I always look for ways to make my budget as simple as possible. To the point that I DON’T HAVE An elaborate BUDGET PLAN. Ok, honestly, how many of you actually make a budget?
One of the most popular financial advice is probably “Make a Budget.” If you are able to follow this advice, good for you. Budgeting is a great tactic for people who stick with it. For me however, even as a finance enthusiast, I find it both tedious and time-consuming.
In this post, I’m going to share with your my ultra-simple two-step system:
STEP 1: I pull my savings off the top. Set up automatic transfers into a combination of savings, money market, and mutual fund accounts.
STEP 2: Then, I force myself to live on whatever is leftover.
See how easy that is?
Where do I put my savings?
- An emergency fund to represent 3-6 months of expenses in a money market fund.
- Short term goals account for all non-monthly expenses I need to be saving like insurance, maintenance items, gifts (birthdays/Christmas), and travel.
- Contribute at least 10% – 15% percent into retirement funds in a mutual fund.
- Save at least 5% percent for long-term goals like making a down payment on rental properties or a start-up business.
Since I’m still single with no dependents, I try to boost my savings up to 25, 30, 40 or even 50 percent of my income.
And of course, I never forget to pay off my debts.
“I can’t save! I don’t earn enough to save anything!”
Save money even when you earn little.
If you feel like you can’t save anymore, try this more flexible money-saving trick: Save an extra one percent.
Assume you earn Php 5,000 a month, “finding a way” to save an extra five hundred pesos each month is a lot to swallow. To make it easier, I recommend saving just an extra one percent of your earnings each month. If you haven’t started saving up, start by saving one percent this month. If you currently save 5 percent of your income, save 6 percent this month. If your income is Php 5,000 a month, you’ll save Php 50 in the first month. Find a way to earn that extra Php 50. The following month, save one percent more. And the next month, save one percent more again.
If you earn Php 5,000, save Php 50.
If you earn Php 10,000, save Php 100.
If you earn Php 100,000, save Php 1000.
This is similar in nature to the 52-week challenge. But it’s a little more personalized, as it works with your own income.
After a year, you’ll be saving an extra 12 percent of your income.
To Quickly Summarize
So anyways, if traditional budgeting doesn’t work for you, try it my way. It’s a simple two-step process:
1) Set aside your savings.
2) Live off the rest of what’s left.
Save money as soon as you receive your salary. Paying yourself first is a time-tested saving strategy that has helped a lot of people to become savers.
AND If you save nothing at the moment, try the The One Percent Challenge.
photo credit: Braquela azeda via photopin (license)