Expense Tracking vs Budgeting

Image courtesy of coffeusa.org

After getting out of debt, I am ready to take action.

I spent considerable amount of time researching for ways to save, invest and eventually secure my family's future.

Though late, I started tracking down my income and expenditures so I could actually see where my money was going. I purchased YNAB or YouNeedABudget, a personal finance software to help me keep track of everything finance-related.

It's all good. For the past year, I'm no longer clueless about my spending patterns and trends. I get to see my net worth and actually monitor the progress each month with a few clicks.

Problem is, until now I'm still using YNAB as an expense tracker instead of its intended purpose which is budgeting. I'm having trouble committing to my budget as evidenced by a lot of reds each month.

I have savings but I'm not even sure if I'm fully buffered.

I thought I have an emergency fund in place, but now I'm not so sure.

I have to immediately transition from expense tracking to real budgeting if I want to achieve my goals, ultimately take control of my finances and afford the future I desire for me and my family.

Since August is already a failure with 4 overspent categories, I will try again next month. I have to think of a strategy that will work and will suit my lifestyle.

I am used to frugal living because I grew up in a poor family, but my husband is quite a spender. He spends a great deal on clothes, he drinks and smokes. But he sacrificed his job to take care of me and our kids so I'm cutting him some slack.

BUT. THERE. GOES. THE. CHALLENGE.

My Financial Background and History

Hello again, I'm L and this is my story.

I've been working since 2001, shortly after I graduated from college. I had the privilege to work for 3 different government institutions and 1 private company. When I got married in March 2007 and became pregnant 4 months later, I was already working 2 jobs - an 8-to-5 and a night shift online job. And then I decided working from home is what I really wanted. It suits my lifestyle, I can be with my family all the time and I never have to miss special occasions ever again. 

7 years of being employed, and you would think that I was able to save at least a small part of my earnings during that time. But nope, I only had my first savings account in 2009.

Where did my earnings go? When I was still single, I gave half of my salary to my parents every pay day and the other half was spent on entertainment - movies, dining out and shopping with my siblings and friends.  I liked dressing up for work, and shopping for new clothes and accessories every month. I never thought about saving or investing during those days.

By 2008 I already had my first child, D, but I was still living paycheck to paycheck with no savings at all.

A WAKE UP CALL

In January 2011 my father was diagnosed with stage 3 stomach cancer. That was when I started to evaluate our financial status. It was a sudden wake up call. I wanted to help my parents but I only had about 30 thousand in my bank account so I ended up getting a loan from my American employer for $2000. My parents' only source of income was from our 1 hectare agricultural land planted with rice but we had to have it mortgaged as well for Php 200,000. Family and friends extended financial help, we even received money from the government thru PCSO for hospital and chemotherapy expenses, but my father still succumbed to the illness in October 2011.

All in all, when my mother and I summed up all expenses for my father's surgeries, chemotherapy sessions and 5-month long hospital stay including 2 weeks in the ICU, the amount almost reached 1.5 Million. Until now, we still have no idea how we were able to come up with that amount of money and how our family survived and thrived after the tragedy of losing a great and beloved head of the family.

THE NEED TO ELIMINATE DEBT

I felt the pressing need to evaluate our financial situation and do something about it in order to eliminate our huge debt.

My father had a life insurance of Php 200,000, a Php 50,000 group insurance and a dividend income of about Php 20,000 from Knights of Columbus. He also had a memorial service package of Php 50,000 from St. Peter Life Plans. Add to that member contributions from his PGBI group, and financial assistance from the local government he served for 3 years as a barangay secretary.

We used every peso from above to pay for all our outstanding debts in the hospital, funeral home and individual lenders.

My employer's mother paid for half of my loan and the other half was covered by the company. Meaning, I didn't have to pay for even a cent for my $2,000 salary loan. An undeniable proof that good and compassionate people still exist in this world and I am glad I get to know some of them.

By 2012, our only remaining debt is Php 120,000 for our mortgaged agricultural land. By then I was able to save Php 80,000 from my salary and from other side hustles I had. I never liked getting loans but I took a leap of faith and secured a personal loan from a friend for Php 40,000 with 5% interest per month so I can get our little rice farm back.

DEBT-FREE AT LAST

With my full-time work, income from our rice farm and occasional side hustles, I was finally debt-free in 2013.

I felt a sense of relief, but I couldn't relax knowing that I don't have any savings still.

After all, being debt-free is not the end of the journey. It is just the beginning.

Big Day Tomorrow!

Tomorrow, 8/8/2015, is gonna be real HUGE for our family.

I'm scheduled for a C-Section and BTL (Bilateral Tubal Ligation) and I'm nervous though this will be my third time (and definitely the last!). Our bags are all packed, but I still have a few errands to do for the day.

- I still need to rent a Barong Tagalog  for my son D and buy black shoes (a pair he can also wear to school because his current pair's is already worn out and needs replacement) for my husband's cousin's wedding in Cabanatuan City tomorrow.

- We don't have a car so I need to borrow Tito H's for two days. I already talked to his wife last Monday about it but I still have to notify them of the time and schedule, and probably discuss if I will have to pay rent or just pay for gas.

We're all excited to see our new baby girl. I hope and pray that everything goes well tomorrow. By the time I post a new update on this blog, we're already five in the family. :)

Net Worth Update: ₱385,039.45 (Down ₱24,886.98)

July 2015 Net Worth

 

Total Spending - July 2015

Quick post before I hit the bed tonight!

