I am a working professional and I have been working since year 2007 from three different corporations. I must tell you honestly I never tried to save money for my emergency fund or for my future retirement. I only make less like any average employees do. Let’s say my net income or take home money every month is Php14, 000.00, then I have so much expenses to pay like house rent, credit card bills, mobile post-paid lines, utility bills and food. There is nothing left to save. This dilemma is common to most every Filipino who are average or minimum wage earner. Even a family who lives in a fancy condominium unit, who owns a two brand new cars, with children studying in private schools who earns 100,000 pesos a month as Senior Manager of a company has negative savings too. Why is this so? This is because they spent more than what they earn. They get used to a luxury life and they will never lower down the standard of their living. So this practice and attitude ends up greater debts and family risks in the future.
What is Emergency Fund and how significant it is to every individual? I always heard this term from a friend of mine who is a member of a financial organization called International Marketing Group or IMG. They have a Wealth Academy that holds seminars and training to those who wanted to become financial literate. Emergency fund as defined by Business Dictionary as money which is set aside for an emergency situation, such as unexpected unemployment or injury, or a natural disaster which destroys one’s home and belongings. I have been unemployed for quite long and it was really difficult moment of my life. I was too stressed thinking where to borrow money to pay all my bills. Due to loss of my job my credit card obligations accumulated so high because of its interest and penalty. I was really in serious trouble. I wish I was ready…
Did I ever foresee these things are going to happen? The answer is NO, and even if it came across my mind I would definitely say “Bahala na” it’s a Filipino idiomatic expression for God will provide. It is like we can’t hold what future brings. It is about accepting that there is no more possible answers for our problems is bahala na. But Bahala na is not a positive characteristics. We should know that every circumstances there is a consequences. We need to be ready and the answer is to get an Emergency fund. I suggest you open a passbook account without an ATM. In this manner you can assure you will never be tempted to withdraw your money anytime. Make sure every payday before you pay all your bills and spend your money you have already set aside your money for your emergency fund. It is hard to do especially if we don’t really make a lot but I’m telling you it is really effective. In two years I have saved 100,000 pesos in my emergency fund. This money I used when I lost my job six months ago, and paying my Father’s hospitalization.
Make Saving a Life Long Habit
I learned this from a book called 12 Steps to Build Wealth by a Filipino Author Alvin T. Tabañag. “Develop saving into a habit so that it becomes as normal as breathing.” When I learned how important to save I became so excited to go to the bank and deposit my money and check my total balance in my passbook. It became a habit that your day isn’t complete without saving. I also have a coin banks at home, one coin bank for my one peso coin and the other one is for my ten and five peso. I love saving that I would rather save my money than buy a new pair of shoes. Although I love shoes and bags – these are the things that will tempt me the most.
This is just not a habit but also a commitment to myself that I will always save money no matter how much it is.
Based on this book, there are Strategy for effective saving. Most People follow this formula which is not really advisable to those who wanted to save.
INCOME – EXPENSES = SAVINGS
We normally saved what is left and sometimes if there is nothing left then no savings at all. If we tried to follow this formula then we ended up zero savings monthly. I know most of you will disagree with me especially if you are not making so much money and you have so many debts to pay. There are things you need to know and understand in order for you to follow an effective formula. A wise person should spend less than he earns. There are so many stories about how come a house maid saves a lot of money who only earns 4,000.00 compared to a Call Center Agent who is making 23,000.00 a month. This is simply because she follows this formula.
INCOME – SAVINGS =EXPENSES
Every month, Ely makes sure she saved her P1,500.00 in her bank account and the remaining P2,500 is for her family in the province. Unlike Camille a Call Agent Representative, before the end of the month she already had so many plans on what to spend her money. Like paying her credit cards, getting new gadget, a trip with friends and getting new shoes and bags using her credit cards. It’s like after paying her debts she made a new debts again to pay next month.
