What are you doing with your extra cash this Christmas?
I’m receiving a sizable amount of unexpected income this month. Almost like a freelancer’s 13th month pay. This isn’t unusual during Christmas, where people get paid more, businesses generally have more income, and students receive money as gifts from their ninongs and ninangs. This extra money you receive is called “a windfall”.
What exactly is a windfall? A windfall is an unexpected extra amount of income or business revenue. Some examples include: inheritance payouts, Christmas bonuses, extra revenue, cash winnings, and cash gifts (the ones from relatives, not illegal ones form Malacanang hehe).
Although windfalls are common during the Christmas season, they also happen in other months during the year. Anything you receive above your average income may be considered a windfall, if the money has not been budgeted yet.
What to do with a windfall 
Most people spend windfalls by buying treating themselves or taking out their friends and family to lunch. While nothing is wrong with rewarding yourself, leaving the rewards unchecked or unmonitored often means the money will disappear sooner than you think. This is why I always have a plan for windfalls.
In case of unexpected extra income (which I usually have each month, since my income is not set in stone), I always have a hierarchical game plan on what to do with my extra money. Here’s where I stash them (in order):
- Fund for house in the farm.
- Fund for repairing my mother’s house.
- Retirement fund.
- Emergency fund.
- Travel fund.
How I divide the money into those 5 funds depends on how much my windfall is. If it’s only P5,000 or below, I usually put all of it in Fund #1, or I divide it between Fund #1 and Fund #2.
You can also do the same thing, set up a list of 3 to 5 things where you can put the windfall. Make sure your list is in order so you would know what to prioritize. Keep this list handy – whether in your budget notebook or as a file in your computer – so that you can easily refer to it before the temptation to splurge sets in. Don’t worry, you can always include “Personal Reward” in your list of windfall funds so you can enjoy that extra money a bit. Just make sure that your entire windfall doesn’t go there.
It may seem like I’m too disciplined or I’m not rewarding myself enough, but that’s not the case. Having the farm house built as early as possible will be a great reward for me. I prefer to live in the farm and have some place to retreat to when things are going too crazy in the city. It’s really all about setting your priorities based on the things you want to do and the dreams you want to fulfill.
Will you be receiving extra money this Christmas? What will you do with it?
Read MoreDiscussing saving with your spouse
Frugal Pinoy reader Allan G sent in this question as a response to my previous article on saving:
Hi there! I have never been a big spender. I earn well and I have always had. Before I got married, 80% of my money I used to help family and relatives. I was not able to save much except buy a plot of land in Cavite. Now I am married. I am still not a big spender. But my wife is. We continue to help our families the best way we can. When I talk to my wife about saving money she gets mad at me. She says I don’t earn enough so we can’t afford to save. I wonder how I can make her rethink her ways. Any suggestions?
Talking about money with one’s spouse can be a tricky subject. Money, after all, is the number one reason why couples fight. I’ve avoided this by talking to my partner about money extensively before we started living together. It also helps that we have the same values when it comes to money. But not everyone is that lucky.
There are many things you need to consider when it comes to a situation like this. Does your spouse have her own income? What does she spend on the most? What is her idea of “earning enough”? Also, is the help you offer your families really necessary? (I’ve discussed in the past how giving financial help to family shouldn’t be automatic.)
Manage your expectations. First, you need to understand that things might not go 100% your way in the end. Marriage requires compromise and adjustments – you need to find somewhere the two of you can meet halfway. Know that if any change will take place, it won’t happen all at once. Changing one’s financial behavior takes time, and this is something your spouse has to do herself – it’s not something you can force.
Be careful with your words. It’s important to remember that the health of your relationship always comes first, so make sure you don’t talk about money when you’re angry. Whenever you discuss money, it’s important to do it when both of you are rational and in a good mood. Also, be careful of wording your money problems in such a way that looks as if you’re blaming your partner. Choose “we” and “us” instead of “you”.
