Practical Tips for OFWs - Spend Wisely to Build Wealth
SPEND WISELY TO BUILD WEALTH By: Alvin T. Tabañag, RFP®
We hear it all the time. Filipinos complaining that they are unable
to save because their income is barely enough to provide for the needs
of their families. In fact, many grumble that they are neck-deep in
debt. We have also heard of stories about seemingly ‘rich’
people who have 6-digit monthly earnings, nice, big houses and flashy
cars yet are in a financial mess just like many of our poor kababayans.
This just goes to show that anyone can be broke at any income level.
On the flipside of this sad reality is an encouraging fact; that
almost everyone has the ability to become wealthy or at least financially
stable, even the low-salary, ordinary employees. Unfortunately, only
a few have the discipline and dedication to actually go for it. Majority
of Filipinos have very poor spending habits and seem to have been
programmed to spend & spend. They need to break out of this habit
in order to start saving, which is the foundation for building wealth.
Without any savings there’s no way that you can become rich
or even financially stable.
Filipinos are so used to living from payday to payday that they have
become quite “skilled” in spending all the money that
gets into their hands even if they don’t need to. The huge billboards
along EDSA, enticing print ads & the cool commercials with catchy
tunes on TV and radio aggravate this culture of careless spending.
One newspaper ad even elevated splurging to a divine act. It is no
wonder then that people spend first before saving anything. This is
a recipe that can lead to financial disaster. Almost always there’s
too little or nothing is left to save after making all those payments
and purchases.
There’s no magic formula for having enough money to save, only
one simple solution: spend less than what you earn. In an environment
that encourages spending this is easier said than done. Nowadays,
it’s even possible to spend more than what you earn with that
“plastic” inside your wallet. If you do not keep your
expenses from going through the roof, not only will you have zero
savings, that scuttles any chance of you getting rich, but you could
soon find yourself in a debt hole that’s very difficult to escape
from. Fortunately, there are practical & “common sense”
measures you can take to help you control your expenses and start
living beneath your means.
First, take a long, hard look at your current lifestyle. Many people
have a lifestyle that they really can’t afford. Many supposedly
“rich” people have become a financial wreck because of
their extravagant lifestyle. If you regularly find yourself unable
to make ends meet or you’re sinking deeper and deeper into debt
despite a big income, a change to a more modest lifestyle may be necessary.
Often it will just take little changes to get you on the path to financial
stability.
Second, know what you are spending on. You can’t manage what
you don’t know. Try to list down your expenses for the past
2 months. If you can’t accurately recall them you need to keep
track of your daily expenses for the next one or two months to give
you a good idea of where your money is going. Every day record every
expense you make including even the small items like candies, sticks
of cigarettes and jeepney or bus fare. At the end of one month examine
your list. You will probably be surprised or shocked to find out that
you are spending way too much on things you can do without.
Third, cut down or eliminate unnecessary expenses and you’ll
have instant money available for savings. Smoking a pack of cigarettes
a day may not seem to cost very much. But it would add up to about
P1.2 million in 30 years if you save & invest the money. Do you
really need a daily dose of high-priced cappuccino? Cut in half your
craving for it and you’ll be more than a million pesos richer
30 years into the future. There are many other things you can live
without: alcohol, drugs, designer wear, excessive chatting, gaming
& texting, all forms of gambling, expensive hobbies, etc. Do your
health and your pocket a big favor by getting rid of these.
Fourth, create a budget and stick to it. A budget helps you control
and manage your personal finances. From the list you made categorize
your expenses and allocate a reasonable amount for each category.
But before anything else make a budget for your monthly savings. Start
with a manageable figure, say 5% of your income, and gradually increase
it once you get the hang out of saving. Building wealth doesn’t
mean you will have to be a miser the rest of your life so set aside
a little amount for leisure activities and some “nice to haves.”
A budget will be useless if you don’t stick to it. Make every
effort to stay within your budget and do not overspend.
The road to financial stability and wealth is not an easy one. Learning
to spend wisely will make your journey a little easier. Remember,
almost everyone has the ability to become rich and the choices we
make today will determine our financial health in the future. Make
the right choice!
Alvin T. Tabañag is a registered financial planner and a member
of the RFP Institute and the Financial Planning Association (USA).
He is the founder and training director of Advantage Plus Consultancy
& Training, which is dedicated to promoting a culture of savings
among Filipinos through financial education. Comments & questions
about the article and other queries maybe emailed to info@pinoysmartsavers.com
or alvintabz@yahoo.com.
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