Which would you rather get – P3,000 in three days, or P5,000 in three months?

Think about it for a while.

If you answered the P3,000, this usually means you are financially impulsive, since you’d be turning down an interest rate that is much better than what banks and most investments offer.

In a study conducted by researchers from the University College of London, nearly half of their respondents preferred the lower (but sooner) sum – and that these people also showed impulsiveness in other areas of their life. From the article (emphasis mine):

“…researchers suggest money savings or financial behaviors are linked to a set of other personal behaviors, rather than personal knowledge and experience with money.

…[they] discovered impulsive behaviors such as overeating, smoking and infidelity are associated with financial gullibility.”

This means that even if you know a lot about money, investing, and business, it doesn’t guarantee that you’ll be financially secure. What guarantees your financial success is your behavior. If you are consciously planning for the future and spend time evaluating your impulsive desires, then you have better chances of being financially successful – even better chances than someone who had formal training in finances, but doesn’t exhibit those behaviors. Perhaps this is why even the smartest people we know make stupid decisions regarding their money.

How do we use this information to our advantage?

1. Acknowledge that you don’t have to know everything to start fixing your finances. One of the obstacles that most people face when it comes to fixing their finances is inaction. They think “Oh I have to read more about saving before I can actually save” or “I need to know more tips before I can start”. Being good with money is not always about facts – it’s also about behavior. While we need to study some things – especially when investing – we don’t need to know much to get started.
2. Realize that managing money well is a habit. It’s something you have to cultivate and practice regularly. There is no one-off solution, magical budgeting program, or miracle investment that will save you. It takes regular, continuous work.
3. Know that changing impulsive financial behavior may mean changing other aspects of your life as well. My mother was such an impulsive spender, but her impulsive behavior wasn’t limited to money. She was that way about almost everything. From her business endeavors to her anger. For those who are truly impulsive, it may be a more difficult journey to get your finances together – but it doesn’t mean you shouldn’t try.

If impulsive spending and investing was one of your problems, take a look at your past behavior and see how you’ve changed since then. How have these changes affected your finances? How do you feel about the research I quoted above?

Image by cobrasoft from sxc.hu

First of all, I’d like to greet all Frugal Pinoy readers out there:

Happy New Year! Thank you for supporting and reading Frugal Pinoy. I hope that you continue to find this site useful in 2010. Most of all, may you have a healthy, happy, and productive year ahead of you!

Now before we leap into 2010, let’s take this opportunity to review Frugal Pinoy’s top 10 most informative articles for the year.

Does Frugal Pinoy apply to you?

At the start of 2009, I wanted readers to ask themselves if the articles I  post here are relevant to them. This was my response to some comments from both friends and strangers that the site was not applicable to them.

A Different Way of Looking at Income

Do you judge or measure your income per month? If so, you may not be earning as much as you think. This article explores the reasons why we should measure our income by the hour instead.

Money Myths: Frugality Means Sacrificing Fun

In this article, I attempt to debunk the myth that a frugal life is a hard and boring life.

6 Signs That You’re Living Beyond Your Means

Don’t know how much you’re spending each month? Feeling guilty about using that credit card? Watch out. You might be spending more than you earn.

My Investment Strategy

In this short post I talk about my decision-making process behind my investments. Hint: it has nothing to do with the hot stock tips.

Getting Out of Debt vs. Saving: Which Should You Prioritize?

When you’re trying to make ends meet as well as paying off debt, you might feel like you’re being spread too thinly. How do you choose between saving for emergencies and being debt-free?

When Listening to Experts Use Your Brain

Researchers found that when people are presented with an expert, they drop all attempts at decision-making – even if the expert is fake. Is it possible to make independent financial decisions despite all the “expert” advice we receive?

Money Myths: Can Money Buy Happiness?

Scientists learned that having enough money for necessities can buy a feeling of peace and security – but anything else beyond that is up to you.

The Hard Truth: 30 Money Questions You Should Ask Yourself

A no-BS list of questions to help you face the truth of your financial situation.

Free Download: Frugal Pinoy Budgeting Spreadsheet

I made a free downloadable budgeting spreadsheet for Frugal Pinoy readers. There’s a video tutorial to help guide you through it.

Also, let’s not forget that nearing the end of 2009, I launched the 25  Days to Healthier Finances series. In that series, I posted one article per day with an actionable task that readers (and I) can do to make our financial lives better.

That’s it from me for today. Again, I’d like to thank all the Frugal Pinoy readers (even the newcomers) for supporting and reading the blog this year.

All the best,

Celine

Image by puskar from sxc.hu

Today’s Task: Pick 2 no-spending days this month

Look at your calendar. Pick two days, it doesn’t matter if they’re one week apart or if you pick two succeeding days. Then, label these days as your no-spending days. Write it down somewhere, preferably a desktop calendar or something that you look at every day. Then, commit to it.