July was not too great for us financially.  Our net worth continued to take a dip at ₱385,039.45.  Income for the month was just average at ₱44,162.30.  Expenses has really gone sky-high at ₱82,049.28. *sad face* Good thing I have an emergency fund of some sort to cover all those expenses we had for the month.

Anyways, I intend to have a budget meeting with my husband as soon as possible. Ideally, I wanted it at the first day of the month but something came up and we didn't get the chance to sit down and talk about this month's goals yet. But we'll find time for it this week.

Our net worth is down by ₱24,886.98 since last month. *sigh* We really have a lot of things to work on to straighten our ways financially.

The chart and the graph in this post were take taken right from my budgeting software YouNeedABudget, by the way. Pretty slick, right? Awesome software. :)

Two TIN Numbers

I read from the COL Financial website the other night that a Tax Identification Number (TIN) is required to apply for a new account with them so I scoured my important documents and looked for my TIN. Thing is, I discovered I have two and I was unsure which one is correct.

The first TIN is in the "Certificate of Creditable Tax Withheld" I requested from the government-owned institution I used to work for in 2002 to 2006. While the other one was issued when I was working as a Website Administrator for a Hong Kong-based company back in 2009. Confusing! And since this task is included in my list of micro-goals, I decided to tackle this duplicate TIN issue once and for all.

Option 1: Go to the nearest BIR Revenue District Office (RDO) to verify your TIN Number.

Option 2: Call BIR Contact Center at (02) 981-888

I chose to call the hotline and within a few rings, a representative attended to my inquiries. I explained about my duplicate TIN issue and asked which one should I use. After verifying my identity by asking for my two TINs, full name, birth date and address, she checked my records in the system and told me to stop using the first TIN because it doesn't belong to me. I was like, what? Where did my 3% withholding tax go? You mean the money deducted from my salary from 2002 to 2006 amounting to 10,300+ pesos was not recorded in my name? Kind of annoying to discover that I have no contributions recorded despite the fact that the company deducted 3% from my salary every pay day. :/

It was a long time ago so I'm letting this pass. I thanked the representative for responding to my inquiries and said goodbye. I even felt so lucky I didn't have to wait too long to get my questions answered. Now I know which TIN I should use, I just need to request for a TIN ID card. I am due to give birth 2-3 weeks from now so I'm holding off until maybe September or October.

In the end, I'm glad I took the first step today to get my documents organized one by one. Sana sipagin pa ako sa mga susunod na araw. :)

5 Things I Learned from Rich Dad, Poor Dad

One of my friends recommended this book to me, and I was initially skeptical about the idea of reading anything about personal finance. Honestly, I was hardly interested with books about financial management because I always thought they were either boring or too theoretical. However, since my friend had a great taste in books, I trusted her and decided to give this book a try - and I had no regrets reading it.

As I read chapter after chapter of this book, I became more enlightened about the true concept of wealth and how to pursue financial security. So, let me share with you these 5 things I learned from Rich Dad, Poor Dad, and why I consider this book as one of the best I have read, so far.

1. Your income does not define financial security.

I always had the notion that high-paying jobs serve as one's ticket to a luxurious life. In fact, I used to envy my friends who were lawyers, doctors, bank managers, and architects. They live in huge houses, own more than 2 cars, and their kids study in prestigious schools. However, my bubbles burst when I learned that they, too, struggle with paying off debts - and I thought I was the only one! After reading Kiyosaki's book, I learned that it's not your salary that can have a life-changing impact on your future, but it's how you use the resources you have that can make a huge difference.

2. Start saving your money instead of spending them on useless things.

I have to admit - I used to be a shopaholic before Kiyosaki's words helped me overcome that financially debilitating habit. I was always fond of buying branded clothes, shoes, bags and even underwear. Unfortunately, my spending habits have gone crazy so I made a conscious effort to restrain my addiction to shopping and paid off my bills just to start a clean slate. Believe me, it was one of the most liberating things I have ever done in my entire adult life.

3. You can never be too old or too young to start investing.

I had the notion that only people who are 30-something should seriously think about investing. But then again, why not start young, so you'll have better chances of basking in a comfortable life decades before you reach retirement? Whether you're a teen or a yuppie who's just receiving your first paycheck, investing a portion of your savings is a practical move. Just make sure you choose a profitable place to invest your money instead of acting on impulse.

4. Learn from the pros.

Kiyosaki learned so much from his close mentor, the rich businessman who knew right from the start how to put his resources into good use. The truth is, that's just what we need - a guide who can help us attain financial security by simply following his or her steps. So, if you find yourself in a tight situation, consult a financial expert who can lead you to the right path.

5. Other than having good education, financial literacy can have a massive impact on your life.

Financial literacy is all about knowing how to manage your resources and growing them. For instance, you should start accumulating assets or properties that generate income until you can have more to cover your needs - and perhaps have a few more left over to further increase your assets. Thus, rich people get more from high returns on their investments instead of being fixated on earning a higher salary.

Rich Dad, Poor Dad talks about important lessons on finance, which he has learned from his two mentors - his biological father and a close friend whom he looked up to for financial advice and inspiration on wealth creation. Although his father attained a high level of education and worked as a reputable government official, he often found himself worried about settling his expenses. On the other hand, his mentor owned a business that gave him a more comfortable life - and to think that his level of education was only up to 8th grade.

Thus, being rich is not all about getting a high position in your job or earning a high salary. The secret to being wealthy is having more assets and making these work for you to cover all your needs.