Social media specialist Jean cut her target savings by a third to P2,000 a month from P3,000 to manage her bills and expenses as inflation chokes everyone's budgets.
The 28-year-old who takes home P35,000 a month pays rent, a mobile phone installment, and life insurance on top of spending for basic needs like groceries and utility bills.
"Ang mahal na kasi ng lahat talaga kaya mas mahirap din na mag-ipon kasi naadjust na rin yung budget for expenses," Jean told reportr, admitting that she remains hesitant to cut "simple joys" such as a Netflix and Spotify subscriptions from her budget.
"Ayoko naman i-deprive yung sarili ko kasi sa point ngayon na may pandemya pa rin tapos yung mental health ko pino-process pa rin yung 2020 kahit na 2022 na, it's okay for me to have less money than to sacrifice my lifestyle," she added.
With inflation at 6.1% in June, goods are becoming more expensive at a faster rate and budgets are having a hard time catching up.
But what many people don't realize is that inflation doesn't only affect your spending, it also hurts your savings.
How does inflation diminish your savings?
Inflation affects everyone who is spending and saving.
Aside from the fact that your money can buy fewer goods since they cost more, inflation also eats the value of your savings since the peso now has weaker buying power, said financial adviser Salve Duplito.
"Kinakain ng inflation rate yung ipon ng lahat ng tao kasi every year yung piso mo, sa itsura niya piso pa rin siya pero every year yung nabibili niya mas lumiliit na kasi mas nagmamahal ang presyo ng bilihin," Duplito told reportr.
For example, you might find it more painful for your pocket to save P1,000 per payday now than before because your basic necessities cost more. Also, if you think that your P10,000 savings in the bank used to be enough for a Boracay vacation, you might find it on the short side now since airfares, food, and accommodations cost more.
"Lumiliit yung value ng pera na hawak mo so disincentive siya to saving. Yung income na mayroon ka, kaunti na lang ang mabibili mo and kung ano man ang naipon mo, kinakain siya ng inflation over time," she added.
How should you save?
When things cost more and your money is worth less, you might want to review and change the way you handle your finances, including your savings.
Since inflation eats up your savings over time, it becomes more necessary to save more money because it would now take more pesos to buy the same amount of goods, Duplito said.
"Kung tuloy-tuloy yung pag-akyat ng mga presyo ng bilihin, mahihirapan ka na with the same level of income so dapat mas magtipid lalo dahil darating yung time na mahirapan ka na bilhin yung basic necessities mo," she added.
Having a hard time meeting your target savings goal? Here's a strategy from Duplito:
Pay yourself first
Set aside your target savings first once you receive your income.
Let's say you want to save P1,000 every payday. Before going through the nitty-gritty of your bills and budgets, immediately save the P1,000.
"Magtabi ka ng P1,000 muna pikit mata and then kung ano yung matira, pagkakasyahin mo na siya sa necessities mo," Duplito said. "You pay yourself first and then you make sure that whatever's left fits."
For those starting out, save money first for your emergency fund. For employees, Duplito said an emergency fund worth three months of your salary is a good starting point. For freelancers and entrepreneurs, a good starting point is at least six months of your income.
With the uncertainty posed by the pandemic, emergency funds should be a year's worth of your monthly salary.
"You should save money in the bank as your emergency fund. It doesn't matter kung yung interes niya ay maliit kasi ang purpose mo sa pag-ipon ng emergency fund is not to make money but to ensure that that money is accessible," Duplito said.
For those with emergency funds spared, Duplito said it's a good time to invest either in bonds or while the stock market is down so you can earn from it once the market recovers.
Distinguish necessities from budol
Once you've set aside your savings, budget whatever's left to fit your expenses and bills. This is the time to distinguish your necessities from your budol expenses like streaming subscriptions.
For Duplito, there's no rule of thumb when it comes to saving. What's important is that you set a target on how much you should save.
"Gusto mo mag steak dinner today? No judgment, sige lang basta pagkasyahin mo yung natira sa sweldo mo," she said.
If you find that with all the savings and financial adjustments, your income is still not enough, Duplito said it's no longer a budgeting issue but a money-making problem.
"Kapag ang sitwasyon ay kulang na kulang na talaga, the solution is no longer budgeting but making more money. Find new ways to get multiple sources of income so you can afford to save. That's putting yourself in the right head space para di ka lang nadadala ng trend ng inflation," she said.
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