G3

• Personal spending


  In the context of personal finance, refers to the money we use for various expenses and purchases. It encompasses all the ways we allocate our income to meet our needs, wants, and obligations.
• Income


  The money you earn or receive, including salary, wages, bonuses, dividends, interest, and any other inflow of funds.
• Personal spending


  The opposite of income, includes expenses such as paying bills, rent, mortgage, shopping, entertainment, and even donations to charity.
• Personal spending

  • Rent
  • Groceries
  • Transportation
  • Entertainment
  • Savings
• Fixed expenses


  Costs that remain constant within your budget over a specific period such as a month or a year. These expenses are predictable and can be planned for with confidence.
• Fixed expenses

  • Rent or mortgage payments
  • Insurance premiums
  • Loan payments
  • Utilities
• Discretionary spending


  Costs that are non-essential for the operation of a home, business, or individual. These expenses are considered wants rather than needs and provide enjoyment or personal satisfaction.
• Personal expenses


  The costs or expenditures that an individual incurs for their personal needs and lifestyle.
• Budgeting or spending plan


  A method for distributing your income among the mix of things you want and need. Creating a spending plan ahead of time will allow you to effectively manage your finances and determine where to best spend your money.
• Any expense a person bears when purchasing products, services, or anything consumable (i.e., not an investment) is considered spending. Every purchase is made up of two types of payments: credit (which is made by borrowing money) and cash (which is made with cash on hand).
• Importance of spending plan


  • Allows you to determine in advance whether you will have enough money to do the things you need to do or would like to do
  • Allows you to prioritize your spending and focus your money on the things that are most important to you
  • Ensures that you will always have enough money for all the things you need as well as the things you want
• How to create a budget

  1. List all expected after-tax income

  2. List any other money you expect to earn this month

  3. List all expenses, trying to be realistic

  4. Subtract expected expenses from expected income, with any leftover money going to savings
• Monthly budget

  • Income: Paychecks P2,400, Other Income P100
  • Expenses: Housing P850, Utilities P210, Groceries P350, Meals out P120, Transportation P60, Health/Personal care P50, Education Expenses P40, Cellphone P65, Debt/Loan Payments P150, Entertainment P130, Pet supplies P50, Presents P30
  • Total Income - Total Expenses = P395 for savings
• How to make a budget


  1. Calculate and list all monthly disposable income

  2. Calculate and list all bills and monthly expenses, from most important to least important

  3. Subtract expenses from income

  4. Determine what to do with remaining funds (savings, emergency funds, debt repayment, investing, etc.)
• How to use a budget

  1. Assess your income

  2. List your expenses

  3. Set financial goals

  4. Allocate funds

  5. Track your spending

  6. Adjust as needed
• The 50/30/20 budgeting rule: 50% Needs, 30% Wants, 20% Savings or Debt