3 Tips to Make the Most Out of Your Income

Based on the Bangko Sentral ng Pilipinas 2017 Financial Inclusion Survey, only about 48% of Filipino adults have savings. While majority identified insufficient income as the main reason for lack of savings, lack of planning and budgeting seem to be a main contributing factor as well. More than 60% of households earning less than Php10,000 per month and Php50,000 per month both reported lack of income for not having enough money to pay for necessities. It was also found that households who plan and budget their spending were 20% likelier to have money left to save.

Even when earning more, people often still have a perception of not having enough money. This may be due to life-changing experiences like having a kid, or just simple lifestyle changes. Higher income can translate into higher propensity to spend. But no matter what your income is, you can always make the most out of it with the following tips:

1. Set the Budget

A good rule of thumb for budgeting is the Balanced Money Formula. It is a budgeting framework in the book “All Your Worth: The Ultimate Lifetime Money Plan” by Elizabeth Warren and Amelia Warren-Tyagi. With the Balanced Money Formula, you split your net income into 3 categories: Needs, Wants, and Savings.

The Balanced Money Formula

  • Needs – max 50% of net income
    • Includes: housing, utilities, healthcare, transportation, basic groceries and clothing
  • Wants – max 30% of net income
    • Includes: vacation, non-basic clothing, cellphones, gym membership
  • Savings – at least 20% of net income
    • Includes: emergency funds, retirement funds

2. Monitor Expenses

What do retail therapy, binge eating or Mobile Legends Diamonds purchases have in common? We all have different ways to cope with stress at work, but stress relief purchases like these, if left unmonitored, may lead to unnecessary savings losses or even debt.

Even other usual small purchases eventually pile up into significant expenses when accumulated over a certain period. For example, Starbucks brewed coffee at Php105 x 20days x 12months = Php25,200. Monitoring ALL your expenses may reduce bill shock and help you adjust your spending behavior accordingly.

3. Plan and Adjust

Based on your unique spending pattern, you can now plan how to earn additional income, or change your spending behavior to maximize your savings. Sell second-hand items online, join weekend food bazaars, or get another shift at work. Alternately, maybe do a local trip instead of an international one, or shift to buying coffee beans and investing in a French press instead of buying Starbucks.

Did you know that GCash can help in both managing and monitoring your expenses, and increasing savings?

  1. Transfer your “needs and wants” budget to GCash every cutoff to ensure your savings remain untouched.
  2. Pay bills and buy groceries, load, and other items via GCash. Save more through our cashbacks and rebates!
  3. Monitor and get reports of spending via email or by checking your transaction history in the app.
  4. Invest as low as Php50 in GCash’s Invest Money and make your money work for you!

All these functionalities are available via a mobile phone! Just download the GCash App through Google Play Store or App Store and register now!