1.) Know how it works
Among all the various financial needs that we have, retirement savings is the most challenging one to plan and execute, simply because of the time element and the uncertainty associated with longer period.

Typically retirement savings focuses on two stages. The first one is the accumulation phase, wherein you build a lump-sum amount before your desired retirement age. The objective of this stage is to generate above average returns. The second stage is the actual retirement phase, wherein you focus on generating steady returns.

2.) Determine how much you need
The thumb rule for establishing your retirement nest is as simple as taking into consideration your annual household expenses and dividing it by the interest rate you generate from bank deposits.

For example, if our monthly household expense is Php 50,000, our annual household expense is Php 600,000. Divide it by 3%, the prevailing deposit rate, we will come up with Php 20 million. In other words, if we have Php 20 million today, we can place in bank deposit at 3% interest rate and generate Php 50,000 every month and carry on our livelihood.

3.) Consider the impact of inflation and interest

The real challenge to retirement savings comes when we have to make assumptions on what will be our monthly household expenses come retirement and what will be the rate of return we can generate from our savings.

To keep it easy and simple, if our lump-sum requirement for retirement is Php 20 million in today’s scenario, we need to add up the rate of inflation, let’s say 5% for every year from now to the targeted retirement age. In our example above, the lump-sum amount that we need to build towards retirement if we were to retire after 20 years is Php 53,065,654.10.

These factors are being taken into account to make sure that the long-term return that we are to generate from our savings is well above the rate of inflation. If not, we will eventually be unable to maintain the purchasing power necessary to sustain us during the actual retirement phase. This aspect of maintaining or enhancing one’s purchasing power is critical to building a retirement fund.

4.) Identify your retirement savings options
Equities are perhaps the best-known form of investment. They are also known as shares, because they are literally, a share of ownership in the company that issues them. For this reason, prices tend to increase or decrease according to the profitability, assets and prospects of the issuing company.

Investing in Equities offers the greatest potential for an attractive return. In general, Equities can be expected to outperform other forms of investment in periods of rapid economic growth, when company profits rise. Hence, Equities are considered an important investment option for retirement savings, especially during the accumulation phase.

However, investing in equities can be quite difficult for many due to lack of time, knowledge, expertise and a large amount of money needed to achieve a diversified investment portfolio.

The good news is common investors can access these valuable investment opportunities at ease without the hurdles associated with directly investing into equities. Thanks to the availability of products like mutual funds and investment-linked insurance policies, everyone can now plan and execute their retirement plan.

5.) Review your retirement plan frequently
Given that we are making many assumptions in terms of inflation and interest rate, it is important that we review the plan and its progress from time to time and make requisite adjustments along the way. Consult a qualified professional who can help you draw up your retirement plan, identify your savings options and rebalance your retirement portfolio when necessary.

PHOTO CREDIT TO: MONEYSENSE

ABOUT THE AUTHOR
Naresh Krishnan is the Chief Operating Officer of Sun Life of Canada (Philippines), Inc. He has 20 years experience in the financial services, Mutual Fund and Life Insurance industry gained from his extensive experience in India, Indonesia and the Philippines. Starting his career in the Indian financial services industry, he played a pioneering role in introducing bank distribution of mutual funds. In Indonesia, he spearheaded wealth management, bancassurance and corporate distribution divisions for a life insurer. Prior to joining Sun Life Financial in the Philippines in January 2010, he was the President and CEO of a joint venture bancassurance company. In his current capacity at Sun Life Financial, he spearheads the various distribution channels and the mutual funds business.

