Saving money is an essential aspect of financial stability and securing a brighter future. However, for many Filipinos, setting aside savings seems like an impossible feat due to various financial challenges. A simple shift in perspective and budgeting strategy can make all the difference.
The Problem with the Old Formula
Old Formula: Income - Expenses = Savings
The traditional approach to saving—where people spend first and save whatever is left—has proven ineffective. This formula often leads to insufficient savings and financial struggles, as expenses take priority over setting money aside.
Why the Old Formula Doesn’t Work
Filipinos who follow this approach face common financial pitfalls, including:
1. Lifestyle Inflation
When income increases, expenses tend to rise as well. Many Filipinos upgrade their lifestyles with unnecessary expenses like frequent dining out, luxury items, and lavish vacations. This results in stagnant or even decreasing savings.
📌 Example: Maria, a working professional, receives a ₱10,000 salary increase. Instead of saving, she allocates the entire amount to lifestyle upgrades, leaving no room for additional savings.
2. Mounting Bad Debt
Without a structured savings plan, many turn to credit cards and loans to cover unexpected expenses or fund their wants. This reliance on debt worsens financial struggles and makes saving even harder.
📌 Example: John, a recent college graduate, accumulates ₱50,000 in credit card debt due to impulsive spending. With the old formula, his monthly income is spent on paying off debt, leaving nothing for savings.
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Click here to sign-up for FREE!A Better Approach: The New Formula
New Formula: Income - Savings & Investments = Expenses
A simple shift in mindset—prioritizing savings and investments before expenses—can be a game-changer. This method ensures that saving is not an afterthought but a financial priority.
Why the New Formula Works
1. Encourages Mindful Spending
By setting aside a fixed percentage of income for savings first, Filipinos can make more intentional spending decisions that align with their long-term financial goals.
📌 Example: Carlos earns ₱30,000 per month. He allocates 20% (₱6,000) to savings and investments, then manages his expenses with the remaining ₱24,000. This ensures consistent savings while maintaining responsible spending.
2. Builds an Emergency Fund
Having a safety net for unexpected expenses prevents reliance on loans or credit cards. The new formula allows individuals to gradually build an emergency fund for financial resilience.
📌 Example: Anna, a single mother, saves 10% of her ₱20,000 monthly income (₱2,000). Over time, she accumulates ₱24,000 in her emergency fund, enabling her to cover a sudden medical expense without debt.
3. Helps Achieve Financial Goals
By consistently setting aside money, Filipinos can work towards big financial milestones like homeownership, retirement, or education funding.
📌 Example: Miguel, a young professional, saves 15% of his ₱50,000 salary (₱7,500). In five years, he accumulates ₱450,000—enough for a down payment on his dream home.
Switching to the new savings formula—“Income - Savings and Investments = Expenses”—can revolutionize the way Filipinos manage their finances.
✅ Prioritizing savings ensures financial stability.
✅ Mindful spending helps control unnecessary expenses.
✅ Emergency funds and investments secure a better future.
By adopting this approach, Filipinos can break free from the cycle of insufficient savings and embrace a more financially stable and fulfilling life. Remember, every peso saved today is an investment in tomorrow’s dreams.