This is a common misconception: wage equals wealth. No! While it is true that the chance of increasing your wealth comes with the event of increased wage, salary or income, it is not always true that the higher your wage, the higher your wealth is. You’ve probably heard this: It is not how much you earn, but it is how much you keep.
Let’s take the case of Cassie and Candy –
Cassie is earning P21000 a month while Candy is earning P15000 a month (net take home pay). With this, we may say that Cassie should be wealthier (more savings/investments/assets) than Candy. But wait, let’s take a look.
Cassie is paying a P5000 rent, P2000 for her mobile phone plan, P1700 for her transportation. She also goes to the movies every week spending P1800 for ticket and drinks, sometimes popcorn and drinks. That’s a total of P10500 in monthly expenses, not even counting her regular meals and other personal and household expenses.
Candy is paying P1000 rent, P250 for her mobile phone load (a good unli-promo works for her), P750 for her transportation. Her entertainment or relaxation is running or walking around the park, sometimes she had to buy some drinks; at most, she spends P400. That’s a total of P2,400 in monthly expenses (excluding her regular meals and other personal and household expenses).
Putting this into the equation, the net amount that Cassie would have after deducting the said expenses would be (P21000–P10500) equal to P10500. For Candy, (P15000–P2400) P12,600. Wait, is the computation correct? Candy’s cash would be higher by P2,100 even if her salary is lesser by P6,000 compared to Cassie’s? Oh yes, because Cassie has way much higher expenses.
Factoring in their regular meals and other personal and household expenses, Cassie spends a total of P9900 while Candy at P4700. The net amount for Cassie now would be P600 while for Candy, P7900. Wait, is that a whopping difference of P7300?
But there’s more. Both of them sets aside an amount of P2000: Cassie uses this to buy her favorite coffee or tea twice weekly, if not, she would save up for a plane fare promo for that trip she’d been wanting to take; while Candy uses this to buy inspirational and instructional books, sometimes she use it to pay for seminars, if not she would also save up for that plane fare promo for that trip she’d been wanting to take, too.
If we factor this in, Cassie would be at negative (P1,400) while Candy still positive at P5,300. Huge difference!
You might ask how would Cassie deal with the negative – oh yes, she takes care of it with a credit card. I just hope she is paying the full amount on due date so that the interest would pile up, resulting in bigger problems.
On the other hand, Candy saves and invests the remaining. Oh, she actually reserved it sets already in the first place. Upon receipt of her salary, she sets aside 20 percent (P3000) for her savings and investments. And she even has extra cash for other things she wants to spend on or support.
In this case of Cassie and Candy, we saw that, indeed, wage is not equal to wealth. It is not how much you earn, it is how much you keep. It is good to earn higher income but it is important to manage it well. It is okay to spend on wants as long as you can afford them, and that the needs were taken care of already. And it is better to set aside for saving and investments immediately rather than wait for what’s left after deducting expenses.
Together, let’s learn from the mistake of Cassie and emulate the good practice of Candy. Your earnings may be a little lower or way much higher but the concept works in a similar way.
Today, you and I are reminded to become better stewards of the financial blessings we receive.
(Chris Dao-anis/CPA, as an author and speaker, helps aspiring and young professionals become better communicators and leaders. His first book ‘The Gift of the Ordinary’ is available at Mt. Cloud Bookshop, Casa Vallejo, Upper Session Road, Baguio City and in Central Books in Cebu and Metro Manila. For seminars and resources, visit www.chrispoweracademy.com or email firstname.lastname@example.org.)