(This is part of Take Charge of your Money, a partnership between INQUIRER.net and Citibank to help readers handle their personal finances well.)
Question: These days, all TV and newspaper reports say we have to really cut down on spending because the global financial crisis is not yet about to end. If we do so, how else can we get to enjoy life? I was really looking forward to treating my wife and young kids to a summer vacation. But should I save the money instead? – Mikey
Answer: It's true that some belt-tightening is required during times of crisis. At this time, governments and corporations are themselves tightening their belts, cutting costs in order to increase the bottom line -- the profit. This is because consumer spending is low, resulting in lower sales for companies.
Individuals should also have the same viewpoint: Cut costs in order to increase the bottom line -- your savings. This is to prepare for any eventuality, job loss included.
It's not easy -- nor fun -- to cut down on spending. But those who spend their money responsibly and not frivolously today will be rewarded in the end. That will come in the form of having an ample emergency fund one has saved up for, or a retirement nest egg ready just when one needs it.
Still, there should be room for some fun even in belt-tightening mode. Here's how you can enjoy life, Mikey, crisis time or not:
Analyze your spending pattern. Once you get your paycheck, what do you do? If you immediately go out and shop or spend the night with friends at a bar, it's about time you get a hold of yourself. Prioritize what is important first, then there will be time -- and funds -- for fun. Before you make a purchase or spend for something, ask yourself: Is this a need or a want? Prioritize needs over wants.
Set aside a regular amount for savings. Relax, this should not take a big chunk of your paycheck. Start with 10 percent of your income. Start an emergency fund to tide you over during emergencies. This should be built up to an amount equal to about six months' worth of your expenses.
Apportion the rest of your income through a budget. Determine how much you will spend on food, transportation, rent, and etcetera. Use a spreadsheet or do it the traditional way -- via pen and paper. Just find time to do it. Then follow through by spending according to your budget.
Allot some money for fun. Make “fun spending” part of your budget. If your budget will allow it, this may mean a movie date at a nice cinema, a new gadget, or dinner with friends at a new restaurant. If the fun fund is limited, reward yourself with something to make you feel good: a massage, a cup of gourmet coffee, or a DVD. Or you may want to save your fun fund so you can have a bigger treat later on.
Now why should there be money for fun when people are supposed to be saving as there is a global financial crisis? A little treat is like a pat in the back; it affirms our hard work and motivates us to work harder. It's our time to recharge. Remember the adage, “All work and no play makes Jack a dull boy”? Don't deprive yourself of some fun spending. Just have fun according to your means.
Now here are some ways you can enjoy life this summer. These do not cost much.
1. Check out mall and school events for free or low cost entertainment. Recording artists, both foreign and local, do mall tours to promote their new albums. Malls also mount special programs to kick off a sale or summer promotion. In schools, check out concert and theater schedules.
2. Visit art galleries and museums for a culture trip. Entrance is free or fees are very low. Looking at artworks can make for an interesting afternoon.
3. Bring the family to parks that won't burn a hole in your pocket. Some parks worth visiting are the La Mesa Eco Park, Manila Baywalk (catch the famous Manila sunset there), and Nayong Pilipino at Clark, Pampanga.
4. Instead of dining out, mount a themed feast at home. Make one day Italian Night, for instance, and cook fettuccini and make your own pizza. Or go Spanish and serve callos and paella. Even if you cook special food at home, dining at home still won't cost as much as dining out.
5. Invite your friends to some bonding time at home. Have a DVD marathon instead of going to a bar. Or have afternoon tea and show off your garden plants.
6. Shop at bargain centers. Divisoria, Baclaran and the mall department store can yield great finds.
7. Check out your credit card for rewards points. Exchange this for a nice treat, which may be a new gadget, gift certificate to a spa or restaurant, a cool sports item, and the like. You won’t need to shell out precious pesos!
A little fun can be made part of one’s budget. Enjoy the summer!
(INQUIRER.net and Citibank invite readers to ask questions regarding financial matters. Send your questions to personal_finance@inquirer.net or comment through our personal finance blog called MoneySmartshttp://blogs.inquirer.net/moneysmarts/.)
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