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One of the reasons I fell in love with our little home is the balcony near the master’s bedroom. I am so much of a garden-sky-fresh air person. Plants, birds, quiet moments under the night or early morning sky relax and reinvigorate my soul. I have little sketches in my mind of how my little patch of heaven would look after I adorn it with orchids, little bonsai trees, lots of plants, perhaps those little water fountains that delightfully makes you feel you are in a fairy tale forest. Hmm. Visions of a little garden set where I can relax and perhaps type a blog post or two. Where I can unwind with the kids. It has been three months since we moved in. My terrace is still bare. There’s a quiet scream occasionally inside my head: you have money in the bank. Why not buy what you want? Then I quell the urge. That’s my emergency fund, and it’s still not enough. I need six months’ worth. Only when I have that stashed away will I consider setting aside some for the terrace. It’s empowering. Even deeply satisfying to know that now I can master those little voices inside me. I used to believe I was the worst spender in the world! Living on less when you can, postponing a purchase when you can, because you are trying to reach a certain financial goal, is a great way to feel good as a person. For now, I find other ways to relax. The little wild birds near my bedroom still chirp to my hearts’ desire and their songs are free.

Use it up, wear it out, make it do, or do without.

-- a common adage during the Great Depression, says this Washington Post article.

Later on this evening, you can catch me on Lucy Torres’ show, The Sweet Life (QTV 11), where we talked about how to live on a budget without going “losyang” as Lucy herself calls it. It was an interesting evening when we taped the show, as I had a front row seat watching fashionistas talk about how they have fallen prey to the urge to splurge (but have since learned their lessons). Giselle Sanchez, a schoolmate at UP Diliman, was as usual funny, smart and very much honest with her spending binges. She talked of how she ended up buying almost all of the bags in a Louis Vuitton shop in Italy (guess how much it cost her), because the snooty manager tried to boot her out of the store because he mistook her for a Filipina domestic helper. (You must watch the show to fully appreciate her effort—albeit costly—to defend Filipinas). This made me think about how much we spend on clothing (my weakness is clothing for my kids), bags, shoes, accessories, perfumes, mobile phones. Yes, the techie gadgets are as much a part of being in vogue these days, as clothes and shoes. Work places that require power dressing like media, show business, and anyone above vice-president level in a big company, needs suits, barongs, spiffy shoes—and these are all expensive. A New York Times article says there’s a new trend that allows fashionistas to respond to the call of the times by turning into “recessionistas” or recession-chic.

In an economic climate in which buying a handbag with a four- or five-digit price tag is starting to seem gauche, the free-spending style hounds formerly known as “fashionistas” are rebranding themselves. Consider the $1,235 patent-leather satchel with golden hardware designed by Anya Hindmarch. Mary Hall, a marketing manager at I.B.M. in Redondo Beach, Calif., heard its siren call. Then she went to Target to purchase a similarly shiny purse, made out of polyvinyl chloride, by the same designer. Price: $49.99. “In the current economy, I thought I would reform,” Ms. Hall said.”

Now, is this a money-smart move? Or is it falling prey to a marketing spin that makes you feel it is alright to spend because you’re after all spending just a portion of what you normally would? The article goes on to say:

In part, the word reflects the efforts of fashion and beauty publicists to spin the economic downturn as an attractive retail trend. For instance, Bourjois, a moderately priced makeup line from France, sent a recent press release by e-mail to reporters promoting the brand’s cheapest mascara and lip glosses as “the Recessionista Collection,” an antidote to gloom. An e-mail message sent last week on behalf of Salon Eliut Rivera in Manhattan promoted “Recessionista Beauty,” offering discounts on haircuts and eyebrow shaping.”

