By Francisco J. Colayco, Ph.D
When you budget, you usually budget monthly. However, many of your payments are not made monthly but maybe quarterly, twice a year of yearly. The problem in this method arises when you have extra money for the month and you know you will not need it until after a few more months. You start making yourself believe that you can somehow find the cash when payment is due and you decide to spend the present cash instead of putting it aside. If this happens for a real need, then, you are quite blessed that you had the cash for that real need. You just have to immediately find a way to replace that cash. Do not waste any time because time flies in a situation like this.
What is really bad is if you are tempted to use the cash for a want! You will not only be sorry because you may not have the cash when you need it. You will be even more sorry when you realize that you are no longer happy with the item you bought. Wants are usually items that give fleeting happiness. When you already have it, you tend to want something else.
To help yourself out of this predicament, consider setting up a separate bank account to handle quarterly, semi-annual or annual expenses like tuition fees. When you make your monthly budget, include these expenses as well as part of the monthly budget. For example, if you have to pay PhP60,000 for tuition for the whole school year, make sure you include PhP5,000 in your monthly budget. Deposit the PhP5,000 monthly in that separate bank account. This separate account should be an earning account and as much as possible should earn higher than the inflation rate.
Do not be tempted to touch that money for anything else. If you plan for this monthly expense, you will automatically give up expenses for things that you want but do not really need, knowing that you do not have the money. In this way, you will be practicing a derivative of the equation I am always reminding everybody about: Income less Savings = Expenses. In this case, you will have Monthly Income less Savings (10-20%) less Tuition Budget = Expenses allowed for the month.
You can use this same system for other quarterly, semi-annual or annual expenses like taxes, association dues and the like. This is a simple method and many know it but again, many are surprised to learn about it. I know because I have received so many emails thanking me for opening their eyes to the fact that they can save and be ready for their necessities.
source: Good News Pilipinas
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