How to Avoid Breaking Your Piggy Bank

Summer is officially here! It's the season when parents (and parents alike) get some rest from the many bills they need to pay for sending their loved ones to school. Yet, it's also the season when many people splurge for a couple of days' rest at a nearby resort or an out-of-town for their much-needed getaway! 

I can still remember, I used to sell ice candies back when I was in elementary during summer breaks. 

I would proudly deposit most of the profits to my piggy bank. You think I'm an entrepreneur by heart? Ha-ha! But being exposed to such environment taught me a lot of things. And one of the things that I realized back then was that saving is actually easy, it's “how you keep your savings” that makes it awful hard work! Agree? Good thing, guest writer Kyle Kam of Moneymax, will teach us how can we avoid breaking our piggy banks:
When you were a child, your first lessons in money management usually came with your first piggy bank. At an early age, your parents showed you how those coins left over from your baon could be dropped in a coin slot and saved for a rainy day. Sure, you didn't fully understand why, but you knew that keeping a piggy bank was a good habit to have.

These days, our piggy banks usually come in the form of savings accounts at the local bank. The problem comes when we start seeing those piggy banks as a second wallet we can take money out of whenever we want to buy something. 

If you want to break this bad habit and still have enough saved for when you get older, you can start by following these four tips for more effective financial planning. 

Go on diet mode
Go on diet modeWhen it comes to how we spend our money, often our biggest enemy is willpower. Even the smartest folks can get tempted to spend their cash on something non-essential, like a new pair of heels or a trip to Boracay. Sometimes the temptation to spend big comes from something more innocent, like a weekly frappe at Starbucks or a large bucket of popcorn at the movies. Over time, these small expenses add up and shave hundreds of pesos from your salary.

How do you stop dipping into your savings for the smallest things? The key is to build discipline by going on a “financial diet” of sorts. 

Basically, personal finance is to money what diets are to food—by being conscious of your spending habits and learning how NOT to use your savings, you're working towards a goal that will have really awesome benefits for you in the future. Yes, we know going on a diet is not fun, but it's still better than retiring with zero money in your name. 

Treat your savings like your bills
Treat your savings like your billsYou ever notice how our attitude towards money changes whenever bills are concerned? Imagine a 1000-peso bill fell from the heavens and into your hands. Next, consider where you are more likely to use that spare dough: an expensive meal at a fancy restaurant or an overdue Meralco bill? The trick is that no matter what your personal feelings are on the matter, that bill would always rank higher on your list of priorities.

Now try applying the same mindset to your personal savings. When we skip paying our monthly bills, we become aware of very real consequences such as having no water or electricity. By imagining your savings as a bill you pay to yourself, you are taking your long-term financial future more seriously by linking an abstract idea (“saving money for the future”) to a concrete action (“Whoop, time to pay my bills!”). This approach also makes it simpler to get into the habit of setting aside money every time your paycheck comes in.

Make your splurges count
Make your splurges countThe richest people in the world didn't get that way just by shopping on a budget all their lives. No, they also took calculated risks by putting their hard-earned money in the right places, like investments and innovative business opportunities. Like any other aspiring millionaire, you have to look to where the smart money lies. You do this not by avoiding risk, but by taking strategic approaches with it.

While spending large sums of money is inevitable for most working adults, you can plan ahead by having your big purchases go towards something practical and multi-purpose

So for instance, instead of buying a flashy car, go for a sturdy and reliable one with a comprehensive car insurance policy that can protect you from the high costs of road accidents. Instead of fixating on status symbols like luxury handbags and brand-name clothing, focus on things you need everyday like healthy food and a livable home. 

Planning to buy a gadget like a laptop or smartphone? Make sure it will last you a long time and find a place in your job or daily routine. 

Think like a time traveler
Think like a time travelerA lot of times, people make costly mistakes because they get “caught up in the moment” too much. To counter this, both hindsight and foresight are your best friends. Look to both the past and the future to inform the financial decisions you make in the present.

Let's say, for example, that you're saving up for a new home for your family. Plan ahead by asking hard questions and learning from experience—yes, including past mistakes. 

How did other people in your life achieve this same goal? 

Would your kids have it easier in an apartment or a house and lot? How were you able to afford your current home? Would living in this neighborhood give you a rough time during rush hour or typhoon season? Juggling all of these concerns now can make you think twice the next time you make an impulse decision.

A big part of good financial management is taking a smarter approach in how your money gets used. Once you're able to take these principles to heart, you can exercise self-control and save for a rainy day with greater ease. The next time you get tempted to splurge or make an impulse buy, thinking long and hard about your finances can make it easier for you to leave that money in the bank where it belongs.

This is a guest post.

Author Bio:
Kyle Kam is an online marketing specialist for Moneymax, the Philippines’ leading financial comparison website. You may follow him on Twitter @undisputedkyle


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