Pagtitipid: How to Save Money ... and Keep Some of It

Most Filipinos tell you that they aim to save money for retirement, for their kids' education, or for their families back home in answer to the question "Why are you going to work abroad?" I mean, let's face it: the Phil. economy has been left far behind by some of our other Asian neighbors, and we now walk side by side with war-ridden or -torn economies like the former Cambodia, former Burma, Vietnam, and seldom-heard Laos. Even Thailand has outstripped our economy in the last few years. The Phil. peso just doesn't buy more stuff these days than it did 10, even 5, years ago.

One of the officers in the company my husband now works for said that the biggest export the Philippines has is its manpower. Everywhere you go in the world you see Filipinos working in more affluent countries. The countries of choice are usually Saudi Arabia and other oil-producing nations of the Middle East, Malaysia, Singapore, Hongkong, Japan, and the United States. Europe is now also seeing a lot of Filipino workers in the past decade. Do those of us Filipinos who work abroad really earn a lot as what some of our relatives boast about back home? Are we able to send money home? Are we able to save at all?

First, let me dispel a misconception that most of our countrymen have about Filipinos working abroad. A lot of us think that just because other Pinoys work abroad, especially the US, they already have a gazillion money. The relatives back home calculate the exchange rate of the dollars their loved ones earn in the US and exclaim at how big their salary is, and how far that salary will go in the Philippines. Unfortunately, even if US dollar-denominated salaries seem huge by Pinoy standards, we also have to spend dollars to buy anything we need. A bottle of water that costs 70 cents already translates into PhP30. A $5 medium-sized value meal at BK or McDo seems exorbitant at PhP240, when you could buy a similar-sized one for about PhP150 back home. Mind you, there's also the difference in the size of the sandwich, drink and fries you're getting here compared to back home. So even though we seem to be earning a lot to the folks back home and sending them some money, it is actually them who can sit back and relax and enjoy the fruits of our labor while we go on slaving over here to send them more.

Now that we have that all cleared up, let's go to the basics of saving some money. Hopefully, by the time you finish reading this you will be able to brainstorm more ways of saving money for yourself. This list can also help our folks back home who can benefit from a little monetary advice.

1. Make a monthly budget and stick to it. To me this is my starting goal in saving. Here in the US you already know how much you have to pay monthly for your rent or mortgage, car loan, cable and internet, and phone bill(s). Utilities like the electric/gas and/or water bill usually have a range that you will soon be able to establish after at least 6 months of living here. If 3 of those months are in the winter, that's when heat use makes your utility bill go up and you can have a good estimate of your highest monthly usage. Food purchases vary greatly, as well as gas, clothing, and recreational expenses. So when you make your budget, put right there at the top 10% of your salary (see below for more info), the rent/mortgage, car loan, cable bill, phone bill, and utility bills. If you are regularly sending money home, put a fixed amount down there, too, inclusive of remittance fees. Then estimate your other variable expenses including credit card bills. When you add everything up, try to leave yourself a few hundred of your salary that you can also put aside to save.


2. Save 10% (or more) of your monthly salary. This is a common saving tip that I hear often advertised here. Compared to most Asians (except probably Filipinos), Americans are notoriously poor savers. If you had already read some of my posts here, to have a life in the US actually means to have some sort of credit -- credit history, that is. To build that, you gotta borrow money and prove you can pay it. My Pinoy common sense had a hard time dealing with that for a few months because it literally tells you to borrow money, and your credit rating depends on how well or soon you pay that off. (Contrast this with showing the bank you have some savings and a good portion of your salary left over each month in the Phils. before they will actually give you a credit card.) But I digress here.

Before you even think of spending your salary on rent, utilities, food, etc., put aside that 10% in a savings account. Don't give in to the temptation to use that money unless you lose your job. Make this 10% a part of your monthly budget so you don't even feel it's an optional or voluntary thing. Make it compulsory and obligatory on your part to save this, and consider it an expense so you don't think you can go back to your savings account and withdraw the money. If your salary will be severely depleted by saving 10%, then try saving 5%. When your salary increases, then you can save 10%. If you're in a position to save more, then do save more. If you have any money left over because you have wisely stuck to your budget, then save that, too.

3. Consider opening an investment or long-term savings account. The beauty of saving 10% of your salary each month is it soon allows you to build up your financial resources so you can open a CD, money market account, investment account, or start a retirement fund. If your company has 401k and other investment opportunities for employees, take advantage of these. They will usually match a portion of what you save, and some of these are nontaxable (unless you withdraw) and will actually lower your income bracket so the IRS gives you more in terms of a refund for the following year. If you are more daring and financially savvy, you can probably go into stocks or bonds or get a financial broker to invest for you. One tip my mother always told me when it comes to investing in the stock market and other similar products is this: make sure the money you put into these riskier investments is money you can wave goodbye to. Otherwise, when the value of your portfolio goes down (which seems to be what is happening in the past few months), you might lose more than what you have originally invested.

