Do you like this story?
5 simple steps on how to save your money.
When I was 7 years old, I loved blowing plastic balloon bubbles. I also loved to eat chips and drink soft drinks. These are my favorite things that my mom won't allow me to have.
My mom would always say blowing plastic balloon bubbles is unhealthy because when I squeezed out the toothpaste-like glue from the tube and into the plastic straw, I would usually rolled this into my mouth like a lollipop before blowing at the other end to make the balloon bubble. This can be toxic. Chips and soft drinks, on the other hand, are junk food and my mom would like me to eat apples and bananas instead.
|Plastic Balloon Bubbles. Credits: Victor & Patricia Ocampo|
But because these are my favorite things during that time, I would find ways to be able to buy them.
The family's business back then was into sewing blue jeans. My cousins and I would ran up to the sew factory and helped out by cutting the excess threads from the jeans or put on the price tags into each jean. My aunt would give us 10 centavos per jeans. After I had worked on 10 jeans, I would collect my pay and go to the nearby sari-sari store. I would buy my plastic balloons and have tea party (chips and soft drinks) with my cousins. And, yes, 1 peso back then could buy 1 liter of Coke, 2 big bags of Jack & Jill Chippy and lots and lots of plastic balloon tubes. (This is what you call "inflation." I can buy 1 liter of Coke for 25 centavos 30+ years ago; but today, it will cost me 25 pesos for the same size of Coke.)
|Snack time. Credits: Blair4Bears|
At age 7, I was able to learn that I need to work for the stuff I want to buy. I also learned that I need to set aside a percentage of the earned money so that I can buy bigger toys.
|Save. Credits: Tax Credits|
Here's 5 simple steps on how to save your money.
- Know what you need. Know what you want.
Make two columns and mark them as 'Need' and 'Want'.
Need is something you can't live without. (E.g. daily food bill, monthly rental, tuition fees, utility bills, insurance etc.) Want is something you can live without but you aim to get in the future. (E.g. out-of-town or out-of-country vacation trip, new car, become a millionaire, etc.).
The list will help you prioritize how you will allocate and spend or save your money.
- Pay yourself first.
The common formula on how we handle our money is (Income - Expense = Savings).
Worst practice is if we go by (Expense - Income = Debt).
The formula we must use and make it a habit should be (Income - Savings = Expense).
Paying yourself is also equivalent to setting aside your income to be able to buy your 'Wants'.
- Find extra money.
Your 'Want' list from Step 1 will determine how much you will target to set aside. For example, you would like to have 1 million in 2 years. You would then set aside a percentage of your income to pay yourself first. But you could shorten the period from 2 years to a year instead if you have another income stream. Taking a second job or turning your hobby into a side business will add to your savings and investments.
- Invest for passive income.
Investing is an excellent way to gain financial independence because it ideally provides passive income. You can invest in real estate and get rental income. You can invest in bonds, mutual funds, equity, time deposits and get interest income.
- Enjoy life and give thanks for your blessings.
Everyone finds happiness in different ways. We work to have money and we save for the future. But don't be afraid to spend, treat yourself and enjoy life.
And never forget to give thanks to God every day for all the blessings He gives us daily.