Unit 7: Managing Personal Finance

7.3. Money Management Practices

Questions to Ponder
1. Recall an instance where you spent more than what you initially intended. Describe
the circumstances briefly.
Answers may vary depending on the student's experiences. A sample answer could be: I
went out with my friends to get some snacks after class. It was Monday, and I had my
allowance for the entire week. I was only supposed to spend my budget for the day.
However, I wanted to try a new food product and ended up spending three days' worth of
my allowance.

2. What practices can you use to manage your money better?

Answers may vary. When spending, I will follow a budget and stick to it. I will only spend
what I can afford and what I intend to spend. I will think twice or thrice before buying
something that is not within my budget. I will track my expenses to know how much I can
allocate for spontaneous purchases.

3. What are your priorities in spending money?

Answers may vary. My priority is my school expenses. My goal right now is to complete
my education. Thus, I must ensure that my allowance will cover my transportation, food,
and other school expenses. My next priority is my hobbies and interests. I must allocate
resources (time and money) to develop my abilities and skills. These activities will give me
fulfillment.

Check Your Progress

1. Why is tracking your spending important even if there is already a budgeted plan?
I must track my expenses because I might still divert from my original spending
plan. My tracked costs will also allow me to assess whether my initial goal is realistic
or not. I can see whether there are expenses I forgot to consider and make
necessary adjustments to my budget.

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 Unit 7: Managing Personal Finance
2. Why is earning and investing early important?
Answers may vary. It is important to start young since you still have the energy and time
to make more money. If you can earn at a young age, you can develop skills or hobbies
that can turn into a business or profession. If you invest early, you will also develop
business and management intuition. If you lose some money, you will learn and still have
the time and energy to recover.

Try This
True or False. Write true if the statement is correct. Otherwise, write false.

true 1. Money management strategies differ depending on an individual's life stage.

true 2. Budgeting needs previous financial data as references.

true 3. Earning is difficult for students as they have limitations.

false 4. The 50-20-30 rule allots the most significant portion of income for savings
and investments.

false 5. Emergency funds are built to finance significant planned expenses such as
holiday trips.

false 6. All individuals must strictly follow the 50-20-30 rule to achieve financial
stability and freedom.

true 7. Tracking spending allows individuals to cut inessential expenses.

false 8. The money management cycle starts with earning.

true 9. Budgeting requires understanding and quantifying income, expenses, and

goals.

true 10. The need to compare the actual spending versus the budget is necessary for
money management.

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 Unit 7: Managing Personal Finance
Practice Your Skills
Consider Felix as your client in personal financial planning. He asked you to compute his
net cash flow for the month and asked for advice on his finances. Provided below is a list of
his income and expenses.

Cash Inflow Cash Outflow

Personal Income ₱30,000.00 Food ₱15,000.00
Vitamins 2,000.00
Gym Fee 1,500.00
Utilities 2,900.00
Phone plan 1,500.00
Transportation 3,000.00
Total Inflow ₱30,000.00 Total Outflow ₱25,900.00
Total cash, end ₱4,100.00

1. What do you think is missing in Felix's cash flow?

Answers may vary. Looking at Felix's cash flow, he has no savings account and
investments, which are critical in all life stages. If Felix has to deal with an emergency, he
does not have enough money to cover the expenses.

2. What should Felix do with his net cash?

Felix should save and invest what is left in his cash flow if there is an excess of cash. With
savings and investment in mind, he can achieve financial freedom. Alternatively, he
should also build his emergency funds, equivalent to the 6-month worth of his basic
living expenses.

3. Felix allocates 50% of his income to food expenses. Would you agree to this
practice? Explain your answer.
No. Although eating healthy and nutritious food is a basic necessity, allocating 50% of
Felix's income may be too much. He should review whether there are ways to cut these

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 Unit 7: Managing Personal Finance
expenses. Are all these food expenses essential? As much as possible, he should reduce
the portion of food costs to give way to other necessities, which overall should ideally
comprise 50% of his income.

4. If you were Felix, what changes would you make to this budget? Explain your
answer.
Answers may vary. I will change three things:
1. I will reduce the amount used for living expenses.
2. I will allocate for savings and investments.
3. I will set aside a portion for wants and other interests.

5. In relation to your answer to Question No. 4, present an adjusted budget plan.

Answers may vary. The following is a sample answer only.

Income Expenses
Personal Income ₱30,000.00 Essentials
Food ₱5,600
Vitamins 2,000.00
Utilities 2,900.00
Transportation 1,500.00
Phone plan 3,000.00
Total for essentials ₱15,000

Savings and Investments ₱6,000

Wants
Gym 1,500.00
Other wants (food, travel) 7,500.00
Total for wants ₱9,000.00
Total ₱30,000.00 Total ₱30,000.00

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 Unit 7: Managing Personal Finance
Challenge Yourself
Read the following situations and recommend money management practices to improve
the given situation.

1. Jacob has a habit of buying things impulsively. What money management should
Jacob practice and why?
Answers may vary. Jacob needs to know how to budget his money and track his
expenses. If Jacob continues the bad habit of impulsive buying, he will soon encounter a
shortage of money, and worse, he will borrow personally and be indebted. It is
recommended that Jacob practice the 50-20-30 rule. This way, he can ensure that his
essential needs are financed while setting a healthy limit on his impulse shopping.

2. Lani has been delaying her bill payments to use the money for other purposes.
What money management should Lani practice and why?
Answers may vary. Lani should make a monthly budget and include the recurring
expenses in her essential expenses. This way, a specific amount would be earmarked for
obligations. Unlike other costs, delayed payments might incur additional charges and
cause more financial problems for Lani.

3. Monson is very aggressive and risky. He casually buys investments without studying
them. What money management should Monson practice and why?
Answers may vary. Monson, being a risky investor, needs to study the investment itself
or ask for a financial advisor. Since it is risky, there is a big possibility that Monson will
lose all his money. Moreover, he should set a limit on the amount that he will use for his
risky investments. For instance, a portion of the 20% savings can be used for this
endeavor. If his investments lose value, his living expenses and wants will not be
drastically affected.

7.3. Money Management Practices 5