Once you're able, set up a college fund for your kids. You may set up one for each kid or one for all of them. Different states and companies have different investment plans for this. There are plans that let you save while you "spend" such as Upromise. The one we like is the 529 program that is administered differently by every state. Check your state and find out how you can enroll your kids for it. In New York State, a monthly deduction from your checking of as little as $25/month can set you up for a 529 account. The money is not taxed, so you get a refund based on the total amount you put in. They have several tiers of investment depending on how old your child is and how fast you want the money to grow at a certain time. As your finances permit, try increasing that amount so your child has something to rely on when he goes to college.

4. For clothing and shoes, buy only what you need, and maximize the use of the things that you do buy. When you buy, make sure you buy quality. I cannot stress this hard enough because this is the biggest problem area we Filipinos encounter. Para bang nakawala na tayo sa corral pagdating sa US at napapansin mong lahat ay posible mo ng bilhin. Just because you see everyone around you seems to be affluent, you want to keep up with them so-called Joneses and buy what they have. And with the way credit cards are given away here, it's so tempting to just buy and buy and buy. When you have been used to so little back home, suddenly you can't stop yourself when you see so much that you can now afford with a few pieces of plastic. And before you know it, baon ka na sa utang, and your debt hole is so huge you've actually made the creditors love you that they want to give you more credit -- starting a vicious cycle of more borrowing. Pretty soon you're up to your ears in debt that your life soon becomes a hand-to-mouth existence with little, if at all, saved for a true rainy day. (I mean, think of your kids' college funds!)

The first luho most Filipinos fall prey to, especially women, are clothes and shoes. You don't have to change your clothes with the change of season. Buy more clothes and shoes that are classic and time-tested in style so you can store them when the weather changes. Use them until they are truly worn. You can probably still send them to the Salvation Army or other charitable organization for the less fortunate even when they are worn. Buy only a few clothes/shoes that are in fashion so that if they're not around next year, you won't have wasted a lot of money on something that won't come around again until your daughter is probably in her teens.

Buy clothes and shoes during sales and during the off-season: i.e., if it's late winter, most stores will be putting cold weather stuff on sale, sometimes as much as 50%-75% off. When this happens, buy coats or jackets that are durable and have classic cuts so that you can use them for several winters. Shoes, sandals and boots especially, go on sale near the end of summer and winter, respectively. This is when you can actually put your mental exchange rate conversion into good use: a pair of good boots would normally sell at almost $100 (PhP4,800) around the fall season when people start buying them, but would be half that by the end of January or February. Think of what the $50 would do to your savings, or even to your family in the Phils., if you waited until February to buy that pair you've always wanted and sent the rest to them!

Looking back now on our first year here, we arrived in spring, at about the time winter clothes were at rock bottom prices. Acting on some of friends' advice, I immediately went online at the library and ordered winter coats for me and my family. They only cost $20-$30, and they were all from Lands' End. If you know Lands' End, then you know they make high-quality clothes that cost way up there if bought in-season. We are still using the coats and jackets I bought for my husband and myself 6 years ago. This is what it means to buy good quality and on sale. Just because you bought something on sale doesn't mean you have to buy cheap quality clothes or shoes. The better quality they are, the longer they will last (unless you gain an exorbitant amount of weight, which most Pinoys do after a couple of years here). It will still cost you some money in the long run if you bought a cheaply made coat for $10 when that same coat fell apart in one winter of use.

If there is anyone you should buy clothes frequently for, that should be your kids. Exercise discretion, good sense, and take the time to browse several stores to get really good deals. Just because your toddler looks cute and pretty in that Baby Gap pair of pants doesn't mean you have to buy it in every color the store carries. Kids grow very fast: what they wore this season this year will not fit them next year in the same season. It also doesn't make sense for you to buy designer shirts, pants and shorts that you know your little boy will wear out (even tear) after one month of wearing and playing in -- not to mention food and drink spills that never come off in the wash and areas that tend to fray (like the knees) because kids tend to act like little kids: they live to play. You may also want to think about investing in a sewing machine and sewing your kids' clothes. Since they grow up so fast, it's sometimes cheaper to make some of their clothes. But that's another story or, in this case, another blog topic.

If you have Filipino friends with kids, don't be embarrassed to ask for hand-me-downs. Because some kids grow faster than others at certain stages in their lives, they will sometimes be changing sizes within a season during that growth spurt. So the clothes or shoes their moms bought them can easily go to your kid who might be just the same size or growing into that size.

