Financial Freedom

Your Habits Determine Your Future

We recently changed our Cable TV subscription from having over 100 channels thru the old-school Platinum pack with the Discovery and lifestyle channels to the cheaper Dual Def 549 package. As a result, we now have the Simply Money channel where the show ‘Til Debt Do Us Part airs. A few years back, that show inspired me to build better spending and saving habits. Coupled with other concepts I’ve learned here and there, I managed to cut back on consumer credit card debt and felt so happy about it.

Unfortunately, I’ve not always maintained those good habits. Now, my credit card use is getting a little bit out of hand.

After our wedding, my husband and I agreed on a budget and we’ve pretty much stuck to it. We prioritised paying off debt, but by this time, we should already be building our emergency fund back up. Sad to say, we aren’t. We are thru paying off one loan, and will soon finish payment on another. Instead of getting rid of all but one credit card, we still have three. The third one was supposed to be the only remaining card and would be used for auto payments on bills, for gas and groceries too. It is the card we always pay off in full monthly. So far, we’ve managed to do that. But in order to keep cash flowing, I’ve made the mistake of swiping the plastic to pay for meals in restaurants, and also for other purchases. In order for my plan to work, we should stick to cash on all other expenses.

So anyway, tuning into Simply Money even for just a few days has helped knocked some sense back into my thick skull.

But no sound advise will ever be enough. John Maxwell has it when he said in his book Make Today Count that –

Your Success is Determined by Your Daily Agenda

John Maxwell IMG source: https://www.pinterest.com/pin/459226493231678766/

 

Our habits do define us. And I’ve got some pretty bad habits, and so does the husband.

Change your habits

Source: http://www.mairovergara.com/aprenda-ingles-com-citacoes-10-you-will-never-change-your-life-john-c-maxwell/

We will not get our finances in order without making real changes to our daily habits. Same goes about losing weight. It is not going to happen without us changing the way we spend our days. We have taken a bold step – we have been on a calorie-controlled meal plan in the past month and I lost a little over 5 pounds already. But because we’re using a meal delivery service, we’re getting tired of the food. So we have to learn to make it on our own. This week is the start of trying portion control by ourselves on our home cooked meals. Wish us luck.

I examined how I spend my days and realise that spending over 12 hours at work was not going to help me achieve my life goals. Besides, my team’s success doesn’t rely on how long I stay in the office. I need at least 7 hours of sleep, at least that’s what Arianna Huffington says. I already know that no matter how much sleep I get, I still fall asleep at work or on the wheel. There’s a whole different health issue there and I’m going to need a sleep study, but before then I’m willing to give it another shot. I’ll start trying to sleep better. But if I were to sleep that much without changing anything else on my schedule, I wouldn’t be spending any quality time with the husband daily, and there’d be no more time for reading or crochet. I like watching TV, and going on the computer at home, how am I going to squeeze in those activities and add exercise too?

I’ve got to make changes on my daily schedule, and build new habits. Ready or not, here I come.

 

Self Survey–How Are My Finances Doing?

A few weeks ago, we talked about the first step in Personal Finance according to Verabear: Set your financial goals. I hope you’ve listed them down somewhere, if not, take a few minutes and do so, then come back.

Now that we’ve thought about our financial goals – or maybe even our life goals – we’re ready for the next step. Before we even talk about how we get from here to there, we must first determine what the here means.

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Let’s take a look at the current situation – how are you doing, financially?

Take this short survey:

– How much do I have in my bank account/s? –

An Emergency Fund is vital for success. The amount or how much this fund needs to be varies from person to person. Think of it as a cushion that will help soften your fall in case of emergency. Let’s say you find yourself cut off from your income source all of a sudden. The emergency fund is what will help you get through your day to day life without resorting to debt.

Like I mentioned, the amount that needs to be in this fund varies, but typically, it’s three to six months’ worth of expenses.

For most of us, our savings account holds the emergency fund. But an accessible savings account makes it easy and tempting to spend that money for things other than emergencies. That brand new LED SMART TV on sale might sound like an emergency, but if you dip your fingers into your EF, then it may not be so smart.

Sadly, that has been the story of my life, and my bank account’s life.  I bought my first iPad using money from my Savings account. When I’m short for the month’s expenses, I turn to my handy ATM and take from my Savings. As a result, I have an Emergency Fund that will probably only last a month if I find myself unemployed.

It’s a story I am now changing.

It makes sense to me to have a separate account for the EF, and one for short term saving. Short term saving is for big or small expenses I am saving up for. Depending on how big or small it’s going to be, it may make sense to setup separate bank accounts for each. Right now, I have my EF account, my payroll account (for my daily expenses, and short term savings too), and a Savings account for our Wedding fund.

– How much do I owe? –

Be honest. Your success depends on how honest you can be to yourself.

If you have credit cards, take at a look at your latest statement and list down how much you still owe. I do believe in credit cards being a convenient tool for financial success, but if no one tells us how to use them wisely, they end up becoming a tool that ruins us.

