Many Filipinos find the word “investing” a bit intimidating. No wonder, since it does imply having to spend your money, albeit that could be money well-spent—if invested in the right assets.

The question stands, why is it that Filipinos don't invest?

The thing is, not all Filipinos are hanging below the poverty line. When asked about why they think Filipinos don’t invest, Rex Mendoza, a leading investment expert and president of Rampver Financials, said “Attitude and behavior. Delayed gratification isn’t easy for Filipinos. Most of us live in the now.”

It rings true. As you can observe in social media, a lot of Filipinos can afford shopping for the latest fashion trends or gadgets, buy a new car, or stay up till midnight to book cheap flights in different parts of the country and even abroad. These all serve instant gratification. It goes to show that a lot of Filipinos have the money, but not all of them spend it wisely or put it in various investment vehicles to grow.

As such, it all comes down to how they spend and invest. Here’s a visual graph that illustrates the difference between investing and spending. You’ll also find tips on how you can make smart financial decisions.

Investing vs. spending: what’s the difference?

Investing and spending share a similar characteristic: you spend the money when you buy things like a new phone, a car, or investment assets. But where is the line between spending and investing?

Here’s a more thorough distinction for each:

Spending

Merriam-Webster defines “spending” as “to use up or pay out.”

Generally, you spend money to preserve your lifestyle, which includes paying off bills, utilities, and rent. You also expend money for food, transportation, debt, subscriptions like Netflix and Spotify, phone bill, and other fixed expenses. These are the type of expenses that you can no longer recover—gone.

Spending isn’t innately bad. It’s your hard-earned money. You have the liberty to reward yourself with a treat to the cinema or buy yourself plane tickets for that much-needed vacation if it brings you value and enhances your well-being.

However, this goes out of hand when you start spending on “wants” that are unnecessary and which costs beyond your means, such as a car, discounted airfares (which you don't necessarily need and will only require you to spend more for travel expenses), fancy clothes and shoes, and new gadgets, and more.

Key difference from investing: Spending is more about trading your currency for goods and/or services that covers your fixed expenses to sustain your living. Often, you disburse a good portion (sometimes more) of cash exhausted on things to satisfy your instant gratification (e.g., new shoes, clothes, accessories). Do you really need an action camera for your upcoming travel trip or is it just a want? 

Investing

Merriam-Webster defines investing as a way “to commit (money) in order to earn a financial return” and “to make use of for future benefits or advantages.”

In essence, investing is purchasing items, like an investment vehicle, that serves you in the future. These are the smart purchases you make that can bring in more money. It means using your money to get bigger gains and rewards. You put it into a vehicle where there is an opportunity to grow when done right. 

While you invest to earn more money, it also comes with risks of potential loss. It’s crucial that you review your financial situation, your goals, and investment options to find the best one that suits your needs and financial status. When investing, it’s critical that you don’t just put your money in investment vehicles willy-nilly, but you invest wisely.

Key difference from spending: Investing is just another way of spending money, but it is disbursed with the goal of bringing future returns. Additionally, investing is usually carried for long-term financial goals, such as life insurance, real estate property, retirement, and your children’s education fund. You’re still “spending” your money, albeit now with the intent of preparing you and securing you financially for the future. 

3 tips for making better financial decisions

Now that you have a good grasp of the distinction between spending and investing, let’s move on to how you can make smart financial decisions to help you handle your money for a healthier financial standing. 

1. Manage your spending first
   
   If you're having a hard time keeping your impulsive spending habits in check, might as well leave your credit cards and debit cards in safe storage at home. Instead, only carry your daily allowance and a little extra cash for emergencies. Alternatively, you can bring a debit card containing your allowance until the next payday.
   
   Setting your spending habits straight will train you to spend wisely and keep your money where it should be. This is an excellent way to kick-start your investment journey!
   
   
2. Set a budget and stick to it
   
   Sit down and gather your receipts, bills, and statements of accounts to determine your monthly costs and to set your budget. It’s time to plan your finances and stick to it.
   
   For starters, you can practice the 50/20/30 saving and spending rule. You allocate 50% of your income to your living expenses and other essentials, 20% to your savings and investments, and 30% to your personal spending budget. You can adjust it as you see fit in your financial standing and goals.
   
   
3. Invest in assets that grow your money
   
   Congratulations on getting your spending habits and budget in order! Now that you’ve found your groove in your road to a better financial health, you can start putting your money in various investment vehicles, like in stocks or UITF.
   
   If you have a dollar fund, you can invest in a dollar-denominated product like Dollar Protect Plus, which comes with life insurance coverage. Talk about hitting two birds with one stone! A dollar investment allows you to access and participate in a global financial market while you build up your USD funds. This is excellent for Filipinos who’ve built a relatively large dollar fund and wish to grow it.
   
   Check out our Products Page for other investment options that help you reach your long-term goals.

Give every peso a purpose

Bottom line, spending is disbursing money for living expenses and others, while investing is spending your money to build your financial wealth. When you start to spend less on things that don't matter in the long-term, you can put that extra money in the right investment vehicles to set up for a secure future.

From saving money in an alkansiya to your present-day earnings from your job, life is all about making choices on how to spend and manage your finances. Will you give in to the temptations of “SALE” signs plastered on malls and online stores? Or will you spend it on investment vehicles to grow it over time?

If you’re interested in seeing your money work for you, visit any of our 900 BPI branches and talk to a Bancassurance Sales Executive. It’s high time that you let your money serve you for a secure future!