(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 ☺
February 1st, 2008 at 7:59 am
hi jersey girl, thank you SO much for sharing your experiences. i’m pretty sure they will enlighten many couples who read this blog. those who are reading this may email this to your friends and family, just please add a link back to moneysmarts
so they won’t think you cooked these up.
it’s so amazing what you have accomplished so far because changing behavior is the most difficult part of personal finance. most of the times, people already know the principles of saving, but actually doing it is the real difficulty.
here’s another tip for you: if you are having another baby, breastfeed! avoid the bottle during the first two months, nurse the baby anytime he wants to establish your milk supply. it’s tough but the savings in dollars is really huge, not to mention you don’t have to spend on bottles, time and money to sterilize them, less expenses for doctor visits because breastfed babies are less sickly. but the biggest benefit is the bonding time and emotional health of those who are nursed by their moms. i know by experience
all the best to you, dear.
February 1st, 2008 at 7:52 am
I am always inspired by the movie featuring the life of the Old Testament bibilical figure Joseph. He interpreted the Pharaoh’s dream which is the 7 years plenty and 7 years famine. During the 7 years plenty, Joseph, the governor, saved Egypt’s harvest which eventually was able to feed ALL of the people of Egypt when the 7 years famine came…. That’s the biblical wisdom that I also used to convince my husband. You never know what may happen in the future. The past 3 years, there have been yearly layoffs in the casino where he works - and it’s always a blessing that the company is still keeping him - hopefully until he retires! This possible layoff and the effect of this on us his family always hangs over his head - I made him realize that he may also lose his job later on, we never know (Oh God forbid!). So it will be a big, big regret if we are not able to save anything! So I made him use his foresight that will definitely help us in the future…. I always read about saving an emergency fund equivalent to 6 months paycheck — although this is a long shot for me, it will be better to save little by little that in due time - I figured in about 5-7 years, will definitely accumulate equivalent to that 6 months paycheck - just like the coins saved in a jar — pag binilang mo na later on, magugulat ka na lang, thousands na pala ang amount nya! (I also learned this from my mother - she saved her 5 pesos coin — nung napuno na yung jar nya, naka 3,000 pesos sya!!!)
Also as a couple, we just live simply — am simpler than him kse when I began having kids hindi na ako yung shop ng shop (kya I avoid the malls as much as possible). I just shop when it is really needed. My husband is the one who buys and buys - but I always remind him between NEEDS and WANTS — kya dapat isa sa amin should always push and maintain the saving part coz if not, we esp the kids will suffer if both of us will always spend and spend and be careless financially. Here are some of the saving tips we do: we buy some stuff by bulk from a warehouse club and we use coupons esp for diapers and formula; my husband does the oil change for the car and sometimes the car wash weather permitting, we try our best to stick to our weekly budget. We don’t mind accepting hand me down clothes esp. for the kids, they outgrow them easily anyway (and these clothes saved us a lot — it’s very expensive here in the US, you know). They receive new clothes as gifts from relatives anyway. I only buy new clothes for them occasionally, sometimes clearance items that are nice! I really think so many times before buying. Last Christmas, I only bought each kid 1-2 toys - they received toys from relatives anyway and kids easily lose interest in them. These are just some ways we try to save…
Anyway, yes as a couple, although it is complicated and always a challenge, saving still works for us.
February 1st, 2008 at 5:19 am
It’s job circumstance that made me convince my husband. Yearly, my husband, a casino dealer, has to spend 2 weeks forced vacation (one week at a time each on different month) and he is only paid company pay which is only about 1/4 of his weekly pay, 3/4 comes from tips therefore, a big loss of wages. We went through this situation for 3 years and it was hard paying the bills during the week that he won’t receive his pay (the vacation pay is paid lumpsum a week earlier but the following week he doesn’t get paid - that’s why I dread his vacation times!). My husband had to call his grandmother to help us out paying the bills during that week of vacation… Therefore, I used this situation and adamantly used it to convince him that we need to save for the week of his vacation (2x a year) that he won’t receive any pay plus the fact that I don’t want him always running to his grandmother for financial help - I want us to be financially independent because there will come a time that her help will not be available anymore when the time comes his grandmother will pass away (She’s 92 y/o now). And that I think convinced him to save…. plus the fact that he is saving now for a downpayment for the bigger house that he wanted to purchase in the future…. How we did it? My husband opened a savings account in a bank/credit union which is half hour drive from us - inconvenient for him to go to, also we are not carrying our ATM cards. They are put away so we won’t easily use them. The amount is automatically deducted from his pay, therefore it doesn’t pass our hands. Initially it was $25 per week - so that will be $100/month and we will come up with $1200/year. I told him $25 per week is like going to McDonalds for a meal which we can forgo… and then few months later we increased the savings to $50 - my husband increased his tax exemptions which increased his pay that gave room for the savings. My husband said instead of making the State save the money for us (we get bigger tax refund every year when the tax exemptions are lower), why not we just save the money ourselves which is more liquid, i.e, easier to access when the real immediate need arises… We were already able to withdraw once from the savings when we needed it while the savings still keeps on going without us really feeling it (i.e. hindi masakit sa bulsa ang bawas every week - as I said, perang di namin namamalayan). So now we have an outstanding savings of about $1200 (this amount only coz as I said, we started low on the initial months and withdrew money once)… I read in other columns the advice of saving the lumpsum money that you will receive. This tax time, although lower this year bec of increased tax exemption we will still be receiving about $700 tax refund — we got 3 kids that’s why we got higher tax credit. Next year, it will be four, therefore, higher tax refund and more savings!!! Also, the US economic stimulus - tax rebate that will come in May - that will be $2100 for us — I am thinking of saving them, of course but my husband is already thinking of spending them for a plasma TV!!! I can live without the plasma TV but he can’t!!! Not to actually deprive ourselves of a little want, I will just strike a compromise with him - I will save half of it and he can spend the other half. As you said, Salve, shop, spend and eat while saving for tomorrow — striking 2 birds in one stone — we also want our steak (the best one - fillet mignon!) for our dinner too and eat them also with a big smile!!!…. When we have bigger savings, next one I will try is saving them through CDs para naman kumita kami from banks through interest earned!…. Happy saving everyone!!!
February 1st, 2008 at 1:39 am
Hi jersey girl,
How about sharing to us how you convinced your husband?
Nina
January 31st, 2008 at 3:02 pm
P3, you are right. what matters most is that people save regularly — not some one-off thing that will get constantly reduced by the more regular spending forays.