5-15-20-60 Budgeting Rule

Usapang Pera S01E08

“Wow! May pa-cake!”

“Yes, merienda natin mamaya ‘yan!”

“Merienda mamaya.”

“Gamitin ko ‘to mamaya to illustrate a point about budgeting.”

“Aba, wow!”

“Ikaw ba, Venus, nagba-budget ka ba?”

“Umm, actually wala,” sabay tawa ni Venus.

“‘Pag may ano—halimbawa may gusto akong bilhin, for example, may kailangan akong damit, ganyan. Tapos, bibilhin ko lang siya. Hindi ko titingnan ‘yung price.’ dagdag niya.

“Wow!”

“Ganun. Basta kailangan ko ta’s pag-uwi ko sa bahay, tsaka ko makikita. Ito pala binayaran ko for today!?!”

“Oh no. Okay. A budget is a summary of income and how this will be invested and spent over a period of time. How do you understand budgeting? Ano ba ‘yung budgeting to you?”

“Well, siguro paghahati-hati ng mga gastusin?”

“Right. The traditional way ng pag-define ng budgeting ay papa’no hahati-hatiin ‘yung income para sa expenses.”

“Yes.”

“Pero ‘yung sa ituturo ko sa ‘yo, hindi dapat natin bina-budget for expenses lang. So meron akong tinatawag na 5-15-20-60 budgeting rule. This is the budgeting rule. 5% of your income should be allotted for insurance premiums 15% for savings, 20% for investments, and 60% for expenses. Venus, i-imagine natin na itong cake na ‘to— ”

“Okay.”

“—ito ‘yung buong budget mo.”

“Okay.”

“Okay, ito ‘yung income mo, ‘no? So 5% nito. This portion, yeah, this is going to be for insurance.”

“Five perecent.”

“Napakahalaga ng insurance kasi ang insurance, ang primary purpose niya is for protection. And then, after 5%, we—we now allot 15% for savings. So 15% will go to savings. Primarily, the savings that you save for, ang purpose niyan ay for emergencies.”

Patuloy no Sir Vince, “And normally, I say, insurance and savings, eto yoong nagse-separate sa mga mahihirap at mayayaman. Sa mga mayayaman, typically covered with insurance. If something happens to them, ang concern lang nila ay ‘yung grief, ‘no?”

“Yeah.”

“Because they have the insurance that will take care of the economic repercussions.”

“‘Yung gagastusin para sa pagpapalaki ng mga anak. ‘Yung next naman na pagba-budgetan natin ay 20%—“

“Twenty percent.”

“—of your income or the cake will go to investments so—“

“Okay.”

“—ganito rin kalaki ‘yan. Ito ‘yung normally na nakakaligtaan ng mga tao, ‘no?”

“‘Yun nga eh.”

“They take it for granted. Hindi nila nilalagay sa budget nila ang pag-iinvest.”

“Oh, so dapat kasama na siya sa buong budget mo.”

“Yes, kasi remember ang investments, ‘yan ‘yung gamit mo o ‘yung tool mo in preparation for your retirement because the investments, ‘yan ‘yung magbibigay sa ‘yo ng passive income. So ‘yung natitira ngayon is 60% ‘no?”

“Sixty percent.”

“Pero kung titingnan mo dito ‘yung sa expenses na ‘yan, ‘yan nalang yoong gagamitin mo for your daily living expenses.”

“Okay.”

“So, if I may, if you take a look at the rule, kalahati ng kinikita mo, ‘yan lang dapat ‘yung lifestyle mo. Going back to your ano, your spending kanina—”

Sabay tawa ni Venus.

“—on your clothes. Sabi mo kanina parang, ‘Ah ang mahal pala!’ ‘no?”

“Oo.”

“So kung finollow mo ‘yung 5-15-20-60 budgeting rule at nag-allot ka naman ng 5% for insurance 15% for savings and 20% for investments, okay lang na i-spend mo siya for your dress, yung 60% no’n. As long as na-meet mo ‘yung first three.”

“Ah, okay.”