I have three credit cards – way too much. I will soon terminate one of them, but I’ve accumulated a shameful amount of credit card debt. Honestly, I thought that the interest rate for cards were small enough. But if you think about compound interest, and that it grows each month, you realize how important it really is to payoff your credit card bill in full, each month.

I’ll talk more about debts and repayment some other time. For now, let’s focus on inspecting our current situation.

Apart from credit card debt, do you owe anyone anything? I owed my Dad money for my car. I’ve got about 50k left to pay, but he’s allowed me to put off payments because I now also have to pay for my medical bill from last year’s back operation.

Knowing how much you owe makes it easier to plan on how much money to set aside monthly to pay them off.

– How much do I have in investments? –

Have you invested on anything at all? Do you have a life insurance policy? Do you have property, or a business, anything?

Is this something you’ve thought about a lot? Or are you not interested in making any investments?

Investments can be an additional source of income, or it may be your passport to the future. It’s been said how keeping your money in the bank doesn’t amount to much anymore. All it is, really, is a secure way to keep your money instead of stowing them away under your bed. Investments, in contrast, grow your money. How are you growing your money?

How do you want to grow your money? What’s the best investment instrument for you?

I invest in stocks. I have a life insurance policy. The company I work for pays for my health insurance, and that of my parents’ too. They also took out a group insurance company for all employees.

I was supposed to take out another life insurance policy a few months ago, with a mutual funds counterpart. It fell through so it’s on hold for now.

– What are my sources of income? –

Most of us mortals rely on a salary that we receive fortnightly. How much is my take home pay? We all know by now that 18k on the contract doesn’t really mean 18k in the bank monthly. How much do I get after all government mandated deductions?

If you have a sideline, list it down too. Do you earn from blogging? Do you have an online shop? Do you bake cakes and sell them?

List down all of the ways you make money, and how much you expect to get regularly. List down when too.

– What bills do I pay regularly, when, and how much? –

Make a list of the bills you pay, how much you usually pay, and their due dates.

I pay the following bills regularly:

  1. Electricity
  2. Mobile phone
  3. Home phone
  4. Three credit cards
  5. Cable

How much do those bills amount to? If needed, is there any way to lessen the cost?

– How much do I spend in a day/week/month? –

Unless you already regularly take note of every single expense, you will need time for this exercise. I used to write all of my spending but I stopped it. When I decided to right some wrongs in my life again last year, I turned the habit back on.

No matter how big or small the expense, record it. You don’t only need to know how much your expenses are, but what you’re spending on.

My biggest expense, after the bills, has been on food. When I did this exercise I controlled my spending so I didn’t buy any clothes or shoes. Since then, I’ve had to account for budget for those things too. In the real world, I am still building a good wardrobe, clothes and shoes for my size cost a lot.

– What are my seasonal expenses? –

These are things you don’t spend on daily or weekly, but you  know you spend on it – birthday gifts, Christmas, back to school, car maintenance, etc.

Though I don’t spend on these monthly, I need to factor them into my monthly budget so that money is set aside for the time they are needed.

I did this a few months back and realized how much is the minimum amount I need to go through one month of expenses. If I were to go into my own business, I know how much salary I will need to make in order to make ends meet. Or how much more the boyfriend needs to earn in order to support both of us.

My list may not be comprehensive. Basically, you need a very clear picture of what you have, right here, right now. Only then can you move forward with a solid plan to get to where you want to be.

How are you doing thus far? Let me know how else I can improve on this post, but rest assured another one is coming up soon! Smile

Personal Finance–Financial Goals

Failure to plan, is planning to fail. Which famous person said that? I don’t remember, but there’s much wisdom in those seven words.

It applies to many things, financial matters included.

A few months ago, a newsletter at work carried an article on productivity and time management. The author talked about budgeting time, in the same rules espoused by YNAB – You Need A Budget for budgeting money. I got curious, so I ran a Google search on that system.

YNAB has four basic rules:

Rule 1: GIVE EVERY DOLLAR A JOB.
Rule 2: SAVE FOR A RAINY DAY.
Rule 3: ROLL WITH THE PUNCHES.
Rule 4: LEARN TO LIVE ON LAST MONTH’S INCOME.

We’ll discuss these rules at a later time, but let’s start the conversation with something even more basic.

Set your financial goals

 

Financial blogs, and other literature, would normally advise you to start your journey to financial freedom by either inspecting your current resources, or setting a budget. I know that it isn’t as easy as it looks like – at first. Budgeting really just became easier for me once I had decided what my financial goals were – both short-term and long-term. I guess it was easier to come up with and stick to a budget once I knew what I was doing it for.

Purpose.

Having a sense of purpose was what made it click for me, maybe it will have the same effect on you.

What are my financial goals? Here are some.

Payoff debts – credit cards, medical loan, housing loan, car loan (from my parents)

– To truly live within my means – means being able to pay off credit card bills in full each month, or not having to pay on credit at all

– Build up my emergency fund

– To not have to worry if I or a loved one gets sick and medical expenses are high.

– Be able to fund my hobbies and various interests

– To fund a wedding without getting deep in debt

Being able to list my goals made it easier to decide on what to give up, or what to spend less on. I could easily make sacrifices because I knew what the sacrifice was going to be for.