In one Pugad Baboy’s strip, the characters Bab and Igno were dining in an expensive restaurant. Bab had just won a bet in cock-fighting and they were celebrating. When Igno expressed doubts over their capability to pay for their orders, Bab explained that his prize money was P300,000.00 and they are entitled to splurge everything (note: everything).The strip reflects the sentiment of the creator Pol Medina and I thought he captured the idea very well. Majority of the Filipinos love to do a one-day splurging and the strip was this representation. Not all will be fortunate to win in gambling but those who do usually spend everything rather quickly; treating the whole barangay to a drinking spree to celebrate his good fortune. After that, he goes back to either bumming around or doing his dreadful work and relishes on the good time he had the night before and hoping and praying he wins again.

More often, salaried employees do a lot of shopping after receiving their salary. Yes, some are actually legitimate purchases but a lot of times it is to purchase some not-so-important stuffs; stuffs that we actually can live without.

I remember one time my dad suspended three-fourths of his staffs in his restaurant. The reason: they had a big drinking session when they got paid and were not able to go to work the very next day because of hangover. That was 15 years ago. The mentality has not changed and most of the Filipinos are still stuck in the very race they wanted to get out of.

Perhaps, we often feel deprived of things and splurging is one of those times that we feel we are rewarded for the hard work we did. But remember this: living rich one day today may not let you live rich tomorrow.

The mentality should change soon and perhaps then a more applicable strip will be created:

Bab: Nanalo ako sa sabong!

Igno: Halika, mag-inuman tayo to celebrate!

Bab: Naku, tsaka nalang. Iipon ko muna to. Hindi naman araw-araw may ganoong biyaya.

Igno: Sabagay, sayang rin nga lang naman kung uubusin natin yan sa isang gabi lang. Tama yan ginagawa mo, Bab!

by: Kendrick Chua, CIS, The Wealth Warrior

We all make money mistakes once in a while and in my years of financial planning practice, I have come to realize the 10 Money Mistakes people often commit.

1.)    Spending all income. I know of people who spend their income down to the last peso the day before their payday. It’s as if they can’t stand having the money carried over to the next payday. As a result, when a glitch in accounting system delayed the pay, the solution: cash advance or buy on credit.

2.)    Spending more than you earn. What is worse than spending all your income? It’s spending more than what you earn. So if the cash runs out days before the next batch of funds come in, the result is incurring debt. You can always be a free-loader but then you won’t have any friends left.

3.)    Paying only the minimum amount due on the balance. Some credit card companies allow you to pay only 5% of your amount due and people take advantage of this much to the delight of these companies. It’s okay if you really don’t have the cash at the moment but don’t do it every so often. You’ll dig a hole so dip even the devil will have a hard time climbing out.

4.) Not getting life insurance early. In one of my previous posts, I mentioned that the best time to buy life insurance is when you don’t need it. I repeat: when you don’t need it. When you’re young and healthy (hopefully) your premiums are low, your accumulation rate is longer and you can fully-paid up the insurance earlier.

5.)    Not investing early for retirement. One of the 7 habits Covey taught is to “Begin with the End in Mind”. Once you start working, prepare for your retirement. You can never plan too early for this stage. Aim to belong to the 3% Filipinos who are either financially independent or wealthy at age 65. The rest of the 97% are dead, still working or dependent on charity. Choose your side and choose it wisely.

6.)    Not investing aggressively while still young. Some of the baby boomers I have talked to regretted that not only did they not start investing early, they did not invest aggressively. Now, even if they do want to, they cannot afford to invest as aggressively as they would want to. Follow their advice, start young and start aggressive.

7.) Not planning for major financial obligations. Giving birth is not an emergency. It is something being prepared for. Nine months is a good duration to set up enough funds for it. Same goes with education and wedding. Prepare well financially. It can let you enjoy the fruits more.

8.)    Not doing proper research before investing. Some people happen to be scammed more than others. No it is not bad luck as they always thin. Rather, it is the gullibility that resulted from lack of proper research before getting into the investment or joining the company.

