Every time I watch the news, there would be a highlight on the great number of Filipinos who fall into debt. Most would come from the marginalized communities and the middle class. Some would equate the reason of indebtedness to external circumstances such as lack of education, unemployment, other bills to pay as the top priority, other debts to settle, etc. And most Filipinos admit they do not have their own savings. The majority fall into the trap of just living in the present and not thinking long range as to how it could change their future. Some even commit the vicious cycle of buying unnecessary things that make them fall into greater indebtedness.
So what is my take on this? From the previous article I wrote, I mentioned that I have a mixed background in Credit and Collections and as a Financial Adviser. My inputs in this article are based on the recollection of what I have seen from people’s experiences in debt, and people’s experiences in prudent savings.
Here are some reasons that prevent a typical Filipino from saving:
- Buying Unnecessary Things
I am not against the principle of rewarding yourself from your wages. However, are you brand conscious? Do you spend too much money in buying things you can hardly afford or somewhat beyond your means? Are you a smart shopper or an impulsive buyer?
For example, an employee purchasing the latest iPhone or Samsung smart phone for the sake of fitting in in a particular status quo rather than making an informed decision such as canvassing and reading phone reviews online to see if there are other phones that could offer a better value for his money. Just imagine how much money will land on their savings if this principle would be reinforced.
- Listening to Naysayers in Terms of Savings
You heard that right. I’ve hit rock bottom in terms of finances when I decided to leave my past employer and took a risk applying for a government job. I had no stable source of income and just simply had to make both ends meet through the commissions I get every time I get to close an insurance policy.
Still, whatever you are getting, do not mind what other people say. Even your own family members would mock you. Just do what you’re supposed to do. If you intend to save, then keep that goal in mind. It doesn’t matter if you start small… Reiterating what I have written about the three timelines you should reflect on, I always keep in mind that “any number multiplied by zero is zero”…so what’s that supposed to mean? Just have a multiplier no matter how small it is. Eventually, even the littlest sacrifice will yield results over time. What matters is how you take control of your present financial situation and making yourself even more financially literate.
- Lack of Informed Decision or Getting Tempted to Dive Into Financial Shortcuts
There are numerous companies and books that promise to offer financial wellness. And most Filipinos do not understand the virtue of sowing and reaping. You are like a farmer of money, and using a farmer into an analogy means that it takes a lot sacrifice, patience, and conscious effort. This principle is also very much applicable to savings. When you want to grow your money, it does take an overnight process so the temptation on diving into the quick money making schemes such as those offered by networking companies is quite a disappointment. These companies offer false hopes, or if not exaggerated promises that you’ll be successful and richer. Let’s admit it, we are all visual and greedy in a sense. Ones our eyes are satiated by nice cars, beautiful houses, a bundle of money, expect the little spirit of greed will be stirred. But let me tell you this, I am not totally debunking all of it as there could be some who operate in a legitimate way, however, the success rate of an individual who joins a networking company is not guaranteed because it’s not a one size fits all solution. Some pave their way in the form a traditional business, some through employment, and some through these companies. So you really have to identify which financial pathway really works for you.
It is best to first research on ways how you could grow your money. Do not decide instantaneously. Compare these ways to your personal values. If you are somewhat a risk-averse person, then you might just place your money in the bank and set aside a specific amount consistently. If you are quite risky you might consider investing your money in stocks, unit trust funds, or mutual funds. If you are in the middle, you might consider investing your money in a variable life insurance policy. Your way of handling your money must depend on your personal values and by incorporating some effective steps you can learn from reliable sources.
Realistic Steps to Saving Money
The amount you save will depend on your risk appetite and personal values. If you want greater yield, you may increase the amount, but if you want to see and test it first, you can start with a small and manageable amount. The bottom line is to encourage you to save.
- Set an amount you can commit to saving on a regular basis.
A savings of PHP500 / month = PHP6,000 a year
- Set a target amount you desire, a timeline, and a specific step on how you want to attain it.
Target: Yearly Savings of PHP12,000
Timeline: December 2017
Specific Steps to Take: I will save PHP1,000 at the end of the month out of my PHP20,000 salary.
Note: It is ideal to stash your savings somewhere you won’t be able to access anytime as that of an ATM Card. You might want to consider opening a savings account in a bank that has few branches or a rural bank so you wouldn’t be tempted to find your financial stash and spend your cash.
- Consider placing your money in a hidden stash
Placing your money in a piggy bank, or in a common bank has great disadvantages. First, it prompts you to go seeking for your money and access it when you are tempted to buy something you don’t even need. Second, some banks offer very little interest.
Honestly, macro banks, rural banks, and cooperatives offer a greater deal. Some Cooperatives, Macro Banks, and Rural Banks offer dividends when you place your money on them. Why and How? It’s because these kinds of financial institutions lend your money to micro businesses and small and medium enterprises. Their concentration is at that.For example, when you save your money at the bank and you choose a time deposit saving, they can only offer a .25% interest rate per annum, and this needs a minimum of PHP 10,000 a month with that default maintaining balance. Unlike when you place your money in a Cooperative, they can have a more flexible term for time deposit savings which could range to a minimum of PHP1,000 – PHP10,000 (or higher) and can offer an interest rate of 6% per annum.
Before placing money in a Cooperative, Macro Bank, or Rural Bank, make a comparison first or inquire about their terms and interest rates. Also be careful of the fly by night and de-listed Cooperatives that aren’t in this cooperative masterlist.
Some examples of Rural Banks, Savings (Subsidiary) Bank, Cooperatives and Macro Banks
- PNB Savings Bank
- First Macro Bank
- Bank of Makati
- Banco Alabang Inc
- CARD Bank
- Mutual Savings and Credit Cooperative of the Philippines
So, let’s develop the habit of prudence and save. It doesn’t matter if you start from scratch. What a great fulfillment it awaits those who turn nothing into something. Until next time!