Young professionals often face the dual challenge of managing their finances while striving for independence. With the right budgeting techniques, however, navigating through these financial waters can be less daunting. Let’s explore fundamental budgeting strategies for young Filipinos, aiming to foster financial discipline and empower you to make informed monetary decisions.

Understanding your financial landscape

1. Evaluate your total working budget. The first step in budgeting effectively is to have a clear understanding of your total disposable income. For most young adults, this primarily comes from employment, but it can also include side hustles, freelance work, or passive income sources like rental properties or investments. Calculate your total monthly income after taxes to know exactly what you’re working with.

2. Track your spending. Before you can manage your money, you need to know where it goes. Keep track of all your expenses for a month, categorizing them as essentials (rent, utilities, groceries) and non-essentials (dining out, entertainment). Apps are available to help you monitor your spending habits, or you can use a simple spreadsheet.

Crafting a workable budget

1. Explore the 50/30/20 rule. A popular budgeting method among financial advisors is the 50/30/20 rule, where you allocate 50% of your net income to necessities, 30% to wants, and 20% to savings and debt repayment. This framework can be adjusted based on your personal financial goals and obligations.

2. Set financial goals. Identify short-term (saving for a gadget or holiday), medium-term (buying a car or funding further education), and long-term (purchasing a home or investing for retirement) financial goals. This will not only motivate you but also give you a clear direction on how to allocate your funds.

3. Build your emergency fund. One of the pillars of financial stability is having an emergency fund. Aim to save at least three to six months’ worth of living expenses. This fund acts as a financial buffer that can help you avoid debt if you suddenly lose your job, face unexpected medical bills, or have to deal with an unforeseen crisis.

Common pitfalls to avoid

1. Failing to plan for irregular expenses. Apart from monthly expenses, plan for irregular costs like holiday gifts, annual subscriptions, or insurance premiums. Failing to do so can throw your entire budget off balance.

2. Overusing credit. While credit cards are convenient, misuse can lead to debt that accumulates interest rapidly. If you use a credit card, ensure you can pay off the balance in full each month.

3. Not investing. Once you have your emergency fund set up, consider investing to grow your wealth. Look into simple investment options available in the Philippines, such as mutual funds, UITFs, or stocks, depending on your risk tolerance and financial goals.

Make MORE possible

Budgeting is not just about restricting spending — it’s also about maximizing your financial potential. For young Filipinos, establishing solid budgeting habits now can pave the way to financial freedom and stability in the future. 

For times when you need an immediate helping hand, there’s Globewest Finance.