To me, there are no seasons for being money-smart. If you are used to buying what you need, looking for quality items that last long at a good price (hmm, just like Warren Buffett’s criteria for a good company to buy), whether you are in boom times or in a recession, you won’t have to adjust your spending habits. It’s when we are used to luxuries we cannot afford, perennially trying to keep up with someone that’s two notches above our income levels, when we find it hard to adjust to crunch times. Lately, I was going through my eldest sister’s office clothing she left with me when she and her family migrated to the United Kingdom earlier this year. I found suits and clothes she bought more than 10 years ago that still look good and haven’t gone out of style. Classic cut; good quality textile. They were pricey, I bet. Her taste dictated that. But for the items to last 10 years? That’s recession chic :-) If you feel like it’s time to try this new skill, here are some tips I found helpful:

1. Shop with friends who are like-minded. Frugality is now back in vogue! If it’s tough to schedule it, then phone-a-friend when you feel that you’re about to splurge!
2. Tune out advertising. Remember, what you see on television as “the good life” is almost always way out of line with reality.
3. Don’t give in to the siren song of easy credit. Swiping a card seems painless, but that’s just an illusion. You still have billing day to deal with.
4. You will NEVER run out of things to buy. Believe me! There will always be a sale, always be a pair of shoes, a bag or an outfit that’s jut perfect for you, your spouse or your children.
5. Always know how much you earn. It’s not bad to enjoy what you earn; what’s not right is wanting to spend what you haven’t yet earned.
6. If you feel that you can’t resist, don’t go inside malls or shops. In Makati, the best way to go to my office is through the Ayala mall walkways and buildings and buildings of eye candies. When I first walked through them without buying a single item, I was as pleased as a cat that has just finished a meal!

Photo courtesy of Aladdin Cordero I learned a few more things while preparing for my interview at ANC’s Shoptalk, as well during the show and would like to share them with you:

1. Use a budget. Makes you consciously think of what you put in your shopping carts. Write a shopping list.
2. If you must shop, go for frugal shopping hot spots. The psychological rewards of saying yes is the same whether you do it at Zara’s or Divisoria. (Read my previous post to to find a list of frugal shopping hotspots.)
3. Set aside a Christmas fund. In government finance, a sinking fund allows the government to set aside every month some money for future payments. We can do the same in our personal finances. A 12,000 budget for gifts and noche Buena every year for example will not be as heavy when you prepare for it by seting aside 1,000 a month from January to December.
4. Don’t forget the “hidden costs” of Christmas holidays, like contributions for company/church Christmas parties, Kris Kringles for children, etc.
5. The law of supply and demand in economics indicate that if you buy in January, you will get lower prices because demand is bound to drop. Not so, says Pia Hontiveros-Pagkalinawan, who is a self-confessed Divisoria shopper. She says apparently shop-owners have realized that children who get cash gifts during Christmas time go shopping in January!
6. Be a bulk customer: contact your company’s suppliers
7. Recycle gifts
8. Keep Christmas parties simple, go potluck!
9. Think of giving the gift of experience instead of toys
10. Don’t go overboard when buying toys. Some of the most expensive toys these days kill children’s imagination

Is there anything wrong with enjoying the spirit of the season that’s fast approaching? Of course not. We wouldn’t want people to think we are misers who are only concerned with the glint of money. There is nothing wrong with enjoying what we earn. But therein is the key—the words “what we have already earned.” We should be enjoying in moderation past income with some set aside for the future. But Filipinos have to stop enjoying future income, future bonuses, future salary increases. After all, what if these don’t come in? Then we have to live with the reality of bounced checks in January or missed credit card payments when the new year rolls in. Break the cycle by refusing to mindlessly spend. The psychology of spending is a topic that I have been studying for quite some time. Unless we face the deeper reasons why we get into debt come Christmas season—and even after—we cannot really get rid of these urges to splurge. The psychology of spending Drazen Prelec (associate professor of marketing at the Sloan School of Management) says that “people’s complex attitudes towards money defy economic theory.” For example, some buy lotto tickets and insurance at the same time. Buying lotto is risky behavior while insurance shows risk-averse behavior. I also find Prelec’s findings to be “fascinating glimpses into our own complex relationships with money.” He says we all have personal rules when it comes to money, rules that we think will keep us out of money trouble. For example “I never take a taxi unless in an emergency.” When we don’t live by the rules, we feel guilty. That’s what he calls a moral tax on consumption that interferes with the pleasures that we get from doing what we do. Marketers take advantage of these findings by offering freebies or bundled pricing, for example. At a cosmetic shop, for example, you get a free item if your purchases reach, say 5,000. So if your total purchase so far is 4,500, and the next item you like is 700, you add to your basket so you can get the free item. Makes you feel good about adding that extra item. Credit cards, he says, are “insidious” because they remove the pain of that moral tax, or make it appear that the pain is not there. That’s why when you pay with plastic, you tend to spend more than you budgeted for. Money and happiness In one study, a psychologist named Miriam Tatzel, PhD, of Empire State College, State University of New York, compared peoples' spending habits with their sense of well-being. Her study of 329 students examined what types of spenders are the happiest. She observed that there are generally four groups of people with different combinations of the trait frugality and materialistic.

