Annie Villanueva
A lot of us nowadays are into making more money through the means of doing “on the side” because the “salary” doesn’t really fit most, if not all “obligations”, plus the extras we may have to satisfy our wants and other unnecessary things we have in our day-to-day basis.
But the real question is, will this suffice for our future? How do we protect, manage, or even grow it?
I’ve listed some Back to Basic Concepts which may help us be reminded of how money really works.
Save Before You Spend (% of Income)
Sounds difficult, isn’t it? But yes, this is the best way to go about it especially if your salary is the sole income source available for you to survive month after month.
But why save first? Simply put, after computing all the dues you need to pay most often than not saving is at the bottom of your list. Ironically, if you pay your debts and spend everything without saving a cent, you’ll end up with zero – nothing.
Robert Kiyosaki’s book, “Rich Dad Poor Dad” actually changed the way I think about managing my finances every payday. And yes, he’s 100% right that most people put off saving and treat it as an option because well they don’t have a choice – bills won’t pay itself. But think about it, every time you put off saving the more you lose yourself in the rat race.
So if you can manage, set aside even the smallest portion of your earnings. It doesn’t matter how small if you keep at it eventually it will grow. What’s important though is you start doing it until it becomes a habit.
You can try this with 5% of your net income (after taxes and other deductions), or higher, just make sure you’re doing it consistently.
52-Week Plan
What’s a 52-Week Plan? It’s a systematic list of saving for the entire year (1 year = 52 weeks) with the amount of your choice, increasing it on a weekly basis (Ex. doubling, tripling, increments).
Illustration (sample computation):
Week 1: 100PHP, Increments of 10PHP per week
| Week | Amount | Week | Amount | Week | Amount | Week | Amount |
| 1 | 100 | 14 | 230 | 27 | 360 | 40 | 490 |
| 2 | 110 | 15 | 240 | 28 | 370 | 41 | 500 |
| 3 | 120 | 16 | 250 | 29 | 380 | 42 | 510 |
| 4 | 130 | 17 | 260 | 30 | 390 | 43 | 520 |
| 5 | 140 | 18 | 270 | 31 | 400 | 44 | 530 |
| 6 | 150 | 19 | 280 | 32 | 410 | 45 | 540 |
| 7 | 160 | 20 | 290 | 33 | 420 | 46 | 550 |
| 8 | 170 | 21 | 300 | 34 | 430 | 47 | 560 |
| 9 | 180 | 22 | 310 | 35 | 440 | 48 | 570 |
| 10 | 190 | 23 | 320 | 36 | 450 | 49 | 580 |
| 11 | 200 | 24 | 330 | 37 | 460 | 50 | 590 |
| 12 | 210 | 25 | 340 | 38 | 470 | 51 | 600 |
| 13 | 220 | 26 | 350 | 39 | 480 | 52 | 610 |
*It will give you a total savings of 18,460PHP by the end of the 52nd week.
This way, you can monitor the growth of your money and see the progress you’re making from time to time. Note that this is not limited to the fixed amount you initially assigned to the plan, because the more amount you add, the more you will get by the end of the project.
Sounds exciting, right? Wait, there’s more! You may begin as soon as you set the target amount you want to reach! Doesn’t necessarily need to start on the first week of the year.
Only Buy What You Need (to buy or not to buy)
“Keep picking…” That’s what our mind always tells us, especially when you go to the grocery or makeup store, even when we’re just supposed to stroll and go window shopping inside the mall. Sounds familiar? Of course. Who doesn’t want to go shopping?
But come to think of it, do you really need everything that is in your shopping bag? Or are there some things that you just grabbed because they look cute, or because it’s on sale, a limited edition, or comes with a freebie?
Will you be using it in your day to day, or will it just add up to the mountain of stuff you have in your room, closet, or garage? Perhaps you will just throw it out once you realize that you don’t really need it or it does not suit you at all. Then you tend to ask why you even bother to buy it in the first place!
Think long and hard. Distinguish between a need and a want. These are tips I have learned. Think before you get something that in the end might not be worth a penny to you. Even better is to make a list of things you really need before going out, so you can set your mind into buying what you need and what’s within your budget.
Always remember to remind yourself about needs versus wants, and that the less you spend the less trash you’ll produce. As a bonus, you’ll be doing mother earth a favour.
It’s Not How Big You Earn, But How Big You Save
A common mindset most of us have is that you can only start saving once you’re earning a big salary. But I believe that is 100% not true based on my personal experience.
Before I was earning more than I need every payday, you can say I have extra cash all the time but that is not the case. I was never able to save enough and money basically just comes and goes. Why? What held me back?
Honestly, I overlooked the importance of setting aside money when I was earning that much. I was under the impression that I will always have a “continuous” inflow of cash to my bank account and in my pocket.
Little did I know that when I got tired of my routine and decided to leave and look for another job which pays less than what I was previously earning. It was too late for me then to realize that I should’ve taken advantage of the situation where I was more than able to save more.
I learned it the hard way. Regret always comes at the end, my friend.
Saving is an important decision that every person must make when it comes to managing their finances. It can be a huge buffer against unexpected situations like emergencies. You can count on it when money is tight rather than depend on other people or get a loan from a bank or worse settle for a high-interest informal loan such as the famous Bombay with their 5/6 loan schemes.
Although, I’m not saying borrowing money is bad. What I want to say is that it doesn’t need to be your only option when the going gets tough.
Assets Versus Liabilities
Is this Accounting 101? No, unfortunately not. What people need to know is the basic concept of assets and liabilities, which primarily affects how you’ll be able to achieve financial freedom.
