How to Manage Your Budget for Your Big Expenses?

Feb 21, 2020

Do you squint your eye or twitch your nose every time you hear the word “budgeting?” Does your stomach turn when someone starts talking about major expenses like buying a house or a car? You do realize that this is part of daily life, right? If you’re still feeling uncomfortable about the nature of these topics, then you might be in bad financial shape.


Good financial sense is an important skill everyone must have. Managing your budget – your savings and expenses included – should come as second nature to anyone who has ever handled money. There would be some people who would prefer not to think about how and where to spend their money, while some would be in extremely difficult financial situations if they run out of money.


Truth is, if you’re not capable of managing your money, you might end up with the latter situation. Things might even go from bad to worse when you start taking out loans or maxing out your credit card just to pay for your expenses.


And speaking of expenses, this just doesn’t cover the small expenses such as when you’re buying a new appliance or treating your folks to a fancy dinner. For most people, they will be spending more than half of what they earn during their lifetime on a few categories. Read on to find out what these are.


  1. Home


Purchasing a house requires a ton of commitment. So aside from finding one that you can really afford, you need to also consider that you will be paying more than the down payment and your monthly amortization when you buy one. There’s also property tax, insurance, renovation and improvement expenses, interest rates, and more.


  1. Car


Similar to buying a house, a new entry-level, five-seater vehicle would easily set you back PHP 500,000 and up, so it’s a huge expense, especially when you purchase on an instalment basis. If you think why a lot of Filipinos are having problems with money, well there you have it – they’re driving it! Other than the monthly payments, gas is expensive. Plus, you need to pay for parking, maintenance, insurance, and more. They might seem small at first glance but they’ll definitely add up even if you count them annually.


  1. Children


As soon as a woman has a bun in the oven, there would be huge expenses to take care of. From check-ups or ultrasounds, pre-natal vitamins, preparations for the baby’s arrival (cot, diapers, feeding bottles, baby clothes, formula milk), and hospital bills. The list goes on and on. As soon as the baby starts walking, there will be more expenses. Add in the cost of education from pre-school to college, et voila, you’re up for a major financial obligation. In plain English, having kids is expensive!


  1. Health


Often you would hear in the news that a family somewhere in Manila is dealing with an exorbitant medical bill. In most cases, it is about those without medical insurance or PhilHealth coverage. A lot of Filipinos cannot access decent healthcare services, so when times of emergency come, they tend to burn all their money on surprise bills or even bankruptcy.


  1. Retirement


People spend a lot to prepare for their retirement so retirement expenses can involve huge sums of money as well. Even if it’s just your SSS contributions or your insurance policy premiums, they would add up and take out a considerable chunk from your earnings or daily living allowances.


How to manage your budget for major expenses


Coming up with a realistic and actionable budget would be your ticket to a stress-free financial life. By doing this, you won’t be ill-prepared for any major expense that might come your way, whether it’s an expected or unexpected one. If you’re ready to take control of your finances, here are simple steps you can take.


  1. Determine your total monthly income.


Write down how much you make in a month. It can be your combined household income or just your personal income. Note that a lot of your expenses will be billed per month, so this would be your gauge on how to start budgeting. If you have multiple income sources, write the total for each one so you can figure out exactly where each peso comes from. 

  1. Understand your fixed expenses, variable expenses, and non-essential expenses.
  Of course, you’ll need to identify your fixed monthly bills. Rent, credit card payments, insurance, monthly amortizations, and whatnot. These are your fixed expenses. They will be the same each month and there’s nothing much you can adjust about them. Make sure you list them all down. Then, you can write down your variable expenses. These are the payments you need to make but the amount varies each month. Examples include food, utility bills, and transportation. Lastly, list down your non-essential expenses. These are the things you pay for but you actually can live without, such as your Netflix subscription, your expenses for eating out or watching movies at the cinema, and your upcoming piso fare trips. Examine how you spend money for all of these things and use it as your guide to come up with a budget.  
  1. Consolidate your debt.
  If you have outstanding debt, say for instance you have multiple credit cards and at some point went crazy and maxed them all out, you need to consolidate your debt. Anyone who wants to manage his or her finances should be taking huge steps in getting themselves out of debt. You should try to make more money or think of other ways to generate extra income. Do this until you pay off all of your debt.  
  1. Stop spending too much on things you don’t need.
  If you’re spending beyond your means, you need to review your income and expenses and carefully identify the ones you can cut. Know that those non-essential expenses will keep you down. It’s actually not the big expenses that will cripple your finances. It’s those little trips to Starbucks that add up! Some experts say that a simple money-saving hack is to cut back on eating out. This is not to say that your quality of life should suffer, but it could be done in a smarter way, such as sharing a meal or not ordering appetizers or dessert. These simple tweaks can save you a lot of money.  
  1. Create an emergency fund.
  An emergency fund can be useful in many situations. As they say, there’s only one foot before the other so it’s not too hard to get started with building up this important component of your finances. The difficult part is how to prevent yourself from touching or taking money out of this fund.  
  1. Educate yourself about money.
  Your incompetence in mathematics shouldn’t be an excuse to shy away from learning about how you should spend every single centavo that you earn. Every possible imaginable tool about financial education is within your fingertips. Every financial guru or money pro is virtually just a click away. You have YouTube videos, whitepapers, eBooks, Facebook groups, and blogs like this to teach you how to be smarter about your finances. Carefully do your research and pay attention to what these experts say. Absorb the pieces of advice that you think can help you and scrap the ones that don’t.   Share with us your other tips for managing your finances for the big expenses. Let us know in the comments below what you think and if you agree or disagree with the ideas we presented above.