Frugal Honey

Psychology of Money

On Salary Delays and Shopping Triggers

I’m entering my fourth week in the Senate this week and I still can’t believe that we’re doing fine financially. To recap, it’s SOP in government service to have a delay of about two months before a new employee can receive her salary. I actually have no idea why it takes that long because when I was in the private sector, I received my salary without delay. Maybe there’s a lot more paperwork to accomplish in the government? I really don’t know.

Anyway, this is exactly one of those times when having an emergency fund makes perfect sense and I’m so thankful that I managed to set aside about 2 months worth of expenses in savings and another 2 months worth in my VUL account (although I really hope I won’t need to draw on that account). I also applied to monetize my leave credits from my last employer and am supposed to receive that within the next few weeks (crossing fingers). With the monetization of those leaves, I can even afford to replenish what I took out from my emergency funds and use the remainder of my leaves to tide us over until my paycheck comes in. 
There’s a big probability that I’ll be going through the same thing this time next year since my boss is serving her last term as a Senator and will be stepping down by 2016, and if I don’t transfer to a new Senator I’ll be a new employee again in another government agency and will be subjected to the two month salary delay again. Hence the need to build up our emergency funds again.
These past few weeks have been such an eye opener for me because the limited supply of funds has forced me to confront my spending triggers and bad habits, those being emotional and aspirational spending.
I tend to spend more when I’m happy, and I’m happiest when I’m spending for my loved ones. A quick review of my credit card bill showed that I tend to spend the most in Toy Kingdom more than any store. The usual story is that I would go to Toy Kingdom to buy a gift for an upcoming birthday party we’re invited to, and I see something cute that I know my son or nephews will like and include that in my cart. The situation becomes worse when I have my son with me and he takes a liking to a toy and it’s not really that expensive, so what’s 200-300p more right?
It’s also the same with eating out with friends and family. I get so happy spending time with them that I don’t think twice about footing the bill, that is until my credit card statement comes it. Ulp.
As for aspirational spending, this is where the stack of books I have yet to read comes in. I buy books and picture myself in a coffee shop, leisurely going through my new book or leafing through the pages of a cookbook, diligently planning the following week’s menu. But the truth is, I only get to read a few pages each week while I’m scarfing down my breakfast right before I get ready for work. And forget about having a weekly menu. At most, my husband or the yaya comes up with 3-4 viands that we eat and reheat throughout the week. I’m sadly just a domestic goddess wannabe.
Faced with my triggers, I now make an effort to think through my purchases and not let my emotions get the better of me. For example, I’m attending a wedding soon and since I know my wardrobe inside and out, I know that I really don’t have anything appropriate to wear. But instead of picking up the first dress that looked good on me (price: Php2,000), I shopped around some more and came upon a rose printed sheath dress on sale for Php850.
It was a little loose along the sides but I knew that my trusty modista could easily bring in the excess fabric to make it fit. And paired with a blazer or cardigan, I could even wear it to work. Smart shopper alert!
It’s honestly a constant struggle having to deal with my spending demons. Most of the time I can rein in my spending, but there are those days when I am plagued with shopper’s remorse and find myself with another pair of cheap sandals or yet another striped top. But now instead of cursing myself, I treat each slip-up as a learning experience and move on, while taking the time to celebrate my own successes as well.
I wish I could end this post with some sort of fantastic anecdote but I don’t have any. Like an addict, everyday I have to deal with my spending issues and sometimes the best way is to avoid my triggers altogether so that means minimizing mall trips, unsubscribing from shopping sites and creating goals that will divert my attention from accumulating more things. Whatever works.

The Spending Game

I play this silly game in my mind where I deliberate over what I would do if I suddenly came upon x amount of money. It’s usually good for a few minutes of entertainment when I’m really bored (like now) and serves as a gauge of what my priorities are right that very moment. Let’s begin!

If I had an extra…
One Million Pesos, I would use it to fully pay off one mortgage (Php550,000) and split the remaining money 50-50 to pay down the second mortgage and form part of our Central Europe fund for next year.

