Budgeting My Way to Being Debt-Free

Budgets come in all sorts of variants and permutations, but the best type of budget is the one that actually works for you.

The strictest budget that I know of is the zero-sum budget. With it, you have to "spend" every cent you make or to be more precise, you give every cent you make a job to do since money that isn't allotted will only be spent mindlessly. My preferred budget though is the anti-budget by Paula Pant of Afford Anything where you save/invest a pre-determined percent of your income per month. It pretty much goes like this: take out money, save/invest accordingly, and spend the remainder of your monthly income as you please. Easy peasy.

Unfortunately, it will take me a while before I can use the anti-budget since I still have consumer and mortgage debts to deal with, necessitating that I micro-manage my money until I can completely wipe out my debt.

I've been using a zero-sum budget for almost a year and I started by tracking my spending to get a bigger picture of how we spend our money. The results were consistent. We tended to overspend on eating out and travel.

My income also tends to be predictable so when the end of the month nears, I assess the upcoming expenses for the following month and move around money as needed to jive with next month's income. Reduction of consumer debt takes precedence over everything else so I only pay the minimum for the two mortgages to make room for credit card debt payment.

My usual spending categories are: debt payment, mortgage (shelter), food (both grocery and eating out), transportation (parking rental, commuting costs, gas, and toll), insurance premium, savings/investments, maid's salary and benefits, and miscellaneous (entertainment, clothes, health, grooming etc)

My miscellaneous category can be a little bit more organized, to be honest, but we don't really regularly spend on entertainment (at most a movie date or two per month), same with clothes since I don't buy clothes often, probably only a new blouse or shoes every 3-4 months or so. Health expenses usually consist of my husband's maintenance meds and son's vitamins, and now prenatal vitamins for myself. Those only amount to 1k to 2k every month so they don't need their own category.

I also haven't been as conscientious with listing down my income and expenses as I used to be, since the results were consistent and I already got the information I needed so I got lazy. Instead of tracking my expenses, I now use the envelope method and set aside money for eating out at the start of the month. When the money runs out before the month ends, then no more eating out for us. It's quite simple really.

The other spending categories pretty are pretty much on auto-pilot since the amounts are quite predictable and our budget only gets disrupted when we travel; when somebody gets hospitalized (knock on wood); or when family members ask for financial help.

In my State of Debt post written almost two months ago, my non-mortgage debt amounted to Php354,621.61. Currently, it's at Php279,669.72, which is Php74,951.89 less than what I started with. Yay!!!

This is where my non-mortgage debts stand now:

RCBC credit card loans
  • Loan 1: Php13,684.90 (fully paid by November)
  • Loan 2: Php22,351.98 (fully paid by January 2018)
BPI credit card loans
  • Loan 1: Php1,999.58 (fully paid by end of May)  FULLY PAID!
  • Loan 2: Php32,631.27 (fully paid by January 2018)
  • Loan 3: Php55,939.38 (fully paid by December)
  • Loan 4: Php52,210.08 (fully paid by February 2018)
Salary loan
  • Loan 1: Php31,983.40 (fully paid by February 2018)
  • Loan 2: Php40,868.71 (fully paid by April 2018)
Personal loan: Php30,000

Total: Php279,669.72

Once the bonuses start coming in starting late October, the personal loan will be kaput and I can even bump up my savings rate from its current pathetic state of 8%. I joined the Court's savings and loan association so my contribution and salary deduction roughly amount to 8% of my net income. Some months are so financially tight though that I think twice about making a contribution, but I just close my eyes and somehow make things work by tweaking our budget or selling stocks to bridge the gap.

The short-term goal is to wipe off all my non-mortgage debt so that I can start hacking away at the two mortgages while also setting aside an additional 10% in savings every month until my emergency fund is complete.

The ultimate dream, at least for now, is to automatically set aside at least 50% of my monthly income for investment purposes. This presupposes though that all my mortgage and non-mortgage debts are already fully paid and that there's Php300,000.00 parked in my BPI Save Up account (to take advantage of the x5 insurance coverage) . With all that in place, I can watch as many stage plays as I want; go on long-haul trips at least once a year with my family; try out new restaurants and probably even a tasting menu(!) etc. etc. etc. The possibilities are endless when money is no longer an issue.


