ignacio.bunye


IN the last month, I have been writing about the efforts of the Bangko Sentral ng Pilipinas’ Financial Consumer Affairs Group (FCAG) in disseminating helpful consumer tips, especially in light of post-holiday debts.

With Valentine’s Day just a day away [note: this column was submitted on Feb. 13 — editor.], it behooves us to (again!) do some serious soul-searching on what we have always believed is a “need” to celebrate such occasions with a lot of unnecessary spending.

According to the FCAG, understanding why we buy what we buy in the first place will help us make better decisions and take the necessary steps in controlling overspending.

The FCAG explained that the first and foremost reason for all this overspending is the consumerist world we live in:

“Throughout our lives, we have been programmed to work hard to earn money to buy the things we need and then to work again to earn and buy again. It’s a vicious cycle.”

It has also never been easier to buy the stuff we want, but don’t actually need.

The availability of credit facilities and the ease of purchase tend to fuel our overspending habit.

“Many of us don’t see or treat using credit cards as using real money, so it is easy for us to keep charging our purchases. We don’t feel the pinch of spending because we don’t shell out money at the moment,” the FCAG pointed out.

“There is a discord between pleasure felt now with the purchase and the pressure felt when the bills start to arrive,” it added.

Most importantly, it is the lack of knowledge of the true costs of different financial instruments and how finances work that people tend to overspend.

The absence of planning and poor record-keeping can likewise trigger impulse-buying and overspending.

This is where the practice of budgeting comes in handy, the FCAG said.

Sadly, most people resist making budgets, saying that it wastes too much effort and consumes too much time.

The FCAG stressed that budgeting does not really require painstaking numbers crunching (only a basic knowledge of addition and subtraction), and will take you no more than an hour to finish.

Here are some tips:

• The very first thing that you should do in making a budget is to gather every financial statement that you have (e.g., pay slips, bank statements, utility bills, grocery receipts) so you can come up with a more accurate picture of how much you receive and spend each month.

• Record all regular sources of monthly income such as your net salary and earnings from businesses or side jobs, if any, and tally them up.

• List down all expenses for a month and get the total.

Be careful not to omit simple items such as parking fees, your daily newspaper, or morning coffee.

You’d be surprised at how much they add up!

• In listing expenses, you may break them down into two categories: fixed expenses and variable expenses.

While fixed expenses are those with average amounts that stay relatively the same each month (e.g., rent/mortgage, groceries, utilities such as water and electricity), variable items are those that will vary from month to month (e.g., entertainment, hobbies, gifts, vacations).

• Now subtract your total expenses from your total income.

When you have a surplus (income minus expenses is positive), good.

You can use that extra amount for savings.

When you have a deficit (income minus expenses is negative), you should find ways to trim down your expenses.

• Always review your budget.

Take a few minutes at the end of the month to compare your actual expenses vis-a-vis your budgeted expenses.

This will show you where you did well and where you need to improve.

The FCAG reminds us that the best way to avoid overspending (and to concentrate on budgeting and saving) is to focus on the end goal and think of it as sacrificing short-term gratification for long term-happiness.

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Past articles may be viewed at http://speakingout.ph/speakingout.php