Spend wisely to build wealth. Almost everyone has the ability to become financially secure, even the ordinary, low-income employees. But you need to break out of the habit of reckless spending in order to start saving.
We hear it all the time. Filipinos complaining that they are unable to save because their income is barely enough to provide for the needs of their families. In fact, many grumble that they are neck-deep in debt. We have also heard of stories about seemingly ‘rich’ people who have 6-digit monthly earnings, nice, big houses and flashy cars yet are in a financial mess just like many of our poor kababayans. This just goes to show that anyone can be broke regardless of how much they earn.
On the bright side of this sad reality is an encouraging fact; that almost everyone has the ability to become truly wealthy or at least financially secure, even the ordinary, low-income employees. Unfortunately, only a few has the discipline and commitment to actually go for it. Majority of Filipinos have very poor spending habits and seem to have been programmed to spend & spend. They need to break out of this habit in order to start saving, which is the foundation for building wealth. Without any savings there’s no way that you can attain stability in your personal finances.
Filipinos are so used to living from payday to payday that they have become quite “skilled” at spending all the money that gets into their hands even if there is no compelling reason to do so. The huge billboards along EDSA, glossy & colorful print ads & the cool commercials with catchy tunes on TV and radio aggravate this culture of irresponsible spending in our society. One newspaper ad even elevated splurging to a divine act, declaring “to shop is human, to splurge divine!” It is no wonder then that people spend first before thinking about saving; a recipe that can lead to financial disaster. Almost always there’s too little or nothing is left to save after making all those payments and purchases; sometimes for things that people don’t really need.
There’s no magic formula for having enough money to save, only one simple solution: spend less than what you earn. In an environment that encourages spending this is easier said than done. Nowadays, it’s even possible to spend more than what you earn with that “plastic” inside your wallet. If you do not keep your expenses from going through the roof, not only will you have zero savings (which scuttles any chance of you getting rich), but you could soon find yourself in a debt hole that’s very difficult to escape. Fortunately, there are practical & “common sense” measures you can take to help you control your expenses and start living beneath your means.
First, take a long, hard look at your current lifestyle. Many people have a lifestyle that they really can’t afford. Many “rich looking” people have become a financial wreck because of their extravagant lifestyle. If you regularly find yourself unable to make ends meet or you’re sinking deeper and deeper into debt despite a big income, a change to a more modest lifestyle may be necessary. Often it will just take little changes to get you on the path to financial stability.
Second, know where your money goes. You can’t manage what you don’t know. Try to list down your expenses for the past 2 months. If you can’t accurately recall them you need to keep track of your daily expenses for the next month or two to give you a good idea on where your money is going. Every day record every expense you make including even the small items like candies, sticks of cigarettes and jeepney or bus fare. At the end of one or two months examine your list. You will probably be shocked to find out that you are spending way too much on things you can do without.
Third, cut down or eliminate unnecessary expenses and you will instantly have money available for savings. Smoking a pack of cigarettes a day may not seem to cost very much. But it would add up to about P1.2 million in 30 years if you would save & invest the money you get to keep by quitting smoking. Do you really need a daily dose of high-priced cappuccino? Cut in half your craving for it and you’ll be more than a million pesos richer 30 years into the future. There are many other things you can live without: alcohol, drugs, designer wear, excessive chatting & gaming at computer shops, too much texting, all forms of gambling, expensive hobbies, etc. Do your health and your pocket a big favor by getting rid of these.
Fourth, create a spending plan and stick to it. A spending plan (a.k.a. budget) helps you control and manage your personal finances. Set a budget for your expenses based on the list you made in steps 2 and 3 . But before anything else, set a budget for your monthly savings. Remember to always pay yourself first. Start with a manageable figure, say 5% of your income, and gradually increase it once you get the hang out of saving. Building wealth doesn’t mean you will have to eat instant noodles the rest of your life so set aside a little amount for leisure activities and for buying some “nice to haves.” A budget will be useless if you don’t stick to it. Make every effort to stay within your budget and do not overspend.
The road to financial stability and wealth is not an easy one. Learning to spend wisely will make your journey a little easier. Remember, almost everyone has the ability to become rich and the choices we make today will determine our financial health in the future. Make the right choice!