(Photo from AFP)
INQUIRER.net’s personal finance offering for the day has a quote that needs to be given the limelight as often as possible:
Some people reason out that with their meager income, they can’t afford to save. But the reality is, no one can afford not to save.
I realize that there are different successful strokes for different folks when it comes to savings. I am not anal with tracking expenses (just like All Financial Matters and he said it so nicely hehe) so jotting down each expense in a worksheet doesn’t work for me also. For others, that’s the only way they can save regularly.
The single most important tip I have heard so far on saving wisely is automating your savings. I was interviewing a newly wed couple last weekend and their eyes just lit up when I told them about automating savings.
It’s no big surprise why people like this tip. Budgeting is such a painful experience. Shopping on the other hand is bliss! So, the best way to save is not to let that money pass through your fingers. Automate your savings, and spend what remains the way you want to spend it! Simple, quick and easy.
How do you automate your savings? Let me count the ways.
- 1. Set up a separate bank account (passbook only) and write yourself a check for 12 months to the tune of whatever amount of savings you target monthly. Every payday works too. Treat this check as your most important “billing” for the month, second to tithes.2. Set up a separate bank account and program your payroll account to transfer a set amount to that separate bank account regularly, monthly. My checking account with Philippine Savings Bank has this feature. Many other banks already have this service also. If your bank doesn’t, maybe it’s time to switch!
3. Some mutual funds, unit investment trust funds, and variable unit-linked products also allow payroll deductions. This is another option.
For this to work, however, credit card debt and other high interest debt should be at a minimum. No use saving when you’re paying high interest on consumer debt.
Say this with me: no one can afford NOT to save.
Saving automatically will allow you to enjoy what you have. Shop, spend, eat with gusto, because you have already taken care of saving for tomorrow. Compare that with trying to track each little expense and scraping savings from the bottom. Nope, not for me. I like my steak eaten with a smile ☺
January 31st, 2008 at 2:24 pm
I agree with the wisdom of savings. However, savings alone does not guarantee to meet your financial requirements in long term. Savings may be good for short term in case of immediate energy needs like hospitalization bills and other unexpected expenses come along your way.
Savings in a longer period apparently does not guarantee financial prosperity as the purchasing power of money saved over that period could be deminished. Like for example in my case. I saved PHP 500 thousand 5 years ago. The purchasing power of that amount is already decreased to PHP 250,000 as it was depreciated by inflationary factors occured over the longer period. One typical example was that 5 years ago you can a 1 bedroom condo unit for SAR 500 thousand in cash. At present, a 1 bedroom condo unit may cost you about SAR 1.5M to buy in cash. Remember always time is of the essence. The value of your money may change anytime. The Peso now may cost 0.50 after a year much so with the other foreign currencies like dollar.
A prudent way to catch up with inflationery cost and to avoid the depreciation of your savings now is to invest it to any income generating assets. In this way you can offset the inflationery cost as the years go by vis-a-vis with the appreciation of the assets.
Lastly, Savings is good in a short term, however, investing in income generating assets can do more.
January 31st, 2008 at 2:18 pm
I agree with the wisdom of savings. However, savings alone does not guarantee to meet your financial requirements in long term. Savings may be good for short term in case of immediate energy needs like hospitalization bill other unexpected expenses come along your way.
Savings in a longer period apparently does not guarantee financial prosperity as the purchasing power of money saved over that period could be deminished. Like for example in my case. I saved PHP 500 thousand 5 years ago. The purchasing power of that amount is already decreased to PHP 250,000 as it was depreciated by inflationary factors occured over the longer period. One typical example was that 5 years ago you can a 1 bedroom condo unit for SAR 500 thousand cash. At present, a 1 bedroom condo may cost you about SAR 1.5M to buy in cash. Remember always time is of the essence. The value of your money may change anytime. The Peso now may cost 0.50 after a year or so much so with the other foreign currencies like dollar.
A prudent way to catch up with inflationery cost and to avoid the depreciation of your savings now is to invest it to any income generating assets. In this way you can offset the inflationery cost as the years go by vis-a-vis with the appreciation of the assets.
Lastly, Savings is good in a short term, however, investing in income generating assets is the key to financial freedom and prosperity.
January 31st, 2008 at 10:19 am
if you desire to make a difference someday, 1 must have to start saving NOW. Start early .. if you are in highschool, P200 a month will be P2400 a year. Am sure your ninongs and ninangs can add to it
.. same if you are in college … the more you should save … bawas bawasan ang pagtetext and computer games and chat 
P500 a month would make P6000 a year. No need to wait when one is working if you can have it for free (LOL), and if you’re working? hehehehe wala ng palusot with what Salve mentioned.
Some would even talked with their employer to deduct an amount greater than their witholding tax for savings.
It would even be better when a couple is into it like JerseyGirl.
Saving P1000 a month will make P12000 a year … P36000 in 3 years. WOW!
It is a slow process indeed but a sure one, and while saving … open your mind to oppurtunities where you can invest the money you saved since THAT should be the reason you are saving in the first place. B4 investing, it would be nice to get ideas or cosult from columns like this ….. maybe Salve would help
Good Luck to us all
January 31st, 2008 at 9:44 am
omski, i think you are right. most people just don’t know what options are open to them. the company i used to work for, for example, had this plan. i worked there for five years and i never remembered making the time to understand it and taking advantage of it. when i left, it was all a blur so now i wonder if i would have gotten more from that plan. good topic for a future post.
January 31st, 2008 at 9:39 am
owlman, then you belong to a very small, but lucky portion of the global population! can i have just one drop of your genetic code?!! haha