Monday, August 15, 2011

Getting Capital By Controlling Your Spending

Let’s take a break from health care this time and look into making ends meet. After all, this is a primary concern of most people, moreso if you believe that you are earning less than you should. A common question that always arises when discussing finances with friends is why don’t you have the savings your friends do? Of course it is always easy to rationalize by saying that you have more expenses than they do and they have a bigger salary than yours. But is it really that simple? Let me discuss a few things that may be bloating your budget.

By and large, a lot of people simply live and spend beyond their own livelihood. In a nutshell, you feel rich. Hence, you spend much on luxuries you can do without. Do you really need all those after-market products on your car? Is Shu Uemura the only one that can clean your face? Do you really need a new Iphone? If you think so, then think again. Believe it or not, these are expenses that you can temporarily halt. The money you spend there can actually be enough to start your investment capital. If you aren’t spending richly, are the people you support living thusly? I know someone slaving his life away on some forsaken ship in the middle of nowhere while his wife lives it up here in Manila. Then he comes home to find his family bereft of any savings whatsoever but he thinks that there’s more where that came from.

Another example is the Filipino characteristic where able-bodied parents rely on their children’s underdeveloped incomes to survive. “Buhay mayaman,” where people spend the entire day lounging around, is actually “buhay tamad.” I’ve never seen the rich simply hanging out. If ever, they have to be taught to relax. Most of them wake up early in the morning and sleep late at night. They travel around to make money and rarely have time to themselves. An insurance agent once told me that as much as 53% of parents rely on their children for money later in life. On another instance, an elderly man told me that he sacrificed for his children when they were young so they have to repay him in the present. When I told him that he was confused between sacrifices and loans since sacrifices aren’t repaid, he fell silent. I’m not telling you to abandon your parents. I just want you to be able to give them a better life. Your family included.

Studies of good resource managers show that they are masters of the concept of “deferred gratification,” which is the ability to wait in order to obtain something he or she wants. If you think this is a foreign or novel concept, it’s also known as “impulse control,” “will power,” and “self-control.” The results of Stanford Marshmallow Experiment, done in 1972, expose this phenomenon quite well. Mastering impulse control is an intellectual ability that will eventually help you in the long run. It can actually get you a lot of things for free, mainly because your money will produce money which will increase your purchasing power.

This is the first of some topics on resource management. Luxuries are meant for the luxurious. Earn the money first. Then you will deserve it.

1 comment:

  1. Getting Capital By Controlling Your Spending:

    Beyond getting capital by controlling spending, I believe our people should be taught, not to study hard to get a job, but to study how to be in business. Capital growth would be a natural outcome, with the capital coming not from wages and salaries, but from production of goods and services.

    This is the big difference I see between Filipinos and Chinese. When Filipinos meet each other they ask, "Saan ka nagtratrabaho?" or "Ano'ng trabaho mo?". The Chinese on the other hand ask, "What's your business?"

    I admire this young 18-year old man from whom I bought a Magic Jack. He said he was taught by his uncle to be in business when he was 14 years old. I'm positive that this young man would never go hungry and may even be a big businessman given a few more years.