It is the season for christmas bonuses and other sudden windfall. In my previous experience, the mere sight of a big jump in my payroll bank balance makes my heart skip a beat. This year, let us resist the urge to go crazy-shopping. I calm myself down, grab a pen and a piece of paper and then prepare a budget.
Bonuses and other sudden windfall usually get deposited together with the salary. Thus, the hugely inflated bank balance (and resulting heartbeat skip haha). Typically, my budget is the typical 20%-30%-50% list. For this Christmas season, I am trying out a different allocation.
I felt the need for this experiment because after almost a year of keeping track of my money via a budgeting app – Money Manager – I found that there is still room to improve in the way I budget and spend my money.
What the Christmas budget looks like.
Let me preface this by saying that I love Christmas and this season of giving not only to our loved ones but to the less fortunate as welll. No matter how much (or how little) I earned, every year since college I have always conducted some form of outreach program (whether at an orphanage, elderly home, monastery or other) every month of December.
The entire point of experimenting with a Christmass budget is to check whether I can still live within my means (i.e. my usual monthly spending) despite the consumption-happy Christmas season. My experiment showed that I can’t. Haha, but more on that later.
The Christmas budget is simple – I merely segregate the entire amount of my bonuses and other amounts that are not part of my usual net monthly take-home pay. I then deposit that entire amount to my bank accounts (in time deposits, passbook) and some to my stock account.
My usual monthly budget
The money left-over – my usual monthly take-home pay – is then budgeted in my usual manner, to wit:
Fixed expenses: (these are monthly recurrring expenses that to me, are not optional) Fixed expenses may vary per person because what may be a priority for one may not be a priority for another. You can really craft your budget to cater to your specific needs and priorities.
(a) 20% – long term saving; to be placed in passbook and in time deposit certificates. I found a small bank that has really good interest rates for time-deposits with a short term (30 days). While big commercial banks are convenient because of the facilities that they provide, let us not completely discount the small banks. Make the effort to check the rural and other small banks within your area and you will discover that they actually give higher interest rates than the big commercial banks. However, make sure that the bank you choose is PDIC-insured and keep your deposits within the PhP 500,000.00 limit. PDIC only insures deposits of up to PhP 500,000.00.
(b) 10% – for stock account; to be invested in dividend-paying stocks.
(c) 19.19% – for equity payments; to buy condo. Edit:Note that I pay double the amount of my required monthly payments. Purpose is to pay off this condo quicker.
(d) 7.08% – rent; this is discounted since I currently live in my parents’ home until condo construction is done. This rent was recently increased.
(e) 1.8% – Cellphone payments;
Thus, 58.07% of my net take-home pay goes towards my fixed expenses. The rest, or 41.93% is then for my variable expenses. Variable expenses is just my personal euphemism for the free spending portion of my budget. =)
To date, I have spent over PhP 6,107.25 on presents and PhP 1,878.00 on personal apparel and I am not yet done with my Christmas shopping. I also have to prepare for my outreach program this December. I will be giving out food, presents and will be conducting a cooking seminar for some kids at an orphanage.
As you can guess and as logic would dictate, I went over my usual monthly spending. Since I already removed the bonus and other windfall amount from the equation, I took money from my dividend account (essentially free money) to fund my excess spending. I consider this money as accounts payable to myself. Alternatively, this money is something that I owe to myself (borrowed from my dividend bank account) that I will have to pay back. In order to make my debt payment (to myself) manageable, I plan to do bi-monthly installment payments. In order to do that, I need to cut my monthly spending for the next few months. A small price to pay for sharing the love this Christmas. =)
I have paid debts to myself in the past. I borrow money from my dividend account. I add the amounts and write them down on a post-it to remind myself what I owe. With every installment payment, I just deduct the amount on said post-it and watch the balance go down. I am low-tech that way. Haha.
Have a merry christmas to you and your family!