Investing in Philippines: Ways to be debt free: More on Savings Fund

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Sunday, September 4, 2011

Ways to be debt free: More on Savings Fund

source: http://www.dailymail.co.uk


Remember my blog post Allocating your salary or Earnings?

I would like to expound more on the topic on savings. I guess this post will make big wake up call for most of us.

Now lets understand how a normal YOU would do upon receiving your paycheck. First of all even before getting your paycheck you have probably already made plans where will you and your friends will go on gimmick. Or maybe you already called the store where the bag you wanted is being sold and asked them if they can reserve it for you till the night of payday. Or maybe your bags are already pack for a weekend getaway just waiting for your pocket money.

All of those are not bad, you work for your salary so you deserved to spend. So on your pay day you get your check and you invent all excuses to cash that check(if your employer don't do direct deposit). And then you pay the minimum required payment of your credit card, separate the money for whatever your plans for the weekend and the balance you give it to your wife, mom, or housemate for the utilities.

Yup that is YOU. Living from paycheck to paycheck.

You will tell me it is the only way you can de-stressed from the the toxic office or work you have. Or it is only the escape you can afford. Yeah I get you, it is but again why rush to this when you can actually just slow down. 

There is no need to go to out of town just to escape the toxic work or probably your toxic house or maybe the toxic people who will be part of your weekend. I know what you mean, I am human too I did and I am still experiencing the toxicity of people and everything but that action is just short term.

After the weekend getaway, after the buying spree or malling, or even after the gimmick where do you find yourself again? Isn't it you are back to the same toxic work that you hate, the same toxic people that you just escaped or left behind for the short moment, or even the same toxic life that you have. 

I have a suggestion. But let me warn you that this is not a quick fix and is not applicable to all. Do you understand the Law of Diminishing Returns?

Law what?

Yup its a law called Law of Diminishing Returns. This law is in connection to savings. 

Let me first tell you what is Law of Diminishing Returns mean.

Law of Diminishing Returns states that:

Decrease in the marginal (per-unit) output of a production process as the amount of a single factor of production is increased, while the amounts of all other factors of production stay constant.  

source: http://www.relationship-economy.com


Ok in layman's term: The satisfaction you get decreases when a particular factor is increase given that other factors remain the same.

For example as you increase your weekend getaway as time passes(meaning you increase the number of your getaway because you feel stress out every week in your work) it will seem that your excitement to go and your enjoyment going out lessens and at some point you don't feel your de-stressing at all. In the local term this is what we call "nakakasawa."

Back in my college years this topic was discussed in my economics subject(where were you when this was discussed?). The most example us is the bottomless Coke. In a certain restaurant there is a Coke machine where all customers who pay are given a single size cup and they can refill as long as they can and remember no sharing. The maximum a normal person can drink is up to 5 cups. With this restaurants already included the cost of this to each combo meal that comes with a bottomless drink. If you all already fed up at 3 cups of Coke they win because in reality you paid for 5 cups(remember the cost of such bottomless drink is included in the price you are paying for the meal) and if you go beyond 5 cups(you sure have a big storage there) they lose.

source: http://www.coca-cola.com


We have to apply such to our savings.

Yes you save for the gateway or anything that you want to buy that you think you deserve but do you think buying and buying such will make you happy in the long run? Probably for some yes specially for those who collects bags and treasure them like their babies. But it is a truth that you would eventually realize that it is a pointless spending when you don't find that happiness that such spending once brought you.

Here is the solution that I am talking about. Why don't you save and save and when it seems that you don't have that much liking already for the getaway or that bag, or that gimmick you set that saving aside for something more permanent? We call this delaying gratification.

Yup so many people and gurus have already talked about this and again I am reiterating their advice and adding something more; why don't you save up for something permanent. 

Is your work giving you stress? Then why don't you save up so that you wont work in that toxic work anymore? Why don't you be the boss of your own company. I know that is more stressful. Yup it may be more stressful running your own business but in this one you have control of everything.

If you are in my generation you might have also watched the Fullmetal Alchemist anime. Yup remember the rule of Alchemy: Equivalent Exchange.

source: http://media.photobucket.com

source: http://fma.wikia.com


Such is very true. What ever you save up has a value. Everything in this world is not free. If you want a comfortable life you have to sacrifice now to achieve it in the future. But then you ask me how come others are so rich that they don't worry and it seems they don't observe such Equivalent Exchange. To tell you the truth they actually did exchange something for what they are enjoying now.

Besides them sacrificing something along the way they have learned how to make money work for them that it came to the point that even if they are sleeping their wealth works for them a billion times harder than they did. 

How about you will you stay living from paycheck to paycheck waiting for the Law of Diminishing Returns to get at you and will feel it seems your stuck in a rut or will you be brave to sacrifice something in exchange for something so that you will be happy the rest of your life? 

I am working on it I hope you are also working on it as well.


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Chitika