5. When buying food and groceries, buying big or economy-size is usually not economical. Use coupons whenever you can. You might have heard of BJ's or Sam's Club where everything you buy is in bulk. The prices tend to be low when you divide the number of items in the economy-size package vs. the single item itself when you buy it at a regular store. Unless you plan to send 40 of the 50 bottles of shampoo you buy every month to the Phils., then buying in bulk is not saving money at all. Do you really get to use 100 rolls of tissue paper or 50 paper towels each month? Besides that, these items consume a lot of space, and they tend to go down slowly. (I mean, who actually gets to use 1 tissue roll a day per person -- unless you have diarrhea or a cold?) The space they occupy can be used for other stuff.

The same principle applies to food. Even if it's cheaper to buy several pounds of garlic or onions or beef, pork and chicken, the vegetables will dry out (if not rot) in a couple of weeks, and eating long-frozen meats defeats the purpose of trying to eat fresh. If you buy cereal or bread in too much bulk when you know your Pinoy family eats more rice than cereal and bread, then the cereal will expire and go stale and the bread moldy. Same thing goes for canned foods: they do expire within the year so buying them in bulk is not economical if you have to throw most of them when they've gone beyond the expiry date. Buy food in bulk only if you have a huge family (2 or more kids, with your parents or in-laws visiting you from the Phils.), or kids in their teens, or hosting a big Pinoy party.

Another way to save some money during grocery shopping is to cut coupons from the coupon books that come with the Sunday paper. Cut only coupons of brands you know you always buy. Your local supermarket also has weekly deals that you can take advantage of. My daughter is always awed when I hand over coupons to the checkout cashier: we almost always end up saving more than $10 per grocery trip weekly.

6. Do you really need that second car? The biggest luho as well as status symbol most Filipino families in the US soon fall prey to is buying that second car. If your husband is the sole breadwinner because he's the one with the H-1, what do you need a second car for when you and your kids are H-4? You certainly don't need it to go to work since you know if you're H-4 you can't work. During the school season your kids won't actually need it because they surely will be taking the bus. Why not drive with your husband to his place of work and then drive the car home after dropping him off if you really need a car? Or why not take the bus to the mall? Or ride the bus to the nearest stop at your house, then walk the rest of the way home? On emergencies, call a cab. That's why it's important to wisely choose where you live those first few months or couple of years, so you and your spouse can take advantage of public transportation while you are establishing your financial base and credit history. (See my other topic: Starting a New Life Part 1: Where to Live.) Having 2 car loans puts a huge dent in your monthly income, not to mention huge maintenance and loan expenses down the line, particularly in 5 years when you probably already bought, or are considering to buy, a house. If you absolutely need a second car, consider leasing so your monthly car payment for the second car is lower. After 3 years and your financial, as well as H-4, status has improved, you can return the leased car and lease a new one, or buy the leased car, or even buy a new car. (See my other topic: Establishing a New Life Part 3: Buying a Car.) Either way, buying a second car should be a decision made wisely, only an absolute necessity if your old car is more than 5 years old or has more than 100,000 miles to it. If you have a 16-year-old who's ready to get his license and you'd like him to have the old family car, then maybe it is time to buy a new one. Better yet, why not teach your 16-year-old some responsibility by telling him he can have his own car or the family car if he helps pay for part of it?

7. Use credit wisely, if at all. Ideally, you should only have one major credit card. A lot of people reading this will probably be shaking their heads in disbelief or laughing at what seems to be a silly advice. Some will probably think what I mean is have just one credit card with a huge credit limit rather than several with small credit limits each. Actually, I meant just one credit card with a credit limit of not more than $5,000 per couple or per family. This means one spouse carries an extension card; your kid in college can get his own credit card (again, to teach him fiscal responsibility).

The hardest thing to avoid is runaway debt. This is when you have so many credit cards from so many different banks and stores that your monthly salary is eaten up by paying the minimum balance on each that doesn't even make a dent on the amount you owe on any of them, thus, relegating you to a hand-to-mouth existence (unless creditors start denying you new credit first). How can you save when your monthly budget consists mostly of credit card payments? Before long, any extra dollars on your salary is gone, and you're using up the amount you just freed up by paying last month's credit card bill.

Before you even end up this way, read this and stop applying for new credit cards, even if they are pre-approved offers that seem to give you enticingly low APRs. Store credit cards are the first that gets out of hand: you can't resist a department store pre-approved credit card that offers an additional 10% or 15% when you're checking out, and before long you have 3 or 4 of them. Guess what? The APR on them, when you don't pay the full amount you owed by the end of a billing cycle, is actually more than the discount you got on your purchases in the first place. Because store credit cards are usually the ones that have higher APRs than major credit cards, you end up paying back more than the price of the things you bought. So beware of store credit cards.

