People say new year’s resolutions are non-sense. While I think making positive changes in your life doesn’t need to have a timeline — like if you can no longer breathe easily because of your unhealthy habits, you don’t have to wait for the new year to start changing — there’s something about the idea of starting on a clean slate.
I’ve had my share of trying to stick to new year’s resolutions and I’ve admittedly been bad at doing it. One such area I’ve always wanted to be great at but don’t really know how to navigate is finances. But since I’m turning 30 this year (Did I make internal screams while typing that? Maybe.) I figured it’s high time I get it together. So I asked an expert, Ian Bacosa who is a financial advisor with Pru Life UK, to answer some questions I (and maybe you also) have about money. Here are financial tips to help you this year.
What money mistakes do people normally commit during the holiday season?
Most people receive additional benefits such as 13th month pay, performance bonus, and other such bonuses and incentives. Instinct drives us to exhaust our surplus. With the urge to constantly upgrade our wardrobe, own the latest gadgets, and maybe even splurge on food, it would be easy to lose track of our budget and end up without savings. How do we avoid this? Discipline is still key.
My tip: set a higher psychological wallet. If you’ve initially set your psychological wallet to P10k, it means you don’t want your money to fall below P10k. When you receive a bonus, you’d normally want to go ahead and spend as long as you’d still have P10k left. Right? I, however, suggest that you instead increase your psychological wallet from P10k to, say, P15k. You’d save more by the end of the year.
What’s an easy way to get started on accomplishing your financial goals in the new year?
Start with a plan this 2019. Ask yourself the following.
1. How much should I have saved by the end of 2019?
2. What are your financial goals for one year? Three to five years? Five to 10 years?
To put it simply, what do you hope to buy or save up for (e.g. emergency fund, wedding fund, a car, house and lot, start-up business fund, etc.)? Can it help you reach my future goals? What adjustments can you do?
Read self-help financial books. I recommend reading Rich Dad Poor Dad by Robert Kiyosaki, and Think and Grow Rich by Napoleon Hill. I also suggest books by Dave Ramsey and Chinkee Tan.
Segregate your savings based on your financial goals. You can either put them in a jar or in your bank account if your goal is short-term in nature. You can also opt to choose to invest in other financial vehicles such as mutual funds, UITF, VUL and stocks to suit your medium- to long-term financial goals.
Install a budget or expense tracker app on your phone. Input all your income and expenses, keeping in mind that even the smallest of amounts tend to pile up. Review your budget app at the end of each month for you to know how to adjust your spending.
What financial tips can you give working women?
Everyone, not just women, should start working on an emergency fund first. The primary purpose of an emergency fund is to prepare yourself for short-term uncertainties such as job loss, minor repairs for your house or car, and sickness in the family. Financial experts advise that this should amount to three to six months of your monthly expenses or income, whichever you find more appropriate.
If you’re married, don’t rely on your partner’s money. Still be independent in such a way that you can pay your own bills. Always think this way: What if something happens to your partner, can you still manage your lifestyle?
Be responsible and be insured. Get both life and health insurance. Always prepare for life’s uncertainties (sickness, accident, disability, hospitalization, and death).
Why is it important to include insurance in your financial plan?
Insurance should be included as part of your financial portfolio as it transfers risk from your accumulated assets over the years to the total amount that is stipulated in your insurance policy. Simply put, insurance protects the wealth you create throughout your working years. To illustrate, here are a couple of scenarios.
- You’re already in your 50s. You now have properties, your own business and a retirement fund. Unfortunately, you find out you have cancer. You may decide to encash your retirement, but what if that runs out? Do you sell your business and properties? Take a loan? Borrow money from your friends and family? This is when insurance comes in. Instead of you using your hard-earned money to pay for medical bills, insurance protects your wealth and covers this for you.
- If, in case, you have yet to accumulate assets, say, you’re in your early 20s, insurance protects your future income. Your future income is most likely your most valuable asset. Thus, your ability to produce income should be protected. Insurance replaces a portion of your lost income in the event a disability prevents you from working.
If eliminating debt is part of your goals for this year, how do you start accomplishing it?
Always go back to square one. Set a goal and set your mindset towards that goal. According to Dave Ramsey, start paying from the smallest debt to the largest debt that you have. Why? Psychologically, there is a satisfaction when you lessen the number of your lenders. After paying the smallest debt that you have, pay the next debt by adding the amortization from your previous to current debt. This will create a snowball effect. Do this until all debt is payoff. It works!
Should you wish to contact Ian to help you achieve your financial goals, you may contact him at firstname.lastname@example.org, +639778046741 or +639162300924.
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