by: Francisco J. Colayco

This was a question asked in one of our radio interviews. Here we are always talking about savings and how it can help you now and in the future. Then suddenly a question like this seems so unthinking. But in truth, it is a very interesting question.

Remember that the first Commandment of Savings: “Pay yourself first.” This means that you follow the main formula: “Income minus Savings equals Expenses.” You make a budget where you deduct maybe 10-20% of your savings first before you even start thinking of your budgeted expenses.

If you are following the foregoing advice, then you should be so happy and secure, right? WRONG!

You cannot end there. You need to invest your savings in an option that will surely earn you an amount higher than inflation. Remember that there is sure inflation where the value of your money will slowly erode through the years. If you kept it in your closet or pillow or just in a savings account, then the amount you saved will buy you much less in the future. And if your savings are not sufficient when you cannot earn money anymore, then you will suffer as you will not have enough to sustain your desired lifestyle. This simply means that you need to lean how to invest your savings properly. We will talk about some ways of investing in the next article.

I just want to remind you about budgeting for your expenses. Sometimes, you are following the formula of keeping your savings first but you think that you are suffering because you need to put aside so much in savings. This feeling can make you feel depressed and it is not good for your psychological health. However, in many cases, it is just a matter of understanding what your expenses are really for. If you are giving up expenses for Wants to be able to save, you should be congratulating yourself and not feeling bad. Your savings are actually your expense to buy yourself a good future.

If you are saving but not even meeting your needs, then that is also not good. For example, if you don’t even eat the right kind of food at the right time just to save, you may want to think that over more. If you get sick, then all your savings will go to your medical expenses instead of improving your future.

What are some tips you can give to properly save up hard earned money?

First, here are ways of not investing properly:

1. Keeping your money in the closet or pillow or just a savings account earning less than inflation. You need to invest to earn higher than inflation. We discussed this last week.
2. Borrowing money at a higher rate to invest in a business or an option that will earn just the same or lower than the interest rate that you are paying. Believe it or not, some people do this. This can happen when you invest in a business that is not properly analyzed, inadequately prepared for and thus, badly managed. Putting your own business carries high risks.
3. Investing in scams are sure ways to lose your savings. Even if many scams have been exposed, many news ones are coming up. The people who invent these scams are getting better and better especially since they learn from how past scams were exposed. It is so sad but that is the fact of life and we always have to guard against this by keeping ourselves informed.
4. Choose the right people to ask advice from or to partner with. An adviser should be someone who really knows the subject matter for which you need advice and who can be objective. You can pay him to give you the service of advice but it is better if he will not earn extra if you buy some products from him. Otherwise, he might convince you to buy his products even if you do not need them.

In the case of partners, even I have been a victim of choosing the wrong partners especially when I just use my head alone. Sometimes, all the numbers and plans are good on paper and even based on experience. However, when you take a partner, these good plans can change if your partner does not have the same objectives as you have. A friend advised me: “Choose partners using your instincts and your heart and not just based on what you hear.” It is easy to believe especially if the information is basically correct but if your adviser/partners are not right for you, then they can lead you astray.

Visit our website www.colaycofoundation.com or call 6373731 or 6373741 for details on how you can join our seminars and buy our books at special discounts. You will be surprised about how reasonable the price is to help you quickly understand what you can do with your savings.

* First published on April 2, 2012 at the Good News Pilipinas Website