1. First group: frugal and materialistic. They look for sales on high-price items.
2. Second group: not frugal and materialistic. Big spenders who rack up credit card debt to buy, buy, buy, and are the least happy.
3. Third group: frugal and not materialistic. Financial planner Melvin Esteban of Motivating Minds would most likely call people in this group “Ilokanong Intsik”, which is what he calls himself proudly ☺
4. Fourth group: Not frugal and not materialistic. People who pay little attention to prices and don’t care what others have. They are the happiest.

Any violent reactions? How “successful” are you? The psychology of spending can also revolve on how we define success. Jennifer Cuddy in this article makes a very important point:

From the mid 80's to the 21st century, consumers have fallen prey to cues created by socioeconomic standards of living by measuring what is deemed 'normal' against those whose incomes are far beyond their socioeconomic statuses. We measure ourselves by what we own, what we wear, where we live, how we spend our vacations, our choice of automobiles, and other material measures of success. And yet, the majority of us are still unsatisfied with what we have. When our income increases, we inevitably spend more money in order to match those whose income brackets are yet again, one, if not two, levels higher than our own. This creates a society consumed with materialism, and sets the stage for dangerous vulnerabilities associated with consumer debt. Constant, mounting debt forces the consumer to work longer hours, sacrificing their freedoms to a sort of enslavement to money. Meanwhile, corporations merge, monopolies are created, and profit margins that drive capitalists determine what is culture, simply by measuring what sells. This is further complicated if you are a parent, because not only does your self esteem rely on where you fit in the social strata, but your children measure their self esteems in similar ways. " If my friend, Johnny, has a cell phone, a computer, and attends private schools, why can't I?" Middle class parents send their children to unaffordable private schools out of fear that their children will not succeed. What results is enormous debt and related stressors due to debt. And it is debt that enslaves society to the mercy of their employers.

Understanding how or why we spend also means we have to look into how we react to advertisements and whether we fall prey to the contrived psychological triggers that marketers cook up to remove the rationality in our spending. These triggers don’t even have to be “materialistic” in nature. They may include such noble desires as wanting to please our children, our spouse, our relatives and friends. At the end of the day, there’s always a reason to spend if you want to find that reason. Taking control of your money will not happen by magic; it will require conscious choice, and an understanding of the complex relationships we have with money.

