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  • Forget 'Income – Expenses = Savings': The Better Formula To Really Save Money

    Plus pointers to consider before checking out sale events.
    by Jocelyn Valle .
Forget 'Income – Expenses = Savings': The Better Formula To Really Save Money
PHOTO BY Shutterstock/Nattapol_Sritongcom
  • Like many families during the holiday season, Rose Fres Fausto and her family follow tradition. But they go beyond the usual dining, wining, and gift-giving. They actually set a day between Christmas and New Year for an annual assessment and family-goal setting, including money management.

    In her website, Rose describes herself as an investment banker-turned-fulltime homemaker who writes and talks about money and family. She also happens to be a behavioral economist and Gallup-certified Strengths coach. 

    Her husband Marvin, a.k.a. Rose’s “favorite person in the world,” is a fund expert. Their three grownup sons Martin, Enrique, and Anton successfully pursue a career in brand, finance, and entertainment, respectively.

    3 essential money management tips

    The popular financial expert laid out her basic laws of money to guide families as a speaker in the webinar organized by the insurance and investment company PRU Life UK. It’s called “Cha-Ching Kids at Home: Money-smart and Meaningful Holidays for Filipino Families.” Here are her three money management tips.

    Pay yourself first

    Fausto cautioned that before spending your earnings, you should set aside some for savings. It’s time to junk the old equation “Income – Expenses = Savings.”

    Instead, follow this more money-smart formula to ensure you have savings: Income – Savings + Expenses.

    Get into business that you understand

    Rather than focus on the profit, Fausto advised potential business owners to go for something that they’re really good at. She mentioned the Japanese concept of “ikigai,” which roughly means in English as “a reason for being.”

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    She urged finding ikigai — the intersection of what you’re good at, you love, the world needs, and can’t be paid for — to reach the point of success eventually. 

    Another reminder from Fausto is to seek advice only from the competent and vet those people to avoid getting into a scam.

    She stressed, “If somebody offers you an investment and say, “‘Pare, dito tayo. Sigurado ’to. Mataas ang kita,’ run as fast as you can because there is no such thing.

    “In investment, the basic rule is the higher the return, the higher the risk. And the lower the risk, the lower the return.”

    Make your goal work for you

    If your goal is to save up for a designer bag from your sole source of income, then that’s not going to work. Fausto believes you should only buy a luxury item when you can already afford it.

    For a designer bag worth Php100,000, for instance, you buy it if you have Php1 million. There’s really a line that separates those who can really afford from those who just get by.

    Christmas tipid tips 

    Rose also shared some Christmas tipid tips that her followers contributed to save money while still able to celebrate the holidays.

    Have a shorter gift list

    • Go for a simpler Noche Buena
    • Do away with new clothes
    • Forego corporate giveaways (for business owners)
    • Curb salon expenses
    • Tone down Christmas decors
    • Forget holiday travels
    • Ditch plans of buying firecrackers

    As sale events abound both off-and-online, Rose gave money management tips to consider before adding to cart and checking out:

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    • Buy only what you need, not what is cheap
    • Research on the market price of the item you’re eyeing to make sure it’s really on sale or discounted
    • Be careful not to get carried away by the wide range of goods 

    As for gift-giving, Rose believed a lot of people prefer to receive cash. But it still depends on the kind of relationship the giver has for the recipient to be blatant about the value of the gift. The young ones may appreciate receiving their aguinaldo through the virtual wallet. 

    Speaking of kids, the working mother of three suggested for parents to encourage their sons and daughter to make DIY Christmas presents. But those gifts shouldn’t only showcase the children’s creativity but also serve functionality for the receivers. 

    What other parents are reading

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