Fear of being a slave to my sweldo (salary)

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Selection of wine at District on 53rd

Today not only did I receive my initial and accumulated two-month salary but my employer also started implementing the third tranche salary increase for government workers. Looking at the new number on my monthly salary makes me dumbfounded as I have no idea how I will spend this money.

 

Monthly fixed costs and saving rate

My husband and I live a relatively* simple life and don’t really spend that much money. We don’t have a lot of monthly fixed costs as we don’t have a landline, cable, Internet (mmm except data hehe), and household helper/s. We don’t mind shopping at wet markets for fresh fruits, vegetables and fish. Although I draw the line at meats and dry goods, those we buy at the grocery.

Fortunately despite my personal cash crunch these past two months, frugal husband and I were able to a achieve a combined saving rate of 72.77% for the year 2017. That’s 72.77% of our net take home pay for the year.

Our simple lifestyle is by design. If we gave free rein to our natural instinct to shop and waldas, we would be living paycheck to paycheck, working every day to make money just to give it off to someone else– your creditors.

Admittedly, having a higher-than-minimum wage income to start with really helped us. With such income you are assured that once your basic needs are covered, there’s some money left for saving/ investment. When one is just starting up the corporate ladder as I know most of young Pinoys are, the salary is usually just enough to get by, if barely. Naturally, most people who are just starting in their career would yearn for higher pay. But when will it ever be enough?

 

Marginal utility of income at X monthly salary

There does come a certain point when having X amount of monthly salary gives you no additional joy /utility. This is the marginal utility of monthly salary. From that point onwards, the utility for money just goes downhill. I would make a graph but I’m tamad (lazy). Hehe..

 

Fear of becoming a slave to a monthly salary

One such example of a negative effect is hedonistic adaptation to having a good salary. Once you start earning better, you likewise change your lifestyle to accommodate more spending. Eventually the novelty of your higher salary wears off, then your increased expenses exceed your new income.

Personally, I feel that I reached that marginal utility of my monthly salary almost immediately after getting a promotion some three years back. There’s not much to spend on in Cebu compared to Makati so I ended up pocketing most of my money in savings and investments. This is mainly why my saving rate is above the usual 10-20%.

Now that government salaries are further increased (third tranche), I feel no additional joy to the additional money I will be getting as I was already content with what I was making as far back as three years ago!

A small fear creeps in that frugal husband and I might succumb to hedonistic adaptation. If we did, I fear that we might become slaves to our salary, always paranoid of losing jobs that pay so well to fund lifestyles that are unsustainable in the long run.

On the other hand, I could take this as an opportunity to step up my saving game to increase my saving rate (excluding frugal husband’s) to 70%.
We shall see what happens.

How do you avoid hedonistic adaptation?

George

*of course everything is relative. What may be simple to me may not be so for others.

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