Explaining Pinch Principle: A Spending Principle

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Truth be told, I am an advocate of frugality. However, we also cannot deny ourselves of the tendency to spend most especially if this is something that we like and within budget. There should also be a time in your kuripot life where you get to buy something that you really want that is no more under the need spectrum. Needless to say, this is advisable. But then again provided that it is within range and within budget.

To help you better understand the smart way to spend your money without compromising your savings or even your hard earned salary, perhaps it would be best to implement the very simple spending principle that is called “Pinch Principle” or in Filipino “Kurot Principle”.

So what is this pinch principle?

It would be wise to define first the word pinch. This is defined as an amount that can be held between the thumb and the forefinger. We often read this in recipe books like a pinch of salt and pepper. Hence, this refers to a relatively small amount of something. In this case for our finances, this can be tagged as a small amount of money.

So how exactly does the pinch principle works?

Let’s picture a typical scenario. Let us say, you want to buy a tablet. You have been hearing a lot of your friends getting an iPad. Even more, you can see ads about it on TV. Then you head to the mall in order to buy an iPad with Wi-Fi that is 64GB. While there is nothing wrong in this scenario however we haven’t look at your money yet. The cost of this particular gadget is close to 30,000.

So where’s the pinch principle there?

You can go ahead and buy this gadget provided that the 30,000 is just a pinch of your total money and assets. If you have hundreds of thousands or even millions, then spending this much amount would not hurt and even cripple your finances. You might not even notice this amount at all. This is the concept of the pinch principle. As such, you are allowed to spend on something even if it is not a need provided that it is still within your budget and more so there’s still a lot left in your savings account.

The pinch principle would not hold true for individuals who would buy the same iPad but only has enough. Let’s say you have 35,000 in your bank account and you would be spending 30,000 for the iPad. After the transaction, you would be left with just 5,000 in your savings account. That is one huge amount to begin with as compared to your savings. Hence, the pinch principle would not apply. This is now splurging.

Another instance would be not having that amount at all yet still pushes on to buying an iPad. In that case, in order for you to afford one you need to borrow money and get a loan. And that is not suggested and you must avoid that. Because more than getting a new tablet, you are also getting yourself into debt. You would end up paying it in the next months and even worst paying the interest too.

Hence, when you head to the mall for that much awaiting shopping spree, before heading to the cashier, ask yourself if that purchase would be within your pinch principle. Is it something that won’t hurt your savings or your assets? Would you be willing to let go of that amount because you still have a lot left after the purchase? If so, then go ahead and buy that out.

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