If financial peace of mind is one of your New Year’s resolutions, we’ve got good news and bad news: savings-wise, your first P150,000 is going to be the hardest—you’ll be starting from scratch, so expect it to be an uphill climb. On the flip side, the best time to build your bank account is while you’re young, a time of (relatively) fewer responsibilities and (hopefully) better health. So if you’re going to take the plunge, the time is now.
When you've set your sights on a tall order like this, the fact is, something's got to give. "You certainly have to change the way you spend money," says Henry Ong, a registered financial planner. "The change need not be abrupt. You can start by reducing slowly." No one's asking you to live like a hermit, but it won't kill you to curb beers with the boys from every week to once a month. "A change in lifestyle is a change in cost. Magkasama iyon," agrees Rienzie Biolena, chief financial planner of Wealth Arki.
Your goal is to save P12,500 a month to come up with P150,000 by March 2018. If you're mighty determined to get it done by December, you can make up for the the P25,000 you should have set aside in January and February by letting go of some more luho not mentioned in the sample table below or seeking out other earning opportunities outside of your regular work. These are the things that cost you approximately the same amount every month:
Visualize your goal.
"You should have that mindset where you know all your goals. If you plot them on a timeline, mas mai-inspire ka. It puts everything into context," says Biolena, who says your goals should subscribe to the SMART criteria (specific, measurable, attainable, realistic, and time-bound).
Why are you saving P150,000 in the first place? Write that goal down somewhere you can see every day; it will motivate you to give up your dark mocha drink for the day. Try one of these goals, which are all within or below the P150,000 range:
Invest. Or even better, become an entrepreneur.
"Always remember the long-term benefits: The savings you will make in the end will enable you to grow it by investing it for passive income," says Ong. More specifically, Biolena suggests matching each one of your money milestones with a financial instrument.
Your 13th month pay, for instance, isn’t for Christmas gifts or impressing a girl—it’s for investment. You may use it to open a time deposit account—which earns you a pitiful interest rate of one percent or so annually. Or you could get into the riskier stocks, bonds, and mutual funds.
While you’re at it, why don’t you get another job...as an entrepreneur? Start off by reading How I Made My First Million by financial guru Chinkee Tan or youngest Pinoy billionaire Injap Sia's book Life Lessons by Injap Sia. Now assess your skills. Can you be an online entrepreneur? Or how about renting a booth at one of the weekend markets all over Manila? If you can earn at least P12,500 in profit from this weekend gig, you can use your regular income any way you want.
We say again: Find a side hustle
Depending on what you make, that P12,500 a month is steeper for some than others. "You can decide to save whatever amount you can afford, and you can try to fill the balance up by looking for other sources of income," says Ong.
Routinely sell stuff you don't need online (OLX.ph even lets you put up an ad for free). Run a small business from home (Tackthis helps you build a storefront online, complete with payment assistance. It’ll be way cheaper than a brick-and-mortar store). Freelance where you can (GetCRAFT is a content marketplace that matches agencies and brands to freelance writers, photographers, graphic artists, etc.).
"It's not just about managing expenses, but increasing your income," says Biolena. "You need to leverage on your skills and passion."
Consider your income yearly, not annually.
"The technique is, look at your cash flow on an annual level, not a per-month basis," advises Biolena. That way, you won't be so cavalier with your 13th month pay—some companies offer up to a 16th month bonus, if you're lucky—and can resist the urge to splurge. "If you only look at your income and expense monthly, then the tendency is you think of those bonuses as extra money. But that extra months' pay is what we can use as a budget for your goals."
What did you do with last December’s bonuses? Hopefully you put some amount in the bank; and hopefully it’s still there now, earning interest slowly but surely.
Keep a record of all your spending
"Make a budget of your daily expenses for the month. Make that your guide," suggests Ong. You don't necessarily have to live and die by that plan—think of it more as a tool that shines a light on where you're hemorraging money. There’s no reality check quite like a pile of the receipts that have been burning a hole in your wallet. "By end of the month, compare what you [have] spent with what you budgeted, and analyze where you made the most variance, and try to correct that in the following month," says Ong.
Go in with eyes wide open and know what you’re capable of financially.
Think before you commit to an undertaking of this scale: Biolena says that until you have the necessities any self-respecting grown-up already should—like an insurance policy, or a six-month rainy-day fund—you may be biting off more than you can chew.
Say you’re earning P35,000 monthly. Fifteen percent of that—P5,250—goes to tax. About P2,500 goes to employee benefits, which leaves you with P13,625 every two weeks. On top of paying for bills and necessities such as food and transportation, can you afford to save P150,000 by the end of the year? Better to consider everything now and adjusting your financial goal before hating yourself for not reaching your original goal later on.
Stop taking out loans. (Or at least, be a smart borrower.)
First, pay your credit card bills in full and on time. Some credit card companies, for example, charge 6 percent of your past due amount every due date. If you pay just the minimum amount due every month, that’s like throwing away P1,000 monthly (an amount that increases as your unpaid balance increases).
Second, enough with the 5-6 loan sharks; you lose at least 20 percent to interest rates there. If you absolutely have to take out a loan, consider the interest rates, how long you have to pay, and if your cash flow will still be solid if you have to add paying back your loan.
Capitalize on liquidity events
Once you're finally finished paying off your first car or your credit card debt, you'll know it: All of a sudden it's like this pile of money just landed on your lap! But freeing up some income isn't carte blanche to go on a spending spree for a new pair of Yeezys. It's not spare change; it's put to better use to "help with saving goals na hindi mo pa kayang pondohan," says Biolena. "It's all about priorities. You have to structure your money in such a way that prioritizes your goal." Think of it this way: You've survived without that extra cash until now, so you can to go without a little longer.
To help you control your spending, simplify your life and purge whatever material possessions you don’t need. Do a Marie Kondo (your girl will know how). Once you’re used to having less, you won’t feel much urge to add to your junk at home when you can afford to.
Illustrations Louis Arenas