Buying a house is an accomplishment and should be celebrated! If you find yourself stressed, cash-strapped, and unhappy, here is a no-frills guide to balancing your finances as easy as 1-2-3:
Follow the Money
It sounds simple enough, but tracking your cash flow is one of the most overlooked ideas by many people. You have to know where your money comes from and goes to – in other words, budget!
Start with the incoming flow of money. Whether you’re a salaried employee, a freelancer, a businessperson, or some hybrid of those, you need to know where your money comes from and how much you make. For people with predictable paychecks, you already have an idea of your usual take-home pay; for those with varied paychecks, figure the average monthly income you earn.
Then, track where the money goes. You can use apps and software for this, or go into an Excel spreadsheet (there are many free templates online that automatically compute things based on what you type in). You can, of course, go old school and use a balance notebook if that’s more your style.
Classify your purchases to make things easier to manage.
Fixed living expenses include not just your monthly home mortgage, but also car payments, insurance premiums, and any other expenses that are the same every month like phone, internet, and cable bills.
Necessary costs are the opposite as they fluctuate month-to-month such as utilities (electricity and water bills), gas, and groceries.
Lastly, also note other expenses, especially non-necessary ones like dining out, entertainment (going to the movies, watching concerts, etc.) and so on.
Budget and Pay
Once you have figured out your cash flow and where your money is supposed to go, create a budget and pay what you need to on time. If you find that you don’t have enough to pay bills, take a step back and evaluate which costs are important, especially in keeping your job and staying healthy. There are many ways to set up a budget such as the envelope system (dividing and allocating money to envelopes, using that money only for that purpose), and the 50-30-20 budget (50% of take-home pay is spent on needs, 30% spent on wants, and 20% spent on savings and paying off any debt). Budgeting apps are abundant, so tips for budgeting and calculating things is in the palm of your hand.
If you do have just enough to cover your bills, take steps like making automatic payments to your electricity and mobile phone bills, or turning on email or text message alerts from certain providers. Some banks let you enroll automatic payments for certain services like Meralco and Sky Cable. Some streaming sites like Netflix and Spotify allow automatically debiting from a Paypal account or your credit/debit card. You could even set up alerts on your mobile phone or use post-its and notes on your refrigerator – whichever system works for you.
Remember that paying bills on time also means avoiding late fees and penalties, and in some cases allow you discounts, perks, or sometimes even a free month of something for being such a loyal and punctual customer.
Lastly, make sure there is enough for an emergency fund – never touch that money unless it really is an emergency such as a medical situation or a debt you are being cornered into paying.
Bonus: Grow Your Disposable Income
In relation to budgeting, find a way to grow your disposable income. As you play around and experiment what budget style works for you, you slowly become aware of your spending habits and your financial situation. This allows you a chance to grow your disposable income.
For example, identify which things are more of a burden than an asset. If you find yourself no longer using that video streaming service or neglecting to go to that high-end gym, cut these costs! You’ll be surprised how much you can save and allocate for house mortgage or other expenses.
As you start managing your finances better, you’ll find that your paycheck becomes money well spent – eventually, paying for your monthly home mortgage becomes a cakewalk and you’ll have more time and money that can be saved or used elsewhere.