5 Tips for When Your Back is Against the Wall

By Efren Cruz

The inflation rate for July 2008 was reported at 12.2% p.a., the highest the country has experienced in 17 years. With inflation rate that high, consumers will definitely go through rough times. Even before the inflation number was reported, telltale signs were already present like gasoline pump prices reaching over P60/liter, commercial rice hitting as high as P50/kilo, dressed chicken at the wet market hovering at P150/kilo and many others. But in times like these, is the average consumer already doomed? Is his future already bleak?

I am reminded of a quotation lifted liberally from that instant movie classic, “Kung Fu Panda” (and yes I still watch cartoons): “The past is history. The future is mystery. Today is a gift. That’s why they call it the present.” I have always believed that we are not thrown challenges we are not equipped to handle. I myself have gone through some very tough times. And yet, I have managed to survive and come out stronger each and every time. So in the spirit of this optimism, I offer five tips on handling financial situations when your back is seemingly against the wall. Mind you, this is not a comprehensive list of tips.

1.    Take a deep breath and smile I have written about this before. Smile, not so much as to deny the existence of a problem, but more to conjure up the strength and resolve to attack it. In medical terms, smile with your zygomatic major (mouth) and orbicularis oculi (eye) muscles. Smiling allows us to calm our emotions and think clearer. And smile with your whole being. This profuse smile, especially when bundled with laughter, will help produce endorphins, the body’s muscle relaxant, and will put you in the proper physical and mental disposition to tackle your financial situation. Not smiling fully has a direct correlation with your emotions. Did you know that Mona Lisa was found by the University of Amsterdam, through their breakthrough emotion recognition software, to have been only 83% happy while being 9% disgusted, 6% fearful and 2% angry? This was because she was not smiling fully!

2.    Assess your situation Look at your finances as an entrepreneur would his business. All you need is a simple income statement. There can only be two major causes for your financial stress: either there is too little income or there are too many expenses. If you need help, there is a new breed of trained financial planners holding the title of RFP (Registered Financial Planner). They can help you assess your financial situation.

3.    Cut costs In terms of expenses, see if they are due to discretionary or non-discretionary spending. If they are due to discretionary spending, then the obvious thing to do is to cut back. If they are due to non-discretionary spending (like loan repayments or children’s tuition), then see if you could restructure such expenses by negotiating to pay off such expenses over a longer period of time. Longer-term refinancing is an option provided the terms are better for you. However, we can never zero out our expenses. This is why you should consider the next tip.

4.    Boost income The better way to solve your financial problem is to boost your income by finding a better or second job or going intoa sideline business. Just remember not to kill the goose that lays the golden egg, which is your current job.

5. Save Each family should have an emergency fund, the amount of which should be equivalent to anywhere from three to six months of expenses. This is the fund that you will rely on for major emergencies including financial stress. Put the fund in an earning but liquid instrument like a time deposit, money market mutual fund or UITF. And save a fixed amount, come hell or high water. This is why the formula for a balanced budget, as financial planners point out, should be income less fixed savings equals expenses. Savings should be prioritized.

As a final word, surround yourself with people who are also keen on keeping their finances balanced. If you can’t join a group physically, you can join an e-group. There are lots of them on the Internet. If you want one that tackles personal finance topics in the Philippine setting, try joining my website at www.income-tacts.com.