One co-worker and good friend of mine inspired me to change the way I think about the money equation.
You see, just like everyone else I know who’s gainfully employed, I used to practically live from paycheck to paycheck. And being a person with a family to support, that’s probably one of the scariest situations to be in. What if I suddenly lose my job? Or perhaps get so sick I can’t go to work?
My children can’t put off eating until I’m back on my feet again, right?
Image courtesy of Naypong / FreeDigitalPhotos.net
Going back to my very inspiring co-worker and friend, one day – coincidence or not is just not relevant to the equation anymore – I got to take a wide-eyed look at his payroll account. Dear me, he had six figures worth in savings, and his salary and mine were not that very different!
Okay, he was earning a bit more than I was and he had one less kid to care for. But his youngest was still a baby. And based on firsthand experience, babies’ needs are more expensive than a regular six-year old’s.
Play the money equation right
So what was he doing right that I was doing wrong? He had the right perception about money, and I didn’t. My money equation then was:
- SALARY – EXPENSES = SAVINGS
In lay man’s terms, I was saving only as an afterthought, which in truth, is almost nothing at all, except perhaps for the 5-peso and 10-peso coins I had stashed in my piggy bank. Thanks to him, my money equation has now become:
- SALARY – SAVINGS = EXPENSES
Save, then spend
So before I even care to think about the bills and other stuff I need to pay for, I make sure an amount about 10% of my salary is deposited to my savings account. Right now, I’m still in the process of building my emergency fund. I hope to get it done by the end of the year, so that come the new year, I’m ready to move on to something even better.
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Good equation, though I believe it still varies on the situation. Say, if one is paying amortization or rent for a house versus someone who doesn’t, even if their pay is the same, saving still would be hard, especially in these time where prices are soaring high. But again, Good equation, and this would probably help me a lot 🙂
Thanks for visiting! In that equation, ideally, rent should already be included in expenses. I know saving is pretty tough, but any amount, however small, should be a good place to start with. Over time, through commitment and discipline, that little amount will grow in number. Little is always better than zero, right? 😀