Sure, it’s impossible to have absolutely no spending in one day. After all, we use electricity, food, and water daily. In this case, when we say “no spending” we mean no cash out. Don’t even charge your credit card.

But what about transportation? Well, you can either pick a day where you don’t have to go to work or run errands. Or find a way to get to your destination for free (carpool, walking, biking) – as long as it’s practical. Or you can simply aim to spend less on transportation that day (take the jeep instead of a taxi, etc.).

What about food? Cook. I’m amazed when I hear about people who are college graduates and have been employed for a while yet can’t cook anything. That’s a very, very basic skill that everyone needs to learn. It’s your nutritional intake, for crying out loud. Kahit pagsaing lang ng kanin o paglaga lang ng itlog. Don’t know how to do these things? Learn. Kaya nga may Google.

Why do this at all? It’s not just about lessening your expenses, it’s also about doing a practical experiment to see what you can cut back on. It’s easy to overlook spending on daily coffee, convenience foods, and other unnecessary daily expenses, then wonder where your paycheck went. By seeing how little you can spend on some days, you’ll have a more realistic idea about the expenses you can do without. Who knows, you might end up having one no-spending day each week.

Personally, I’m picking December 5 and December 7.

For some people, saving is painful. When our paychecks arrive, most of us are excited to spend it. Which brings us to today’s task…

Today’s Task: Automate your Savings.

What does this mean? Basically, you’ll set up your bank accounts in such a way that a specific amount gets paid automatically from your payroll account to a savings account. Doing so has the following benefits:

• Ease. You don’t need to remember to save. “I forgot to save this month” won’t be an excuse again.
• Consistency. Saving becomes regular, and before you know it you’ve built a well-padded emergency fund for yourself and your family.
• Lessens temptation. Since money is automatically deducted from your payroll account, every time you look at your balance, your savings won’t be there anymore. You can’t say to yourself “I can buy a new iPod since I still have X amount in my account.”

Even if you’re only automating P500 worth of savings each month, its still better than nothing.

How to start: First, call the bank where you have your payroll account. (If you don’t know where to find their number, I’ve listed the phone numbers of major banks below, so you have fewer excuses to avoid calling them up.) Ask them if they have a special account that automatically deducts a specific amount from your payroll account each month and transfers it to your savings account.

If their answer is yes (it usually is), ask them how to activate this feature or how to open this kind of account. Also ask a list of the requirements needed and the actions you need to take.

Here are the customer support phone numbers of major Philippine banks:

• Banco De Oro . (+632) 631-8000 or email at callcenter@bdo.com.ph
• BPI. 89-100 for Metro Manila, 1-800-188-89100 for domestic toll-free calls (where available.
• China Bank. (632) 885-5555 or through their online form (I’m not sure they check it, though, as I sent a query last month and they havent replied)
  
• Metrobank. (632) 860-3000. For provincial areas, 1-800-10-860-3000.
• RCBC. (632) 894-9577, Domestic Toll Free# 1-800-10000-7222
• Security Bank. (632) 867-6788
• UCPB. (632) 811-9111
• Unionbank. 84-186

Have you already automated your savings? Do you have a similar system set up?

Image by Taluda from sxc.hu

If you manage to save at least a small amount of your paycheck every month, move along and feel free to skip this post. This post is not for you. This is for those people who seem to have a hard time saving their money. If you want to have savings but can’t seem to find it in yourself to set aside even P500 or P1,000 each month, here are the 5 most likely reasons why:

#1: You tell yourself that it’s too hard.

Here’s a solution for you: make it easy. What barriers prevent you from saving money? I’ve written a post about ways to make saving less painful, so you can check that out for more tips. But here are some other suggestions:

• Automate your savings. Call up your bank and ask them if they have options for you to automatically send money each month from your payroll account to a savings account.
• If you find yourself using your credit card everyday on things you don’t need, then leave it at home. Some people even freeze their credit cards in ice, but that’s an extreme (and it probably ruins the card).
• Focus on what’s harder. What’s harder is that if your car breaks down and you don’t have enough money saved up for repairs, forcing you deeper into debt. What’s harder is being laid off from your job and being unable to support yourself and your family until you get a new job. In other words, it’s harder to be in a desperate financial situation without a plan. Believe me, planning is easy. Living through the consequences of not planning is hard.

#2: You don’t know where your money is going.

How much did you spend on utilities each month? How much do you spend on gas/transportation? How much money goes to fun/recreation? If you’re giving the computer monitor a blank stare or you’re just giving an estimate, then you need to start budgeting.

You’re probably shrinking in your seat thinking, “Ick, there’s that B word again.” Relax. The good news is that budgeting is not something you have to do forever. You can forget budgeting after you’ve gotten to the point where you are absolutely sure that you’re spending less than you earn (for example, I know that I’m only spending 1/3 of my income, so I don’t stress about my budget as much).

