The NEW Savings Formula: Make Your Dream Savings a Reality!

July 9, 2023 | by Erwin C. Baluyot

Saving money is an essential aspect of financial stability and securing a brighter future. However, for many Filipinos, saving seems like an impossible feat due to various financial challenges.

Old Formula: Income - Expenses = Savings

The traditional formula for saving, "Income - expenses = Savings and investments," has proven inadequate for many individuals, leading to a cycle of insufficient savings and financial struggles.

NEW Formula: Income - Savings & Investments = Expenses

Thankfully, adopting a new savings formula, "Income - Savings and Investments = Expenses," presents a major advantage in the Philippine setting. This article explores why the old formula falls short and how the new formula can revolutionize savings habits, empowering Filipinos to build a more secure financial foundation.

The Pitfalls of the Old Formula:

Under the old formula, the focus is primarily on expenses. Filipinos tend to prioritize their expenses over saving, believing that they will save whatever is left after covering all their costs. Unfortunately, this approach often leaves individuals with little to no savings and perpetuates a cycle of financial instability. Here are some reasons why the old formula hampers saving efforts:

Lifestyle Inflation

With the old formula, as income increases, expenses tend to rise in tandem. Filipinos tend to upgrade their lifestyles, indulging in unnecessary expenses like frequent dining out, luxury items, and lavish vacations. Consequently, the amount available for saving remains stagnant or even diminishes.

Example: Maria, a working professional, receives a salary increase of ₱10,000. Under the old formula, she allocates the entire increase to her expenses, leaving no room for additional savings.

Mounting Bad Debt

In the absence of a systematic approach to saving, individuals often turn to credit cards and loans to fulfill their desires or tackle unexpected expenses. This reliance on debt further diminishes the possibility of saving and exacerbates financial burdens in the long run.

Example: John, a recent college graduate, accumulates ₱50,000 in credit card debt due to impulsive spending. With the old formula, he struggles to make monthly debt payments, leaving no room for savings.

The Power of the New Formula:

Adopting the new formula, "Income - Savings and Investments = Expenses," can be a game-changer for Filipinos aiming to improve their financial situation. This formula prioritizes saving by emphasizing the allocation of a specific portion of income towards savings and investments before considering expenses. Here's why the new formula makes more sense and can help Filipinos build their savings:

Mindful Spending

The new formula encourages individuals to be intentional about their expenses. By setting aside a predetermined percentage of income for savings and investments, Filipinos are compelled to carefully consider their spending choices, ensuring that they align with their long-term financial goals.

Example: Carlos earns ₱30,000 per month and decides to allocate 20% of his income (₱6,000) towards savings and investments. He then manages his expenses using the remaining 80% (₱24,000). This approach enables him to save consistently while maintaining a responsible spending pattern.

Emergency Fund Creation:

The new formula empowers individuals to establish an emergency fund, providing a safety net for unforeseen expenses or unexpected financial hardships. By making savings a priority, Filipinos can gradually build an emergency fund, enhancing their financial resilience and peace of mind.

Example: Anna, a single mother, saves 10% of her ₱20,000 monthly income (₱2,000) using the new formula. Over time, she accumulates ₱24,000 in her emergency fund, allowing her to handle a sudden medical expense without resorting to loans or incurring high-interest debt.

Achieving Financial Goals

The new formula facilitates the realization of long-term financial goals, such as retirement planning, homeownership, or funding education. By allocating a fixed portion of income towards savings and investments, Filipinos can gradually build the resources necessary to achieve their aspirations.

Example: Miguel, a young professional, sets aside 15% of his ₱50,000 monthly income (₱7,500) using the new formula. Over five years, he accumulates ₱450,000, enabling him to make a down payment on his dream home.

Conclusion:

Adopting the new savings formula, "Income - Savings and Investments = Expenses," can revolutionize financial habits and enable Filipinos to build a more secure future.

By prioritizing saving and investing over expenses, individuals can cultivate mindful spending, establish emergency funds, and achieve long-term financial goals.

The new formula empowers Filipinos to 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.

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