How to Do Basic Budgeting

The very first thing that one must know in managing finances is budgeting. It doesn’t matter whether you are budgeting millions or just a few thousands. If you know how to budget, then not only that you will be able to save money, you will also be able to invest more little by little until it grows where you can feel it.

Know your average monthly income

The very first thing you need to know in budgeting is your average monthly income. To do this, you must list every source of income that you have as long as it is a regular source.

Think monthly. For example you only earn quarterly, then you will have to divide those earnings by three to get your average monthly income.

There are various sources of income.

Examples:

• Income from farm
• Income from services
• Income from being an employee
• Income from business
• Love Gifts – gifts given to you by way of saying “Thank you”.

The goal is, you will list whatever income you are generating. Some of you will probably see that you only have one or two sources of income. If that’s the case, then it means you will have to generate other sources later when opportunity arises.

So below is the example of income:

Note: Amount is in Philippine Peso. But if even if you live in other countries, the principles remain the same and do the same thing. List your sources of your average income. 

Example:
Income from Copra Php 2000
Income from Pigery Php 2000
Income from grass cutting Php 1000
Love Gift Php 3000
Total Php 8000

Know your average monthly expenses

Others
Tithes (not expense, non-negotiable) Php 800
Savings Php     500
Electricity Php     500
Water Php       50
Food Php   5000
House rent / maintenance Php   1000
Total Php  7850

Note: I included the Tithe here (read about Biblical Foundation on Stewardship). I always believe in God and his blessings including the giving of our ability to produce wealth. Therefore, I deemed it necessary to return to Him what is due Him in blessing me. I do not consider this as an expense but a form of worship. 

Excess Php    50

As you can see in our example, there is an excess of Php 50. It may not do much as it is. But when you save it and combined it in previous month’s excesses, it will still be big and substantial.

In our next post, we will be talking about how you can use and grow that extra.