Woohoo! “Sweldo day is finally here. What to do? What to do? You're probably thinking, "I've got to pay for my bills!" Your credit card bills, phone bills, rent, utility bills, all of those. When you're done paying them and you realize that you have some more money left, you might think to try out that restaurant you saw on a friend's Instagram feed, or do a little shopping, or maybe even book a ticket to someplace because there's a seat sale.
Before you know it, your hard-earned money's all gone and you're left with just enough money to get through day by day until the next payday. When you're asked, "were you even able to save?", you think to yourself, "where'd all my money go?"
Does that sound familiar? You've been working for quite some time now yet you still find yourself in the same situation. You might’ve even asked yourself this: How will I get out of this cycle and finally start saving?
You're not alone. Majority of the Filipino people, regardless of salary/income, are stuck in that same cycle, but there's a way out of that! You have the power to take control of your finances and you can start right now.
Let me share with you five simple ways to get out of your money woes.
1. START A BUDGET AND MONITOR IT
The very first thing that you can do to break the paycheck-to-paycheck routine is by creating a budget and making sure that you follow it. This is basic. The good thing is, budgeting isn’t at all complicated! A simple formula that you can use (as I've mentioned in a previous blog) is this:
The Abundance Formula: Income (100%) - Tithes (10%) - Savings (20%) = Expenses (70%).
Your 10% and 20% are non-negotiable, untouchable, and sacred, it shouldn't go anywhere else other than on your tithes (the church) and on your savings respectively. As Warren Buffet said "Do not save what is left after spending but spend what is left after saving." I repeat, save first before you spend. A lot of people do it the other way around so they usually end up not having enough. Practice paying yourself first and learn how to live within your means (70%). If there's a part of your budget that you need to adjust, it should be on how you spend your 70%. That's why it's very important that you understand your spending habits. Where does the bulk of your money go? Track every expense - even the small ones. Create a list of your monthly expenses - your fixed expenses (bills, transportation, rent), flexible expenses and all other discretionary expenses and then compare them to your monthly income and find ways by which you can keep your expenditures within or below your 70%.
Again, let’s keep this simple, this is the order that your budget should follow: tithe - save - spend.
2. ELIMINATE UNNECESSARY EXPENSES
Now that you already know how to budget, it’s time to understand how you spend your 70%. Learn how to distinguish your needs from your wants. Think of the things that you can't live without and the ones that you can do away with. A simple way to assess your needs from your wants is by asking yourself "Purpose o porma?" Try this: think of the clothes that you buy, the restaurants you eat at, the mode of transportation that you take, the frequency of your travels, your postpaid plan, the coffee that you buy, your grocery list (if you even have one), the number of times that you go out to watch a movie -- are you really being practical about your spending or do you just ignore them and think to yourself, 'minsan lang naman' or 'maliit lang naman'. You'll be surprised how much the little here and there can add up and actually cost a lot.
One more tip: try self-improvement. What do I mean? Quit a vice. Not only will you be able to save money over the course of a year but you will also improve your health.
Last tip on eliminating unnecessary expenses, avoid going to SALES! The thing is, when you put yourself in a place where you will only be tempted to spend, the chances are you will just end up buying something that you don't really need. You'll start to rationalize that there's no harm done since you got it on sale but the truth is, you just spent on something that you don't really need in the first place.
Be wise with your spending. Learn how to live simply. Notice that the wealthiest people in the world are the simplest. If you wanna be wealthy start by spending wisely.
3. LOOK FOR OTHER SOURCES OF INCOME
This comes in when you really can't seem to fit all your responsibilities and lifestyle in your income. Kulang talaga? Now, if you really want to get out of your tight situation I dare you to stretch your earning capabilities. Start exploring ways to supplement your regular income. There are a lot of ways to get some extra money these days - especially online. You could try being a home based English Teacher, a Virtual Assistant, or a web developer. Try exploring UpWork or OnlineJobsPh for a wider selection of online freelance jobs. You may also try to offer your services at a cost. If you're into arts and crafts you can also try selling them online. Or you might want to consider getting into a part time teaching job. In case you want to try a part-time career in the Financial Industry you may also feel free to message me.
Whatever extra income you earn, make sure that you add it to your savings, or use it to pay off your bills. Make sure that as you earn more, you don't end up spending more - that would be pointless.
4. CREATE AN EMERGENCY FUND
Avoid having to spend beyond your budget by actually having a budget for emergencies. The formula is simple, you should have at least 3 to 6 months worth of your monthly income for your emergency funds. Please take note that your emergency fund is intended for unexpected expenses - not for an emergency shopping, or an emergency getaway.
Some of the things that we would like to prepare for are the following:
Building your emergency fund prepares you for all the unwanted uncertainties of life. It gives you a sense of security. Think of it as your buffer – something that softens the impact of any unpredicted situations, without resorting into debts nor touching your investments.
Here's a tip, treat your emergency fund as a regular expense item in your budget. By doing so you ensure that you are able to save a portion of your monthly income for emergencies instead of just spending every centavo frivolously.
5. FIND AN ACCOUNTABILITY PARTNER OR A FINANCIAL COACH
Successful people have one thing in common: a mentor. So if you really want to be successful in your financial life find someone who has more experience than you and ideally someone who’s already living the life that you want to live.
Your Financial Mentor should be someone who will walk with you on your journey towards Financial Independence. I recommend that you find someone whom you can trust, who will constantly encourage you and reminds you of your financial goals, who can share wisdom from previous financial mistakes, and someone who can be honest enough to correct you when you lose your way and celebrates with you for every milestone that you achieve.
It would also be great if you can get yourself to be part of a community or a group of investors. Investing will be made easier if you surround yourself with people who has the right money mindset so that they can also support you on your financial goals. Your real #financialgoal for now is to transform yourself from being a spender to an saver and then later on an investor.
Personally, I am blessed to have parents who taught me the value of saving and investing. Not only that, I am also part of an organization who really imbibes the life of simple living. As the famous saying goes, “Tell me who your friends are and I'll tell you who you are.” If you're determined to get your money mindset fixed start spending more time with the right crowd and ideally bring your friends along with you too! Wouldn't it be nice if you all made your journey to financial freedom together?
Ultimately, the decision to get out of the paycheck-to-paycheck cycle is in your hands. It’s up to you. It all depends on how big your desires are. Do you really want to get out of debt? To provide more for your family? To fulfill your dreams? To achieve your goals? To help more? To live and love more?
Again, it's your choice! The decision to live a happy and prosperous life is in your hands! The question is, what will you do if you knew exactly how to get there?
Let me leave you with this famous Filipino saying:
(If you want it something so badly, you’ll find a way, else, you’ll find excuses.)
If you have questions, clarifications, violent reactions (which I hope you don't), happy thoughts, or any message at all just feel free to comment below.
Happy sweldo day, friends!
P.S. Saving isn't your problem and you already want to start investing but you just don't know how? Feel free to attend our FREE Financial Literacy Class . To know more about it, click the button below.
About the Author
Chai Santiago is a graduate of Manufacturing Engineering and Management from De La Salle University who later on found her passion and purpose in the Financial Education industry. She is a Certified Financial Educator® (CFEd®) under Heartland Institute of Financial Education (HIFE) and a Financial Coach at International Marketing Group (IMG).