Jane said…
Why so many non-mortgage debts?
Francis said…
I left a comment on your "State of Debt" saying "It too shall pass like everything else"... It looks like you are well on your way. You managed to pay off almost 75K in 2 months time Wow! You can do it Jill Im sure you can & will be waiting for your future post wherein you'll declared to the whole world..."I am debt free!" 😀
Jun said…
Go, go, go! There will be temptations along the way but you just need to focus and talk to your future self, Jill.

Part of that conversation is to ask her what she's doing on her free days during her retirement (lol) ? Is it paying off debt still or travelling the world (or in my case, volunteering)?

I use zero sum budgets until today btw. I don't think I will move away from it since its been effective at getting me to about a 46% savings rate. I do have some categories that are catch all though (like allowances for food and Grab/Uber). But I will refrain from refining those too much (as it smacks of OCD). Lol.
Jillsabs said…
Hi Tita Jane!

I had to draw on my savings last year when my parents asked for help with their resort projects. Then a few months after that, my husband was hospitalized twice and had an operation, leading to the decimation of my emergency fund. Instead of selling my stocks, which were in the red, I opted to take out several credit card loans instead since the interest rates were surprisingly workable.
Jillsabs said…
Hi Francis,

Sorry about your missing comment, some comments went missing after my husband transferred servers (or something like that). But I did read it and really appreciate your words of support.

I can't wait to declare my debt-free state! First will be freedom from consumer debt (by April of next year) then freedom from my mortgages (in 2-3 years). I can hardly wait.
Jillsabs said…
Hi Jun,

When I fantasize about early retirement, I still consider keeping my current job because the only thing I don't like about it is that it's in seedy, dirty Manila.

But I would like to be able to travel more with my family and stock up on books, because I have this dream of setting up a children's library in either one of my hometowns in Cebu or Biliran and create an army of bookworms and dreamers.

I am so behind on my zero sum budget! I'm usually 2-3 days behind in logging my daily expenses, but I am MONTHS delayed in tabulating my monthly totals. That's when I realized that it was no longer working for me.
Jane said…
Rough! Life happens at times to shake our resolve. No worries. This too will pass. BTW, I had a similar situation regarding drawing cash for a relative. We can compare notes next time. 😍

Here's my unsolicited insight 😘 about getting out of the rat race (cash flow game based on Rich Dad, Poor Dad). A) sometimes the focus becomes more towards the future that we stifle the present. Keep in mind that life happens now, not tomorrow. B) A clear perspective of the definition of happiness personally. I used to think that making lots of money to get out of the rat race faster is the solution (more money to invest and save). I ended up sacrificing my valuable family time to make more money. My husband once asked, "How much is enough?" C) consistently question/challenge the "why" to get the most out of life in relation to my personal definition/pursuit of happiness. This way, how I spend my time and resources lines up with my definition of happiness.
Jillsabs said…
Hi Tita Jane,

Your pieces of advice, whether solicited or unsolicited, are always much appreciated :)

I do have a tendency to overthink and overplan, but I have come to accept that I cannot control everything in my life and I've gotten ok with that. I'd like to believe that I'm making progress in working to create a better future for myself and my family, while also enjoying the present at the same time. It's a tough balancing act, but whenever I see how quickly my son is growing, I know that I have to make the effort to appreciate the present instead of putting things away for the future.
Diane said…
I came across your site looking for the steps for a police clearance, and I ended up reading more about you! Wow, I admire how honest you are and it's a good thing you are able to budget everything! How long have you been married? Are you still paying for a home loan/mortgage? The advise written above by Jane is SUPER helpful :) I tend to overthink daily, and I guess that's the cause of my lack of sleep and panda eyes.. but sometimes I want to live just for today, the present, rather than working my ass off all the time (which is what I usually do). This of course, take a huge toll on my kids, as I don't get to spend much time with them.. BUT I make sure to spend weekends with them, with weekly DVD nights, board games or dining out :). Nevertheless, I would love to exchange notes with you and talk some more! :)
Jillsabs said…
Hi Diane!

I've been married for 7 years and have a son, with another son set to be born before the year ends.

I'm paying for 2 home mortgage loans at the moment.

And I agree that my Tita Jane is amazing :) You can follow her here: http://unfilteredlifestyle.com/the-blog

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