Wednesday, February 20, 2008

Managing our moolah

Part I

This is what I did this week, posting into Quickbooks program everything that we’ve spent in a month. After a year of not being able to do it due to so many urgent matters, I’ve realized, though tedious, it really works if I just do it consistently for just 2-3 hours every week. I know, I know, you hear the word ‘budget’ and you run screaming as if I’d just told you to hand over every one of your paychecks to the tightwad gazette for the rest of your life. The word "budget" - much like the word "diet" - has negative connotations. Budgets and diets are viewed as restrictive reminders of things we cannot have.

Not so. Budgeting is really pretty harmless, even to those with spending addictions. Like myself. And it’s simple. Takes up hardly any time, and makes it so I don’t HAVE to feel guilty - or play dumb - when I buy something, and then get a ‘your check has bounced’ notice from the bank.

If it makes you feel better about the process, drop the word "budget" and call it a "spending plan". Instead of viewing the plan as restrictive, think about the things it allows you to buy. After all, a budget is nothing more than a plan for how you will spend your money.

The question is simple: where does your money go?

Regardless of how much you earn or when you earn it, everybody has expenses, fixed or otherwise. You just have to be aware where it goes, to whom it goes, how much you pay for what.

Backtrack to 6 years ago, what works for me then wasn’t putting expenses in my mobile phone, palm pilot, but just in a simple 3” x 5” small notebook and a pen where I can write anywhere anytime, right after dining-out, after loading some gas, after the grocery, inside the car, or practically every after I’ve released money in my wallet. Well… not really every time, but I try to post my expenses before going to sleep or when I wake up. I tend to forget things spent every time I delay in writing my expenses. Additional note, before writing down expenses, compute how much is left for “Cash on Hand” so you’d know if you forgot to list an item or if I released it to somebody else.

When the month ends, I would segregate the expenses into separate columns in a bigger notebook. I have used a columnar notebook or sometimes a simple pad paper. This would enable you to have an idea how much is spent on what or who. Sample segregations would be (just amend according to your family needs) :

* Food – Groceries & snacks
* Utilities - Electricity, water, Gas Range/Shellane, Telephone
* Condo Monthly Amortization - interest expense, condo dues, real
estate tax (common area), Insurance, etc.
* Mommy – toiletries, Health, Clothes, snacks, mobile, books,
accessories, etc
* Daddy - toiletries, Health, Clothes, snacks, mobile,
accessories, etc
* Child 1 - Tuition Fee, Educational Materials, toiletries, Health,
Vitamins, Clothes, accessories, field trips, etc
* Child 2 - Tuition Fee, Educational Materials, toiletries,
Health & vitamins, Clothes, accessories, etc
* Household – Cleaning materials, household items (these are furnitures,
fixtures, kitchen items), medicine, helper 1, helper 2,
Repairs & Maintenance
* Mobilization – Unleaded/Gas, Parking, Transportation
* Car Maintenance
* Leisure – Dining-out, movies, travel
* Family Contributions- J’s parents, A’s Parents
* Insurance
* Taxes – Real Estate, Withholding
* Depreciation Expenses
* Bank Charges

After computing how much is spent on what, you would have a bigger overview on how to budget your expenses, how much would only be spent on what, what should be your priorities in spending, when should it be spent. It would help if you buy an envelope to prioritize according to importance & schedule. For a PHP 60K & below, the simplier like "Envelope System: the better. For 100k & above income, the wife can opt to the “Envelope System” or an Index card to balance check payments & credit cards but it is also good if you use a software system since there are more complicated items for payments like loans, mortgages, more than 1 credit card, check payments or any payments other than cash and more than 2 sources of income. Either systems is ok, the important thing is consistency, discipline and you have a system that works for you.

After doing this manually for a year, I opted to have a software system, stumbled upon Quickbooks 2003 Edition (didn’t upgrade it). It takes me 2-3 hours every week to do posting but it is much easier, user friendly unlike other accounting software systems…. too complicated for me. How can I possibly comprehend accounting softwares, I’m not an accountant. Anyway, Quickbooks 2003 Edition is much quicker since I just post the debit & credit & it does all the reports for me especially the Budget versus Expenses Report where I can instantly view where we had overspend. It segregates everything, for example under “Household” there are 7 other items: cleaning materials, household items, medicine, Repairs & Maintenance, Salary for Helper 1, Helper 2, etc

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