Easter 2016 in Prague!
Five Hundred Thousand Pesos, again it would be split between paying of the mortgage and funding our Central Europe vacation, with the mortgage taking 4/5 of the cash and our vacation fund the remaining 1/5.
One Hundred Thousand Pesos, mortgage payments would still be king but I would set aside enough cash to buy or have a cross leg dining table made. Our current dining table is plastic fantastic and I’ve been dying to upgrade to a wooden table. I’m really loving the distressed look and feel of this table:
One of my best childhood memories is playing under the dining table, creating forts on top of and around the table and then squeezing myself underneath it with my siblings and cousins. Thus I look forward for my son and his cousins to also discover the magic of pretend play and the endless possibilities that a dining table can offer if you only use your imagination.
Ten Thousand Pesos, it would be spent on a dining table no doubt.
One Thousand Pesos, I would buy a tube of Bobbi Brown Creamy Matte Lip Color simply because lipstick guru Rae talks so highly of it, and for someone like her who takes her lipsticks seriously to give that level of praise means that this is The One. I’m thinking a fun, pink lippie would be a nice addition to the 2-3 tubes that I already have (excluding lip balms) since my lip color arsenal is mostly limited to reds and variations of red.
Okay, enough daydreaming and back to work! No way are those pre-employment forms going to fill themselves up.

Peddling an Experience

“Marketing is the mystical science of figuring out what makes people behave the way they do so you can make them behave the way you want.” Paul Richard “Dick” McCullough (“Exploiting Human Nature: How to Successfully Market High-Tech New Products“)
For a while now, I thought I was already immune to marketing strategies, because I’ve been on that side of the fence and I’ve seen how it operates. But after reading some posts on how marketers exploit human nature, I began to look around my house and I was dumbstruck when I realized that all of the products on my bathroom shelf are either colored blue, white or green. 

I have problematic skin that easily breaks out in rashes and years ago, my derma prescribed medications to keep my skin at bay. Those cleansers and topical medicine came in nondescript white tubes and simple packaging, so I’ve always associated doctor-recommended and sensitive skin safe products with white and no-frills packaging. I also tend to gravitate towards blue and green products because of how clean and fresh they are (Aha! Another marketing construct right there!).
Earlier this year, my friend and I thought of putting up a small bakery/restaurant within my condominium compound and I was adamant that it should be “Instagram-worthy” to entice my mostly young neighbors to make it their hangout where they can do their selfies, in effect generating free advertising for our bakery.
Little did I know then that my “Instagram-worthy” bakeshop was actually what Starbucks peddled, an experience. People don’t want to merely eat or drink coffee, they want to spend time with their friends, people watch, enjoy the ambiance, take a break from studying or working. And Starbucks delivers all that, that’s why people line up for its overpriced coffee. Absolutely brilliant.
I asked my husband, a marketing graduate, if there was anything morally questionable about this practice, because it seemed quite deceptive on some level. But he answered that on the contrary, marketers were giving people what they really wanted: something that made them feel good about themselves.
Again, it’s never about the toothpaste, the coffee or the facial wash. It’s about the promise of what you can be with those products and how they make you feel.
As a personal finance geek, I think it’s bullcrap, but as an avid observer of human nature and behavior, I am fascinated.
However, now that I’ve uncovered my own bias and triggers, I’ll be more careful about what I put inside my shopping cart, as I might just be spending a bit more on something that is actually no different than the cheaper variety just because Juday (my secret BFF) endorses it.
P.S.
Fitz Villafuerte’s fantastic article on Starbucks is a study of how brilliant marketers really are, and their uncanny understanding of human nature and frailty. Go read it now.

A Year’s Worth of Excuses

(clickable image)

“Bakit Hindi Nag-i-invest ang mga Pilipino” is a very insightful piece from Richard Macalintal that pretty much sums up why a huge majority of Filipinos fail to invest year in and year out.

It’s actually a funny piece, but as Macalintal warns in the end, such financial recklessness is sheer idiocy and will result in tragedy sooner than you think. And I quote:
“Sa tingin nyo pag ganito ng ganito taon taon ang takbo ng buhay nyo, anong bukas ang naghihintay sa inyo at sa pamilya mo?

Pano kung wala ng magpautang sayo? Pano kung magsawa ng kabibigay sina mommy at daddy, sina kuya at ate?

Ayusin maige ang kaperahan Bago pa mahuli ang lahat…”
I really do hope people wake up and be brave enough to go against the flow. So what if people think you’re poor or stingy because you didn’t spend your entire Christmas bonus on gifts? So what if you don’t go all out with your handaan once fiesta rolls in? So what if your car is 10 years old?
Step away from the pack, and be secure in the knowledge that for every peso you save and invest, you’re building a better future for yourself and your family.

Are Further Studies Worth the Cost?

One of my good friends is attending an Ivy League university on a scholarship this coming September. But even with her partial scholarship from her hotshot university, she still has to shell out a staggering amount and since she wasn’t born rich, her friends helped out by holding a fundraiser. However, even with what we raised for her, she is still several hundreds of thousands of pesos short.

She’s leaving the country in a few days without knowing where she will get the rest of her tuition money from, and after a year, when she comes back from her studies, she has debts to pay off.

Which now brings me to ask, are further studies worth the gargantuan cost?

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