a higher excess fees on insurances for lower monthly premiums.
3 x ING Everyday Orange 
  • My husband's account is used for our auto-debit expenses: utilities, internet, etc. - I name this "AUTO-DEBITS"
  • My account is used for splurge - when we go out for shopping and the kids had an urge to buy trinkets here and there, bubble milk tea, yoghurt ice cream... for those stuff that are not too expensive to deny. But it's only limited to a set budget weekly so when it runs out, that means the kids (everyone in the family that is!) will have to wait for the next budget to splurge again. I name this account "SPLURGE."

2 x ING Savings Maximiser

  • My ING Everyday is linked with 1 ING Savings Maximiser. This account is intended for mid and long term wants and needs. Things I consider under this account are holidays, big toys, parties, clothes and even furniture and fixtures needed around the house. Some necessary expenses that are not urgent are also budgeted under this account. For this account, I borrowed Scott Pape's term, "SMILE", and rightly so. Because these goals give a smile to our face when we think of them.
  • Another ING Savings Maximiser is linked with my husband's account. This one is for savings and are usually long term, like home deposit for instance. ING's interest is quite competitive compared to a lot of term deposits. For this account, I call it "FIRE EXT" taking from Scott Pape's book, Fire Extinguisher. If you read the book, you will understand why Pape refer's to fire - but what it means is that these are for the big purposes in your life.
While building your target amount, preferably 20% of the value of house you're looking at, you may choose to diversify a part of your savings to investments (for higher earnings) but that's for another post. Right now, our concentration is to budget wisely, so that our hard earned money does not feel like burning in ashes! 

1 x Bankwest Easy Transaction
  • This account is for charitable purposes like financial assistance to families, church donations, anything that is about giving. I have a small time side hustle that helps me earn a bit of extra from time to time which is linked to this account so that also helps fund it. My hugs in a card mission is also budgeted through this account. This account is personal to me. I don't know if my husband keeps one like this himself but that's all up to him too. 😄 Let's call this last account as "GIVE."

With all the bank accounts we are using, there really were no particular reason except for ING, which I have stated above. So feel free to choose your own bank accounts. The idea is to just separate your salary every time it comes so that you don't OVERSPEND unconsciously.

From spreadsheet to bank accounts

Now let's move on from our spreadsheet to actually putting the plan into action. Exciting!

Let's base from our example spreadsheet below:

Barefoot investor template income vs expense
Start by grouping up all your expenses and figure out which ones should go under which account:

As a recap we have 8 accounts at the top. Sounds like a lot but that is only because some accounts were savings linked to main accounts. Plus also because, I have mine and my husband's account separated. So don't get overwhelmed.

We'll match the expenses with the accounts. I have chosen the weekly amounts to make it easy. You can use color coding to make it easier. We just need to know how much amount needs to be transferred to each bank accounts every time your salary comes.

Barefoot investor excel template bucket
This sample spreadsheet allocates all expenses to each bank accounts - color coding makes the process easier

Set up auto deposits and auto debits

Once you have all expenses sorted out to which bank account they should go, now you should schedule your auto deposits. Say for example your salary comes in on Wednesday, then you should schedule your auto deposits on a Thursday.

If your salary comes in every month, then it will be a little bit tricky. You may want to set up your auto-deposits (especially for the groceries and splurge) on a weekly basis still. For me, I would do this because it's easier to create a trigger on a weekly basis. 

For instance, in this example, the weekly amount is $192.50 per week. If you have this amount on a Thursday and by Sunday only $50 is left, that means you only have $50 to spend until the next Thursday. Time to tighten the belt! It's easier to tighten your belt for only 3 days then for a whole month!

Setting up auto deposits is easy. Just go through the normal procedures of transferring money online. Once you get to the Frequency portion, choose periodic instead of one-off. Then just check the calendar to make it coincide with your salary payments.

Periodic transfer will let you choose cycle (weekly, fortnightly, etc) and the first transfer date. 

Auto-debits are for those expenses that are billed by cycle. For instance, monthly internet, monthly phone plans... you may still transfer to the AUTO-DEBIT bank account weekly, that's not a problem. The money will just sit there until the auto-debit is scheduled.

