The Kurot Principle [Financial Wisdom]

What is the “Kurot Principle” all about? The “Kurot Principle” is truly remarkable.

Kurot. (As a verb, it means “to pinch”. As a noun, it’s “a small pinch”)

To better understand this, I will tell you a story of a person who had the intention of getting for himself a mobile phone worth Php1,000.00. Just so happens that he has Php100,000.00 in savings. Realistically, can he buy himself a mobile phone?

The Kurot Principle, Yes he can, because Php1,000.00 is a small pinch (a kurot) taken from his savings.

Now a second person wants to buy a mobile phone as well, also worth Php1,000.00. He has savings in the bank worth Php1,000.00. He goes right ahead and buys a mobile phone. So what would you call that?

A handful (dakot)– he didn’t just pinch off a little bit of money, he grabbed a handful of money!

OK now here’s a third person, who also wants to get a mobile phone for himself, but he has no savings whatsoever.  He goes ahead and buys the same Php1,000 mobile phone anyway.  So what do you call that now?

Debt (utang). He is now in debt.

So the question is: which of these three principles are you currently using as far as your financial lifestyle is concerned: the pinch, handful, or debt?

Is it any wonder why we usually find ourselves penniless or even buried in debt? Most of the time, we don’t pinch; we grab money by the handfuls. Or we borrow money, leaving us in debt. If you want to be rich, you have to learn to pinch instead. If you must buy something, just pinch a little bit off, not grab handfuls or borrow. Understand that if this is what you do, you can be assured that you will eventually live rich.

To understand this, let’s observe the lifestyles of the richest social group in the Philippines: the Chinoys, or Chinese-Pinoys. Why do you think they live such prosperous lives? Because they practice the Pinch Principle. And us regular Pinoys? We practice the Handful Principle.

The Mindset of the Pinoy and Chinoy Businessman

There was once these two businessmen who started their own enterprises: one was a Pinoy, and the other, a Chinoy. They both started off with a working capital of Php100,000.00.

After the first month, our Pinoy business owner made a profit of Php10,000.00 What do you suppose he bought for himself? A mobile phone. Our Chinoy business owner also made a profit of Php10,000.00. What do you suppose he did with this money? He added it to his working capital.

So how much does the Chinoy businessman now have in capital? Php110,000.00. Meanwhile, the Pinoy businessman still has Php100,000.00, but he does have a shiny new mobile phone! That ain’t so bad now, is it?

Philippine MoneyLet’s continue with our story. After a few months, their businesses are doing rather well. Our Pinoy businessman made Php50,000.00. When any Pinoy has this sort of money, what do you think he does? He goes out and splurges on a home theater system with a DVD player and an LCD TV! Our Chinoy friend also made Php50,000.00, but does he do? He adds it to his business once more. So how much is his working capital now? Php160,000.00!

Fast forward a few more months: the Pinoy businessman makes Php150,000.00! When a Filipino has this sort of money, what does he buy? Either he treats himself to a second-hand car, or he puts a down payment on a brand-new one. When the Chinoy businessman has Php150,000, what does he do? He puts it back again into the business! So much does he have in total now? Php310,000!

Do you see what we’re getting at here?

Every month, both businessmen make the same amount of profit. Our Pinoy friend makes some money, then goes ahead and buys new stuff. In the end, his business still works on a Php150,000.00 capital. On the other hand, our Chinoy businessman makes some money, then puts that back in to his business.

Eventually, the Chinoy entrepreneur was able to save up Php1,000,000.00! What do you suppose he does next? He approaches one of his suppliers and said, “Hey, if I buy a million pesos worth of inventory from you, will you give me a discount?” And what do you suppose the supplier says? “With that sort of volume, sure I’ll give you 5% off our regular rates!”

Our Chinoy friend takes it a step further: “Hmm. What if I give my customers a 3% discount, and I keep the 2% savings for myself?” This only means that he can lower his prices a little bit more.

It just so happened the respective shops of our Chinoy and Pinoy business owners are right next to each other’s.  They sell the same products, offer the same services.  Given the situation, where do you suppose would you make a purchase?

