The 12-month saving challenge

I wonder how many of those who took up the widely talked about Filipino version of the 52-week savings challenge in 2014 were able to finish it?

The challenge requires saving P50 ($1.11) in the first week of the year and increasing it by P50 ($1.11) every week so that by the last week of the year (week 52) you will need to save P2,600 ($57.87). 

Sounds easy?  Not really. 

Drawbacks

A major drawback of the 52-week savings challenge and other schemes which require saving specific amounts regardless of how much you earn is that most people will find it impractical, unrealistic, and unsustainable. 

In the last 4 months of the 52-week savings challenge, you are to save P7,000 ($155.80) to P10,000 ($22.57) a month.  If you are earning P20,000 to P25,000 ($445.14 to $556.42) monthly, this represents 30% to 50% of your income.  

For a vast majority of Filipinos, such percentage is unrealistically high and cannot be sustained over the long-term because ideally, we should be saving 10% to 20% of our monthly income.

For individuals with higher incomes, the 52-week savings challenge may not pose much of a challenge, particularly, in the first quarter of the year. 

P50 to P600 ($1.11 to $13.35) per week will be “peanuts” for someone earning more than P100,000  ($2,225.68) a month. Thus, high-income earners who follow the 52-week savings challenge will end up saving too little.  

Also, if you can afford to save P8,000 to P10,000 ($178.02 to $222.53) per month, why wait for the last quarter of the year to come around before you do it? Then you have to start saving this amount as early as January. Saving unreasonably small amounts when you are already capable of saving a lot more is foolish.

A ‘better’ savings challenge

As such, I devised the 12-month saving challenge to address the shortcomings of the 52-week savings challenge – a more practical, realistic, and sustainable alternative to building your savings. 

Anyone can take on this challenge, whether you are earning less than P20,000 ($445.04) monthly or more than P100,000 ($2,225.19) a month. You will find this challenge achievable even if you have a master’s degree or PhD in spending and you have not tried saving since birth. 

If you are already saving regularly, the challenge will allow you to gradually increase the amount you are setting aside. The challenge also works whether you are earning in peso, dollar, euro, yen, riyal or any other currency.

Here’s the formula:

12-month saving challenge

Savings for the month = base amount + additional monthly savings

Savings for the month = base amount + (month % x monthly income)

Month % refers to the applicable percentage corresponding to the month number. For January, the month % is equal to 1%, for February, it is 2%, for March, 3%, and so on. 

It is a lot easier to remember than week numbers. (Off the top of your head, can you tell me the week number corresponding to August 1-7?  I do not think so.)

Base amount is the minimum amount you commit to save.  If you are just starting out with saving, you can set the base amount to zero. Or you can really challenge yourself and set this amount to P1,000 ($22.26) or more. 

Normally, the base amount remains constant throughout the year. But you can increase it later in the year if you feel you can push yourself further. Below are examples of how the formula is applied:

Example 1: Income = P20,000 / month; Base amount = 0

Month	Base amount	Additional monthly savings ( month % x income)	Total savings for the month
January	0	1% x 20k = P200	P200
February	0	2% x 20k = P400	P400
March	0	3% x 20k = P600	P600
April	0	4% x 20k = P800	P800
May	0	5% x 20k = P1,000	P1,000
June	0	6% x 20k = P1,200	P1,200
July	0	7% x 20k = P1,400	P1,400
August	0	8% x 20k = P1,600	P1,600
September	0	9% x 20k = P1,800	P1,800
October	0	10% x 20k = P2,000	P2,000
November	0	11% x 20k = P2,200	P2,200
December	0	12% x 20k = P 2,400	P2,400
Total amount save for the year			P 15,600

Example 2: Income = P50,000 / month; Base amount = P3,000

Month	Base amount	Additional monthly savings ( month % x income)	Total savings for the month
January	P3000	1% x 50k = P500	P3,500
February	P3000	2% x 50k = P1,000	P4,000
March	P3000	3% x 50k = P1,500	P4,500
April	P3000	4% x 50k = P2,000	P5,000
May	P3000	5% x 50k = P2,500	P5,500
June	P3000	6% x 50k = P3,000	P6,000
July	P3000	7% x 50k = P3,500	P6,500
August	P3000	8% x 50k = P4,000	P7,000
September	P3000	9% x 50k = P4,500	P7,500
October	P3000	10% x 50k = P5,000	P8,000
November	P3000	11% x 50k = P5,500	P8,500
December	P3000	12% x 50k = P6,000	P9,000
Total amount save for the year			P 75,000

For easy reference, here is a table showing the required monthly savings for different levels of monthly income.  Simply add the base amount to the figures below to get the total savings for the month.

Table of monthly savings

Month	Monthly income (in PHP)
	P10k	P15k	P20k	P25k	P30k	P35k	P40k	P45k	P50k
January	P100	P150	P200	P250	P300	P350	P400	P450	P500
February	P200	P300	P400	P500	P600	P700	P800	P900	P1,000
March	P300	P450	P600	P750	P900	P1,050	P1,200	P1,350	P1,500
April	P400	P600	P800	P1,000	P1,200	P1,400	P1,600	P1,800	P2,000
May	P500	P750	P1,000	P1,250	P1,500	P1,750	P2,000	P2,250	P2,500
June	P600	P900	P1,200	P1,500	P1,800	P2,100	P2,400	P2,700	P3,000
July	P700	P1,050	P1,400	P1,750	P2,100	P2,450	P2,800	P3,150	P3,500
August	P800	P1,200	P1,600	P2,000	P2,400	P2,800	P3,200	P3,600	P4,000
September	P900	P1,350	P1,800	P2,250	P2,700	P3,150	P3,600	P4,050	P4,500
October	P1,000	P1,500	P2,000	P2,500	P3,000	P3,500	P4,000	P4,500	P5,000
November	P1,100	P1,650	P2,200	P2,750	P3,300	P3,850	P4,400	P4,950	P5,500
December	P1,200	P1,800	P2,400	P3,000	P3,600	P4,200	P4,800	P5,400	P6,000

Develop a habit

The 12-month saving challenge is designed to allow you to develop the habit of saving gradually, realistically, and sustainably, and therefore, increasing your chances of succeeding.  

Since the savings amount depends on your income, the challenge does not unnecessarily burden people with relatively smaller incomes. The inclusion of a base amount also makes the challenge suitable for individuals who are willing to commit to saving bigger amounts. 

To make this more challenging and help you save further, you can double the amount of the additional monthly savings. Remember: do not to save too much. Do not allow your desire to save more severely affect your family’s quality of life.

You will likely quit saving if it becomes too painful for you and your family.

Take the challenge

Begin your journey to financial freedom by taking the 12-month saving challenge. 

If you take on the challenge, do not worry so much about where to put the money. Our main objective here is for you to develop the habit of saving and not to learn about investing. 

It will be more exciting to learn about investing once you have the money to invest. You can also invest regularly only if you are already saving consistently. You can keep the money at home if you are only saving small amounts. 

But try to avoid using it for whatever reason. It is highly recommended that you open a savings account specifically for this challenge and deposit the amount every 15th or end of the month starting January.

If you have what it takes to succeed, take on my challenge and join the Facebook group, 12-Month Saving Challenge. There, you can download the calculator to help you determine the exact amount you need to save every month. 

I will also post every week tips on managing your money and reducing expenses so that you will have more money available for saving. Do you think you can do it?  I dare you to take the challenge! – Rappler.com