Sunday, March 29, 2015

My Envelopes to Wealth

A Valuable Lesson From TRC


It is my honor to introduce to you today the seven helpers of my journey to my dream of financial freedom. Ladies and gentleman, please welcome envelopes WEEK 1, WEEK 2, WEEK 3, WEEK 4, WEEK 5, EMERGENCY FUND, UNSPENT EMERGENCY FUND, and the happiest envelope of all, the UNSPENT WEEKLY MONEY. Let’s give them a round of applause, haha.

I’ve heard about envelope budgeting a long time ago as a way of managing and saving money but I didn’t have the interest back then to try. I always have this negative response every time I hear the word saving which is, ‘’Kulang pa nga, ano pang masasave ko?” It was only a little while ago that I decided to do it and I’m glad I did it. I now see how it affects my financial life.
Please allow me to share with you my envelope budgeting. How do I do it?

1. Once I receive my monthly pay, I immediately separate the money that goes to my permanent monthly expenses which are;

a. my monthly ‘padala’ in the Philippines for my family’s
expenses such as utility bills, daily basic needs, students’ allowance, etc.

b. my insurance payments,

c. my COL Financial account. For those of my friends who are not yet aware of COL Financial, it is an online stock broker where I put a small amount of money monthly for my long term investment on stocks.

d. my small bank savings for emergency purposes

2. Once my permanent expenses are already taken away from my salary, the money left which is just 15% of my monthly pay will be distributed into the 6 envelopes namely; WEEK 1, WEEK 2, WEEK 3, WEEK 4, WEEK 5 and EMERGENCY FUND. Each of the WEEK envelopes corresponds to the number of weeks of each month. I always count 5 weeks. It doesn’t matter whether the month has exactly 4 weeks like in February or less than 5 weeks like the rest of the months. I do this because if I exactly count the weeks in a month, I might ran out of money in case my salary will be delayed. (It happens sometimes and it’s good to be prepared for the worst.)

3. You may ask how these envelopes guide my spending. Every week, I take the money out from the corresponding envelope and transfer it into my wallet. That’s the only money I’m going to spend on that particular week. I may use it for my groceries, eating out (I seldom do this though), and other needs that may arise on that week. Then, at the end of the week, I check my wallet if there are unspent bills and coins. This is my exciting day of the week. Because of this, I try my best to be frugal so that I will collect more unspent bills and coins every Sunday morning before having another trip to the grocery store for the next week’s needs. How about if my money for that particular week has already been spent before it ends? Well, I just need to wait for the next week. Taking money from WEEK 2 envelope before week 1 ends is a BIG NO! NO! (I’m glad this hasn’t happened yet.)

4. What happens to the unspent money collected every Sunday morning? That’s the time the 8th envelope which I named UNSPENT WEEKLY MONEY comes in. The money I collect from my wallet every Sunday morning goes straight to it. This money will be added to my Insurance payment to lessen my premiums or will be used to purchase new shoes or clothes or will be used for my vacation.

5. Let’s not forget my monthly EMERGENCY FUND envelope. If you noticed, I already separated a little amount from my salary to be deposited in the bank for emergency purposes and yet I still have an envelope for emergency. Well, for me there are two kinds of emergencies. The first kind is health related, accidents, change of employment, or worst-death. As an OFW, there are many unforeseen events that may happen to me. So, in case some of these mentioned things happen, I will be ready. That’s why saving in the bank for my first type of emergency is one of my priorities. The second kind is social obligation emergencies, haha. For example, you've been asked to be a godmother in a wedding or christening and you will of course give a nice present, right? With the small amount of money sitting in my emergency fund envelope every month, I can now buy my inaanak with a good gift without sabotaging my other envelopes or my savings. One more example is the social events at work. There are times when we need to look nice for certain events like parties, graduation and the like. So, my monthly emergency fund can be spent for a short trip to the hair saloon for a little hair fix or make up.

6. What happens also to unspent emergency fund? Just like the unspent weekly allowance, it will be transferred to the UNSPENT EMERGENCY FUND envelope at the end of the month. This unspent money will be kept and will still serve the same purpose until the year ends. If the year ends and the money is still there, I can either use it for house improvement or for rest and recreation.

There, that’s how I do my envelope budgeting. Weekly budget works best for me because I’m living on campus (I’m a teacher). And because I’m living at school 24/7, there’s nothing much to spend on in the campus. I've only got to spend my money basically on the weekend.

My envelope budgeting is not perfect. I still have a lot of things to learn to perfect it but at this moment, I can say that it helps me a lot in disciplining myself. It guides me not to lose track on my spending and push me to reach my goals for financial freedom.  DISCIPLINE and DETERMINATION for FINANCIAL FREEDOM, YEAH!!!


No comments:

Post a Comment