Setting up auto-debits may be done online or you can call your provider (ie. Vodafone, AGL Energy & Gas, etc.) then just give out the account details of your chosen AUTO-DEBIT account (in my case, my husband's ING Everyday account.)

Finally, the best part

In the beginning, you may encounter some bumps like a missed out auto-debit charge. And for things like SMILE (mid and long term wants), you may start with ZERO so you may need to say NO to some plans. But don't worry, that's not going to last long.

Time is our valuable friend. God willing, if we still live tomorrow, chances are, the deposits will accumulate before you even knowing it.

The best part is choosing a day in a week to have a date with your partner (or a time out for yourself). You can be creative and do it at home like what I and my husband did because we have a toddler - see post here

If you are the Finance Manager in the family hehehe, bring your spreadsheets with you and explain it to your partner. You can both choose your mid and long term plans (how you'd want to spend your SMILE account), or check if there were any other expenses you've missed that weren't budgeted. In any case, it's always best to work as a team.

And that's it... so many birds hit in one stone, I believe (but please don't literally hit birds with stones 😉). Managing your finances will give you a huge relief down the track. I hope this exercise will help some families out there. 

This journey entails a lot of sacrifices, especially in the beginning, but with discipline, you'll discover that it gets easier in time...

Again, you may download the budgeting template featured in this post by clicking the image below:

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Practical Money Management for Everyone

Monday, February 22, 2021

First of all, if you are the finance savvy one in the family, then brace yourself. I'm sure you've had your share of being labelled as "kuripot," "stingy," or in some extreme cases, "mukhang pera." 😂 

Don't be disheartened.Trying to be wise about money, you're actually doing your family a service, whether you're doing this as a partner, as a daughter or whatever your role is.

Second, I'm not a finance management expert. I am just sharing what I learned from Scott Pape's "The Barefoot Investor," and the actual worksheets and bank accounts I use in order to manage our family's finances. 

This book has practical and specific tips that are helpful in managing your personal finances

So far, it's working but there are still struggles along the way. It will be particularly challenging if you have outstanding credit card balances as this will eat up a portion of your budgeting (plus the interests) but it will be worth getting rid of them.

Without further ado, let's start.

How much income can you allocate?

List down your periodic income and expenses. It might be a good idea to breakdown your budgeting to weekly because it's easier to estimate your spendings over a shorter period of time. If you're income is monthly, then you just need to break this down into 4 weeks. But if you're more comfortable with monthly or quarterly, then you can do so whatever floats your boat.

Just write down the amounts first to get a clear cut view of how much there is to allocate. It's ideal to combine the family income so you will need the details for your partner too. If you have a business and your income is not fixed, just write down the minimum income your business produces periodically, or your minimum target income that you think will allow you to live comfortably.

    This is an example of how you can list down your income - list down ALL your sources of income

List down your necessary expenses

Start with the expenses that are fixed and recurring in nature, like rent, car loan, personal loan etc. Then estimate the ones that vary in amounts but are necessary expenses you can't do without such as electricity, internet, water and phone bills. Once you have the total amount of your necessary expenses, calculate the rate against the income you receive. 

If you end up with expenses greater than your income, that's serious trouble! You have to adjust either your expenses or look for additional means to earn money. Otherwise, you will end up in financial quicksand.

This exercise will give you an idea if your income is more than enough to satisfy all your necessary expenses. It will let you know if you are living within your means or not.

Allocate the rest of your income

Depending on how much is taken up by the inevitable expenses, you will divide the rest of your money for other variable expenses. The reason I didn't include groceries above (even though food, toiletries and other household items are also inevitable) is because this is where we can be more flexible in our spendings.

In the book that Scott Pape wrote, he discussed about marketing as manipulation. One of the reasons why we sometimes find ourselves out of budget is because we buy things we "think" are necessary. 

