Financial Literacy, Personal Finance, savings

Parkinson’s Law:The reason why we fail to save money.

 

parkinsons law

Few years ago or many years ago, when you just started working,your income was small. You survived on that level of income and you thought that your salary was not enough that was why you did not save money. But today,your income is higher but it is impossible for you to save still. The reason for this is because you are under the Parkinson’s Law. It is a law that states that the work expands so as to fill the time available for its completion.  So, if you will rephrase the law, it says: The expenses expand so as to fill the unnecessary wants to spend all the incremental salary instead of saving it. While you income is increasing, your spending will increase as well but you fail to save money for you to use for your future expenses. Instead, you get yourself into building more liabilities than assets and you start believing that it is impossible to save money.

Saving money is behavioural. It is how you set your mind to prioritize your saving money first before you spend. If you think your salary is small, you can still set aside some of it, if you want to. It is not about when you earn bigger, that’s the time that you will start to save. You should start right away, when you got your first job.  Saving should be always part of your budget because you need to pay yourself as well. When you spend all your income, you are paying other people first. Your priorities will be your bills that you have to pay every month which you will not benefit in the long run. You will make other people rich but not yourself that is why Meralco, SM, Petron, Globe and other big companies are getting richer because for sure we need to pay them. We never pay ourselves as well through saving. Ideally, you should set aside from 10%-20% of your income. If you are not comfortable yet setting aside 20% of your salary because you have so many liabilities,you can start with 10% savings. If you think that 10% is still big,try 8%,if not,try 5%. The important thing about this is creating a habit,start where you are most comfortable. Even though, you start saving small at first and gradually, you can increase the saving percentage of your income in the near future. From 5% saving percentage, you can now save 20% of your income.

We have to break the Parkinson’s Law for us to save effectively. Everytime that your salary increases or if you have bonuses,make it a habit that you have to save 50% of it right away and use the 50% to other things that you like to add to your lifestyle. You need to allocate your income for you to have directions where your money should go. Practice to increase your savings rather than increasing your expenses when your income goes up. Always use this formula: Income-Savings= Expenses, rather than Income- Expenses= Savings.

Building your savings will be your muscle for you to start to become Financially Independent. You can now grow your money through investing and protect your income as well because we are not going to work for the rest of our lives. Saving should not be the only goal but it is the foundation for you to achieve your financial goals in life. Breaking the Parkinson’s Law will benefit you for you to be effective and efficient in handling your finances. Let’s beat the Parkinson’s Law.

Let’s all be financially free!

 

Archie M. Yuki
Financial Adviser,Investment Consultant and Insurance Specialist
4th floor Karina Bldg., No. 33 Shaw Blvd. Pasig City
Tel No. 571-3274
Mobile Number. 0917-5769607, 0923-4941362
Email Address: archieyuki30@gmail.com
equities, investment, life insurance, Personal Finance, stockmarket

7 Things To Do Before You Invest in Stock Market

7things

Investing in Stock Market is beneficial because you can achieve your financial goals in the future. You can prepare for your retirement,funding for your children’s education,buying your dream house, business funding and many more. It will require discipline and commitment. It is not easy but it can be done. Many Filipinos do not see investing in Stock Market as a viable tool to attain our aspirations in life. But if you are willing to learn and be consistent on handling your finances well, you can start to invest in stock market and do these 7 things first before you jump into it.

1. Pay your debt. It is ideal that you have no loans before you invest particularly the ones that give big interest. Good interest and bad interest will pull each other,thus, your networth will not grow. Know if what you borrowed is an asset or a liability.
2. Create a habit of paying yourself. Learn to live at 80% of your income. Set aside the 20% for your savings and investment. Everytime you earn,prioritize saving first. Use this formula:Income Minus Savings=Expenses rather than Income minus Expenses=Savings
3. Create your emergency fund. Save 3 to 6 times of your monthly salary. If you will have to pay something that is unexpected,you can get it from your emergency fund. You have money to use if you lose your job,a member of the family gets sick, your daughter needs to pay something at school,the gate of your house was broken down,you need to buy a spare tire and many more.
4. Get yourself a health card and your family members. It is very important that you have health card so that if illness happens, you don’t have to shell out cash. If you will be hospitalized for a dengue, it will cost you like 30k-100k  for a week. But if you have a health card,you do not need to pay for it but the HMO company will take care of it.
5.Insure your non-life assets. Things will not go well unexpectedly. You are driving and suddenly you slam someone’s car or worst is you hit people while they are crossing the streets. This will cost you money if you do not have an auto insurance. Get your non-life insurance for your car,house,business,accident,travel and many more for you to be protected.
6. Get Dread Disease Insurance. We hope that we will not get sick like cancer,diabetes,stroke,terminal illness, etcetera because this will cost you a lot of money. It’s better to have this coverage so that if it happens, you have funds to use for your treatment.
7.Get Life insurance. The most important insurance that you should have. You are the money making machine and if death comes,your income will stop. Your dependents will surely be left for nothing. How they can continue the lifestyle that you are providing with them. If you pass today, would you know if your family will be financially secured without you? If not, you should insure yourself properly.

These are the things that you should do before you invest in Stock Market so that you can maximize the returns of your investments. It is not ideal to jump right away to invest without assessing if you are capable of doing it so. Your hard-earned money should be well allocated otherwise you will lose it all in one snap. The logic here is even if you are earning well to your stock market investment and unexpected things happen, you are prepared for it rather than you will suddenly stop your investment or withdraw it which you will be in a losing situation. If your money in stock market is not even earning yet,you just wasted your time and money. You simply follow these steps from saving money, you can insure then you can invest and you will be in a winning situation long term for you to achieve your financial goals in the future.

Thanks for reading my blog.

Archie M. Yuki
Financial Adviser,Investment Consultant and Insurance Specialist
4th floor Karina Bldg., No. 33 Shaw Blvd. Pasig City
Tel No. 571-3274
Mobile Number. 0917-5769607, 0923-4941362
Email Address: archieyuki30@gmail.com