Learn more about her financial values. As I said earlier, it helps to know her standards about income that’s enough for you. Note that you think you earn well, while she thinks your earnings aren’t enough. What is her idea of sufficient income? What are her financial dreams? How does she define “a good life”? Ask her these questions so you’ll be able to see things from her perspective, as well as have a starting point for your future discussions.
Make it exciting. As Adie pointed out in the comments, it helps to start saving for something that excites her. Ask her where she’d want to spend your vacation this summer, then tell her that this is possible and you want to save up for it so you can give her the vacation she wants. Or, it doesn’t have to be a vacation, it could be an item she wants, a seminar or workshop she’d like to attend, or an experience she has yet to try.
Be sure to follow this up with a discussion on “Kaya naman pala natin mag-save ng kahit kaunti each month. Why don’t we do it for the long run?”
Consider additional income. If your wife really doesn’t think that you make enough money (even if you do), you can both discuss ways to add to your income. If she doesn’t have any income, ask her if there’s a business venture or work-from-home opportunity she’d like to try. You can also ask her if the two of you can start investing. By opening up the discussion on one aspect of your finances (income), it’s possible you’ll be able to talk about other aspects (such as saving) more freely.
Talk about success stories. If you have any friends, especially couples, who have financial success stories, tell your wife about it. Pick those stories that come from something similar to your own income bracket, family size, and lifestyle – it doesn’t make sense to discuss the success of the Ayalas if you’re a regular middle-class family. Your wife should know that financial success and saving is possible from your income bracket (or even from those who earn less than you do).
Discuss money in several short talks, instead of one big discussion. This is especially important inf your spouse is really sensitive about the issue. Keep your conversations light and short so she won’t feel that you are pressuring her too much.
If you want to read more articles on how to talk to your spouse about money, you can start with these three:
- 6 Ways to Follow Up that Big Financial Talk With Your Spouse @ TheSimpleDollar
- How to stop fighting with your spouse about money @ GetRichSlowly
- Getting Your Spouse to Save @ CNN Money
I hope I was able to help! 
Thank you to the other readers who chimed in, gave their own advice, and talked about their experiences with saving.
Do you have any personal finance or online moneymaking questions? If so, kindly click here for the contact form, type in your question, and I’ll answer it here at FrugalPinoy.
Photo Credit: Image from Jasper Greek Golangco from stock.xchng
Read More5 Ways to Make Saving Less Painful
Saving comes easy for some, but it’s an impossible task for others. When I ask some friends about their savings, they sometimes cringe or tell me “I don’t want to think about that!” as if I asked them about a life-threatening disease.
The act of saving doesn’t have to be difficult or painful. If done right, saving can be a wonderful thing you can look forward to each month. A few years ago, I didn’t really take saving seriously, but after implementing some techniques, it’s something I now look forward to with each paycheck.
So how can we make saving easier to do?
Automate it. Most banks will allow you to automate your payroll account to deposit monthly to a savings account. Check with your bank to see if you can do this with your payroll account. Saving can be much easier if you don’t have to remind yourself to do it regularly.
Focus on the benefits. I’m currently saving up to buy a house within the next 2 years. Of course, the way to motivate myself is to think about that house, which I’ll consider as my sanctuary. I also think of the pride of home ownership and the beauty of living in the province. This makes me wants to say “Yes! I absolutely want to put money into that dream every month!”
However, other types of savings such as for an emergency fund or a retirement fund tend to be harder. Maybe because their purpose and benefits still seem a bit abstract. For these types of savings that you aren’t particularly fond of, focus on the feeling of security you’ll have when these savings are in order. From my experience, it feels great not to worry about losing my job or getting sick because I know my emergency fund is there to catch me when financial problems arise. Plus, I just feel so free not being pressured to work super hard. That feeling of freedom and security, I wouldn’t trade for the world.
Have a mantra. During tough financial times where I was forced to live paycheck to paycheck, I used to have a mantra that I would recite in my head every time I was tempted to spend on something frivolous. My mantra was “Every time I spend on a short term want, I give up a part of a long term dream.”
Get visual. It’s also more encouraging to save if you can actually see what’s going to happen when you accomplish your saving goals. For example, if you really want to save up for a trip to Paris, you can cut up pictures of France from a magazine and place them in an area you’ll look at regularly – whether it’s on your office desk or by your bed.
