Manila, Philippines

Juan, Please Save Yourself, Save

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The title is not an advice, but a plea and urgent call to action. 

savings and budget
Majority of Filipinos, hardworking as they are, do not prepare for their eventual retirement and rely on their kids for support when the time comes. Then their kids would do the same when it’s their turn to retire (assuming they have the privilege to do so). This then becomes a vicious cycle for most Juan.

Will you be Juan of them? Will you rely on future generations or the government to save you?

How to avoid this? Invest. How to start investing? Save.

Before risking your money in investments, you must first set up your emergency fund (or personally I prefer to call this liquid cash/ reserves). Otherwise, you might end up pulling out of your investments (which could be in the red at that time) due to more pressing needs. 

The ideal multiplier is 3x to 6x of your monthly expenses (or monthly income) if you are employed, while 6x if you are engaged in business. Afterwards keep on saving and saving and saving. In saving, what matters is the regularity, more than the quantity.

DISCIPLINE: Lack of Savings is not Lack of Money
Of course what you try to save is money but the lack of savings is reflective of lack of discipline, more than the lack of money. Living within your means is the key to regular and growing savings. As they put it, 


Savings comes first before expenses, and not the other way around. For more savings either you increase your income, or lessen your expenses, or both! The former takes time to do so (you can read more of it in this site), while the latter is a quick win but entails greater sacrifices. But hey, better sacrifice now than suffer later.

You have to budget all your expenses (and stick to it) such that it fits your income net of savings. If not, then a change of lifestyle is necessary. For one, if you’re reading this blog, then you have internet access, or data plans which you might need to reconsider. Significantly reduce other impulse expenses (coffee shops, milk tea, cinemas, shopping, games, internet surfing, vices etc) and avoid booby-traps and temptations — places where you are prone to spend beyond budget (malls, promos, sales). Only go there when you’re on a mission. Lessen utility expenses, either cut those you no longer use, or reduce consumption. More energy-efficient appliances.

ROUTINE: Can’t See It, Can’t Use It
Don’t put too much money in your wallet, just the amount you need for the week or until the next payday. Put just one credit card and ATM in your wallet, then leave the rest at home or have them cancelled. You should have a separate savings account (with separate ATM or passbook which you don’t carry with you). Consider enrolling in automatic savers of banks wherein it takes a regular amount from your account and transfers it to another designated account. Make it a habit to save and protect it from yourself most of all. Lock the cash in short term time deposits (30days, 60 to 120) so that there is less incentive for you to withdraw it. Remember, it’s for emergency use, not impulse.

GRADUATE: Can’t Save Due to Loans
Ideally, you pay yourself first (via savings) before paying others. If you are able to do this, then well and good. If not, then best to service your loans and credit cards first, otherwise you’ll end up with poor credit standing which might affect your credit applications in the future. The key here is to graduate from all these short term loans as soon as possible such that money used in repayments may instead be saved. Have preference for shorter loan tenors. Explore partial prepayments, pre-termination of loans, etc. Keep your card balances to a minimum and pay cash most of the time. Remember, with great credit limit comes greater responsibility. The advantage of using one card is that you can easily recall how much you owe, and have the discipline to wait for cutoff dates. Multiple cards make you forget their balances (until it’s too late! due date!) and tempt you to use each one due to varying cutoffs and due dates.

REWARD: Discipline Not Deprivation
Yes, don’t forget to reward yourself. Yes you need to be disciplined but depriving yourself altogether may just make a bigger mess. Saving is like people on a diet — they are allowed to eat controlled amounts of food instead of no food intake at all. The latter just makes temptation a lot more stronger and harder to resist (and giving in a lot more counterproductive). So indulge yourself (a little), reward yourself for the disciplined savings. Allocate in your budget an amount for SOME reward for yourself. This makes you feel better about the savings routine and more looking forward to more savings and small rewards. Note, just a little.

Here are wise words from Gandhi or Lao Tzu:

Your beliefs become your thoughts,
Your thoughts become your words,
Your words become your actions,
Your actions become your habits,
Your habits become your values,
Your values become your destiny
–       Mahatma Gandhi / Lao Tzu

Photo: “Savings and Budget” by 401(K) 2012

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 Filipino Personal Finance

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