How to Save & Budget Wisely


saving1Practical Money Tips for Filipinos

How can you invest, if you do not have enough money to invest? Ipon muna!

Aside from acquiring knowledge, knowing how to save and budget wisely is one of the keys to smart investing. Failure to do this simple step properly might prevent you from investing regularly.

We have mentioned in our previous blogs that investing is a journey. (Read our top blogs here) If your chosen investment is the vehicle to get to your destination, saving and budgeting is the fuel that will keep it going.

The Saving Habit of Filipinos:

RECEIVE salary – SPEND salary = SAVE the leftover

Saving Habit of Filipinos "Receive Salary -Spend =Save the leftover

“I will start investing once I have extra money.” Sounds familiar? This is a common scenario once the salary is received. But after spending, more often than not, there won’t be any leftover and investing is put off until next month.

This was also Pong’s excuse as to why he started investing really late. (Read Pong’s story again here: the Social Cost of Investing). As we always teach everyone, the earlier you start investing, the more time your money can grow. But what makes it very difficult to start is because of the misguided saving habit we Filipinos got used to.

Unless you make saving a priority, it would be really difficult to start investing.

The Ideal Saving Habit:

RECEIVE salary – SAVE & INVEST = SPEND the leftover

Ideal Saving Habit

No matter how small, learn how to save a portion of your salary for the purpose of investing. You may have heard about the 10-20-70 principle before. To help you accomplish the ideal saving habit, we recommend that you do the same thing.

Upon receiving your salary, divide it accordingly: 10%, 20%, and 70%.

Take the 10% which you can save for your emergency fund, or for paying off debt. Or if you are religiously inclined, you can give it to where you receive your spiritual nourishment. This is what they call tithing.

Next, set aside the 20% for your savings and/or investments. Separate it immediately and deposit to a different bank account or into your investment.

No matter how small, keep on saving until you have enough to start investing. Did you know that you can start investing in the stock market for as little as P5000? (Click here to read our 5 easy steps)

Ideally, only 70% should go to expenses. The key to do this successfully is to prioritize your important expenses first like bills, utilities, grocery, and food items.

This might be very difficult to practice at first, since you got used to spending all your salary. It may mean adjusting your current lifestyle to accommodate your new investing habit. Do you really need to buy that Starbucks coffee or DVD?

If the 70% will not be enough to cover everything you need, you can be flexible in doing this just as long as you set aside even a small portion for your investment.

Remember, saving and investing for your future requires discipline. It is not easy, but this small act can make all the difference.

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Comments

  1. says

    May I just say what a relief to uncover somebody who
    really understands what they’re discussing over the internet. You certainly know how to bring an issue to light and make it important. More and more people need to look at this and understand this side of your story. It’s surprising you aren’t more popular given that you definitely have the gift.

  2. says

    10-20-70 is a good way to start building a saving/investing habit. Once you get the hang of it, you can even make the expenses lower. This can enable you to reach your goals faster.

    Thanks Sir Aya for this easy to digest blog post. :)

  3. Earl says

    Good day sir…..
    My question is ….. i think you forget about budget and allowances for Education transportation…… how many Percent ???????

    Best Regards…….

  4. gz says

    The problem is the culture of the being responsible for sharing and pleasing others; if you don’t you get labeled as selfish and greedy, being subjected to guilt and shaming to provide.

  5. figjam says

    I find it disconcerting that only 10% is suggested to pay off debt. Most people in the Philippines, indeed, the world, are lliving in debt. So wouldn’t it make sense to clear the debt first before thinking of investing?

  6. says

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    but I’m not seeing very good success. If you know of any please share.
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  7. Portia says

    I was amazed with this,very balance selfless-selfish strategy, pay for yourself and pay to God who gave you breath each day. I WILL PROBABLY DO THIS 10-20-70 MONEY ORGANIZING.
    TY PESOS N SENSE.

  8. rhen says

    since i was only 17,the eldest and my mother is an ofw im the one who is responsible to budget the salary of my mom i need to consult and this helped me alot .

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