There may be days in a month where you start to think to yourself, “How can I stretch my remaining money to last me until the next payday?”, or you wonder every time you check your wallet if the money you earned ever lasts – well then, you might be in the Petsa de Peligro days.
The term “Petsa de Peligro” translates to “danger days”. This refers to the last few days before payday where money is tight, where people struggle to make do with what remaining amount of money they have before the next paycheck. A rough time to thrive, awaiting the relief that the next payday brings. This usually happens when you overspend, or you do not take track of your expenses.
The solution to this dilemma is saving. To some it is called budgeting, expense tracking, cost-cutting – the terminologies may differ, but the outcome remains the same. Allowing you to thrive without having to burden yourself with the stress of having next to no money left.
Budgeting is the process of creating a plan for how money will be spent over a specific period. How you plan your budget helps you to identify and prioritize your financial goals, avoid unnecessary spending, and prepares you for unexpected expenses (emergency funds, medical emergency, etc.) Budgeting is about balancing your income and expenses. It ensures that you do not spend more than what you earn. This can be done on a weekly, monthly, or yearly basis, depending on your financial goals and obligations (taxes, dining out, bills, etc.)
Here are some basic steps that may jumpstart your budgeting ideas in ensuring you won’t have to experience Petsa de Peligro days anymore.
- Identify your Income – Determine the amount that is coming in, whether it be monthly, quarterly, or annually. Not only does this include your salary, but also include any investments and other sources of income that you may have. Having a tangible amount that you can see, allows you to set realistic boundaries on what you spend your money on.
- Track and Categorize your Expenses – after determining your income, list down your expenses for the month and other expenses you may encounter during the next months. Categorize your expenses going from things that are paid more frequently, to things that are paid with more time allotted in between payments.
Example:
- Rent
- Utilities (Water, Electricity)
- Groceries
- Wi-Fi
- Transportation Expenses (commute fares, gas/diesel, car maintenance)
- Shopping
- Eating out / Online Delivery
- Insurance Payment
- Emergency Funds
- Medical Funds
- Financial Goals – What are the things you hope to achieve with your budget for short term and long term? Setting goals allows you to set an amount to making these goals a reality.
o Example:
- Short Term Goals: Upgrade my microwave, Buy the latest PS5 Game
- Long Term Goals: Save up for a Retirement Fund, Pay off mortgage, Set up educational fund for my kids
- Allocate Funds to your List – Now that you have identified where most of your income goes to, and you have a clear view of both short term and long term goals, it’s time to allocate portions of your income to each category. The most common method is the 50/30/20 rule.
o Example:
- 50% Needs – Rent, Bills, Groceries, Insurance, Transportation
- 30% Wants – Shopping, Eating out, Hobbies
- 20% Savings and Other Payments – Insurance, Mortgages, Loans, Emergency Funds
- Monitor and Adjust – a budget is meant to be changed from time to time, as it is not a one-time task. Test out the budget you have prepared for a month or two, and see what needs to be adjusted so that it can remain effective. If you find that your expenses continue to exceed your income, you might need to adjust your budget and cut cost for some unnecessary spending or increase your income.
A variety of budgeting hacks and tips can be overwhelming especially if you are just starting out. Here is a list of ways that you can start cutting costs or ensure you are still saving and spending responsibly.
- Envelope System – When using cash as a form of payment, you can use this method to visually track your expenses and savings. Set aside your budgeted amount in an envelope with their corresponding labels to avoid overspending.
- Limit Impulse Spending – avoiding temptation or the itch to buy what you like at first glance is a great way to cut costs effectively. Avoid going to the malls, do not watch live selling pages, or uninstall online shopping apps to avoid being tempted to buy unnecessary purchases.
- Meal Preps & Make your own Meals – going to the grocery once a month instead of every week, prepping a grocery list you can follow, and setting a menu for the week helps greatly in cutting costs. This allows you to adhere to a list of things you need to buy to create nutritious meals. Creating your own menu allows you the freedom to choose (and maybe learn a few recipes or two) what to cook, and is a cheaper alternative to eating out.
- Swap out subscriptions for Free alternatives – Instead of paying for subscriptions (which when tallied up, might surprise you with how much you actually spend on it), avail of free services instead. You might be paying for premium subscriptions, but is it cost effective when there are other cheaper alternatives available?
- Drink Swap - You know how much you love your drinks and how you buy them a few times a week? Those costs add up, and you may not notice how high the bills goes once you tally it. Skip the expensive drink orders and check out if your workplace has a free drink station instead. Still finding yourself buying those drinks? Shift to a smaller size next time, or change up your order to something on the less pricey side.
If you have a credit card, or are looking to getting one, you can use this to maximize your budget plan if you use it responsibly. Here are a few tips on how you can use it to your advantage:
- Treat it like a Debit Card – Make sure that you pay the full balance each month to avoid incurring interest charges on your credit card. Try and spend only the amount of cash you have to avoid accumulating debt.
- Use rewards, promos, and discounts – Using your credit card in groceries for example allows you to rack up the reward points. More often than not, there are a lot of travel, dining, and shopping promos you can avail that can help you reduce your spending while still allowing yourself the freedom to splurge in a few wants here and there.
- Late Fees? Not a Problem! – Set up auto-pay to avoid late fees on your credit cards.
- A Card for an Expense – If you have multiple credit cards already, try using a different card for a specific expense. One different card for groceries, utility bills, etc. so you can track your expenses better.
- 0% Installment Plans – For big purchases you might unexpectedly have or are planning to buy, you can use zero installment plans on your credit card to spread out your payments without the worry of extra costs. By doing this, you avoid unnecessary installment purchases that could strain your cash flow.
Remember, budgeting is not about depriving yourself of your wants in favor of being strict to only spending for your needs. It’s about finding the balance and ensuring that all your bases are covered, while still being able to enjoy the fruits of your labor. Watch in pride as you achieve your financial goals. A sign as simple as a smile on your face or a sigh of relief – knowing that you are underbudget on your spending, or you have a little extra to add to your savings.
Budgeting does not need to be a a hassle for you. Yes, it requires discipline. Yes, you need to be vigilant and to monitor your spending. The benefits far outweigh the challenges you will encounter, and it is a skill that can lead to financial stability and long-term wealth accumulation. At the end of the day, you can sleep knowing that the Petsa de Peligro days is slowly becoming a thing of your past.