Note: The visualization doesn’t work for everybody, especially those who forget that action is needed to make things happen. Some get stuck in the visualization without doing anything about it. In those cases, it’s not visualization – it’s mere daydreaming.
Reward yourself. Break down your savings goals into milestones and have a reward for each milestone you reach. For example, if you want to save P100,000 in your emergency fund, you can reward yourself for every P5,000 or P10,000 you successfully stash away for it.
Rewards are important because you won’t feel too bogged down or tired, thinking that all you do with your money is save it. Without rewards, it’s easier to fall back on old spending habits when you get too tired of saving.
How much do you save each month? What do you do to make it easier for yourself?
Read MoreLadderized Savings
What do you mean when you say you’re saving money? You’re saving money for what? What do ‘savings’ mean to you?
For me, there are several categories of savings, with one category higher up my priority list and more ‘untouchable’ than the next. These categories include my retirement savings, money that I’m saving to spend on big ticket items, money for smaller purchases, and my emergency fund.
These savings categories all have their ranking – like a ladder – and in times of financial need, there’s a certain hierarchy I follow when choosing which of my savings I can withdraw from.
So what are these categories of saving and why do I have them?
Step 1: Retirement Savings
Obviously, retirement savings are meant to be spent during retirement. But the definition of the word ‘retirement’ varies from person to person. For me, it means the time when I am no longer physically or mentally able to work or earn money. For others, it could mean leaving their line of work when they reach the age of 65 or 70.
After you’ve defined retirement, you need to figure out how much you’ll be needing for the lifestyle you want. I’m currently 24, and the time between now and retirement seems a bit too far for me, so I haven’t calculated this exactly. I just put away as much as I can each month.
For me, this is money that I absolutely cannot touch until I reach retirement. After all, that’s what this is meant for. This is at the top of my savings ladder because it is the one that is farthest from my sight (since it’s a long time ’til then) and it’s also the last of my savings that I will touch. If I needed large amounts of money in a time of financial crisis, I’d go through the bottom levels first before spending my retirement savings.
Read MoreStretching the peso against the high cost of living (Part 1)
The news about inflation rising to 9.6% is alarming, giving people more reason to learn how to live frugally and invest wisely. Over the next few days, Frugal Pinoy will be publishing a series of blog posts about how to lessen inflation’s effect on your wallet.
In this series, Stretching the Peso Against the High Cost of Living, we’ll be covering a variety of topics:
- Food and Household Needs,
- Utilities,
- Entertainment,
- Transportation,
- and Income.
Today’s installment lists basic frugality tips for Food, Household Needs, and Utilities.
Food and Household Needs
Buy vegetables, meat, fish, and poultry from the palengke, not the grocery. Grocery prices tend to be more expensive, and if you’re unlucky, the products won’t be as fresh either. I made this mistake when I was starting to be financially independent.
Eat more veggies than meat. Vegetables are generally cheaper than meat. Generally, because I’m pretty sure hydroponic zucchini is more expensive than one kilo of pork. When I say ‘veggies’, I mean your average kamatis, talong, repolyo, etc. It’s amazing how versatile these vegetables can be if you experiment. This month, I’ll be featuring some vegetable recipes you can use.
Buy non-perishables in bulk. This includes toilet paper, dishwashing liquid, detergent, soap, and other things that take a long time to spoil. My favorite place for these bulk purchases is Makro, but an inexpensive grocery store such as SM Savemore will do. REMEMBER: Do the math. Just because something is in bulk, it doesn’t mean it’s cheaper than it would be if you bought it in smaller portions. Your cellphone has a calculator – use it.
Plan your meals. If you can plan your meals throughout the month, you’ll be able to monitor the ingredients you use and how much you consume. You can also apply batch cooking, if you can. I don’t plan my meals strictly, but I think this is something I’ll be doing in light of the cost of food nowadays.
