Question: I want to save but I have no fixed income. I depend on commissions on selling real estate; and it takes many months just to close one deal. Please help. —Anonymous SMS through “ask a friend, ask Efren” service
Answer: It is great that you have taken on the mindset of saving. While a lot of people have been talking about entrepreneurship and stock investing, these cannot take place if they have no savings to start with. No matter how high the potential return, the future value of zero will always be zero.
Saving, like doing pushups for the first time in two decades, is hard. Your pocket would have gotten used to a certain lifestyle that you would think would be part of your needs. The trick lies in separating the chaff from the grain, or the wants from the needs.
We have many preconceived notions of what we need in life. And we have proven time and again in our training programs that we have many misconceptions about day-to-day needs.
Take for example the use of electricity. Many participants in our EnRich™ CD-RW trainings would say that the flat iron is one of the most expensive appliances to use. That may be true on a wattage rating basis. But when we would ask the Iron Men in the audience how often they would iron clothes, the normal answer is about two hours each time for two days in a week and four weeks in a month. This pattern of ironing would only cost around P182 a month in electricity (i.e., assuming a monthly bill of P4,000 and using the Meralco Appliance Calculator, or MAC).
Since these participants already know the proper way of using the flat iron, it doesn’t make sense for them to stop using it to save P182 a month at the cost of an unkempt look for their family. Their current level of electric consumption for the flat iron is down to a must.
Contrast this with the use of the electric fan. Many of our participants will say that they use each electric fan eight hours a day. Plus, a lot would say that they have two to three electric fans running at the same time.
A sixteen-inch electric fan running at 8 hours a day, seven days a week and four weeks in a month will already cost P204 a month in electricity (i.e., assuming a monthly bill of P4,000 using the MAC). Multiply that cost by three fans and you already have P612 a month in electric fan usage alone.
That’s why we jokingly say, “iron more and fan yourself less.”
Once you have seen where the holes in your budget are, try to plug them slowly.
If you are like our participants, you can cut down on the use of electric fans by two hours each, thereby reducing your electric bill by P153 a month or P1,836 a year. There you go … savings!
You may want to augment your cost-cutting by doing interearning, which is similar to intercropping but with income.
Try to find another source of income that can carry you through the dry spells in real estate. The DTI has a ton of brochures on small and medium scale enterprises that you can study. But please augment your research with other sources. And do remember that, for any business to flourish, four departments need to run efficiently and effectively together. These departments are production, marketing, human resources and finance.
If you want to learn more about effective personal finance, please visit www.personalfinance.ph. There are a lot more free resources there for you to benefit from. You may also want to attend our EnRich™ public training on personal finance on Aug. 3. Details for EnRich™ can be found on the website.
Saving may be easier said than done, but it can be done nonetheless.
(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 efren@personalfinance.ph. To learn more about financial planning, attend a free personal finance talk on June 6, 7 p.m. at the PSE Center. E-mail at info@rfp.ph to register.)