Breaking Even

It's a pity when your 15th and 30th salaries just come and go at the top of your palm. Better than broke, I daresay.

However, the thought of "just breaking even", without having to save for the future, should make every person uncomfortable, especially at a time when we hear that the economic recession is finally affecting the Philippines.

I am reposting a good article c/o Inquirer and Citibank, which gives us good practical points on how to save some out of our salaries:


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Q: I just turned 30 years old and realized I have been working for almost a decade and have little to show for it. I'm ashamed to say that I don't have much savings. Although I work, there doesn't seem to be enough left to set aside. What should I do?

A: Instead of waiting until there is money left after paying your bills and other expenses, do it the other way: Save first before spending a single peso from your take-home pay. This is what financial experts mean when they say “Pay yourself first.” It means treating savings as a bill which you have to prioritize over any other bill or expense. By doing this, you will be able to stash away money for your savings which would otherwise have been spent on something you think you need but actually can live without.

You may think it's easy to say but hard to do. The truth is, saving can be done by anyone. Here are five easy steps on how to build up your savings easily:

1. As soon as you receive your salary, take out a certain percentage, start with 5%, and put this in an envelope you will mark “Savings.” Live on what is left of your salary.

2. Do not touch your savings if funds are running low a few days before your next payday. Instead, adjust your spending so that your funds will be enough until payday.

3. Open a separate savings account in the bank and deposit the funds you have set aside in your “Savings” envelope.

4. Deposit to your savings account every payday to ensure that the money earmarked for your savings will not be spent.

5. Once you have built up your savings a little bit, transfer some of it to a time deposit so it can earn a higher rate of interest. Later on, you can also move some of your funds to a mutual fund or unit investment trust fund so it can possibly earn even more interest. These investments have a risk attached to them, so discuss first with the bank or financial advisor if these are right for you.

One other important thing to do is to make a budget or spending plan. Write your projected income and expenses and see where you can cut down on spending. For instance, look at how you spend for your lunch every day. If you regularly buy food, think of bringing baon lunch to work. The excess funds freed (maybe about P500 a month) may then be added to your savings.

What can you use your savings for? It can be money for your retirement. You might think that at 30, retirement is so far away. However, saving for it now can make your money grow faster for you even if you put in only a small amount of money regularly. It is due to compound interest, which lets your money earn interest on top of money that has already earned interest.

Your savings can also be your emergency fund. This should be equal to three to six months' (even more) worth of expenses, which should be helpful when sudden unforeseen events occur: a job loss, an illness, etcetera.

Savings is doable. Start today and keep at it for a long long time.

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