Recently updated on: September 20, 2023
The Kurot Principle is a simple yet effective personal finance concept that applies to many Filipinos' money management.
When we say "kurot," we can visualize pinching or getting only a small quantity from a larger repository - like how we take a "pinch" of salt from its container.
So, how can we relate the Kurot Principle to our personal finance?
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The Kurot Principle
The Kurot Principle applies when you're spending money - whether to buy an item, book a trip, or do other activities that cost money.
The Kurot Principle says that you need to spend only a fraction of your money before buying, especially costly items, instead of using it all in one go. This principle can also be related to the minimalistic approach in personal finance.
For example, you want to buy a new cellphone to replace your old one. You currently have around P100,000 in your bank account from your bonuses but without savings. How will you decide which phone you will get?
For many, the latest iPhone will be at the top of the list because of its brand. Unfortunately, that phone will easily take a huge chunk of your money in the bank.
If that's the case, instead of just a kurot (pinch), what you did is a "dakot" or a handful.
The Dakot (Handful) Principle
From the example, we saw that instead of taking only a pinch of the P100K bonus, the buyer spent more than half of the pot, which took a huge chunk of the money, leaving only spare change for savings and investments.
If you can relate, that's because many of us are inclined to spend more than we earn instead of saving it. This causes people to live paycheck-to-paycheck and in the rat race.
A saying says if you can't buy it twice, you can't afford it yet. This has been controversial because people don't want to wait. They want the best they can get their hands on as soon as possible.
However, this mindset can be unproductive in the long run because if you keep digging handful after handful, you are not letting compound interest help you build your wealth.
The Utang (Debt) Principle
If you think the "dakot" or getting a huge chunk of the money pie is bad, the worse part is if you get into utang or debt.
Let's go back into the iPhone scenario. Instead of a P100,000 bonus in your bank account, you only have P20,000. And because of your burning desire to buy the latest iPhone, you took a 24-month, high-interest loan.
So you will continuously pay for a depreciating item for the next two years. By then, the excitement of a new purchase has already worn off or may have caused an upgrade to other things because of the Diderot Effect.
Think In Terms of Percentages
A good habit in personal finance is to think of percentages - don't take any peso amount as it is. What do I mean by this?
For instance, imagine a P20,000 sports watch. Without a reference point, this amount is an arbitrary number. However, our mindset may change if we put it in terms of percentages.
If you have a P30,000 monthly income with no savings, the P20,000 sports watch is already two-thirds (67%) of your income.
This makes buying the watch almost impractical and only possible by getting into debt or taking a dakot (handful) from your earnings.
On the other hand, if you have P1M savings in your bank account, the P20,000 will suddenly look small because it is only 2% of your savings, and the watch becomes affordable.
So whenever you decide to buy expensive items, consider how much percentage it will take from your savings or monthly salary.
The Power of Delayed Gratification
This principle may seem extreme to people who don't want to look kuripot or spendthrifts. Unfortunately, the desire to look well-off may be one reason why many people live paycheck-to-paycheck.
When thinking in terms of percentages, the operative phrase is "not yet." This means you must practice delayed gratification and wait for the right time before buying pricey items, including big-ticket items.
So, instead of spending more than what you earn on things with depreciating value, you can save for the meantime to avoid taking a big scoop from your money bag or getting into debt.
By using delayed gratification, you will have more time to think about your purchase to know if it is worth it rather than experiencing buyer's remorse after buying it hastily. Buying things after you work hard for them is also more rewarding.
The Art of Temporary Self-Deprivation
Aside from delayed gratification, self-deprivation and sacrifice are unpleasant words for some. They think that depriving yourself of anything or sacrificing is bad. Still, if we think of it, we will either deprive our current selves or our future selves.
The interconnected ideas of the Kurot Principle, delayed gratification, and temporary self-deprivation builds perseverance and character along with your savings.
When we have to wait and work for something, we appreciate the journey more than the destination. So, when we finally get our hands on the item we want to buy, it is more satisfying.
We need to put our purchase into proper order with the right perspective. Don't join the "fake it till you make it" crowd because many of them go broke.
There is a quote that says, "If you buy things you do not need, soon you will have to sell things you need." So, you must remember to save for your emergency fund.
The Kurot Principle is a simple concept that says we must be mindful of our spending. Instead of spending using dakot or utang, we need to learn how to kurot or pinch.
We also need to learn delayed gratification and temporary self-deprivation as it builds up, and we will soon reap the fruits of our sacrifices.
A small saving today that is consistently increased and compounded for a long time will set us up for a better future. We must look not only at today but also in the future.