Where’s My Money???!!!!!!
“Where’s my money?!” is the question we always ask ourselves 3 days before and after payday.
We know that we have a budget in mind and earned last payday but how come we don’t have enough money for the next 2-3 days?
We call this Petsa de Peligro.
In personal finance, the solution is what we call Cash Flow Management.
This article will discuss 3 Simple Steps in order to make sure that we won’t experience Petsa de Peligro again!
Petsa de Peligro
Petsa de Peligro is the time of the month when we don’t have enough money until the next payday.
It is the time when we often skip lunch using diet as an excuse or walking instead of riding public transport using healthy living as an alibi.
It is the time when a daily budget becomes a 3-day budget.
And you often ask yourself, “How come this happened? I’ve earned last payday and I did a budget in my mind! How come I don’t have money?!”
You are tired of being tired and broke!
You tell yourself, “Next payday will be different!”
At last! Payday comes! Money comes in! And in an instant, money went out!
You pay the bills! You lived like a millionaire because you deprived yourself for 3-5days living like a beggar!
And then after 3 days, you do a budget. You try to live below the budget because you know it won’t be enough.
And then, it happens again! Petsa de Peligro!
The cycle never ends!
Today, we Stop the Cycle of Petsa de Peligro!
This article will discuss 3 Simple Steps on how to never again experience Petsa de Peligro through Cash Flow Management.
What?!!! Cash Flow Management?!!!
Don’t be overwhelmed! My goal is to make Complicated Financial Concepts commonsensically simple!
Cash Flow Management is basically how one manages the Inflow and Outflow of Cash.
It is just “Money In, Money Out.”
Step 1: Have a Written Budget
A budget in mind is different with a written budget.
What is imagined in thin air can’t be measured like a budget on paper .
A written will help you allocate, track, and manage your income(s) and expenses.
Write down All Expected Income(s) for next month.
Regular Income Income from Work Income from Rental Properties Income from Investments Income from Businesses Other Regular Income Irregular Income Commissions Overtime Bonus(es) Other Irregular Income
Your budget will be based on your expected Regular Income.
Income(s) from irregular sources are bonuses/add-ons and should not be used as a basis for your budget unless it becomes regular.
Write Down All Expenses
I follow the 10-20-70 Rule.
- 10% goes to Giving Fund
- 20% goes to Financial Freedom Fund
- 70% goes to Living Expenses
I deduct 30% of the income (after taxes) and live within the 70% which might be composed of:
Fixed Expenses Mortgage/Rental Payment Electricity Bill Water Bill Telephone Bill Cable TV Bill Internet Bill Credit Card Debts (the objective is to eliminate this) Grocery/Food Househelp Car Payment/Transportation Healthcare/Medicine Gym/Exercise Variable Expenses Eat Out Date Night Massage/Facial Entertainment Miscellaneous
The goal here is be as true to yourself as possible.
Fixed Expenses are necessities which you can’t live without while Variable Expenses are wants and can be cut if needed.
The budget above is just an illustration. A variable expense for one person may be a fixed for another.
For example, when you go to the drugstore to buy paracetamol due to fever, that is a variable expense for medicine. But if you buy a maintenance medicine for high blood pressure, then that is a fixed expense.
That is why Personal Finance is personal! It is unique for every person.
As you can see, doing a budget is awesome!
When you budget how much you can spend for eating out, you don’t feel guilty when you spend. And You will also not worry if you can survive the next day.
Step 2: Schedule your Income(s) and Expenses
After listing all your income(s) and expenses, schedule them out.
This is the clincher why we experience Petsa de Peligro!
There are times when our fixed expenses are lower on the first half of the month compared to the latter half.
You might also not be earning every 15th and 30th of the month but on the 12th and 27th .
Or your income on the first payday of the month is higher compared to the second payday because all taxes and gov’t deductions (SSS, Philhealth, and PAGIBIG) are deducted on the second payday.
Here is an example:
Let’s say you are earning P25,000 net per month and you receive every payday P12,500 (1st and 16th of the month).
Based on the Formula: 10% goes to Giving Fund – P2,500 20% goes to Financial Freedom Fund – P5,000 70% goes to your Living Expenses – P17,500 So divided by two, you allocate the following per payday: Giving Fund – P1,250 Financial Freedom Fund – P2,500 Living Expenses – P8,750
But the Problem is this:
Assuming you don’t have debt and you are living within your means, almost all your fixed cost are due on the second half of the month.
Let’s say total expenses for 1st-15th of the month is P5,000 while the total cost for the 16th-30th of the month is P12,500,
What happens is this:
On the first half of the month, your budget in mind is P8,750 for living expenses but your total cost is just P5,000.
Looking at your bank account, you thought that you have a surplus of P3750 (P8750 – P5,000).
You thought you lived below your means and you deserve to splurge a little.
Then you realized that the excess cash is not really an “excess” but the amount needed to pay for your living expenses for the second half of the month.
Your income for the second half is just P8,750 but your total expenses is P12,500.
Ahh!!! You tell yourself, “The excess P3,750 + P8750 = P12,500!”
Then what you do? You get funding from your Financial Freedom Fund.
You stop saving for your future.
You stop giving because you need your Give Fund for your Living Expenses.
Then you try to live until the next payday!
Sounds familiar? It’s the Petsa de Peligro.
If you think you need help for this, contact me and I will help you create a budget plan for yourself. This is for FREE. We can even do it online if you want.
Step 3: Monitor your Budget Weekly
There are no perfect projections!
Sometimes, life happens and we can’t control it.
That is why it is important to update your income(s) and expenses every week.
By doing this, you know if you are on-track or overspending.
Then you can re-allocate or cut your variable expenses to pay your fixed expenses.
And remember, don’t touch that 20% Financial Freedom Fund.
It is for your future! For your retirement! For your Financial Freedom!
It is for the time when you no longer need to work because your money is working for you. But this will not happen if you don’t start building that fund.
If you are in drowning in debt (personal loan, credit card, etc.), cut all your variable expenses and use it together with the giving fund and financial freedom fund to pay your consumer debt. (Read Breaking the Shackles of Debt)
You need to take care of yourself first. To save yourself from drowning in debt.
Use all your cash to pay that debt as fast as possible.
You can’t ask for the balanced life if you can’t balance your budget when your expenses is greater than your income.
You can’t give to others if you have negative income.
Give back later! And give more!
Goodbye Petsa de Peligro!
Hope these 3 simple steps will help you in your finances:
- Have a Written Budget
- Schedule your Income(s) and Expenses
- Monitor your Budget Weekly
Your Millennial Wealth Planner,
Harold Q. Gardon, CWP, CEPP
How do you find the article? Do you have any questions? Please feel free to message me if you want me to discuss a particular topic or if you are seeking financial advice.
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