Sort your spending based on “needs” versus “wants.” Then, divide how your money should be spent into four simple categories: food and drinks, housing and utilities, transportation, and leisure and entertainment. Start with these basic categories. Add more if your circumstances call for it.

Budgeting can spell the difference between living comfortably and surviving on instant noodles. Following a budget protects you from having to go to lenders that prey on people who are short on cash. It makes you proactive. Instead of living on paycheck to paycheck, budgeting allows you to manage your income (the money that flows in) and expenses (the money that flows out).

Budgeting doesn’t have to be complicated. All you have to do is to figure out how much money (income) you need to allocate for things you need to pay versus expenses that are “unnecessary.” We define unnecessary expenses as those that you can eliminate from or reduce in your budget.

Here are a few things that you should reconsider when creating budget:

Food and drinks. This falls under the needs category. You should set money for food and groceries; this will include eating out. If you can, go for home-cooked meals versus expensive restaurants. Keep dinner dates to special occasions, and choose a healthy packed lunch over fast food.

Housing and utilities. You need to pay rent, electricity, water, Internet and mobile services. These are necessary spending, so put that in your budget. Include monthly association dues if you live in a condominium and parking (if it applies). Track these expenses, add up how much these cost on the average, and set that as your budget.

Transportation. This category covers the money you need to get to and from work. Whether you're commuting or getting there in your own vehicle, set aside a bit more for when you want to go out on weekends. If you want to save on this category, set just enough for a daily commute to discourage you from making unnecessary trips. You can also add your average monthly gas money here.

Leisure and entertainment. There’s nothing wrong with indulging so long as it’s in moderation. A budget will help you achieve that. This category covers anything that adds to your quality of life but isn’t “needed,” as we defined it. These are things like hobbies, movie tickets, online subscriptions, beauty and health treatments. These expenses should be the first to go if money is tight. Remember, needs before wants.

Personalize your budget

These are the four expense categories that can start your budgeting discipline. These can change depending on your circumstances. For example, if you’re living with your family and you don’t need to share in the household expenses, you can set aside more for categories like savings and investments.

On the other hand, if you have debt, make sure to budget for repayments to protect yourself from mounting interest and penalties for not paying them on time, and in full.

To help you manage your money, you can learn more about Metrobank Online or the Metrobank Mobile App.

See Related Article: Understanding Good and Bad Debt

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This article is part of a collection of stories and practical financial tips that are published with the goal to help people learn from the experiences of others, and to pick out lessons on personal finance and sound money habits beyond the pandemic.