ADVISORY: Catch me live today on ANC’s Shoptalk with Pia Hontiveros-Pagkalinawan at 3 p.m. to 4 p.m. to talk about the psychology of spending (one of my uber-favorite topic) and how to hammer down your Christmas budget. We all know the urge to splurge bites everyone strongest during the Christmas holidays or as the colder months come near. But we also get little scratches and bites all year round! Just look at all the stuff (most of which are useless after a month) that we accumulate through the years! The best thing would be to control the urge, of course. The next best thing would be to shop in the right places. Lately, I have discovered new frugal shopping secrets in Metro Manila, but to my delight, somebody else has been thinking about the exact same thing. Blogger Paetechie/Tutubi, who owns the blog Budget Travel Philippines (among other blogs), practically read my mind when he emailed me yesterday about his blog post “Manila Shopping Guide and Tips: Divisoria, Malls, Markets and the Art of Haggling”. Drool, drool, drool! You’ll know where to find me most weekends from November 2008 to November 2009! :-D So here are some of the frugal shopping “secrets” I have discovered lately (thanks to my friend and shopping maven Kharoll Tobias), in addition to Tutubi’s list: Native, wooden, ceramic, porcelain gift items for Christmas, and even sushi platters – Dapitan St. in Manila. You won’t be able to find little gift items good enough for whole departments or a whole clan for P20 per piece in the malls and still be proud to give them away! But you’ll find them in this little stretch of street near the Dapitan market. There’s also a new “mall-type” enclave that you should also check out for items with better quality (but just a little bit pricier). Plus, if you like simple and cheap sushi platters to serve your guests, walk over to the Dapitan wet market. The rice used is not yummy Japanese rice, but for P60 per small pack and round P350 for a big platter, you can already impress your guest with your sushi creations. Quality wood furniture—Silang, Cavite on the way to Tagaytay. I have been asking around where to buy good quality furniture for my new home and found a series of little workshops on Silang, Cavite where you can buy solid Kamagong consoles, Acacia or Mahogany beds (and you can be sure the bottom will not break even if kids jump on the mattress), tables, chairs, quaint garden swings, you name it, for around ¼ of the price in malls. No reconstructed wood here, buddy! Pure furniture heaven. Beef—Tagaytay’s famous beef can be found at the Tagaytay wet market. At one point, my friend said they bought meat so fresh the flesh was still moving. Grab some pineapples while you are there because you will really find them cheap for P25 per piece, (these sell in Metro Manila for P35 to P40 per piece). Baby rompers, booties, flannel pieces for wrapping etc.—Tutuban mall. Prices here are surprisingly lower than 168 mall or Ylaya St. in Divisoria. There are more options, too, in terms of design and quality. Good quality rompers for P40 apiece beat Zara infant rompers that sell for P1,000+ per, and will be worn by the baby for only one or two months. (I admit, I was very tempted, but he, money-smarts has to be money-smarts!). Related blog posts:

1. Christmas shopping in September
2. Get your kikay fix without spending a fortune
3. Hidalgo: Gadget haven for the money-smart and fearless
4. Money-smart holiday gifts
5. Where to put your Christmas bonus?
6. Book shopper’s heaven
7. 15 tips to reduce Christmas debt hangovers

If you have more frugal shopping secret destinations, even in other cities, why don’t you let other money-smart readers know! :-)

The not-so-friendly bundle of grocery receipts have been winking at me for quite some time, so I finally got around to putting all the figures down into an Excel worksheet to make a Grocery Booklet—an exercise that reveal some pretty interesting lessons. Here are some of those lessons: From January to August, these items showed the biggest jump in prices: 1.    Condensed milk and other dairy products like cheese. If some stores are crazy enough to still have dairy products from China on their shelves and are selling them at bargains, I hope no one buys them just for the savings! 2.    Canned goods like sardines, tuna etc. 3.    Toothpaste, soap, and shampoo 4.    Olive and canola oil 5.    Bread 6.    Sugar 7.    Bacon 8.    Ready-made soup mixes 9.    Longanisa Where brand substitution can work: 1. dishwashing liquid 2. bathroom tissue 3. pride detergent (washing machine and all purpose) Most effective strategies for cutting corners: Avoid snack items, canned goods, use more tomato paste instead of real tomatoes when prices of tomatoes at the market go up, and make your own soup stocks. Those who want to have a copy of my Grocery Booklet can email me at lightdream (at) gmail (dot) com. In the booklet, you will find comparison prices of everything I have bought from the grocery since January. You can enhance it by inputting your own figures. I promise, it will make you squirm sometimes, but taking the time to jot everything down will be worth it. ☺