Assets are things that bring money while Liabilities are things that take money from you – that simple.
What are they? Assets are the things that bring money to your pocket. While Liabilities are the things that take away your money. It looks simple enough but sometimes it’s hard to distinguish a thing for what it is. For example, is a car an asset or a liability? I know most of you will answer asset because it’s a property that you can sell in the future.
I know most of you will answer asset because it’s a property that you can sell in the future. Wrong. It only becomes an asset when you can make money out of it and it brings monetary value more than the amount you spent on its purchase.
Say you bought the car for 400,000 but its use is only to ferry you from one location to another, that’s it. You don’t generate income from it at all. Then after 3-5 years, you decide to sell it because, well, money is scarce. Do you think you can sell it at the same amount you bought it? The simple answer is no because unlike real estate, a car’s value depreciates (lowers in value) over time.
Not to mention all the other expenses you have incurred all those years like maintenance, insurance, gasoline, parking fees etc. But if you use this car for your business, like in deliveries, rental, or registering it under Grab or Uber, then it would make sense to call it an asset. The money you earn from the above-mentioned will pay for any expenses you will incur for the car’s use. As well, you’ll earn extra money which you can add to your current savings or perhaps use to set up a business.
Money Has a Time Value
This principle is something that piqued my interest way back in my Finance class in College. We were once asked, “When is the best time to invest?” to which I answered “Now!”. Why do you think that is?
Well because money has a time value. What does this mean? It simply means that the sooner you start saving and investing, the bigger your returns will be and the lesser time you will have to wait for your money to grow.
If you’re scared to invest because you find it risky, then choose a doable investment scheme that you’re comfortable with. But if you still can’t decide, you can start by learning how the system work – read investments books, attend training/seminars, feed your mind non-stop on things you need to know to decide on the best investment for you.
Always remember that now is the only time you have to shape your future. The past has already happened, and the future is yet to come. So control what you can and the rest will follow.
Treat or Trick
Clearance Sale: All items must go!
Exciting, right? Clearance sale is always something to look forward to especially when it falls on a payday. But is it really worth your time, effort and money? Why do we always need to consider these things? Because all of them are indeed connected since the money you will spend to go to these clearance sales is equal to the effort and time you spent to earn that money.
I’d like to share an eye-opening video I’ve watched on Facebook about 15 Things Poor People Do That The Rich Don’t. One of them is, poor people buy clothes or products that are on SALE. Why is that? Is buying clothes on sale making us poor? No, in fact buying clothes you “need” during a sale is a good money decision. However, when you always buy clothes when there is a clearance sale, regardless if you need them is indeed a mentality of a poor person. For one, it speaks a lot about what you can afford – meaning not much. Second, it speaks a lot about your personality. When you always buy things you can’t afford when they’re at full price, it only means you want to appear like you have enough money to burn on expensive kinds of stuff, when in truth you can only afford them when they’re half price.
So think, and re-think. Are you treating or tricking yourself?
What is Your Net Worth
Net Worth is the amount by which assets exceed liabilities. In layman’s term, this is the value of everything you own minus all your debts.
Now, why is it important to know or at least be aware of your Net Worth?
Simply put, knowing your self-worth will help you value yourself enough so you can attract people and continuously improve. Same thing goes with your net worth which is something you may want to make sure is a positive net cash flow.
Improving it means more cash inflow (money-in) to your account that you can use to invest later on.
The more you value it, the more blessings will flow into your life.
Health is Wealth
This phrase is one of the many common things we use to hear from adults, especially our parents. How true is it though? How and why do they need to reiterate such a thing when health doesn’t earn a penny?
Here’s a simple answer to that. Health is wealth because when you are physically, emotionally, spiritually, socially healthy, all possible ways of earning will always be possible to you.
First in line would be your job. Of course, you can’t go to work if you’re not feeling well. It can be a simple headache, fever, or a toothache, which will surely affect your mood, enthusiasm, energy at work. You might just feel like going back to bed will be the best course of action after all.
It might be okay if your company has health care benefits (HMO) but what if they don’t? Who will shoulder the expenses for a consultation fee, medicines prescribed, and transportation? Not only that, we all know that there is a “No work, no pay” policy for some type of jobs especially for contractual employees. Good for you if you still have leave credits, but what if you’ve already used them all because you keep getting sick every now and then? How much will be left of your salary? Will it be enough to pay all your dues, buy food, and save?
It has an indirect effect on your income that can directly affect your budget and your survival until the next payday.
And if you’re in business, do you think anyone would like to deal with someone who can’t take care of himself much less a business? Not a chance.
Think about it. The best investment you can that you can start with is taking care of yourself.
What is Your Deepest “WHY”
The first time I heard this was from an MLM company I joined several years ago. Deepest WHY? So, what?
It hit me hard when I realized this was the same thing I was always thinking of every time I need to hit a target (grades, sales, metrics at work, etc.). This is actually what drives us to move forward in spite of the many challenges along the way. In short, Internal Motivation.
So, why do we need to know our deepest “WHY”? It is because we need something rock-solid to hold on to whenever our inner selves want to give up.
I always believe in the saying, “Bathing doesn’t last long, so as motivation. That’s why it’s recommended daily.”
How to Be a Budgetarian
Last but not the least is a brief list/summary of the things we might want to consider in properly handling our money.
- Save before you spend.
- Only buy what you need.
- Make a priority list for your dues.
- Save to invest.
- Monitor your spending habit.
Having the right mindset and applying these money principles consistently will greatly help you in achieving a better finance attitude. Always remember, “You can never have a positive life with a negative mind.”
