Don’t save! | Inquirer Business
Money Matters

Don’t save!

Question: Can you teach me how to save? I find it very difficult. I am easily tempted to spend especially when it comes to food. I also stay up late at night to catch the sale promos on online selling platforms, usually when the month’s number coincides with the date of the month.

Answer: Your concern is rooted in your decision-making process, much of it is based on heuristics.

Heuristics—which are nothing more than rules of thumb, educated guesses, intuitive judgments and plain common sense—have evolved in the brain since the time of the cave dwellers. One such heuristic is loss aversion, which is a direct result of self-preservation.


Let us put that to the test. What if after reading this article, you get paid P20? Would you be jumping up and down? Probably not. You will at most have a timid smile on your face.


Now consider this. What if after reading this article, you are compelled to pay P20? Would you be disappointed to the point of being angry?

Look, it is the same P20 in both situations that would not even afford you to dance inside a disco or buy a hoodie. But why is it that the same P20 takes on more value when it flows out of you than when it flows in? Behavioral economists say that it is because losses hurt more than gains please you. You simply do not like to lose.

Now ask yourself if you can save 30 percent of your income. What was the raw emotion that bubbled up? Be honest with yourself. Was it positive or negative? Put a pin on that.

Take that question off your mind and ask yourself this time if you can live on 70 percent of your income. What was the raw emotion this time that bubbled up? Was it positive or negative?

If you answered negative to the first question, was your answer to the second question positive? And if you answered positive to the first question, was your answer to the second question more positive?

The reason many people cannot save is because they mandate themselves to “lose” or incur what behavioral economists call outright loss. The brain rebels against that. But if you were to do it the other way wherein you slowly build up a spending budget on what you can live on (i.e. zero-based budgeting), you do not get the sense of any loss. This is what behavioral economists call forgone gain.


Believe you me, I have asked countless people to do this strategy. Each and every time, it works. There was one person mired in debt whom I asked if he could save 50 percent of his income. His answer was no. But when I asked him if he could live on 50 percent of his income, he started computing and eventually said yes. Then, I gently pointed out that he had given two different answers to effectively the same question.

A financial advisor also could not get an appointment with her client because the client had answered no when she asked if he could save 20 percent for building his future. When she learned the framing of forgone gain in a training program I conducted, her client answered yes when she later on asked if he could live on 80 percent of his income. And she got the appointment.

There is no programming of the mind here. I am just imparting the most appropriate heuristic for the situation.

And by the way, what should be done with the savings? Naturally, they should be invested not simply to make money but to afford a better lifestyle in the future. In other words, investing has to be purpose-driven. INQ

This question was asked at “Ask a Friend, Ask Efren” free service at, SMS, Viber, Twitter, LinkedIn, WhatsApp, Instagram and Facebook.

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Efren Ll. Cruz is a registered financial planner and director of RFP® Philippines, seasoned investment adviser, bestselling author of personal finance books and a YAMAN Coach. To consult with a YAMAN Coach, email [email protected]. To learn more about personal financial planning, attend the 96th RFP Program this June 2022. To inquire, email [email protected] or text at 0917-6248110.

TAGS: Business, efren Ll. Cruz, Money Matters

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