Bakit pareho pa rin ang net take home mo?

Just met up with a client who I had finished a customized financial plan for, she has been working for about 7 years now and has been finding it hard to save, in fact she has very little savings to her name. This lady works hard and is slowly 'moving up' in the company she works in.

My question to her was, "when you started working, how much was your salary?" She said, "minimum wage". At that time minimum wage was around PHP275 a day or PHP6,000 a month. I asked her, “what her salary is now?" She said, "PHP15,000 a month."

I said to her, "now go back 7 years ago... If I told you back then that you could have PHP15,000 a month, what would you say to me?" She said, "if I had PHP15,000 a month all my problems would be solved!!!"

I told her. "But you do have PHP15,000 a month now. How come you still have the same problems? If I said that in a few years you will have PHP20,000 a month would your problems be solved?" She said again, "at PHP20,000 a month all my problems will be solved na talaga, makakaipon na ako."

Guess what... If you continue to live the way you do, no matter what salary increase you have, you will always have financial problems!

In this particular case, you can say to me that my client wasn't able to save because the price of goods has increased. My answer is simple mathematics. Inflation has averaged around 5% compounded over the last 7 years. At that rate, her salary should only be around PHP9,000 a month. What happened to the PHP6,000 a month?

The fact is this, if you are getting a promotion your salary is rising faster than the increase in the price of goods. The problem is this; most people who get a salary increase suddenly have more things they want to buy. Suddenly they go out more; suddenly they need that new cell phone or dress. All of a sudden, they have more friends and relatives borrowing money from them.

So here are my tips for what to do when you get a salary increase.

• Save half and invest it. Spend half. So if your salary is PHP10,000 and you get a PHP2,000 increase. Save PHP1,000 a month and spend PHP1,000. Think to yourself, I only got PHP1,000 salary increase.
• Don't tell people about your salary increase. I'm sorry to say this but the more people know about your salary increase the harder it will be for you to save. I know you want your family to be proud of you but its not always wise to tell them about your increase.
• Don't change. A salary increase doesn't give you the license to change. Live the same way, be the same person. You don't need more material things to be happy. Live a financially organic life (see my previous article).

For those who have been working a few years already with no savings you have to ask yourself this question. 'Bakit pareho pa rin ang net take home mo?'

Saving tip for the week:

• If you eat in the mall, buy your drinks inside the supermarket.

If you have any saving tips, share them with me and I will include it in my newsletter.

For more information on how I can help you email me on

hoover@barongroup.com.ph.