Should you really budget? Yes. Some people don’t even know it but they’re spending more money than they make. How is it possible? Credit cards and other forms of debt. You’ll never know for sure until you start budgeting and seeing where your money goes.  Here’s the simple way to do it:

• For an entire month, list all of your expenses as you pay. Utilities, rent, that fruit smoothie you just bought. Gather receipts or jot it down in a notebook – do whatever it takes to list where every single peso goes. Credit card and online purchases included.
• At the end of the month, look at all your expenses. Compare how much you spent vs. how much you earned. If you’re spending more than you’d like, separate the things that are necessary and the things that aren’t as important. Bills, food expenses, rent, and transportation costs fall under the first category. Dining out, watching movies, clothes shopping, unnecessary gadgets all fall under the second category.
• Write down your monthly budget, including savings. Now what you know roughly how much you spend, it’s time to allocate specific amounts to each expenditure (including savings). I recommend that you overestimate your expenses, at least by 100 pesos. For example, here’s what my budget looks like:
  • Meralco – P1,600
  • PLDT – P1,800
  • Water bill – P500
  • Drinking water – P200
  • Palengke – P2,000
  • Groceries – P2,500
  • Transportation – P500
  • … and so on.

By the way, if you make, say P30,000 per month, don’t make a budget worth P20,000. Allocate the rest of that money somewhere (including “fun money”) otherwise it goes to frivolities you never really wanted that much in the first place.

Once you get into this habit, it’s going to feel easier and natural. Trust me, it’s worth the initial effort.

#3: You don’t have self-control.

The latest iPhone might sound attractive to you, but is it really worth buying if you’ll be stressing about paying the bills the next month? To cover the costs of this purchase, do you have to work overtime for several months? I’m all for personal rewards and enjoying the fruits of your labor, but the true cost of expensive one-time purchases isn’t just limited to the price tag. Here’s are some tricks I use to curb compulsive spending:

• I ask myself “How many hours of work will it take to pay for this thing?”
• I apply the one-month rule. If I still want something after one month, then I know I really want it. You’ll be surprised at the new gadgets and alternatives that are launched in that month.
• For every expensive frivolity I wanted, I tell myself “Every time I give in to a short-term want, I lose a part of a long-term dream”. (I forgot the original source of this quote, but if you know, please tell me.) What are your dreams? Is it to own a house? To travel the world? To leave the rat race and start your own business? To never worry about money again? Keeping these dreams in mind will allow you to shift your priorities and channel your funds on the long-term things that will give you more security and happiness.

By all means, shower yourself with expensive rewards after you’ve reached financial security, but not before. Until you get there, you should be content with treating yourself to a movie or a meal.

#4:  You don’t have financial goals.
“I want to be rich someday” is not a goal, it’s a wish. It’s a very vague statement that gets you nowhere. How do you define rich? When exactly is “someday”? And, most importantly, why?

Here’s how you make a real goal:

• It must be quantifiable. “Rich” and “financial freedom” are abstract terms. Do you mean “I want to be debt-free and have a net worth of P10M”? Be as clear and precise as possible, otherwise you’re not 100% sure what your goal really is.
• There’s a deadline. When do you need the money you’re saving up for? 30 years from now? 10 years from now? The deadline will allow you to plan for your needs accordingly.
• You know the steps to get there. How do you get to save up for a P50,000 emergency fund? How much can you put away each month? How many months will it take you to get there?
• It must be about things you can control. Winning the lottery is not a goal, neither is getting an inheritance from your wealthy tita.The winning lottery numbers are random, left to chance, and for all you know, your tita changed her will before she died or she has other heirs you don’t know about. On the other hand, getting a raise, adding new income streams, and creating a business are all within your control, at least partially.

#5: You don’t have the time or energy to manage your money.

If you have the time to watch TV, gossip, or aimlessly browse the internet, you have the time to manage your money. You don’t have to do it all in one sitting if you’re feeling overwhelmed. Take 30 minutes today to list the worth of all your bank accounts, then take another 30 minutes the following day to note your remaining debt. The funny thing is, once you’ve set up a system and tried all my recommendations above, it doesn’t take more than an hour each month to manage your money. 

On a final note:

If you have the problems above and you don’t want to fix them or you keep making excuses, that’s fine. It’s your money, it’s your life. Who the heck am I to tell you what to do?

But if you don’t do anything about your money, stop wondering why you’re not able to save.  Stop complaining that you have too many expenses or that you can’t afford the things you want. There’s no shortcut, no workaround to saving.True, you can focus on earning more rather than saving, but you’ll never learn how to manage that extra money until you start looking at your expenses and controlling them. Saving is something you have to do, especially if you’re only becoming financially aware now.

