Quantcast
Latest Stories

MONEY MATTERS

Starting 2013 with Halloween

By

Photo taken from http://www.bsp.gov.ph

Question: I have tried the many personal finance lessons I’ve read about in the past months. While many of them make a lot of sense, I realize that practicing personal finance lessons is as much behavioral as it is technical. Do you have any suggestions on how to apply these lessons from the behavioral side?—Makati-based employee looking for effective personal finance solutions

Answer: At the start of this year, I came up with the article “Is the World Coming to an End in 2012?” The fact that you are reading this article now is clear evidence that life as we know it continued after Dec. 21, 2012, the end of the Mayan calendar and supposedly the end of the world as well.

But this doesn’t mean that the world will not end. Why, your own life might end even before the end of days comes. So how do you prepare for the future financially, including 2013? The best way is to start 2013 in Halloween mode.  This time, do more of tricking instead of treating yourself. Here are a few practical tips.

1. Hide money from yourself: It is known that we develop shaking akin to Parkinson’s disease when we hold on to money. We start to shake uncontrollably from the need to spend. In fact, a guy by the name of C. Northkote Parkinson wrote in his book “The Law and the Profits” that “individual expenditure not only rises to meet income but tends to surpass it, and probably always will.”  The question is, how do you hide money from yourself so that you don’t get to spend it? Solution: Have your desired savings amount automatically debited from your bank account periodically and funneled to an investment account like a time deposit, treasury bill, commercial paper or pooled fund.

Seeing your bank account with less money will help to kill your spending urges.  Behavioral economists have found that people have an easier time living on 90 percent of their income than saving 10 percent of it. The reason is that there is no perceived loss with spending 90 percent of income. In other words, you trick yourself into believing that even if your true take-home pay is P20,000, your take-home is only 90 percent of it, or P18,000. But you get to spend 100 percent of P18,000!

Moreover, since the tactic is on automatic mode, it becomes sustainable. From time to time though, you will have to adjust upwards (so you can afford more in the future) the amount that is automatically debited as I doubt if banks will debit a percentage of the amount in your bank account.

2. Cash is King: If you plan to buy big-ticket items in 2013 like humongous TVs, the latest cell phone or tablet, an industrial washing machine, a complete home theater system and others, think rich and use cash. Condition yourself to think that buying in cash shows how much you can afford such mega-purchases. And as much as possible, leave your checks and credit cards at home.

If you can truly afford the purchase on cash, there should be no problem. If you can’t, you will feel tears rolling down your cheeks as you count each P1,000 bill you pay the cashier. You immediately feel the loss of wealth, even if you are replacing it with a consumer durable. So, delay the purchase until you can afford to pay for it in cash.

Buying on credit may be a solution, but it is a passing one at best. Credit anesthetizes us temporarily while spending. Just wait until you get next month’s bill. And if you bought on installment, you will find yourself yearning to break away from the shackles of debt as the repayment period drags on.

3. Win cash: If you are deferring payment on your credit card balances, accelerate the payments so that you zero them out sooner than later. If your credit card is charging 3.5-percent per-month interest on your outstanding balance, that is equivalent to 42 percent a year. Imagine the savings that you can have once your balances are fully paid. This is free cash for you!

So trick yourself into believing that each accelerated payment you make toward your credit card balance is like a “raffle ticket.” The more raffle tickets you “drop in,” the more chances of winning early. Remember that your winning cash is already guaranteed. What you will be working on is the chance of winning early.

Accelerating payments with a fixed income is a challenge that will require a lot of sacrifices. But hey, just like with lotto, you can’t win if you don’t buy a ticket.

If you want to learn more about and practice effective cash, debt, risk (insurance) and wealth management (CD-RW), download the country’s first free personal finance mobile app called Ya!man from www.personalfinance.ph. You may also attend the Feb. 16, 2013, EnRich CD-RW personal finance training. Call (63-2) 216-1541or (63-2) 359-3094 or visit www.personalfinance.ph for details.

So spend the better part of 2013 tricking yourself and you will find a lot more treating by the year’s end.

Happy New Year to one and all!

(Efren Ll. Cruz is a registered financial planner of RFP Philippines, personal finance coach, investment adviser and author. Questions may be sent by SMS to 0917-505-0709 or e-mail to efren@personalfinance.ph. To learn more about the RFP program, visit www.rfp.ph or e-mail info@rfp.ph.)


Follow Us


Follow us on Facebook Follow on Twitter Follow on Twitter


Recent Stories:

Complete stories on our Digital Edition newsstand for tablets, netbooks and mobile phones; 14-issue free trial. About to step out? Get breaking alerts on your mobile.phone. Text ON INQ BREAKING to 4467, for Globe, Smart and Sun subscribers in the Philippines.

