Hey there! I haven’t blogged in a while mainly cause I’ve been too busy with work and I haven’t found the time to shoot and create material for blog posts so I’ve been MIA for almost about a month! Anyway, I thought I’d try something different and instead of doing a blog post about fashion or my other usual posts, I thought I’d write about something I think every twenty something year old or someone who’s just out of college and is just beginning to work, difficult: saving your hard-earned money.
It can be pretty hard to do save your own money when you’re just starting out cause earning money on your own usually gives you such a huge freedom to buy whatever you want. But it’s also a hard thing to do cause once you start earning, you have to keep in mind that you now have responsibilities such as paying your own bills or helping out in the household (either if you live with your family, room mates or special someone). I’ve been working for about three years now (I graduated college 2011) and I have experienced these dilemma and have still been experiencing it even now.
So, I thought I’d share with you guys on my blog what I’ve done to help me save my money and still let me have my bit of freedom. Please keep in mind that I’m not a person from the banking or finance industry so this may or may not work for you and some these may or may not be right but so far its working fine for me which is why I’m sharing it here.
1. Open different bank accounts.
When you start working, most of the time your employer will open a bank account for you so that they’ll just transfer your salary to one account, this is called your payroll account. This should not be considered as your personal account because often times, you will end up taking and taking money out of this account until you’re out of money and will have to wait until the next pay-day. I suggest opening your own personal account either from the same bank your payroll account is from or from a different bank. This will allow you to properly divide your earnings into two categories :your savings and your expenses.
2. Allocate a % of your income.
This goes hand in hand to advice no. 1. I’ve been doing this for a while now and while it does take a lot of getting used to, it does do wonders to my bank account and my savings. It also helps me in creating and maintaining my budget. It’s up to you how you want to allocate your salary but what I do is I follow the 70-20-10 rule. This rule simply means that you allocate the following percentage of your salary to:
70 %- expenses
20 % – savings/emergency fund
10 %- debt/emergency fund
This usually depends on your current financial or lifestyle status, if you don’t really have any debts then you could add the 10% to your savings or use it as an emergency fund or if you want, you could use the 10 % to fund an item or the items on your bucket list so that you won’t have to touch your savings when you travel or if you have to support your family, like most of the people living in the Philippines, you could add the 10 % to expenses. It really depends on how you would allocate your own expenses but always keep in mid that you have to allocate a part of your salary to savings, you wouldn’t want to work to pay your expenses for the rest of your life, right?
Also keep in mind that the 20 % allocated to your savings should also be divided into two parts: Retirement and Investment. It’s up to you how much you want to allocate to each other so long as you do. If you have debts to pay then divide the 20% into three by adding an allocation for emergency funds instead of using the 10% like I suggested earlier.
3. Cut down on the unnecessary expenses.
This is probably the biggest and hardest thing to do for a newly earning person and this is probably the area where most people, even those I’ve known to be working for years, make their biggest financial boo-boos.
Back when I started working, I realised that even though I’ve been working for over a year and even if I had saved enough of my allocated savings money for my investment, I still felt pretty broke as I was always left with little money above my bank account’s maintaining balance. I decided to write down everything I’ve been using my own money to spend on, excluding my expenses and realised that I’ve used my money on unnecessary expenses.
Here’s a breakdown of what my money and I have fallen victim to:
– Unnecessary food bingeing: Every time I go out or even when I’m at home (where the fridge is always stocked with food) I always end up buying food more than necessary. For example, I went out to watch a movie with my best friend one time and I ended up buying a Jamba juice while waiting for her then for the movie, I bought popcorn and milk tea then after the movie, we both had dinner at a fast food place. I mean seriously, not only is this habit unhealthy and fattening, it also hurt my wallet! Another example is whenever I’m at home and I couldn’t sleep or am hungry, I used to call in the nearest 24 hour fast food chain for a food delivery (McDonald’s) or have my brother drive me to the nearest café (of course I have to buy him something too). These are just some examples of unnecessary food bingeing. We can all avoid this by planning ahead or just stopping to think if we are really hungry or just plain bored. Going to watch a movie? Check the available time for the movie online then plan your outing around it, go have dinner before watching the movie or after it rather than meeting up ahead of time, eating before the movie then eating again after. Hungry for a midnight snack? Check the fridge or drink some hot milk or eat what’s available at home.
