USING BEHAVIORAL SCIENCE TO DESIGN A CUSTOMER-CENTRIC FINANCIAL MANAGEMENT TRAINING FOR MICROENTREPRENEURS income sources to pay for their household expenses. On the other hand, a few clients did take out a fixed “salary” amount daily from their business income to pay for their household needs, but they did not have a good way to assess if it indeed was the right amount of money to take out. One client believed that her daily salary from her business should be 300 pesos, because she got paid 500 pesos per day as a cook for other people on very special occasions. Another client reported that if she was to pay herself a salary, it would be 400 pesos per day because running a store is “really very hard work.” Another client shared that she was doing the sari-sari business because the daily salary that she believed she could make in her business was more than what she would earn as a farm laborer. To an extent, these salary estimations were both intuitive and most likely highly arbitrary, as they did not take into account either the business profits or the family household expenditures. Based on our findings, NWTF clients could certainly benefit from training that teaches them when and how much money to take out of their business for household expenditures in a more systematic way. The salary calculation heuristic developed for microentrepreneurs in India and the Dominican Republic precisely teaches clients how much cash to take out of their business for household expenses on a weekly basis. The qualitative interviews confirmed the relevance of this heuristic even for the microentrepreneurs in the Philippines. 4.1.4. Many Clients Compartmentalize Income Streams and Direct Them toward Different Expenditures For the most part, clients we interviewed did not keep their business and household cash separate. What many clients followed was some sort of cash compartmentalization, where cash earmarked for different purposes was kept in different locations. For example, one way of compartmentalizing that clients used was to maintain two separate piggy banks: one to pay for the electricity bill and the other one to pay for home repairs. One client shared that every day, she contributed 10 pesos to the electricity piggy bank and 5 pesos to the home repair piggy bank from her business revenue. Clients reported keeping such earmarked cash in different locations—in a separate purse, under the tablecloth in the kitchen, or in a box. Clients also shared their own heuristics for contributing cash for such expenditures (Box 2). Overall, most clients were using some form of income and expenditure compartmentalization, but instead of focusing on creating a strict division for business and household cash, they used it as a way to collect money for bill and loan payments. This points to a need to teach these clients how to separate their business and household cash for effective cash flow management. As discussed, the cash separation heuristic we have already developed as part of the Financial Heuristics training could be useful for the Filipino microentrepreneurs studied, who are also struggling with cash management issues within their business and household. Box 2: The “Compartmentalization Heuristic” for Cash Management Based on our interviews with clients and probing around their cash management practices, we observed that many of these clients routinely practiced “compartmentalization heuristic.” To implement this heuristic, clients earmarked cash for different expenses by keeping it in different locations. An example, of a day-based heuristic shared by one of the clients is a case in point. This client who maintained a box to collect her weekly loan payment reported that she used the business sales from Tuesday to fill her loan repayment box, and collect the necessary payment amount by Thursday. We also encountered compartmentalization heuristic based on income stream—one client reported saving for her monthly electricity bill from two income streams, her sari-sari store income and her gasoline retailing business, by allocating 10 pesos every day from the earnings of each of these two businesses toward her electricity bill. Although practicing such heuristics helps clients be prepared to make timely payments of their expenses, such as a loans or an electricity bill, the lack of strict division between business and household cash makes it harder for clients to know how well their business is performing, and respond accordingly. 13