Personal Finance – Creating a Budget

By: Arlen O. Macaspac

One of the essential elements of financial discipline is establishing a budget.

Such activity would help you track where your money is going and how much is used for each intended allocation of your expense.

A budget will not only give you a fix overview of your regular expenditures but will also teach you how to live within your limits. This means that the maximum you can spend should always be aligned with the budget which you have created.

You may classify your budget into 3 categories.

1. Saving or Investment budget.

2. Fixed Expense

3. Discretionary Expense.

Saving and Investment budget is placed on top as it supports the principle of putting aside your savings first before spending or shall I say, Pay-yourself-First.

Your saving maybe fixed on a monthly basis say 10% to 20% of your income.

I am including under saving category an allocation for Emergency funds. There should always be a saving fund at least 3 to 6 months of your monthly budget specifically intended for emergency expense like car repair, home repair, hospitalization and unforeseen liabilities.

Fixed Expense is categories for your regular non-discretionary expense which may include your food, education cost, transportation allowance, household bills like telephone, electrical, and water.

Discretionary Expense is placed on last since you can actually live a good life without spending too much on these things. Such expense would include holidays spending, social liabilities, junk food, cable plan, entertainment, others.

Your best enemy in creating a budget is your discipline and commitment. If you are not accustomed with it, all you need to do is to program yourself for 72 days and you will see yourself doing it as a habit.

Many of us would realize that at the end of the day, your 100% commitment and  discipline in abiding on your budget can lead you to a good saving habit.