-Impulse Shopping: As a personal style blogger, I’ve fallen to this boo-boo countless of times. This is a one way ticket to becoming Rebecca Bloomwood, before the green scarf. That 70 % off on Forever 21? I’ve gone crazy for that. Spend a minimum of Php 5,000 to get a three month, 0% instalment on your credit card when you shop? I’ve taken advantage of that too. The thing is, even if these promos are a steal, it can still hurt your financial goals and hinder on your financial routine. I’m lucky that the only credit card I actually use is a supplementary from my mom which is limited to only 10,000 pesos. I’ve even reached that limit cause I kept shopping whenever I went inside a mall and availed of that 3 month instalment plan. The thing is, even if it is an instalment plan, it will keep adding to your limit until you finish paying it off, so even if you have 3 instalments, 1 month apart each, it will still take up from that 10,000 pesos limit. What happened is that I had to pay my mom (cause my credit card is under her name) most of my earned savings so that I could clear off my credit card debt (this is why you should stick to that 10-20-70 rule in advice no. 1). Now I’ve learned to make a list of what I need to buy and schedule when I need to buy it so that I won’t have to hoard items that I want but don’t necessarily need or will wear until an event or occasion props up.
– Impromptu out of town/country trips: It sound’s fun and exciting and adventurous, yes. After all isn’t that what we, the youth should be doing? exploring the world and living life to its fullest? In an ideal, perfect world, yes, that’s what we should be doing but let’s get real, unless our parents are willing to shoulder all our travel expenses and shopping money, the chances are, we will shoulder our own travel expenses. I’ve experienced going out of town with my friends and realising how much money it costs, that toll fee on the express way you have to split up? fine, that food place we just have to try, and some souvenirs to bring home to the family and let’s not forget about gas and or commute fee if you’re traveling by commuting. These can all still add up even if you split it amongst yourselves. The same goes for traveling by plane, you have to consider how much the airfare, hotel and accommodation and again, food and souvenirs. Where are you gonna get the money to fund all of these if you’re allowing yourself to be carried away by these spur of the moment ideas? Your savings account. That’s where you’ll most likely take the funds from and after that? you’ll just be as broke as the day you started working.
These unnecessary expenses can easily be avoided by planning ahead and being up-to-date with the latest deals (restaurant deals, shopping sales, airfare promos). Adapting a habit of scheduling when you will go on vacation, go shopping or even go out can help you maintain and track your spending and keep your savings account away from being used.
4. Make a list of your monthly bills.
This is pretty easy. Knowing what you have to pay every month will keep you from going out of your budget because you forgot to pay one or a few of them on time. Keep track of your phone, electricity and water bills so that you won’t miss your deadline and you won’t be inconvenienced when they cut off your power or water supply or your phone line.If you own a credit card, track and pay your credit card bills on time or before to avoid incurring unnecessary fines.
5. Do not touch money in the bank once it is at the maintaining balance.
This often happens when you don’t have enough saved up. I have friends who keep taking out money from their bank accounts and not put enough back to keep it at a maintaining balance. It might seem nothing but depending on your bank’s policy, they may charge you for going below the maintaining balance. I was pretty surprised (and not in a good way) when I checked my online account and see a 300 pesos debit from my account. When I called up my bank they informed me that they charge a fee for every 3 months that an account has been under the maintaining balance (which is 5,000 pesos at the time). Can you imagine how much money you’d lose in a year if you keep your account below the maintaining balance? So my advice is to always make sure you have an extra fund of at least half the amount of the required maintaining balance to avoid going below the required balance. Once it reaches the maintaining balance, don’t touch it unless you can return the money as soon as possible.
6. Stick to these resolve as much as possible.
Creating and sticking to a routine will never be easy. But just like working out, the key to financial success is to discipline yourself to saving your money and smart spending in order to reach your financial goals.
Hope this post can help anyone out there like me! Let me know how you save your money by commenting below!