How To Be Penny Wise: Smart Money Tips (Third of a series)



People without plans drift aimlessly and get nowhere.  Planners and goal setters get somewhere.  Set financial goals for yourself, and that includes your family if you’re married with children.

Finances cover a multifaceted scope where savings, budgeting, spending, investment, retirement and estate planning are counted in.  In setting goals for each financial aspect, you should have a target to aim for.  Just remember the SMART principle:







In applying the SMART principle, start with the basic 10-20-70 principle based on your present net income:

10%       –              Tithing

20%       –              Savings

70%       –              Spending

Involve the family.  If there are plans for a family vacation, encourage everyone to chip in by setting aside a certain amount for the money pot.  This makes it more exciting for everybody.  More than that, it strengthens family ties, cultivates the spirit of cooperation and teamwork, and helps develop in each family member the good habit of saving.


Live within your means.  We’ve heard that often enough and we found nothing wrong with it.  But do you know that there’s a new paradigm shift?  Live below your means.  You can exhaust your monthly pay and still be considered living within your means, but that leaves you with nothing to spare for unforeseen emergencies.  But when you live below your means, you will surely have something extra to set aside as savings for future needs.

That’s where budgeting comes in, which is an integral part of financial goal-setting.  Before we even spend or think of how much to set aside for savings, we can control our purse and manage our finances by working backwards.  Budgeting is simply listing down your essential, regular daily expenses and adding them all up to determine your monthly expenditures vis-a-vis your monthly income.  You may be surprised to learn that you are actually spending more than what you’re receiving in your paycheck.  If that is the case, it’s time to review your expenses and identify which items can be tapered or which ones can be scrapped altogether.  Once you’re settled with your acceptable monthly budget, simply break it down into a daily budget for your daily expenses.  Be conscious of your budget and stick to it.  Don’t give in to temptations that will make you overshoot your budget.

Set aside the funds to be allocated for each expense item.  Safekeep the funds in separate individual, properly-labeled pockets or envelopes or folders.  There are available envelope folders with multi-layered compartments in bookstores.

Do not juggle funds. When money allocated for a particular expense item gets depleted, avoid touching the funds set aside for something else.  This requires discipline and self-control.  Over time, you will learn to master the habit.

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How To Be Penny Wise: Smart Money Tips (Second of a Series)


Need vs. Want

How do you distinguish between a need and a want?  Being able to spot the difference is a fundamental tenet in wise, smart spending.

A need is something essential for daily survival and sustenance.  Food is definitely a must.  Need also includes what would be necessary to maintain dignity and decency in life.  Shelter and clothing fit into the criteria, and not to forget, necessities that fall under the personal hygiene department.

Those are just the basics.  But expounding on the subject expands its territorial bounds, extending to a whole gamut of incidentals required in the performance of work for our daily bread and butter.  Transportation fare for commuters or gasoline for motorists is part and parcel.  Home-based online jobs could not be accomplished without the aid of a computer.  In this context, needs are relative; they may differ in meaning and relevance depending on personal circumstance.  But I’m sure you follow the drift, right?

A want is something you can do without or live without.  It’s just about anything beyond or in excess of a need.   This can be a bit tricky, though.   People nowadays cannot do without a mobile phone (now smartphone).  While it is true that it has evolved into an important and necessary communication tool in this millennial age, it is an electronic gadget that, strictly speaking, falls under the “want” category.  As long as the mobile phone can deliver on functionality, that should be sufficient.  But itching to have more units than is necessary, or to acquire the latest, most expensive brand and model with the most sophisticated apps than what you can afford is considered a want.   A need item like clothing, when it becomes exorbitantly extravagant, is going overboard, unless you’re filthy rich.   When you buy new apparel to add to your cabinets already bursting at the seams with wardrobe, some of which remain unused, that is already a fetish, a caprice if you will, especially so if you are not a celebrity.

Know your priorities

When you have learned to distinguish between a need and a want, the next step is to learn to identify what is an immediate need and what can wait for a later time.  Recognize and admit that we can’t have it all at all times.   Learn FQ.

Have you heard of the marshmallow test?  A number of children were subjected to such test.  They were left inside a room with a plate of marshmallow, with a promise that they will be entitled to a double portion if they could wait till they got the go signal to eat.  The children obviously grappled with a tug-of-war inside them while they tried to resist the temptation laid before them.  You guessed it – most of them failed.  Click here to watch the video:

Self-control is the leverage.  And that requires discipline. The same is true with FQ or Financial Quotient, which is your ability to control and manage your finances.

It’s all about Delayed Gratification vs. Instant Gratification.  We are living in an era where patience is becoming more and more a rare virtue.  People are always in a rush, hence, the convenience offered by fast food, and any other stuff labelled “instant” like instant coffee and instant noodles.  There’s a growing generation of impatient people bent on satisfying their desires no later than NOW, only to figure out later how to extricate themselves from the mess they got themselves into.  Patient waiting buys you time to think things through.  It may be that your interest will eventually wear off, or you will come to realize that it’s really not necessary after all.  But a more rewarding prospect is being able to appreciate the beauty of waiting for the perfect time when the money for the item you’ve been eyeing becomes available.