A concrete example is a conversation from a couple below, regarding a set of pyrex containers that were on sale in Woolies (note the use of spouse 1 & 2 because it's not always the wife that's got the impulsive buyer behaviour hehehe):

  • Spouse 1: Oh look, these pyrex set is now just $9! It's better than 50% off.
  • Spouse 2: But what are you gonna use those for?
  • S1: We can use them to heat up food in the microwave.
  • S2: We don't have a microwave and we never use one. We hardly have any leftover food to begin with.
  • S1: Oh come on, it's a huge savings! What if we need them next week and they're no longer on sale!? You'd pay extra $11 then. 
  • S2: But...
  • S1: Trust me... I'm the one cooking most of the time so... (puts the dish set in the trolley).
Guess what? The dish set gets stored on the top shelf because as the other spouse pointed out, they don't use them. They eventually end up in the bin when the clutter builds up in the house. 

Imagine how often this happens in your house. If you look at your closet now, how many pieces of clothing are in there that's not been worn for ages vs the ones you regularly wear? Or shoes that get dusty in the storage? What about bags? In short, a lot of our spendings end up in the garbage because we bought them for the wrong reasons.

One of the lessons I have learned and am teaching to my husband and kids now is that we only buy something when we need it or really really want it and will use on a regular basis. If you pick something up and think, "I might need this someday," chances are, you're not going to need it. The best way to avoid buying on impulse is to plan ahead the things that you need and want to buy.

Anyway, going back, now we are going to allocate the rest of our income. This is the part where you should also allocate for things like splurge (we need to spend on some small things that make us happy every once in a while, such as bubble milk tea or books hehehe), savings (for short-term plans like celebrations, holidays), emergency, etc. 

I will show you an example of how the rest of the 45.40% of income was allocated but of course, feel free to play around the rates. In this example, I just used a fixed rate of 5% for each item and then the rest was allocated to groceries. But it's really up to your circumstances.

How you can allocate your income down to the last zero - without being too stingy to yourself and others

When allocating your income down to the last zero, make sure that you're giving an allowance for things like splurge, which is your budget for things like eating out with the family or for buying petite things that bring joy to you. 

You should also allocate some money for bigger wants that take longer to save up, like a nice watch, branded shoes, family holidays, celebrations... you know the deal. 

Savings and investments are important too because it provides you with passive income in the long run. I'm not knowledgeable yet in this area but I try to learn from reading and experiences of my more finance-savvy friends. As soon as I have seen some developments in my own journey, I will share some helpful information too.

Long term would be for your bigger plans like purchasing a home if you haven't yet (so you may also set a higher rate for this), while emergency, as the name suggests, for unexpected expenses such as your car breakdown. It's ideal to keep at least $2000 in emergency fund.

In the book, Scott Pape calls this emergency fund as MOJO. With a maintained balance of $2000, that means you can pay for smaller insurance premiums because you have spare for excess payments in case something happens. 

I didn't include insurance expense in my example but this expense is actually a necessity. Again feel free to add it to your worksheet once you start filling it out. 

Finally, try to allocate some for "giving" too. This will give you a feeling of contentment and gratitude that you have enough means to share to others who are in need. 

Now that you have every cent of your money laid out for its purpose, the next step is: How do you manage the budgeting to make sure that what you have planned would actually be implemented? 😉 

On my next post, I will share how I set up our bank accounts to automate my deposits and payments. It only takes a few minutes each week to check whether the money is on track - no missed payments, no amounts improperly allocated and learning what your limits are in terms of splurging.

For now, you can download the template spreadsheet here to help you start your money management now. 💗

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Basic Skills You Need As An Entrepreneur

Tuesday, December 15, 2020

So you want to start a business but you're thinking: am I cut out to be an entrepreneur?

Same here... I have always wanted to be. There's something inviting about it: the flexibility, creativity and if sustained, the self-fulfilment and security. In the end it all boils down to giving yourself and your loved ones a much improved quality of life.

But entrepreneurship is not learned in school. So naturally, we are not confident as to whether we have the skills to become one, much less succeed as one.

But did you know that you don't have to be tech savvy or an expert in finance to become an entrepreneur? These skills are a bonus but they don't guarantee your failure or success.

I have seen this proven. There's this community of entrepreneurs I joined where we can help each other out in terms of strategies and inspiration. The number of successful people came from diverse backgrounds: working from different industries, stay at home, parents, single, young, old. So that makes one think, what do these people have and do I have what it takes too?

Here's the good news. The basic skills you need are already in you. Probably not used, but if honed properly, it's there. You have the guts to succeed as an entrepreneur.


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