By Illac Diaz, Social Entrepreneur
Reaching rock bottom
My tip comes from being down at the deep end and clutching my way back. I had fallen prey to the media of the immediate, that everything could be had here and now, and to make it worse, I had too much spending power for my own good.
Never again should it be about making financial decisions based on buying things that would make me look good and being at the right place with the right crowd because often I find out that my buddies are juggling enormous balances of payables. I prefer to live with a credit card debt of zero. When we need to meet a shortfall, it is intoxicatingly easy to borrow from our future income to meet current needs. Money is good only when it is spent for good things.
Cash in and out
First thing I did was to come to terms with how much money I could spend by calculating my “Cash In” or what I earn on a monthly stipend and income from other small business investments. Then I look at “Cash Out” that I definitely had to spend on, like my living space, food, gasoline, and other regular expenses. What is left is what I regard as “Spending Cash”. This balance is the money I have a choice over.
What I do now is a system of “Funding” which is saving up for the things that I want to have and do by putting away specified amounts into specified future expenditures. I have a funding account separate from my savings account as commingling the two is like mixing business and personal money.
I list down the big ticket items I want and slowly work back how much I have to set aside every week to afford the expenses on their due dates, and then chart them out as if they were payables that I had to put in the funding account every Friday of the week.
This is also a way for me to judge how much money I had for the less important things in my life, like going out or some things I could do without. Now there are moments when I would get sudden income when I get hosting gigs, commercial jobs, or consultancy work. I would allocate the extra cash to months when I would have a shortfall and add it to my Friday disposable money. This could also shorten the time I have to wait till I get my, say, expensive television.
This may look simplistic, but definitely it does not have to be a straightjacket experience. I cook at home for friends to save on restaurants, and I could delay the dates a bit for major expenses to build up more cash. It’s a rudimentary model but it tempers my trigger purchasing finger.
It’s a choice
There is some discipline about what I can do based on my resources and this earning before purchasing model somehow makes working towards acquiring things more fulfilling. It also applies the principle of living within one’s means and not letting the future be damned. Certainly it’s a choice: I can find myself one day under crushing debt with a lot of purchases that I thought I wanted, or I can have zero credit card debt and achieve the important things in life.