I’m intrigued by the phrase “scrimp and save.” It sounds so crunchy and delicious when it actually connotes discipline and sacrifice. :-p It made me think of how far people will go to save money. The genetic footprint, as well as cultural background, can impact this tendency greatly. For example, some people can skip lunch to save for something. Some can’t. While interviewing Jocelyn Sta. Ana, Bank of the Philippine Island’s vice-president for retail mortgage division, for my article “Goodbye easy home loan terms?” published in the Philippine Daily Inquirer today, she shared this amazing story about a friend and gave me permission to share it with you. Celyn says that her friend, who works for a well-known multilateral agency, decided with her musician husband to buy their own home. They were eligible for a loan, but their money-smarts told them to pay off everything in two years rather than opting for what most Filipinos go for –- the 10 to 15-year term. Some people might describe their strategy as “extreme personal finance.” For two years, Jollibee meals were luxuries. They consciously kept their Meralco bill at P800 per month. I’m guessing that means no airconditioning and lots of 10-watt-bulbs. “Our joke was that they used Christmas lights in their bathrooms,” Celyn said. The husband who did the grocery always had a plan before entering any store and he spends plenty of time comparison shopping. The wife didn’t buy make-up until the loan was fully paid. They were the brunt of all jokes, Celyn said. And yet the last laugh belonged to them. In two years, they paid off the loan and since then, they’ve been to at least one vacation overseas to celebrate. Do you think that’s too extreme? Or just a millionaire mindset? My eyes have been glued to my blog post on “How did you make your first million” since I uploaded it last week and the comments that it sparked from readers! Sixty comments so far and counting! Thank you so much for sharing your stories. You inspire and make people believe that crossing that one-million mark is possible even for ordinary people. And the great thing is it doesn’t have to be the final mark. Go, go millionaires!

Pacita U. Juan, owner of Figaro Coffee, said her secret to cutting her electric bill in half is the humble power strip. Admit it, its such a chore to unplug all devices. So, use the power strip with a switch. Even that telephone charger that hardly gets removed from the socket consumes power and your television set which is always turned on by remote may not be showing images on screen but still consuming electricity. Agree? Disagree?

UPDATE: Editor's note: Added video of Abby Sarmiento taken by INQUIRER.net business editor Ma. Salve Duplito. Filipinos spend too much on staying connected. When you don’t text, you’re not a good friend. When you don’t call, you’re a bad daughter. Husbands know full well the wrath of a woman untexted. These days, cutting costs will have to include taking a second look at alternatives to the high cost of getting connected. In our household, only my 7-year old and the toddler don’t incur costs. There are six mobile phones in our household (two for the hubby), a landline and a DSL service. This should be interesting for financial voyeurs . On a monthly basis, this is what we pay telcos : Hubby Line 1 – P1,800 (postpaid) Hubbly Line 2 - P3,000 (Blackberry service paid by employer) Salve – P2,500 (Blackberry service) Danielle – P240 Maid 1 – P60 Maid 2 – P150 DSL service – P2,727.27 Landline – P700 Total: P11,177.27 Annualized: P134,127.24 Less company support: P74,127.24 Ouch. To put expenses in proper perspective, annualize them. Multiply the daily cost of texting for prepaid plans, for example, and find out how much it would cost in a year. My daughter does not think a P20 unlimited texting fee is too much, until she realized she is actually spending P2,880 a year just to text. That’s deducted from her allowance, so she tries to be more careful. By the way, you can use this tip also for other expenses, like restaurant dinners, taxi rides – just about almost anything. If you eat out two times a week and spend P500 each time, you are spending P1,000 weekly, P4,000 monthly, and P48,000 annually. That's already tuition for Junior. Awareness is the first step in cutting down the cost of getting connected. These things are expensive. Trimming the down without losing the connection may be possible with some discipline. Use the landline more instead of texting. Try instant messenger and email instead of calling overseas. Skype works for many of my friends. Cut costs but stay connected. Hermits are lonely. For businesses that need to call overseas regularly, try VOIP phones. One of our editors in the office, Dennis Maliwanag, tried PLDT’s wireless landline. He’s P700 richer every month after he disconnected his landline service, with a new one that can also receive text messages. (Model: Feliza Cana, INQUIRER.net) Sweethearts and business partners Franco Mesina and Abby Sarmiento learned that staying glamorous with a small and hip mobile phone is not as good as being smart using their big portable landline. They have cut down business costs by getting a wireless landline and even bringing the clunky apparatus with them when they go to places as busy as the grocery. Here's a video I took of Sarmiento. Franco says Bayantel charges P699 for the wireless landline service (it an also send out and receive short text messages.) PLDT has a P600 per month service but limits the calls to 10 hours. After that, you pay P1 per minute. Franco and Abby runs a water purifying business and need to be on the go and yet accessible to their people. They swear the wireless landline has cut their telephone bill significantly. How about you? How much do you spend on getting connected? Annually?