The Filipino Millionaire #3: What is your excuse for not saving? Necessary expenses? Here is a lesson from history.

Many of us have excuses for not being able to save, while a lot more just don’t know that we could already start doing it with what we have. We wait for that magical moment that money will come to us after years of working — yet all it ends up in is another Filipino struggling with money. It is really just furstrating, right?

Many of us just go about our daily lives without thinking actively about money matters. We buy and we pay our hard earned money to others and we forget to save for ourselves. Saving requires discipline — it is a habit that must be started by saving little every day, no matter what, and then saving more. There is no shortcut.

Talking to many people about saving, I frequently hear the problem of the average Filipino that they could not save. They and the 82% of Filipinos noted in my #1 blog post, have that problem. But did we stop to think about it and ask ourselves why we think this way? Most will answer a big NO.

Necessities, or are they?

The usual response to the question of why people could not save is not because they did not want to, but because they have to many things they needed to spend on that they considered necessities. Key word here is considered. What many of us dont realize is that many of our “necessities” are not even real necessities but just a part of our lifestyle.

Did you ever just think of the time when you had less money back in highschool or college but you were still able to make it? But now that you are earning for yourself many times more, your expenses still caught up? Or have you ever gotten promoted? What happened to the extra income you are earning now?

Say for example Juan was earning Php 10,000.00 per month back in 2016 and now he is earning Php 15,000.00. That’s a big jump! But why is Juan still having the same problems that he had before? It is because his lifestyle expenses caught up to him.

Earning a lot or earning little — does not matter if you do not think of things the right way

Let’s take a lesson from one of my favorite books, The Richest Man in Babylon by George Clason. Here he has the richest man in Babylon teaching a class of 100 people about finance. And the richest man in Babylon explains to them the concept of saving 10% of what they earn (one-tenth).

Some of your members, my students, have asked me this: ‘How can a man keep one-tenth of all he earns in his purse when all the coins he earns are not enough for his necessary expenses?” He answered, “Yesterday how many of you carried lean purses?”

“All of us,” answered the class.

“Yet, you do not all earn the same. Some earn much more than others. Some have larger families to support. Yet, all purses were equally lean. Now I will tell you an unusual truth about men and sons of men. It is this: That what each of us calls our ‘necessary expenses’ will always grow to equal our incomes unless we protest to the contrary.”

The Richest Man in Babylon has many concepts of personal finance that we could apply in our own lives — some of them may be very simple yet, so simple it is that we forget to even do them!

Think for a moment!

Now is the time to take a step back and reflect on this, what are my necessary expenses? Are they really necessary expenses insofar as I need them to live?

Personal finance (or basically saving) is about self-discipline and realizing that there are many things that we could forego so that we could spend on what we really want and what we really need in the future. Here are some points to consider:

- Don’t let yourself get caught up on what is “in”

- If you can’t allot money for something yet, don’t force it or make it happen by taking a loan. If you can save for it, the better

- From the things you are spending on, ask yourself, “Are they really necessary expenses?”

o If your answer is yes, then ask yourself again, “Am I sure?”

o If your answer is no, then don’t spend on it that much! Especially if it is something recurring

- Don’t mistake all food expenses for necessary expenses, most of the time we really are just bored and eating is a way of fighting boredom

- Plan for your future, the kind of future you want should be your motivation to save

- Spending all that you are earning will make you ‘live off’ what you earn. What if you lose your job? What if something happens to the company you are working in? An accident occurs? Where will you get your money?

- Saving all that you are earning would be a pain, don’t let yourself get frustrated on saving but focus on saving at least 10% of earnings per pay — at least that is the recommended amount. This is the point of budgeting, to balance saving and spending.

It is not hopeless. No matter what you earn and what you have now, there is still the way towards becoming financially well off. It all begins with saving and realizing what we are considering our necessary expenses.