How to Manage Your Budget for Your Big Expenses?
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.
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.
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.
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!
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.
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.
- 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.
- Understand your fixed expenses, variable expenses, and non-essential expenses.
- Consolidate your debt.
- Stop spending too much on things you don’t need.
- Create an emergency fund.
- Educate yourself about money.