Of course, proper goal setting is more than just creating your wish list. It’s a good start though. Honestly, that list above is really more like a wish list. What would make it a real set of goals? It’s to further examine each wish and be SMART about it.

SMART. As in –

Specific – How much of an Emergency Fund do I need? How long will it take to build it? Here’s where we determine the cost of that goal (or achieving that goal).

Measurable – This one is easy, we are talking about money after all. This can mean deciding how much needs to be  What’s hard to measure are goals like “peace of mind” or “freedom.” We need to assign a value that can be measured.

Attainable (or assignable) – Self explanatory. It needs to be achievable in your lifetime. You shouldn’t have to defy physics or kill yourself to hit your goals.

Realistic – Again, if you’ll have to borrow money to accomplish your financial goals, then you’re not being realistic.

Time bound – What’s your target date?

So my SMART Financial Goals are still a work in progress. But examining them has allowed me to really start my journey to financial wellness. I still make mistakes, and I don’t always stick to the plan, but I’ve found it easier to get back on track.

What about you, have you decided what your financial goals are? Let’s chat! Smile

Beware of Investment Scams

As the below poster from Pesos and Sense goes: “Aral muna bago invest” – Aya Laraya.

Indeed, before entering into any investment, financial or otherwise, study your options first.

aral muna bago invest

In the news for weeks now, we hear about thousands of investors in Visayas and Mindanao duped by Aman Futures Group, Visioner 20/20, and The Rasuman Group. These separate groups have all promised the same thing: get-rich-quick, guaranteeing 30%-60% return rate in a short period of time.

Every few years, we see these stories in the news. The faces change, the names change, but the tactics are all the same. Why then do our countrymen still fall prey to these scammers?

Before October closed I attended Module 2 of the Pesos and Sense Seminar Series: Time Value of Money. I attended the first module (Make your money grow) months ago and have made initial investments since then. In this installment, I learned about key things one should take into consideration when deciding on a suitable investment. One of these is FUTURE VALUE – how much do you want to get in the future out of your investment?

Now in scam situations, the promised future value is usually very high, 30% to 70% of the initial investment. What’s more is that this is supposedly recoverable within a short amount of time, say a year. So are claims like this automatically scams in nature? If they are unable to tell you exactly where the profit is coming from, where the money is going to be invested, then you need to start asking more questions. If it’s too good to be true, then maybe it is too good to be true. Even PNoy offered his tips on avoiding pyramid scams.

In How to Avoid Investment Scams, we are given four questions that we need to ask anyone offering us an investment opportunity:

  1. What is the background of the company?
  2. How much do I invest and how much will I get?
  3. When will I get it?
  4. How will I earn?

These are very simple questions, but the answers are very important.

In summary, it pays to be educated. Here, educated doesn’t mean formal schooling or a University degree. Financial literacy is key. Do not go into something without first learning about it.

For this information (and more), driving to Commonwealth on a Saturday afternoon was well worth it.  I had almost missed the seminar because my day was so full (Friday night shift > Monday morning therapy > Seminar in the afternoon > Saturday night shift) but I didn’t want to throw away the free pass that the Pesos and Sense team gave me for being a loyal stalker of their projects. And Sir Aya and team did not disappoint. There was new information, and I learned a lot from the very active audience. Compared to the first seminar I attended, there were more questions from the floor this time. There was even a long line after the session because some participants chose to field their questions privately.

The Pesos and Sense Seminar Series is something I would continue to recommend to anyone wanting to know more about growing their money. They have raised registration prices a bit, but just consider it as your initial investment for your future. Smile

Pesos and Sense: The Social Cost of Investing

Filipinos are very social. Sikolohiyang Pilipino (Filipino Psychology) identifies kapwa/pakikipagkapwa as our core value. This refers to community, togetherness. We hardly do things alone. Oh we do, but things make much more sense if we do them with others, or if the end result is for others.

That’s probably why Facebook is so popular in this country. They say 9 out of 10 Pinoys have a Facebook account. Not sure how accurate that is, I can’t find exact and accurate figures. FB allows us to keep tabs on our family and friends. Though we don’t even bother to text or call them offline, we can show our seeming concern over their affairs and well-being online. People I haven’t talked to or seen in 10 years are ‘speaking’ to me online.

But being social has its toll. When you see your friends posting photos of their latest gadgets, or photos of their recent getaways, you can’t help but WANT those things too. If you have a job, then you probably can afford it. But do you want to spend on those really?

Pesos and Sense featured this video in one of their episodes, and it was shown in yesterday’s seminar as well:

 

It’s true, deciding where to use your money can be a tough call. What are your priorities? What do you want for yourself?

Do I buy that electric guitar now and live my rockstar dream (even if just at home), or do I wait a few months or years? Am I good with my four pairs of shoes, or do I really need a red pair for that outfit I might wear at least once this year?

But the video also kinda makes it sound so boring. Can’t wise investors ever have fun? Can’t we have the good things in life right now as well? I think we can. It’s really just all a matter of planning.

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