Before I left the corporate world, the salary system of our company transitioned from a 15/30 payout schedule to an Every Other Friday payout schedule. This means that we get more frequent payouts but a lesser pay compared to what we usually get when we had a 15/30 schedule.
A few days ago, I met some of my office mates and had a conversation with them. I asked them if they are doing fine at work and if they still have complaints about their salary.
They mentioned that they still have a hard time on budgeting since the payout is small and they all have their daily expenses. One of them even mentioned about transferring to another company which offers a higher basic salary.
Somehow, I actually expected this answer from them. However, I still think that the reason why they are having a hard time on budgeting is because they don’t follow a specific rule in managing their expenses.
So as of today, I would like to share the “70-20-10 rule of budgeting”. This rule is not a know-all rule but is a good start for a person who wants to take the first step in controlling their finances.
The 70-20-10 rule states that:
– 70% is allocated for living expenses (rent, food, clothing, etc)
– 20% is allocated for savings (retirement, investment, emergency fund, etc)
– 10% is allocated for debt repayment or fun money or tithes
(Please take note that taxes and other monthly deductions were not included in this scenario to simplify the explanation). If your monthly income is 20,000php, this means that a you can a lot 14,000php for your daily expenses; 4,000php for your savings; and 2,000php for paying debts or tithes. This may seem easy if you just read thru the scenario, however, the challenge starts when you are actually implementing it especially if you have a lot of debts and don’t follow a specific budget plan before.
For these cases, I suggest sticking to a specific spending limit for your expenses and a lot more for paying your debts until you manage to pay most of it (e.g. 60/20/20). Just make sure that you don’t compromise your health as you budget.
You may also modify the percentage for each category and do 60-30-10 or whatever you think is best for you. Always remember that poverty is not caused by a low income. Poverty exists because of lack of financial education.
I hope this article taught you something about how to achieve success.
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I Struggle, I Win!