Just remember that building up savings is a lifelong effort. If you work smart, then steady progress will get you to your goals and help you to avoid those big slip-ups on the way. Here are strategies to help you save money the smart way.
Have different bank accounts
When all your money is in one account, seeing a large balance can be very tempting and make you feel richer than you actually are. The day after payday, you might look at your account and want to treat your whole barkada for drinks and pulutan.
Putting your money into different types of accounts within your bank lets you see immediately how much money you have to work with for every need in your life. Have one bank account for your fixed expenses: monthly rent, utility bills like water and electricity, your monthly grocery budget, and any other fixed monthly expenses like your insurance, cellphone or debt payments.
With what’s left, divide the money into two bank accounts: one for savings, and one for your monthly “allowance.” The money that goes into your savings account should be money that you never touch. In fact, don’t even get a checkbook for this account and leave the ATM card for this one at home. Try to put up to 20% of your monthly salary in savings, and if you can’t then hopefully a minimum of 10% is doable.
Give yourself an allowance
What is your allowance for? It’s hard to stay on track with saving money if you feel deprived every month. You work so hard for your salary, it’s only right that you get to enjoy the results of your hard work. The money that goes into your allowance should be for all the fun things you like to do: eating out, watching movies, shopping or travel. Anything goes! If you want to save up your monthly allowance and then blow it all on a nice leather jacket, then you can do it without feeling guilty.
You can determine what your allowance should be by putting aside your desired percentage of savings first and then leaving the rest for allowance. But if you don’t have much money after removing your monthly expenses, then think of a reasonable amount of monthly allowance that will help you stay sane – enough for two meals out a month, for example – and put whatever’s left toward savings. The further along you get on your saving and earning path, the more you can increase your allowance later.
Use automated payments
The sooner your money gets sorted to your different accounts and put out of your sight, the less temptation you will have to spend it. Ask the HR department at your work if they are able to do your direct deposit into different accounts. If they can, then a specific percentage of your salary can immediately be put into your savings account every month. If not, or if you are paid in cash or do freelance work, then set an alarm on your calendar every payday (or twice a month for freelancers) to remind you to immediately transfer money to your different accounts.
You can automate payments to other forms of savings too, like BPI-Philam's investments-linked insurance plans.
Find expenses to cut
If you find that money is tight and you would like to lower the amount you put into savings every month, take a pause and look at your expenses first. We think that our monthly bills are non-negotiable, but there are actually a lot of ways to cut these expenses down if you look closely.
Does your cellphone plan really need all those extras? Are there ways you can lower your electricity bill at home? Are there more affordable groceries you can choose than the ones you've been buying? Should you find a roommate to share your rent and utilities rather than living by yourself? Always try to cut money from your expenses and allowance first before your savings. Remember that savings can save your life, while everything else is just extra.
It can be hard to maintain habits over a long period, so setting smaller goals along the way to a long-term goal can be helpful for lasting commitment. If you are starting with no savings or very little savings, set a small savings amount you can reach relatively quickly. How about trying to set aside enough savings to cover all your monthly expenses for two months? Once you hit your small goal think of a creative and inexpensive way to reward yourself, then set a larger goal, like enough savings to cover all your monthly expenses for 6 months.
Keep increasing your goals, and never stop setting targets. You lifelong savings priorities should follow this order: enough cash for an emergency fund, savings that you can put into investments to help your money grow even more, and finally enough total savings (cash, investment principal and interest payments from investments) that you will be financially secure after you retire and can even leave some money to your children.
BPI-Philam has a range of products to help you reach your lifelong savings goals by giving you protection from unforeseen medical expenses and providing investment opportunities through your insurance. In any of the BPI branches, you can talk to a Bancassurance Sales Executive from BPI-Philam to get to the next step of your savings goal.