BY: BORDI JAEN
A FEW years ago, I downloaded an e-book copy of “The Richest Man in Babylon”. The premise was of two friends who both came from humble beginnings and started out relatively even in life. However, one became the richest man in Babylon while the other is, well, an ordinary man.
The book was about the advice of the rich man to his friend, so that he might grow rich, too.
In financial management class, we were taught advice that would help us manage our money better and in simple, mathematical terms, it was: “Income – Savings = Expenses”.
I like this concept greatly and remembered the e-book that I had read because a passage in the e-book and the equation mention fundamentally the same concept about saving money: pay yourself first.
To paraphrase a line from the richest man in Babylon, we pay the merchants for our goods, we pay the government taxes, we pay MORE for our electricity, but why do we not pay ourselves, too?
It seems farfetched and ridiculous, this concept of paying ourselves first. But what does the equation really suggest?
Simple: that we budget our income (or baon) to allot for savings and necessities before splurging. The problem is most people follow a different equation, which is “Income – Expenses = Savings and too often that is what society insinuates. The problem is that this equation leaves room for impulsive spending, because in that equation, savings is more of an afterthought than a concern.
What a trifle is impulsive spending too! Little drops of water fall, they turn into an ocean slowly. Little 20s, 50s and 100s, they, too, balloon into the thousands! I do not insinuate that people live like paupers and spend little to satiate themselves, but too often are people finding unexpected expenses to be especially painful. You’ll be happy to have it when you need it.
Savings is like fire insurance. Will you get fire insurance when your house is already on fire?
Impulsive spending is especially on the rise now because spending is much easier than before. We have credit/debit cards, buy now pay Later, online payments, and on and on. Some of these have their merits of making transactions easier but the speed at which they are being done is so convenient that people often do not think twice before spending.
A good way to deter this is to use these modes of payment only in necessary circumstances and pay in cold, hard cash (studies show that physically handing out money is actually mentally painful).
Not all the things that you think you buy to make you happy really do make you happy. That’s the magic of 21st century advertising companies make you believe: that their product is a key to happiness. They are sell an illusion, a mere distraction. Just because something is on sale doesn’t also mean it’s also good.
I’ve heard of a lot of people trying to justify bad expenses by saying, “but it was on sale!” Trying to quell buyer’s remorse, I suppose. If a 100-peso item was on sale for 90 pesos, you don’t save 10 pesos, you spend 90 pesos. As Chiz Escudero put it clearly, “If it’s on sale but I don’t need it, it’s still expensive”.
It isn’t easy to start saving for the long term. It takes discipline, patience and dedication. Some people characterize a frugal person as a person who barely spends money, but that is wrong, that is a miser (of which the word, “miserable” is related to).
I prefer frugal to be the term for someone who knows how to stretch a good peso or make the most value out of it. Frugal people know when to spend.
Let’s not treat saving like a fad diet that we do when we remember and stop when we get tired. It must be consistent to be truly effective and make a difference in our lives.
After all, everyone can do better with a little more money because we’re at our calmest with financial security./PN