If you're already on the boat with a lot of credit cards, try paying them off fully one by one and closing the account by giving the creditor a call. This will help clean your credit history, too, and give a signal to potential big creditors (i.e., of housing loans and car loans) that you're fiscally responsible. Paying off credit cards one by one til you're left with one is not easy, but it's well worth it. One way is to use your tax refunds to completely zero out the balance on at least 1 or 2 credit cards. Start with the store credit cards first because they're the ones with the huge interest rates. If the company where you work gives you bonuses at the end of the year, pay off the rest until you're left with one major credit card. If the limit on that one credit card is lower than $5,000, you don't have to call the bank and ask them to increase it up to $5,000 just because you've paid off all the other smaller cards. Unless you're buying plane tickets to go home to the Phils., you won't need a huge credit limit on even that major card. The benefits of having just the one card with this reasonable limit is that you have more disposable income left over from your monthly paycheck. Extra cash means extra money for you and your family. Hopefully you will save some of that extra cash, too.

8. Control recreational and hobby expenses. This is another area where we sometimes can give in to splurges. Let's face it: Filipinos are known for their social life and hospitality. This means get-togethers, parties, trips and activities planned together, etc. As long as these events don't need you to fork several hundred over each time, then you're safe. For example, if you're planning to watch a movie with the kids, eat lunch at home so when you get to the movie house you're all full and not likely to buy from the concession stands. Better yet, eat a good home-cooked breakfast then catch the matinee, which is usually cheaper than the other show times. If you want to have some unique movie fun, you can also try watching the movie at a drive-in. Drive-in theaters like the Hollywood Drive-in Theatre in upstate New York are usually open from spring until late summer. When we go there, our kids are usually in pajamas with their favorite stuffed toys and/or pillows. We eat an early dinner, bring some snacks, and buy a little food at the food kiosk they have. The prices of their food are way cheaper than those at the regular movie theater. On top of that, you are helping keep the drive-in continue to do business by supporting them whenever you purchase a few dollars of food from them. You may also opt to wait for the DVD of the movie to come out if the movie you're planning to watch isn't actually a blockbuster. Especially with little toddlers who can get restive and ask a ton of questions so that you lose track of the movie, it's sometimes better to wait for the DVD so you can rewind and repeat those scenes your toddler keeps wanting to see.

When you go out for a weekend outing, do you really need to eat breakfast, lunch and dinner outside? You can save money by just eating one meal in a restaurant, like brunch, then have an early dinner when you get home. If you're going out of state for an extended vacation, plan well. If the distance is considerable, maybe it will be cheaper if you fly there instead of drive over (especially with the price of gas nowadays). If you make ticket reservations well ahead of time, you can actually get a good discount on plane fare. Consider timesharing a condo instead of staying at a hotel/motel. Instead of renting an RV, why not go camping?

If you love to read books, why buy when you can borrow them from the library? Libraries here are so well stocked with books that some of them are actually rejecting book donations. After you read a book, it will only gather dust sitting on your shelf, unless it's got wisdom you'd like to impart to your kids. Additionally, there's the internet. Some books are available in electronic form. Sometimes it's now actually cheaper to download an e-book than to buy the hard copy. Some stores like Amazon are now selling e-book readers. Always use whatever resources around you that are widely available and cheaper to use, not to mention friendlier on the environment.

This goes the same for music: CDs are so outré while mp3s are in; buying classic/oldie DVD movies or season TV shows are out, Netflix and Blockbuster Online are in. (Now don't get carried away on the latter: just get the one-DVD-out-at-a-time and you should be good. Even if you get the 2- or 3-out-at-a-time, you won't be able to watch 2 or 3 of them simultaneously anyway. Meanwhile, while you're watching one of the DVDs during a school night, the other 2 are sitting there, and you've paid more than $20/month to have them sit there at any one time. Duh!) Another tip on renting movies: Blockbuster has a Rewards program where you can "rent one borrow one" free from Monday to Wednesday. For a small annual fee, you can save $4.31 per second DVD that you borrow and get a free rental coupon on your e-mail as well as a free rental if you borrow 5 DVDs a month. As long as you don't borrow more than 6 paid DVDs a month, you're fine. Otherwise, if you borrow more than that, it's better to sign up for their loyalty program where you pay a $300+ fee but all your rentals per month are free already.

If you are already doing some of the tips given above, then chances are you are on good financial ground. If you are like me who wants to visit the home country every 2 1/2 years or so, then you know that saving money wisely is the key to being able to do this without digging yourself into a financial sinkhole. There is a nice feeling of satisfaction when you know that if anything happened to you, your family will still have the house you bought for them, your kids will not be saddled with a huge debt they have to pay off (thus, ruining their dreams of college or a good education), and you will be living comfortably on the fruits of your investments when you finally retire. Remember, the SS pension was not meant to be your only source of income when you grow old -- despite what many people think. So start watching where your pennies go each month and make sure you're saving some of them for those days when you truly will need them.