Tags: Halloween mode , new year , Personal finance , tips

  • rock_steady

    “2. Cash is King: If you plan to buy big-ticket items in 2013 like humongous TVs, the latest cell phone or tablet, an industrial washing machine, a complete home theater system and others, think rich and use cash. Condition yourself to think that buying in cash shows how much you can afford such mega-purchases. And as much as possible, leave your checks and credit cards at home.”  – Rewards must not be a big thing in your dictionary. well, i’m not surprised since credit cards in the Philippines ZERO protection from theft and unauthorized transactions.

  • http://www.facebook.com/weya.sago Weya Sago

    You must find a reason within yourself to inspire you to really take action to improve your finances. You can read every book about financial planning, you can attend every seminar but you will never act until you find your own reason as to why you need to manage your finances.

  • http://www.facebook.com/profile.php?id=763346987 Ding Estraza

    Yes! spending and saving money is a behavioral issue! It simply means withholding your instant gratification. Suppression of buying instinct. On the other side, it could be spiritual which means, one must not be lovers of material things and rather be desirous of heavenly things. By this you will lose your attachment on tangible things..

  • OFW_Investor

     Save, Invest , Spend. Arrange your financial affairs in that order. 
    Money is plentiful for those who understand the simple rules of its acquisition

    1. Start thy purse to fattening
    2. Control thy expenditures
    3. make thy gold Multiply
    4. Guard thy treasures from loss
    5. Make of thy dwelling a Profitable Investment 
    6. Insure a future Income
    7. Increase thy ability to earn.

    - The Richest Man in Babylon – read this book



Copyright © 2014, .
To subscribe to the Philippine Daily Inquirer newspaper in the Philippines, call +63 2 896-6000 for Metro Manila and Metro Cebu or email your subscription request here.
Factual errors? Contact the Philippine Daily Inquirer's day desk. Believe this article violates journalistic ethics? Contact the Inquirer's Reader's Advocate. Or write The Readers' Advocate:
c/o Philippine Daily Inquirer Chino Roces Avenue corner Yague and Mascardo Streets, Makati City, Metro Manila, Philippines Or fax nos. +63 2 8974793 to 94
Advertisement
Advertisement

News

  • Man wins half marathon, dies in Argentina
  • Clouds to bring slight relief from summer heat
  • Canadians rally to legalize marijuana
  • S. Korea ferry transcript reveals evacuation panic
  • Obama, family cause a small stir at Easter service
  • Sports

  • Reigning champs Miami open playoffs with win
  • Spurs subdue Mavericks in playoff opener
  • Wawrinka beats Federer to win Monte Carlo Masters
  • Ageless Hopkins pitches 50-50 Mayweather deal
  • Goodbye MGM, Las Vegas for Pacquiao?
  • Lifestyle

  • Miss America: Don’t suspend teen over prom invite
  • Transitions and resurrection in the performing arts
  • ‘Archaeology tour’ of Cebu’s heritage of faith
  • Historic Fort Bonifacio tunnel converted into a septic tank
  • ‘Imports’ from London, and play of the year
  • Entertainment

  • ‘Captain America’ stays strong atop US box office
  • Easter musings
  • Solenn in shorts
  • Unmerry mix of attention-calling moves on ‘Mini-Me’ TV tilts
  • Persistence pays off for The 1975
  • Business

  • BDO seen keen on bidding for Cocobank
  • Bataan freeport investment pledges up 1,302%
  • Golden Week
  • Bourse to woo Cebu stock mart investors
  • Supper power
  • Technology

  • Nasa’s moon-orbiting robot crashes down
  • Netizens pay respects to Gabriel Garcia Marquez
  • Nokia recalls 30,000 chargers for Lumia 2520 tablet
  • Facebook rolls out ‘nearby friends’ feature
  • Netizens seethe over Aquino’s ‘sacrifice’ message
  • Opinion

  • Gigi’s home
  • Palace stonewalls on MRT inquiry
  • Couple of things too
  • There is plenty of water behind Wawa Dam
  • Triduum thoughts of a young boy
  • Global Nation

  • Search for Etihad passengers launched
  • Japan presents $57-B ‘dream plan’ to solve Metro congestion
  • Tim Tebow’s charity hospital in Davao seen to open in 7 months
  • OFW died of Mers-CoV in Saudi Arabia, says family
  • Aquino, Obama to tackle US pivot to Asia during state visit
  • Marketplace