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The Best Approach to Handling Your Finances
Sean: We have a question from Patrick. Patrick, thanks again for tuning in. Why do Filipinos have a hard time saving and budgeting?
Fitz: This is related to my podcast. My podcast is entitled, The 80 Percent, which is inspired by what Dave Ramsey said. He says that financial success is 80% behavior and 20% head knowledge. A lot of Filipinos, they just focus on the 20%. They know that it’s important to save. They know that it’s important to track their expenses, to spend less than what they’re earning, and it’s important to create a budget. But they failed to study the 80%, which is really developing a daily habit that will help you achieve your goals.
A lot of Filipinos have a hard time saving and budgeting because they focus too much on the goal of having savings. They focus too much on creating a budget. But they don’t really give time to ask themselves, why do I want to do this? Because having a good why or knowing or reminding yourself the reason why you need to take care of your finances is a good motivation. A great motivation into having the patience and the persistence into building your money management skills.
One reason also why Filipinos fail is because they don’t save for a goal. So again, having a goal is very helpful when you’re trying to manage your finances. A lot of people, they just know that I need to save money. But you have to ask yourself, why do you need to save money? One of the studies that have shown is that when you’re walking in a mall and you see a sale, so you will be tempted to say, “Oh, I will buy new shoes. There’s a sale.” But you also have to remind yourself that you need to save money. So between a shoe, a new shoe, and a vague concept of saving money, for sure, buying those shoes will win because it’s a concrete thing and our mind is set to go for that instant gratification.
But if you set a concrete goal for yourself, like you want to save money because you want to buy an iPhone, for example. Again, nothing wrong with setting those types of goals. Now, when you’re walking through the mall and you see a sale that, oh, there’s a shoe sale, but you also know that you’re trying to save for a new phone, for an iPhone. You just have to ask yourself, which is more important for you, saving money so that you can buy that iPhone or buying those new shoes?
At the end of the day, there’s no right or wrong answer here. What I always emphasize is you have to be aware of the motivations that you have. And if you believe that it’s more important for you to buy those shoes, then you have to accept the fact that you won’t be able to buy that iPhone that you want. So it’s all about being aware of our decisions, creating systems and processes in how we live our life so that we can build that 80% behavior, that 80% mindset that we need to achieve financial success.
So I think that’s what’s really missing among Filipinos. We just tell ourselves that it’s important to do this and that, but we don’t spend that much time into studying the why, the reason why we want to do that. And the how, how do we achieve those goals? So that’s my answer to that question.
Sean: Love it. You’re right in saying that, you know, we know, right? We know it’s important to save. We all know that but it’s hard to do. And it all boils right down to the heart, right? How do you feel? What’s your why? Why do you want to save? If you don’t have a concrete answer and maybe one thing that you can do to be able to help you remember why you’re saving, write it down on a piece of paper or print it, whatever you want to do and put it in front of you every day, maybe paste it on the mirror where you check your face.
Fitz: Make it your phone’s wallpaper.
Sean: Make it your wallpaper,
Fitz: I have friends who do that. Yeah.
Sean: Yeah. Because your phone is the first thing you pick up and the last thing you put down. That’s right. You know, put it in front of you. Because if it’s not in front of you, you’re going to forget it. And when you see that big S A L E on the mall, that’s what you’ll gravitate towards.
And from that, Erika asks again, should I be frugal with my money?
Fitz: Yeah, there are two translations of frugal in Filipino. Frugal can mean stingy. It can also mean thrifty. Right? Of course, the more positive definition is being thrifty. But personally, I believe that it’s important to be prugal instead. P R U G A L. Prugal means being prudent and frugal. It’s not enough to just be thrifty with our money, but we also have to be prudent or we have to be smart with how we spend our money.
One story that I tell people is that a few years ago, I wanted to buy new running shoes. So of course, I saw cheap running shoes. And if you’re a frugal person, that would be a good choice because it’s an affordable choice, an affordable shoe, running shoes. However, I did not consider how durable it would be. So after less than a year, the running shoes got broken and I have to buy a new one. So the next purchase that I did, I researched more on the durability of different brands. I also considered what its use is. I will use it more for running, so I cannot just buy any random rubber shoes so I have to find one that fits my needs. Although it was more expensive, those running shoes lasted me for almost four years, which is far more than if I just kept on buying those 500 peso affordable shoes. Right?
So being frugal, which is being smart with our money. Being prudent and frugal is what’s more important. So in Filipino, it’s being wise with our money. So it’s not enough to be thrifty, we also have to be smart in spending our money on the things we buy. So it’s really important to be prugal – prudent and frugal.
Sean: Prudent and frugal. It’s not enough just to be frugal. That’s great. So I hope that helps. And Erika is asking, are there some best tools out there to help us keep track of our money?
Fitz: Again, the personal finances are personal. Use whatever tool that really helps you and inspires you to track your money. I started tracking my expenses, tracking my cash flow when there are still no apps that you can use. So I started with pen and paper and then graduated to using Excel, which I eventually found as the best tool for me. So even if there are already a lot of apps, a lot of software out there, I still use my Excel file to track my expenses. So use whatever is convenient and easy for you.
One thing that I would tell you is that tracking your money at first, we’ll be very tedious. When I was just starting out with using Excel, it would take me around an hour and a half to just allocate my budget for the week, but I just became persistent and patient with it. Right now, after more than a decade of doing it, I can easily develop my budget for the whole week in about five minutes. And I am able to analyze my cash flow for the past month in just about ten, fifteen minutes. So it becomes easier, it becomes faster, the more you do it. It will be a challenge at first to find the best app or the best tool or the best software to use, but you can also consider it as a challenge or it’s also a learning experience for you.
So once you are able to find that tool, that app, that software, that you feel that you can run away with, then go ahead and just be persistent with it. At the end of the day, whatever you choose, what’s important is that you do it and make it a habit and make it part of your life.
Sean: I cannot agree more with that. It’s not about the tool. It’s about how disciplined you are in keeping track of your money. Personally, I’m horrible at keeping track of my money. So my wife actually helped me out a lot and she just uses a free app to do it. I think the name is Spending Tracker. I’m not promoting them. I’m not an affiliate. I don’t know who they are, but it’s a free tool. I’m not sure if it still exists though.
But I’m more of a big picture guy. So I use Excel and then I just punch in everything I can remember or every receipt that is in my pocket during the day. That’s how I do it. I think getting the receipts makes it easier, but not a lot of people have the patience to wait for the receipts sometimes. So you’d have to put in a little bit more patience in work if you want to really keep track of your money. If you don’t know where your money went, you don’t know where it can go. Right?
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