Any tips for those who complain that they don’t have any savings? Please share them in the comments.

Image by woodsy from sxc.hu

It’s a new month again, which means that it’s a new opportunity for you to find other ways to save money. If you don’t know where you can get extra money for your savings, check out these five tips and see if they apply to you:

Have a daily quota for using cellphone credits. If you find yourself calling and texting often,  exercise a bit of discrimination when sending out messages. Avoid sending out forwarded messages the entire month. My cousin once asked me to be honest about how much I load my cellphone each week, expecting that I’d tell him a large amount. He was shocked to find out that I usually just spend P30 per month, and I almost never spend more than P90.

While I understand that there are some professionals that may find this difficult, at least try to cut back on using your cellphone for texting or calling friends and relatives. Opt for free ways to communicate instead, such as via instant messaging, landline-to-landline calls, Facebook, or email. (Of course, this isn’t applicable if you don’t have easy access to the internet, or if you need to call long distance.)

Don’t buy new clothes this month. Unless your house was accidentally set on fire or your clothes were stolen as you left them hanging out on the clothesline, don’t buy any new clothes this month. I know quite a few people whose monthly income is mostly spent on clothes shopping, and as they tell me they can’t find any money to save, I just want to slap my forehead in disappointment. Just eliminate shopping for clothes or shoes this month. It won’t kill you, I promise.

Discontinue newspaper and magazine subscriptions. I don’t subscribe to any newspapers, mostly because I just read them online. The Philippine Daily Inquirer, The Philippine Star, and The Manila Times all have online editions. Apart from the subscription savings, you’ll also have access to breaking news, and you won’t have old newspapers cluttering up your house.

I also don’t subscribe to magazines, but this doesn’t mean I won’t buy the occasional magazine that catches my eye. I just happen to be very choosy and I make sure that the content and value that I get from the magazine won’t be found for free elsewhere.

Cut dining and drinking out by half. If you find yourself going out often, such as more than once a week, cut this by half. This includes going out for coffee or lunch during the regular workday. Brew your own coffee or pack your own lunch instead. If friends invite you out and you don’t want to let them down, try my suggestions for making a gimik more affordable.

Automatically send at least P500 to your savings account as soon as you receive your paycheck. It’s wise to keep a  separate account for your savings, apart from your payroll account (as I’ve mentioned in a previous post). By setting aside your savings as soon as you receive your income, you have a lower chance of spending it.

Do you have additional money saving tips? Please share them in the comments.

Image by asterisco from sxc.hu

“Live within your means” is one of the first rules of personal finance. If you think about it, this is common sense. Still, most people forget this and spend more than what they earn, getting themselves into financial trouble.

Not sure if you’re living beyond your means? Then read on to find out if you have any of the following 6 symptoms:

You don’t know how much you spend each month. If you can’t answer the question “How much are your monthly expenses?” then now’s the best time to compute it and find out. Guessing isn’t allowed. You need to know the ballpark figure for sure.

Why is this important? So you can compare it with your income and know for sure that you’re spending less than what you earn.

You’re dependent on your credit card. Whenever money’s tight, you find yourself using your credit card and just paying for those expenses after your next paycheck arrives. Usually, your credit card bill is more expensive than you thought, too. Because of that, it’s possible that you’re also afraid of opening your bill each month.

You regularly dip into your savings, if you have savings at all.Your income isn’t enough so you have to pay for some purchases with your savings.

This used to be one of my mistakes. I had “savings” but I didn’t know what they were for, I was just saving up money to be spent later. This means that whenever extra expenses came around, I would spend my savings on them whether they were needs or wants.

Your savings need to have a purpose. Are they for your emergency fund? Retirement? A new house? Without that purpose, you’ll be taking money from your savings indiscriminately.

Speaking of savings, you’re saving up less than 5% of your income on retirement or emergencies. Saving more is especially important if you want to maintain your lifestyle during times when your income is lower, you’ve lost a job, or you’re ready for retirement.

You live from paycheck to paycheck. There was a time when I would eagerly await my next paycheck – because I’d already run out of money before it arrived. This is a very stressful way to live.

You need to be confident enough about your spending habits to know that you can wait a bit longer for that next paycheck. You can only feel this way if you know for sure that you’re spending much less than what you earn.

You use new loans to pay off existing loans. It may be common for people to borrow money to pay off other loans, but it’s a clear symptom of living beyond your means. Think about it for a second – getting into more debt to pay for other debts. Not really a sign of financial health.

Have you ever experienced any of these symptoms? What have you done about them?

Image by Steve Woods

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):

1. Fund for house in the farm.
2. Fund for repairing my mother’s house.
3. Retirement fund.
4. Emergency fund.
5. 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?

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

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?