By Gus Cosio
Many people don’t save or invest because of lack: lack of discipline, lack of know-how, and lack of resources.
Lack of Discipline
Discipline is never easy. Changing long-held spending habits takes willpower and time. But habits – bad or good – can be acquired. Recently, I developed the habit of good diet and thrice-weekly exercise – at over 50 years old. And they say you can’t teach an old dog new tricks!
Similarly, the savings habit doesn’t happen overnight. But putting away a small sum of your income every time you receive pay will soon make saving second nature for you. It’s a simple change of mindset. There is an old notion that INCOME minus EXPENSES equals SAVINGS. This is not exactly gospel truth.
Many find that as their income increases, so do their lifestyle and spending habits, thus depleting the extra income. To accumulate savings, you must compensate yourself first. The formula for doing that is INCOME minus SAVINGS equals EXPENSES. This implies that you must first put away savings for yourself. This becomes what finance people call “personal equity.” You should then live within what remains after savings have been put away.
Some companies promote personal investing by providing employees with a savings program by way of salary deduction. By authorizing your employer to put part of your salary in a savings fund, you discipline yourself to make do with what remains.
Lack of Know-How
Reading articles on the internet about savings and investments can help increase knowhow. Remember that there are no free lunches. Have the diligence to research on savings and investments. Ascertain the reliability of the info sources and savings vehicles you consider. Reading this article is a good start. You can go to www.save-and-learn.com.ph or www.guscosio.com to read further.
Lack of Resources
Following the formula shown earlier, you should be able to set aside at least a bit of savings regularly. Now to find investment possibilities for your small savings. Most investment instruments require a minimum amount that might be out of your reach. This is where mutual funds can help.
Mutual funds probably have the lowest minimum requirements among investment opportunities. It takes only P5,000 to start an account in the Philippines and P1,000 for additional investments to the same fund.
If P5,000 is too high for you, you can still surmount that problem. Some company-sponsored savings programs pool resources of employees in a mother account under the company’s name, eliminating the initial investment requirement. Or open a joint account with close relatives or people you trust explicitly. Find four other people who want to save, and put up P1,000 each to meet the minimum requirement. Do this every month until each individual has enough for the minimum investment. You can then break it up into individual accounts.
There is no substitute for starting early. Mutual funds are great for students who already want to start saving. Parents who encourage the discipline of saving do their children a great service. Once young people get into the habit of saving, they learn the discipline of living within their means for life. This brings fulfillment because they don’t desire material things beyond their means. Furthermore, they’re able to identify financial goals and plan for them.
People easily find excuses not to save. Certainly, spending on whims provides short-term satisfaction but long-term frustration. But if you set your mind to it and slowly develop the savings habit, there is no reason why you cannot secure your financial future today – even if you think you have nothing to save.
Remember, INCOME then SAVINGS then EXPENSES. Follow that priority and enjoy a better life. You will soon develop investing skills, the ability to put your savings to work.