The National Economic and Development Authority (NEDA) once gained online backlash when they supposedly said that an average family of five members need at least PHP 10,000 to live decently. NEDA later clarified that the breakdown was a hypothetical budget they presented, not the amount a Filipino family needed to survive. They later showed that a family of five needed at least PHP 42,000 to live above the poverty line.
This led to discussions about how much a Filipino family truly needs to survive. These conversations put a spotlight over families without a wide berth for disposable income and the ways they can keep to their budget.
Here are important things you should know.
How much should your household budget be?
If we’re following NEDA’s recommendation, a household of five members should have at least PHP 42,000 in income–specifically, two family members earning PHP 21,000 every month. This exempts them from paying taxes under the new TRAIN law . If your household is at least earning that much, then you are living above the poverty line and can afford the bare necessities.
For those with a higher cumulative household income, your household budget depends on your income. While a higher household income provides you more luxuries and room for flexibility, it’s important to keep a budget to address all your needs, set aside savings, and allot money for your wants.
Keeping a realistic budget for your household is critical. With that in mind, here are a few tips to create a practical budget that you can stick with.
Budgeting tips to balance your money wisely
Use the 50-30-20 budget rule- This is more of a recommended method than a hard rule when it comes to budgeting. According to the 50-30-20 guide, 50% of your net income should be spent on your needs (e.g. utility bills, rent, groceries, transportation costs), 30% on your wants (dining out, streaming services, clothing), and 20% on savings. You can switch the 20 and 30 percent between your wants and savings, depending on how much you want to save.
Never spend more than you have- This means avoiding unnecessary loans and excessive purchases if you are unable to pay them back. Failure to pay your loans and balances may eat up into your monthly budget through interests and penalty charges.
Use the 24-hour rule- Another tip when it comes to large expenses is to wait 24 hours and see if you need to make that purchase. This isn’t just limited to small wants like designer clothes and branded bags. For example, you want to take out a car loan to buy an SUV for your growing family. Instead of immediately signing up for a loan, wait 24 hours to allow yourself time to think if you can afford the monthly loan payments on top of your monthly expenses.
Create a meal plan for your family- Food is almost always the biggest chunk in a household’s budget, and for good reason. Rather than eating out frequently (which is more expensive), create a meal plan for your household. By planning your meals for the next week or two, you only spend on what you need when you go grocery shopping. Not only does this save you money, but it also reduces your food waste and helps your family eat healthier.
Use your bank app to pay for utilities- Most banking apps have a feature where you can automatically deduct the cost of your monthly bill payments from your bank account or credit card.
Track your expenses- Even the smallest purchases can create a dent in your budget when it accumulates. There are many budgeting apps that allow you to keep track of your expenses so that you see where your money is going.
Your household budget depends on your income, but sticking to that budget can be an entirely different matter. These tips offer practical ways to stick to your budget while still catering to both your needs and wants.