Do not compare yourself with others.  Be content with what you have.  If you keep looking around you, you will see what your neighbour has that you don’t have, so the green-eyed monster rears its ugly head and cultivates envy.

Do not keep up with the Joneses.  We have different capabilities, capacities and circumstances.  Nothing rings truer than this quote from Dave Ramsey: “We buy things we don’t need with money we don’t have to impress people we don’t like.” 


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HOW TO BE PENNY WISE: Smart Money Tips (First of a Series)



The Sad Truth

A study shows that 9 out of every 10 Filipinos have no savings, and 8 out of every 10 Overseas Filipino Workers (OFWs) end up broke.  What do these numbers tell us?  Filipinos rate poorly in the proper handling of financial resources.  Nothing can be more glaring than that.

The key to this social malady is education that will wean Filipinos from their old undesirable habits and develop new good ones.  Just imagine where our economy would be if all Filipinos managed their money wisely!  Money in banks and other investment instruments create a very conducive environment for businesses to thrive and fuel a more robust economy.  Not only will each and every Filipino family gain from it, but just think how you and I will be a contributing force to spur the country’s development and progress. Every small drop fills up the bucket.

I must admit that I thought I knew everything I needed to know about Personal Finance 101, until I worked for a non-profit organization whose advocacy is to promote financial literacy through the conduct of seminars. This is something that grew on me and later evolved as one of my Corporate Social Responsibility (CSR) platforms in my last job as Corporate Communications Unit Head of a bank. The principles I learned then are the same principles I will impart in this brief course as a matter of personal cause.

But the very first thing we need to learn in the area of financial literacy is to UN-LEARN the wrong notions we have about money.

Ownership vs. Stewardship

We do not own what we have in our possession.  Got that?  Yes, you read it right!   The funds deposited in our bank, the money in our wallet, and the material goods we have acquired through the years are  not ours.  The earth is the LORD’s, and everything in it. The world and all its people belong to him (Psalm 24:1, New Living Translation).   We are just stewards, or in layman’s terms, managers of the resources that God has simply entrusted to us.  After all, we brought nothing with us when we came into the world, and we can’t take anything with us when we leave it (1Timothy 6:7, New Living Translation). The earlier we embrace this truth, the easier it would be for us to come to terms with our role as mere managers.  Then our perspective, attitude and behavior toward money will change according to God’s design.

In the final analysis, all our financial decisions are spiritual decisions.  We have the Best Financial Adviser in the whole universe to consult for decisions involving financial matters.  Getting divine guidance about our earthly treasures will keep us from erring and falling into financial sinkholes.

The Value of Work

Since God owns everything, even our knowledge, skills, talents, and abilities that enable us to work in order to earn and acquire material goods are from Him.  “But remember the LORD your God, for it is he who gives you the ability to produce wealth, and so confirms his covenant, which he swore to your ancestors, as it is today.”- (Deuteronomy 8:18). It would, therefore, be arrogance to assume or claim that the success we may be enjoying now in our career or business is but the product of our own genius and labors.  We need to acknowledge that our qualifications and sheer hard work won’t get us anywhere without God’s permission.

What does the Bible, the life manual provided by our Maker and Owner of everything, teach about work?  For even when we were with you, we gave you this rule: “The one who is unwilling to work shall not eat.” (2Thessalonians 3:10, New International Version).  As clear as daylight, it leaves no room for second guessing.  If you have nothing to eat, then you’re not doing your part.  It’s as plain and simple as that.  God gave us the ability to work.  There’s no excuse not to work; no reason why we can’t make money.  Work hard. Earn a decent living.

Your work earns your keep – it puts food on your table, covers your back and provides a roof over your head.  Love your work and it will love you back.  If you’re unhappy with your job, think of the many that are unemployed and without any means.  This is not to say that you cannot look for greener pastures.  What I’m saying is, never take your work for granted.  Do not bite the hands that feed you.  Instead, do your best while you’re there.  Be grateful that you are gainfully employed or are engaged in an income-generating activity.

Parents, start your children early in inculcating the right values about work and money.  Training and disciplining them in these matters while young will prevent children from developing an entitlement attitude where they become demanding because they think the world owes them. Don’t we just find it disturbing when we see children throwing tantrums inside the mall when parents can’t or won’t buy them what they want?  Children need to be made to understand that money doesn’t grow on trees.  Even the money tree (scientific name: Pachira aquatica) doesn’t bear paper bills and coins, does it? Learning to say no to their caprices, teaching them to wait till there’s enough money for a valid object of desire, and being firm about it will help develop their EQ (Emotional Quotient).  They will learn to handle disappointments and grow in the virtue of patience.  Likewise, they will realize the value of work and not grow old idle and be like a leech depending on others for financial and material support.

The carrot principle, a reward system that can be applied by parents for a child’s good deed or good behavior (good grades in school, doing a house chore, waiting for the right time for daddy or mommy to buy a toy, etc.) will, first of all, plant the seeds for proper motivation. More importantly, it will impart important life lessons for survival and successful living.  Wages are paid in exchange for work done.  But promotions, bonuses and merit increases are for those who do more and fare better at work than the average guy.