Why is it so difficult to save?

QUESTION: I have been trying to save but it’s like fighting a losing battle as I keep on nibbling away at my savings until they’re all gone.  It’s like going on a diet, that’s the word die with a “t.” Do you know of an effective way of saving?—Housewife from Quezon City via e-mail.

Answer: Your ability to spend is determined by your capacity to stick to your goals within an environment that is full of temptation. And yes, in the age of technology, temptation walks to you.

Just look at how ads find their way into your favorite cable TV channel, your bookmarked Internet page and even your personal cell phone. To be sure, our urge to splurge has always been there. Temptation just tips the balance toward spending.

To paraphrase the Good Book, temptation is like a roaring lion looking for someone to devour. Yet, despite all its strength, temptation will not succeed if we realize our weaknesses and address them effectively.

I need to emphasize “realizing weaknesses” because we fall prey to this human behavior called overconfidence.  In behavioral economics, overconfidence refers to our unfounded belief that we possess superior abilities in managing our budget, controlling our debt, choosing insurance policies and growing our wealth through investing in securities or a business.

Try to recall the times you told yourself that you would not succumb to the urge to splurge even if you went to a mall with a 70  percent off promo, and then left the mall with shopping bags galore.

Try to see how many Ponzi scams have robbed people of their hard-earned savings over and over in the past decade or two despite the warnings from the Bangko Sentral ng Pilipinas and Securities and Exchange Commission. People say it’s so easy to spot a scam but readily fall into it when blinded by the (false) promise of a high return yet low risk investment product.

Once we acknowledge that we are weak, we would then be in a better position to adopt the TWAHCD practice. The what?

Look at a picture of what you want to enjoy in the future. Let’s say it’s a picture of Boracay. By just looking at the picture, a thought will enter your realm of consciousness. That thought would manifest itself into a word like vacation or relaxation.

If you keep on coming back to that thought and word, they will drive you to action perhaps like saving up for the vacation.  But going to Boracay is not cheap so perhaps you will save gradually.  By saving gradually, you will be forming a habit.

As people see your habit of religiously saving up, they will say that you have eventually developed the character of being a saver.  And because of that character, you will be able to reach your destiny, both figuratively and literally.

So TWAHCD is nothing more than thoughts turning into words; words inspiring action; actions becoming the habit; habit melding into character, and character leading you to your destiny. But let’s focus on the AH because the famous philosopher Aristotle did say “We are what we do repeatedly. Excellence then is not an act but a habit.”  This was echoed by Malcolm Gladwell in his book “Outliers” where he said that one of the formulas for success is to do something repeatedly for 10,000 hours.

To nurture that habit of saving, you must start out with small mortifications. A person who is just starting out to become a professional weightlifter will not lift the heavy weights right away for fear of physical injury.  Similarly, you should not try to save large amounts right away for fear of financial injury.

Mortification means killing the desires of the flesh. Start to kill the small desires first.  As I say in my training, if you are so used to drinking coffee with sugar, try to drink it without sugar for the next couple of days.  Eventually, you will get the hang of it.

If you have trouble saving P100 a day, try it out first with P10 a day.  But you have to have a concrete plan for saving that P10 a day. As they say, goals have to be smart or specific, measurable, achievable, relevant and time-bound.

A smart goal would be to save P10 a day for 30 days as it would eventually lead to a fairly significant amount of savings of P3,000. To achieve this, you could stop buying extra rice. Another smart goal would be to visit places where the urge to splurge would not be strong. So instead of malls, you could visit public parks for the next four weekends. And be sure to make it a family affair so that it is more fun.

Financial mortification multiplied daily will eventually lead to financial discipline.

If you want to learn more about the proper way to save, borrow, insure and invest, please visit www.personalfinance.ph. There are a lot more free resources there for you to benefit from. You may also want to attendEnRich™on May 25, 2013 (moved from May 18), our public training on personal finance. Details for EnRich™ can be found on the website.

Remember that excellence in saving is not a single act but a habit.

(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 0917-505-0709 or e-mailed to [email protected]. To learn more about the RFP program, attend a free orientation on May 9, 7pm at the PSE Center. Email at [email protected] to register.)

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