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Monday, July 3, 2017

BUDGETING 101: The 10-20-70 Principle


Disclaimer: I am not a financial expert. We are not financially stable. We are on our journey to financial literacy. So I just thought it'd be best to share what I learned along the way. Dito kasi sa Pilipinas, parang medyo taboo pa for majority of people ang money talks, right? It's like those who can talk about it are only those who are rich? I don't know, maybe it's just me, or what, but others may say, "wow, galing na about sa money oh, mayaman na siguro to" you know what I mean? Pero if rich people talk about money openly, dapat siguro tayo ding mga mahihirap, ano, para matuto tayo. :)

Ok, moving on...lol! A few weeks ago, I started watching videos about finance and investing. The many blog posts I read about investments, insurances, and finances have challenged me to start learning about them. I am 28 years old now, I should have learned earlier but back then, I settled on the fact that we are poor and can never really invest. I was wrong.

On one of the videos of Bo Sanchez, he talked about the 10-20-70 principle of budgeting. I'm glad I am on the right track because I have been doing it already, I just didn't know there's a term for that. lol! But in all honestly, we were not diligent in doing it.

So what's this 10-20-70 rule? According to him, in every income that you get:
10% goes to tithes or offering (or charity to those who don't practice the former)
20% goes to investment
70% goes to expenses
On the posts and financial videos I read and watched, I noticed that some have even more detailed budgeting than this. Some would change that also, depending on their needs. As for Dane and I, this is what we try to follow now, and more savings as much as possible. My mother taught me to tithe ever since I was a child so I take that with me everywhere I go.

Before Dane left for Saudi, they had a seminar where they were taught about the I-S-EX principle. Medyo bastos sya sabihin pero, it's INCOME minus SAVINGS equals EXPENSES, hehe. For so many years, we never had savings. Or kung meron man, nagagamit lang din at 'di talaga naiinvest or lumalago. Nawawala lang din sya as time went by. Either nagamit for emegency or kaya nagastos sa ibang bagay. Ngayon lang kami nagkaron ng opportunity na makapag ipon talaga, pero I can't say na malaki na ang naiipon namin, sobrang liit lang compared sa iba na magaling magsave ng pera.

Does this principle work for us? Yes, both 10-20-70 principle ang I-S-EX work for us. Kasi, kung ano lang talaga ang matitira, yun nalang talaga ang pagtatiyagaan mong gastusin. I hope Dane and I will be consistent at doing this. Is it easy to follow, definitely not! And I can't say we're doing great at this yet 'coz we're just starting. Consistency is one of the hardest parts in following this principle. Thankfully now, we're starting to save little by little. We're also planning to invest in the near future but I don't want to do it just yet.

Right now, I just want to be able to learn more about finances and investments. Ayoko sana pumasok sa isang bagay na hindi ko masyadong naiiintindihan. So more on learning for us first, for now. :) I remember during the Q&A portion nung seminar namin about money matters, medyo nangangapa talaga ako sa terms nila and all, lol! I'm 28 and just starting to know about them. I'm a bit late kung tutuusin, especially compared to others, but better late than never, right?


How about you? Do you practice the 10-20-70 principle? If not, what principle works for you? I'd like to learn from you! :)

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14 comments:

  1. Haha.I'm doing 50-50-0 principle. Ha ha
    Income-expenses= savings

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    1. Haha. Di pa huli ang lahat. hehe. :D

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  2. This is really how things should be when it comes to budgeting. We try as much as possible to follow this but most of the time it's just so hard especially when the income isn't even enough. I think for now, we will focus on growing our income first.

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    1. Grabe talaga ang mga gastusin, no? hirap! hehe.

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  3. We are following this principle too but sometimes hindi ko nasusunod yung 20% for investment, lalo na kung malaki expense namin for a particular month. But it is really nice to have savings kahit maliit income, sabi nga nila paano mo mahahandle yung malaki na income kung sa maliit pa lang, hindi mo na mabudget. You are not late, mas late pa ko sayo nagstart mag-invest. :)

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    1. Aw, I'm happy to hear that! hehe. Sana tuloy tuloy na 'tong sa'min. :( And I agree, sobrang hirap sundin ng % lalo pag may mga emergency.

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  4. I have read quite a lot about budgeting and have heard about the income-savings=expenses. I honestly think its a tricky way to budget. Siguro I'd go with the percentage principle...but would add more pa like, the money jar principle. I blogged something about it. http://www.babyneosmama.com/2013/08/on-saving.html share ko lang too :)

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    1. Thanks for sharing! Will check this out. I also learned about the jar principle from Miriam Quiambao. I haven't tried that yet, I'm not sure kung magwowork sakin kasi natetempt ako pag nakikita ko. lol. I'm using ung tinatawag nilang envelop system.

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  5. Good for you that you started to take an action into saving and investment. Yes, consistency and discipline is the key. You have to keep your focus and remind yourself of your goal. Whenever I am tempted to buy something 'nice' for myself I constantly remind myself of the goal na "maging mayaman" NOT "magmukhang mayaman" 😜

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    1. Ay, gusto ko 'yang motto mo, lagi kong aalalahanin yan! "maging mayaman" NOT "magmukhang mayaman" haha.

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  6. I used to do that when I was working before. Now that I have no money to Budget, I leave that to my husband as he prefers to do all the saving, paying of bills etc. With the little money I earn from writing, most of them are put in a savings account and I haven't withdraw anything pa. I think there's nothing to buy naman. As for the donation and church, husband is generous and kind enough naman to share his blessings.

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    1. That's wonderful! And you're great for being able to save still, even now that you're a SAHM! ♥

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  7. Unfortunately, we don't practice that. Hehehe. But we allot a big chunk of our money for savings and investment. The 10-20-70 rule may work, but I think it's not for everyone. After all, we all have different lifestyles :)

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    1. That's true! Some would save more than the 20%, really depends so I completely understand and agree with you. :)

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