How we spend our money
By Randell Tiongson on July 17th, 2012
“Don’t tell me where your priorities are. Show me where you spend your money and I’ll tell you what they are.” – James W. Frick
One of the most common questions I ask all my financial counselling session is this – ‘how do you spend your money’? The first things we need to establish is reviewing the cash flow statement. Looking at the expenses gives me a quick look at the financial situation of a person and most of the time, I’m pretty dead on.
The cardinal rule of being wealthy is this – “Spend less than what you earn and invest the
difference.” The first and most difficult hurdle is often the spending less part. I’ve always believed that there are only two forms of an expense – its either a need or a want. Lo and behold, most people I know (me included) had a problem having a healthy cash flow are those who have difficulties controlling their ‘want’ expenses. In extreme cases, I’ve witnessed some people bring down their ‘need’ spending just to maintain their ‘wants’ – yikes!
The prudent thing to ensure we will have a healthy cash flow (where inflow of cash is far bigger than its outflow) is for us to be sensible in the way we spend. There’s really nothing wrong in spending on ‘wants’ but when those spending is causing you to have a very unhealthy cash flow or worse, being in debt, it’s time to STOP.
Our income is always finite therefore we must be very wise in the way we spend it. 
Priorities should be clear, communication between spouses and between children should be open so that everyone in the family will understand about priorities in the family income. I implore parents, specially fathers to take a strong lead role in coming up with a healthy family finance so there will be peace and harmony.
I strongly believe that we have the power to curb our wants. We are all rational and logical – its time our finances reflect our real priorities.
A patient man has great understanding, but a quick-tempered man displays folly. – Proverbs 14:29, NIV
I totally agree with this.
I remember my mom sitting me down for a discussion when I was a lot younger. She said she was leaving her current job, and moving to a new one with lesser pay. She said we would have to make some sacrifices, like maybe buy fewer toys (I think I was around 7 or 8 years old at that time), but that it would give her more time to spend with me and it would make her happier. Because she explained it so well, I was fine with it. I didn’t mind having fewer toys if it meant my mom would be happier in her new job. I didn’t even see it as a sacrifice because she said she’ll have more time to spend with me 🙂
On the other hand, I know of some families where the parents try to shield their children from their financial situation. They try to keep up appearances by saying yes to everything their children’s heart desires, even if it means swiping their credit cards or eating away at their emergency funds. They are afraid of disappointing their children. However, I think parents should trust their children more. I am sure their children can handle the truth, as long as it is explained well.
Hi,
Do you have any lectures coming up?
Hopefully, there’s another seminar here in Singapore..
@ glo, I’ll be in Singapore for a seminar. Sept. 29
Hi Sir! pwede po malaman ang exact date ng seminar niyo sa august? Thanks!
Sir, i always read your blog and i used this as a material device to encourage and teach my friends on how to manage their finances. Thanks for this.
Hopefully, you can visit also UAE. I’ve known some Filipinos here needs your advices.
Hi Feda,
I would love to speak at UAE. Sana may mag organize & bring me there.
Hi Geraldine, its august 18.
Hi Gio,
I will have a series in Singapore end of September. Posting details soon.
I agree with this,
Our spending reflects our priorities in life.
I know some people who changed their financial habits due to marriage.
🙂
Sir,
Whoever said and invented this cardinal rule…“Spend less than what you earn and invest the difference.” …he is a genius! …and I think it should possibly be converted into a mandatory law (kidding but can be done).
I also like what you mentioned Sir Randell about prioritization. This is really important especially for those who started to have a family, “Priorities should be clear, communication between spouses and between children should be open so that everyone in the family will understand about priorities in the family income.” Very important.
Thanks for your thoughts and ideas about money matters, and sharing it here… FREE.
More success,
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