It is also important that before you start saving money in a bank that only earns 1% a year is that you are already free of any credit card dues with a 3% monthly interest. I also have two credit cards I paid every month. What I did is I keep saving money so I can pay them in full. For me to focus on a regular saving process I need to get rid all the obstacles. One of these is full pay my credit card dues and terminate my account as soon as possible. I told myself I will never get a credit card again.
That is why we need to be more financial intelligent and we need to learn how to manage our finances.
How to Avoid Debts and Loan
Stay out of debts as much as you can. There are so many lending institution today and one of their major goal is to lend money with greater interest. I knew someone who was lent money from an agency amounting Php200,000.00 where she used in paying her papers and work permit for working in Taiwan as a helper. She said maybe after two years of working she can finally pay her debts.
What she has is a strong determination and faith that if she works harder she will find a new employer that will give her a new contract and no need for her to pay her agency. I don’t understand why there are people who are willing to stay into debts knowing that what they earn is not sufficient to pay their debts.
To help you get started there are some practical tips we need to practice to avoid debts:
- Manage to use one credit card only
Using credit card is a lot convenient and also a big help if we run out of cash and we have an emergency purchase. We need to learn how to use our credit card. Some people possessed two to three credit cards and it becomes a tool to be more extravagant in spending fancy and not so important things.
- Save More Spend Less
It is common sense that we need to save more and spend less. That is why as I mentioned earlier we need to manage our income and make sure we already set aside our savings and budget our expenses. This time since our expenses are lesser then we are able to save more or twice as before. It is better to open a time deposit account. A time deposit is an interest-bearing bank deposit that has a specified date of maturity. A bank is authorized to require depositors to give 30 days’ notice before withdrawing funds from saving account.
- Budget Your Money
It is necessary that we know how to budget our money and expenses. That is why we need to write down all our expenses weekly or monthly. By preparing a monthly budget we can easily identify which items we spent the most and cross out some items that are less important. One of the best example of this is when we are going to grocery store make sure we have listed down all the items we need to buy. If we don’t have a list we ended up buying more stuff exceeding to our budget.
- Make more Money
Even if I have tried to do Tip 1, 2 and 3, it is more practical to get a part time job or make an extra income. I have an office-mate who sell Avon, Natasha and Personal Collection items any kind of shoes, undergarments, and home kitchen wares. Some people gets a tutorial job during weekends. Now a days most basic goods are increasingly high we really need more than one job and extra income. I’m thinking about doing some tutorials and selling items as well.
Preparing for the end of My Retirement
I am 32 years old but three years ago I had started planning for my future retirement stage. What are the things I need to do, what are my plans after my retirement? Where should I stay? Getting a place to live is not a big problem to me anymore, we have a family house in the province. But my main concern is the money I will spend for food, medicines and other health maintenance. We don’t wish to end up living as hobo on the street or dying from an illness because we cannot afford to be admitted in the hospital and buy our medicines.
We need to get a Saving Plan with an Investment at the same time. We all believe that bank is the safest and guaranteed institution to place our money. However if we are aiming to have a protected future and live life comfortably. We need to open up our mind and start building and growing our money. These are the following major institutions we can inquire which offer different kinds of insurances and investments. Please click here for more information about these institutions.
- PhilAm Equitable Life Insurance
- Pru Life Inc. UK
- Manulife Chinabank Life Assurance Corp.
- Caritas Life Insurance Corp.
- Fortune Life Insurance Company Inc.
- Great Pacific Life Assurance Corp. (Grepalife)
- Insular Life Assurance Company
I am deeply grateful I have shared all the things I learned from the books and other blog sites I read, and particularly from friends of mine who are financially literate – they are the ones who kept pushing and reminding me to study and help me realize how important to have an awareness in this matter. It is not too late to start saving up for the future. It is better to be ready and get prepared. I have learned my lesson. I once became careless of my money and I’d become improvident.
All we need is a strong determination to keep going to reach our goal as we aim a better and more comfortable future. I hope this article help those people with debt and money problem.