Do your groceries only once or twice a month. This forces you to be creative with what you have, rather than buying things at your every whim. We usually just buy the ‘staples’ of our diet – including bread, margarine, cheese, cream, broth cubes, and tomato sauce. It’s amazing what you can do with these seemingly ordinary things. You can use them with a variety of vegetables, meat, and fish products.
Use generic products, but only when it makes sense. Generic, store-brand products are usually less expensive than branded counterparts. But make sure that when you opt for generic, you’re getting a good quality product. So what if it’s cheaper if it doesn’t work, right? Like in the case of the SM Bonus Dishwasher I mentioned before, it wasn’t worth the money at all (but an effective generic product from Savepak was perfect). Try generics, but don’t stick with them if they’re not worth it.
Utilities.
Review your bills and cut back on what’s unnecessary. When I realized that my cable TV bill was unnecessary, I unsubscribed from the service, which was costing me roughly P800.00 per month. Instead, I spent that money on a DSL subscription, which pays for itself because I work online. Plus, with YouTube and SurftheChannel, who needs cable? I haven’t had cable TV in over one year, and honestly, it’s made my life better.
Also, if you realize that you spend so much money on your prepaid or postpaid cellphone service, try to cut back. I don’t think I spend more than P100.00 of load each month.
Learn how to conserve water and electricity. This can help you spend less on your water and electric bill.
- Unplug appliances that are not in use.
- If you’re using a washing machine, wash your clothes in big batches rather than in small batches. You generally use less water this way.
- Handwash underwear and light clothing.
- Maximize windows for lighting during the day.
- Use a rain barrel. Since it’s been raining a lot recently, it wouldn’t hurt to store that “free” water in a barrel for future use (such as watering plants, washing your car, flushing the toilet, etc.) Just keep it covered to avoid turning it into a home of dengue-carrying mosquitoes.
Here are some other water and electricity conservation tips:
In the next installment, we’ll talk about being frugal with Entertainment and Transportation. Stay tuned!
How did you react with the startling news on inflation? Are you taking any measures to spend less or earn more?
Related Posts:
- Stretching the peso against the high cost of living – Part 2
- Stretching the peso against the high cost of living – Part3
Zero Based Budgeting 101
The phrase “zero based budgeting” is used in both business and personal finance budgets. However, I’m going to discuss how it applies to personal finance rather than business.
So what is a zero based budget?
A zero based budget, simply put, is a budget where your income minus your expenses = zero.
Income – Expenses = 0
What this means is that you’ve assigned every single peso of your income to some kind of expense, which includes your utilities, miscellaneous expenses, living expenses, and savings.
What are the benefits of this kind of system?
- Every peso is accounted for.
- You’ve already ‘spent’ your money on paper, before you actually spend it. So there’s less temptation to re-allocate money that was intended for bills into something frivolous (like a new, but unnecessary cell phone). For me, at least.
- If you get some extra income you didn’t expect (such as winning the lottery, a cash gift – not from Malacanang, I hope), it’s easier to spend that money on where you really want/need it (savings, retirement, travel, or entertainment), instead of watching the money fade away with unfocused spending.
- The problem with traditional budgets is that you often don’t account for the “fun” things. Since you have to spend all your money in zero based budgeting, you can set aside money for fun things – which hopefully makes you enjoy the budgeting process more.
How do you start with the zero based budget?
1) Write down and total all your income sources. This includes your paycheck, remittances from relatives (if any), and all the other places where you get your money from. I often don’t include interest from investments and accounts, because I spend the interest in the same place where they came from – such as my emergency fund or retirement savings.
If you’re a freelancer like me, your income probably varies month to month – so every time you budget you’ll be facing completely different figures.
You can use either net or gross income. Personally, I use my net income (after taxes, transaction fees, etc have been deducted – also known as ‘take home pay’).
So, basically, your list should look something like this:
- Paycheck 1 – P12,000
- Paycheck 2 -P8,000
- Garage Sale – P1,500
And so on. Since there are numbers involved, I highly recommend using a spreadsheet so that it’s easy to add and subtract numbers.
Read MoreHelp Iligan and CDO
Reader Discussions: