Question: Christmas is just around the corner and it is not uncommon for me and my family to rack up total bills worth P50,000. Are there tips you can give to help us manage our expenses better during the holiday season?—Family desiring to follow the straight and narrow financial path
Answer: If you want to be financially free this Christmas, here are some Burt Bacharach and Hal David-inspired tips to get you through the hustle and bustle of the season:
1.) Temptations to spend are everywhere because they long to be close to you. So avoid eye contact with people who approach you with flyers and special offers. Simply walk on by. If by chance you find yourself talking to one selling you perfume, makeup, clothes and other personal effects, say in a casual but determined way, “Please, don’t make me over.”
2.) Sometimes, it is a nearly impossible task to break away from those things that you have developed a strong magnetism to. Your eyes bear the look of love the moment you spot that object that your little heart desires. Well then, make it easy on yourself. In this situation, the trick lies not in parrying the blows of attraction but in knowing when to leave; this may just be the smartest thing that anyone can learn. To be sure, always be with your spouse or a buddy while shopping to help bring you back down to earth, that’s what friends are for. Don’t linger too long in front of the object of your desire because breaking up is very hard to do.
3.) Leave your credit and ATM cards at home. Budget your expenses and withdraw just enough cash. Remember that each zero balance on a credit card affords you one less “bill” to answer. If you are game, transfer the balance on your ATM card to a passbook account. You not only make it more difficult for yourself to withdraw money, you also force yourself to retain a larger balance just to keep the passbook account open. And with the passbook providing you an accurate record of your deposits, withdrawals and account balance, you will be able to say to yourself that “there’s always something there to remind me.”
4.) If you lack cash and truly need to use other people’s money through credit cards, go for the straight charge where you pay the entire amount when next month’s bill comes. While paying on installment may only feel like raindrops falling on your head, it can turn into a heavy downpour if the urge to splurge is not put in check. And we haven’t even factored in interest yet. The cardinal rule is that your total debt payments in a month should not exceed 36 percent of your average gross monthly income. So if you will be repaying debt amounting to P20,000 monthly, you should be earning no lower than P55,556 on a gross monthly basis (i.e. Php20,000 ÷ 0.36).
5.) If you are afraid that your heart isn’t very smart then you are right. We easily fall in love with zero percent interest, buy one take one, and buy now pay later promotions. Zero and free are two of the more effective lures in spending because the default attitude is that if the interest rate on installment is zero or there is a free bundled item, then it must be a great bargain, even if such bargains are not programmed in the budget. This is the time to say to yourself that you’ll never fall in love again, at least not that easily with promotions.
6.) What the world needs now is savings and investments. So after saying a little prayer to conjure up the courage, go to your bank and give yourself the better Christmas gift. Tell your bank to automatically deduct from your savings account a fixed amount that will be invested in a particular instrument. And if it is still intact, start with your 13th-month or any other bonus pay. Just be aware that promises, promises of exceptionally high returns are not legal. And while a chair is not a home, it might just be what you will have left if you are not careful with investing. The unbreakable rule in investing is that the higher the potential return, the higher the risk. Conversely, the lower the potential return, the lower the risk.
7.) Talking about investments, emotions run high especially when presented with eye-popping returns. As of this writing, another scam had been uncovered, with estimates ranging from P250 million to P12 billion being spirited away. Scams proliferate because people allow their emotions to get the better of them. Even saying to scam artists that they’ll never get to heaven if they break your heart will not dissuade them from their nefarious acts. It would be better to get a pin to burst your get-rich-quick bubble. There are no short cuts that lead to sustainable wealth.
Christmas is somebody’s birthday. And what better way is there than to celebrate that birthday by giving the Celebrator what He truly wants; and that is true charity for those around us.
To get a better handle on spending and investing, download Ya!man, the country’s first free personal finance mobile app from www.personalfinance.ph. Ya!man helps in cash budgeting as well as computations on effective loan interest, sufficient life insurance, the future cost of education and the future cost of retirement. And all of these are FREE.
Thanks Burt and Hal for the wonderful lyrics and the lovely melodies.
(Efren Ll. Cruz is a registered financial planner of RFP Philippines, personal finance coach, seasoned investment adviser and bestselling author. Questions about the article may be sent by SMS to 0917-5050709 or e-mailed to firstname.lastname@example.org. To learn more about the RFP program, visit www.rfp.ph or e-mail email@example.com.)