The Chinoy’s, of course. Because it’s cheaper. And what do you suppose would happen to our Pinoy businessman? He’ll start losing business. And then what do you think would happen? He’ll start selling off some of his stuff to cover his expenses. That car he bought for Php150,000? He’ll start peddling it around. Our Chinoy entrepreneur is pretty liquid, but he makes an offer, and haggles the price down to Php80,000. And because our Pinoy friend needs the cash right away, he sells the car at a loss. Now the Chinoy businessman got himself a car at a bargain!

After a few months, the Pinoy’s Php80,000.00 is about to run out. So what does he do next? Sell off his home entertainment system, this time for only Php20,000.00. Our Chinoy friend also snatches it up. And then eventually, the Pinoy business owner sells off his mobile phone. For how much? For only Php2,000! Soon, the Pinoy decides to close up shop. Most likely, he’ll end up working for the Chinoy.

And this, pretty much, is the story of our country.

There used to be a time when the Pinoys were more prosperous than the Chinese. How do you suppose that changed? What seems to have been the problem here? We Pinoys are great at grabbing money by the handfuls! The Chinese are great at pinching just a little bit off their cash!

You know, we used to have a participant before who remarked, “Sir, that isn’t all true! I know a Chinoy, he drives a BMW. That’s a P5 million car! Is that a “pinch”?” In all likelihood, yes. Yes he did practice the Kurot Principle. When he bought that new car, he probably had Php100 million in savings! So that’s just a pinch! Are you still with me?

A Hand-To-Mouth Existence

Where do you suppose you’d find people living a hand-to-mouth (isang kahig, isang tuka in Filipino) existence? The squatters area? The depressed neighborhoods of Manila? While that seems to be the usual connotation, if you really want to see these kinds of people, look no further: Makati, Ortigas Center– you’ll find them there.

What do I mean? If you don’t get a paycheck this month, do you think your family will survive? If you don’t have a credit card now, or if you lose your job this very moment, how many days do you think would your family last, living a decent lifestyle? The truth is: if you lose your monthly paycheck, you’re not going to make it.

For Chinoy businessmen, even if they don’t make a profit at first, they will eventually lead a prosperous lifestyle. Why is that? Because they’ve already put in the hard work for so many years, and they’ve learned to just pinch a little off their rewards. Which is why so many Chinese-Filipino families now reap all the benefits. As for the regular Pinoys, for a lot of us, if we don’t work, we don’t eat.

In a way, this is a painful realization. Even as we grow old, we are still in that perpetual state of working and working. How many Filipinos 60-years-and-up do you think are there still making a meager living? Don’t you think it’s about time, starting today, to put in all the hard work, and avoid grabbing your rewards by the handful? Delay your gratification a little.

You know what’s a more painful realization? One day, you’ll find yourself wanting to work, but cannot. You are already old? Why? Because you’ve led such a decadent lifestyle when you were a child. You wasted your youth and good health back then on endless partying and other vices.

Here’s a question: is it wrong to buy yourself good things? The short answer is “no”. As long as you’re just pinching a little off the top. If you see your colleague sporting a new pair of Nike shoes, don’t be too judgemental. Who knows? Maybe he did just pinch a little off his savings. At the end of the day, what is happening to other people is not important. What’s more important is what is happening to you.

The Bible says in 1 Thessalonians 4:11, “Make it your ambition to lead a quiet life. You should mind your own business and work with your hands, just as we told you.”

(Excerpted from Vic and Avelynn Garcia’s book entitled Kontento Ka Na Ba Sa KaPERAhan Mo?)

Photo by Liu Yangfeng. Shared on Facebook by Maribel Loyola-Generoso. Original post “Kurot Principle” by the good people over at CBN Asia, and translated into English by Renzie Baluyut.

Author: Renzie

Renzie voluntarily removed himself from the hectic Metro Manila lifestyle, and moved to Amadeo, Cavite, just outside Tagaytay where he can wake up to the sound of roosters, and freshly brewed coffee in the morning. By day, he manages a specialty cake shop. On weekends, he studies real estate management. In his spare time, he tinkers with websites. He loves DC action figures, the smell of paperback books, and KFC Hot N' Krispy.

What's On Your Mind?