Saturday, 7 September 2013

personal finance: planning for a brighter life

It's a good thing the husband was able to buy us (free!) 'tickets' to the Brighter Life Session on Personal Finance by Sun Life Financial. The session was held this Saturday, September 7, from 10 in the morning to 12 noon at the spacious Coffee Bean and Tea Leaf Net Lima in Bonifacio Global City.




We live nearby so we got to the venue early and had the chance to meet and chat with some Sun Life Financial Planners.

Randell Tiongson of www.randelltiongson.com was the invited no nonsense resource speaker.

It was a time well-spent and I came home with a number of takeaways.

Financial Literacy

As an accountant by profession, I am financially literate in theory. I mean I understand cash flows, the concept of income and loss and the analysis of which scenario would bring in more profit or savings.

The problem is I don't apply those skills to my personal finances. I should. We should. Which leads me to my second takeaway...

Personal Finance

Personal Finance = 80% Behavior + 20% Skill

Personal Finance refers to all financial decisions and activities that a person undertakes in order to manage money in the light of current needs and wants.


My problem must be behavior - my attitude towards money and the way I spend it.
I am an Ilokana but thriftiness is not in my bones. May galit yata ako sa pera. :)

I am not alone. Majority of Filipino people are not savers and investors! That's why dependence on children by their parents when they go old are very rampant. But is it really fair for the children to be burdened financially by their parents in their supposed-to-be 'golden' years?

Survey showed that for Filipinos,

Only 1 out of 10 of plan to invest

Only 2 out of 10 plan to get insured

And 8 out of 10 opt to save in the bank

The problem in our society is that we have been exposed to consumerism. We have the biggest malls in the world. We give too much value in material things. We view them as status symbol, a measure of how successful we have become.

For parents like me, would we want to impose on our children when we grow old just because we have not prepared well for our retirement? Shall we be contented with the SSS pension?

Pressure.

Corporate slaves

As a full-time employee, I am indeed a corporate slave with most of my hours bound to the Company I work for. But the mindset that I can never attain financial freedom as an employee is not correct (daw).

Being an entrepreneur does not guarantee financial freedom in as much as being an employee does not equate to a lifetime of slavery.

We always have a choice. It's either we aim to earn more (i.e. aim for merit or promotional increase, find a higher-paying job) or save more (i.e live within our means, live a simpler life).

Planning

Planning is very important in personal finance. We cannot jump to financial freedom without going through proper planning.

We should start thinking foundational:




Step one - improving cash flow

Income should be greater than expenses to achieve positive cash flows.

Note to myself:
Take stock of your current finances. Monitor your spending. Know where your hard-earned money is going. Make necessary adjustments.

Step two - getting out of debt

Huwag kaskas ng kaskas!

It's so easy to spend with a credit card. Just swipe. But before you know it, the purchases have accumulated and you're finding it hard to pay the balance so you settle the minimum and incur finance charges. Vicious cycle.

I do pay the whole balance every cut-off but sometimes, in order to do that, I have to withdraw from my savings. I am also guilty of availing 0% installment plans. I should curb this desire to have the latest gadgets.

Step three - setting up you emergency fund

Experts say you should have an emergency fund set aside which should equal about 6 months of your monthly expenses. If that is the case, it seems my so-called savings is only an emergency fund. Kulang pa nga yata.

The emergency fund is to ensure that you will not die of starvation when you suddenly find yourself out of job or indisposed.

Step four - getting protected from life's risks

We should get financial protection from sickness and fortuitous events such as accident and death. This is where Health Maintenance Organizations (HMO), Accident and Life Insurance come in.

For these, I depend on the insurance provided by my Company but this is dependent on my tenure. My coverage ends when I resign or get separated.

So experts encourage us to get our own insurance so that just in case something happens to us, our dependents can rely on some financial assistance.

Step five - investing for your future

Once we have covered all four steps, we can now focus on investing for the future. This is where money works for us or where 'passive income' comes in.

We merely invest a portion of our income now and expect to earn income in the long run.

It is best to start on this early so as to take advantage of the time value of money.




"If you don't want to work, you have to work to earn enough money so that you won't have to work."
- Ogden Nash

It is indeed wise to be thrifty but try to avoid extremities. Do not be too pre-occupied by thoughts of the future that you forget to live for and enjoy today. It is also wise to invest in memories from experiences and travels rather than from material things.




The goal now is to transition from Spender to Saver to Investor.

Debt-free should be the new status symbol.

And to end this post, I would like to remind myself of this:

"Do not turn your back on reality, on what's really going on with your finances. Do not rationalize it, do not fantasize about it. I want you to only spend money that you need to spend." - Suze Orman




References:

Personal Finance for the Self-Employed session by Randell Tiongson

It's Your Money Spend It, Save It, Invest It and Lead a Debt-Free Life by Entrepreneur Philippines




For Richer For Poorer by Chinkee Tan



- Posted using BlogPress from my iPad

1 comment:

  1. Great Share Sir ... Each and every point is clearly described in simple words. This enables us to understand the finance planning easily. financial planning is the most important in each and every field whether it is personal life or corporate life. It will help you for better future planning as well as personal growth.

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