Cash Plans 101: The Label System

At long last, payday has come! After 2 months of no salary due to transition of government from Arroyo's to Aquino's, I have received a bundle of cash today.

I first read about the Budget Your Money Through the Envelope System article of co-blogger Fitz Villafuerte years ago. The idea of budgeting your finances through the envelope system helped me a lot to manage my expenses. However, I find it unnecessary to buy envelopes to separate the paper bills, so I had my own version: the Label System.

I use scratch papers, cut into strips, to label my finances. In this way, I am able to schedule where my money should be spent and how much can I save from the month's earnings, especially at this point in time when hard-earned money should be spent wisely.

I just have to suggest that when you are budgeting, 1) prioritize to pay your debts that run with interest, so as to avoid additonal charges for the late payment and interest percentage. Loans with more than 5% interest should be first in your to-pay list; 2) pay your bills on or before the due date to avoid inconvenience: falling in line to beat the due date, supplies and lines being cut (electricity, water, phone, internet, credit cards), and reconnection fees; 3) and lastly, when you borrow money from your savings account, charge yourself with interest. For the past months that I was not receiving my salary, I borrowed P10,000.00 from my savings so I charged myself with a 5% interest rate, giving me additional earning of P500.00. By doing so, you will be able to save more than what you expect.

We all have our own way of budgeting our finances. We may have different means, but we share the same goal, and that is to pay what we should and save what we can. But most importantly, we should spend less than what we earn. Overspending is a bad habit, so let us not buy it.