Sunday, March 1, 2015

Financial Fitness Plan

Do you find yourself in dire need of mega-savings in preparation for that once-in-a-lifetime-splurge-like-crazy trip or, do you simply desire to see your savings grow for the rainy days?

I do not claim to be an expert of finance. Growing up in a household that continually make both ends meet made us (me and my husband, Alvin) more conscious of spending money wisely and have enough savings for those events that matter (like investments and travel) and help get us through when the unexpected happens.

Here are tried and tested tips to stay financially healthy... These are tips that my husband and I embraced through our 14-year of married bliss, and a few more that we have discovered along the way.

1.  Keep a fix amount of savings and stick to spend based on what is left.

After hubby and I got married, our primary goal then was to save enough to afford a lot for our future home. We have been working for 3 years then and we didn't boast of a big chunk of savings (or income).

But one had to start somewhere. So, we decided that my salary will become our savings while every payday, hubby would turn over to me his earnings.  We created a strict budget for necessities, some money left for us to enjoy our time together and everything that was left also went to savings.  It meant renting a small, non-airconditioned studio space vs. a trendy-condo unit. We may have been able to still afford the later but that meant less savings. Fortunately we are both low-maintenance and live a simple lifestyle so forgoing luxuries is not a difficult sacrifice. 

We also bought a decent 2nd hand car rather than splurge on a brand new one which is over that the car loan limit. It was only in 2013 (after 14 years of marriage) when we finally bought a brand new car.

Even when our expenses grew as our family and the children’s needs grew, this principle of putting the savings intact first and spend only based on what we can afford, became embedded in our financial habit through the years. 

2.   Live within your means.

Corollary to #1, it is was crucial that we learned to live within our means.   I believe that it doesn't really matter how much one makes, to be able to save well.  It is often the case that when your income and spending capacity grow, your lifestyle also changes accordingly and you tend to spend more.  There are way too many lifestyle temptations today.  Be careful of what lifestyle you cultivate especially if you are treading that dangerous ground of spending above your means. This can get you neck deep in debts.

3.  Plan big spending and vacations in advance.

You are of course entitled to enjoy the fruits of your labor and treat yourself and your family to some R&R every now and then.  Our family loved travelling too.  Key here is to plan your trips ahead and stick to the annual plan.  I start the year planning with my husband our travel for the entire year and NOT give in to last minute travel temptations that tend to blow the budget off-tangent.  The same goes for major spending like home renovation, school tuition fees, major purchases.

4.   Keep credit cards to a minimum (ideally, just one).

If you watched the movie “Shopaholic,” you’ll know why this is a must-do if you want to live a debt-free life.  The temptation of credit cards all the more became too good to pass when you are lured with zero-interest installments, deferred payments and waived annual fees. Some credit card companies even allow you to accumulate points that can be redeemed in exchange for goods and gift certificates. This system encourages further credit card spending.

Credit cards are useful when paying without the need to carry around large amount of cash, and if you intend to pay for it soon after the purchase was made;  or when purchasing products on an installment basis provided that you can keep up with the monthly payment without  further adding on to your initial installment purchase.

The downside is that it is just so easy to keep on swiping that card to luxurious oblivion and before you know it, you are entangled with debt and accumulated interests.  The more credit card you keep, you have more susceptibility to credit card debts, unless you are good tracking, controlling and payin on time your credit card spending.

When I started working, there were soooo many credit cards offering waived annual fees. I turned all of them down except the one credit card that I have been using since day one of my employment. Kept my credit life simple.

5.  Save (or invest) your bonuses.

We all look forward to bonuses—that time of the year when we feel a little bit richer, a little bit extravagant, a little bit more cash in our pockets (or ATM card). For parents like me, the bonuses are probably earmarked already to pay for school tuition fees, or for family vacation and travel.  

But have you also experienced that feeling of wondering where did your bonus money go ? As if the bonuses were leaves blown into oblivion by a hurricane? I blame it on my O.C.-side, but I always would like to keep tabs of where my bonus went.

If you can manage it, the best way to safe guard your finance is also actually put bonuses to savings or investments that can actually grow in time. Or, carve out debts like housing loan, car loan, etc.

I also learned from my financial mentor that while one is still young and able, invest on something (eg, properties, stocks) that will also help safeguard your children’s future. Don't leave this out until you are only few years away from retirement.

6.  Stay away from malls and sale.

Our family used to spend at least once every weekend going to the mall.  Last year, we decided to revamp our weekend schedule so that we complete most errands during Saturdays and stay at home during Sundays. We only go to malls if we need to pick up something that we couldn’t find in Sta. Rosa, Laguna where we live.  This forced us (well yes, me…) to instead have home-cooked Sunday lunch instead of eating out, and simply enjoy the weekend together.

If we are in the mood to dine out, there are plenty of good places in Sta. Rosa and Nuvali for family dining, sans the exposure for mall finds, extra snacking and extra purchases that we probably don’t need in the first place.

I also stay away as possible from sale. Although when we lived in Singapore, I only buy stuff on sale because otherwise it is really expensive to be buying them on regular price. But that is SG.

Conversely, I am also not a fan of sale here in the PH especially if the discounts are not worth the effort and if we don’t have specific things that we need to get.  I don’t relish the thought of having to squeeze through the jumble and tumble of items that I most likely do not need, wait on long lines for fitting and payment. I also found that most items on sale are outdated, off-season or sub par quality, while the really good items will only provide 5-10% discount at most. If you need to purchase through sale, do it wisely! (and that, is another side story...)

Enjoy life!  Enjoy the fruits of your labor!

But make sure that you build enough nest-egg – for the people and interests that matters most to you, for the unexpected moments in life and so that you can stay strong and have a peace of mind even when rainy days are up ahead!