“If we command our wealth, we shall be rich and free. If our wealth commands us, we are poor indeed.” – Edmund Burke, Irish statesman and philosophical founder of modern conservatism
Last 2018, the National Economic and Development Authority (NEDA) reported that a Filipino family of five can survive with a PhP10,000 monthly budget and expectedly, it drove social media nuts, with most saying that it was far from reality. PhP10,00 or PhP100,000, one thing is true. A portion of that monthly budget should be set aside and should go into savings (and also investments). In this article, I’m not here to determine the perfect budget for an average Filipino family. What I will discuss is why we have to save and develop a simple guide to successfully do it.
I’m sure we can recognize the good things that saving brings to our personal lives. Mainly as a safety cushion for life’s emergencies or as a way to fund the things that we want for ourselves like those latest electronic gadgets you’ve been wanting to have or that dream vacation abroad you’ve been planning for months or anything really that makes you happy — saving can give that to you.
But the sad fact is, even though we are aware of these things, a lot of us are still not doing it. Life is unpredictable and so living a life without savings is like waging an ongoing war without ammunition. You’re not prepared for when even the simplest of emergencies arise and that nagging feeling sucks.
However, I understand it can be quite difficult to save anything when you’re so busy making sure your family is well-provided with the household’s day-to-day needs. On top of that, there’s also the need for the children’s education, or paying off the mortgage, car loan, and the monthly utility bills. True enough, it’s hard to sustain a family’s needs and wants but that doesn’t mean it’s unattainable.
When it comes to savings as a family, it really depends on a lot of factors – your current financial situation, how many heads there are, how many are contributing to the family income so there’s no one-size-fits-all amount wherein we can say that you’ve saved up enough and that your family is set for life.
Nonetheless, just like with personal finance, the first goal should be to gain knowledge of your spending habits. As you all know, the formula for saving ideally is income minus savings then expenses. If you’re reading this, there’s a good chance you’re doing the opposite which is income minus expenses then savings and if you do, it is then important that you track your expenses and see to it that your expenses do not gobble up your income.
Once you have a clear understanding of your spending habits, the crucial part steps in — building the habit of saving. You can make a reasonable budget around your family income and make sure that you prioritize the things that your family needs over the wants.
This is also the time for you to make a conscious effort to curb your bad spending habits. As with any other habit, in savings, consistency is the key. Building your emergency fund should be one of your top priorities. It makes sure that when emergencies like job loss, an injury, accident or a health problem strike you, you’re not financially incapacitated.
Now I understand that as a family, you have goals in the long term. You might want to own a house or renovate the one that you have, retire early, purchase or upgrade a car, or go on a family vacation. When it comes to these sorts of things, you have to take a step back and really weigh whether your income can support such goals without sacrificing your ability to save. This is why you need to come up with a financial plan that should be developed with your financial situation taken into consideration. It’s a heavy financial decision to make so discussing it with a Registered Financial Consultant might be the best way to turn these financial dreams into a reality.
As heads of the households, we just want what’s best for our families, but with all the things that life throws at us, there’s only one thing we could do and that is to prepare. Preparing a sound financial plan and saving for certain funds help us be prepared. As you will learn in our future discussions, saving is simply not enough and we should aim to increase what you already have in your hands. To do that, investment vehicles are simply just another way for you to grow your money. Dear reader, stay tuned for our next articles because we will help you make your way to investing and eventually make your money work for you.
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Disclaimer: We want to remind you, dear reader, that the content in this column is my opinion and AlphaEdge Research’s opinion only and should not be construed as investment advice because we’re not your financial adviser nor have we taken into consideration your personal objectives, financial situation, needs or circumstances as your fiduciary. This column is mainly for your entertainment and education only.