9.) Not preparing for rainy days a.k.a. not saving. At some points in our working career, emergencies and unexpected financial circumstances will happen: getting laid off, getting sick and hospitalized, etc.  Although not often, but they are bound to happen. Not having a contingency fund is planning a project without a plan B. You need to have an emergency fund to prepare you for these “disasters”. Otherwise, you’ll be left with no choice but to borrow and be in debt. A good rule of thumb is having three to six months worth of cash easily accessible.

10.) Not giving back to the Lord. This may well be the biggest financial mistake. The Lord, in all His graciousness, provided for all our needs and at times, even some wants. Isn’t it just right we give a part back to him through our tithes and offerings? Seriously, the Lord doesn’t need our money but it is our own way of submitting and thanking Him for all the blessings we are receiving bountifully. The Lord did promise that when we offer Him the first fruits of our labor, he will provide us with blessings so full, we won’t even have enough containers to store them.

Bonus

11.) Not having hospitalization or medical insurance. The paradox of medical insurance is that you need to get sick and hospitalize for you to find this investment worthwhile. But it is better that you have one and not use it at all rather than having none and need to have one. It will greatly mitigate a lot of your expenses which can be allocated for other purposes.

Ask anyone what trait defines Chinese the most and you’ll likely get one of these two answers—rich or cheap. To a certain extent, the answers are accurate. After all, despite accounting for only 2% of the total Philippine population, seven out of the ten richest Filipinos are of Chinese descent. Although most Chinese will not plead guilty, it has what defined this race based on the society’s perception. It has what defined me.

Society has identified Chinese as being cheap for the longest time. Having personally been ridiculed as one, I’d like to believe that the Chinese are above this stigma. We are frugal and if that’s a euphemism for the adjective then so be it. We look at the value of a commodity rather than its price. It is simply a trait we have been accustomed to.

Recently, I traveled with a group of Chinese Filipinos and in one of our shopping activities, several of them bought Rolex watches. They reasoned that the price was much cheaper compared to the ones being sold here. They certainly had the money but the same group is contented in flying economy class and seating in cramped seats hardly getting any sleep on the red eye flight home. They find value in the first and none in the second.

Perhaps this has its roots from our forefathers who came to the Philippines several decades back. Being in a foreign land, they just had to fend for themselves and saved whatever they can here to send back home, similar to our present-day OFWs. Thus, they had hardly any room for frivolous spending.

The Chinese persistent adherence to the idea of “saving” became the corner stone for their financial success. Long before financial planning was coined, the Chinese were already practicing it albeit informally. Present money management advises us to save 10-20% of our income. The Chinese would have none of it; saving at the very least 50% and living on the rest. In fact, my mom prodigiously saves 70% of her income—a practice she did for the past thirty years. She led by example, we, her children, learned by example.

And it is a not a wonder that the Chinese do not flash their wealth through material things. A lot are contented in driving boring vehicles and living in ordinary homes both which do not justify and reflect how much they are really worth. For them, their comforts and security lies in the fact that they have fat bank accounts.

A monk residing here once told me that the Chinese fear the uncertainty of the future and that is why they prepare very well for it. They know how to look at the bigger picture and anticipate problems long before they occur. It may well be a Confucian value we inherited as the great sage said, “In times of peace, prepare for war.” To put things in perspective, “in times of abundance, prepare for scarcity.”

While the Chinese may be experts in saving, they very well know that this alone won’t make them financially successful. They need to make it grow. This necessity has fired up the entrepreneurial spirits of the Chinese building businesses one after the other. Although majority of the business owners run dull businesses: auto-supply, hardware, printing, textile and garments, trading among others, these have proven to be great investments. Nothing really glamorous in them yet, these businesses are generally responsible for the wealth the Chinese now enjoy.

Yet those who may not be as entrepreneurial have not allowed themselves to be left behind. They looked for other viable investments to make their money grow. And this includes being highly meticulous about interest rates for their deposits, literally shopping from one bank to another. While interest rates may vary little, as small as 0.5%; this difference multiplied by the millions and millions each Chinese possesses becomes a significant number.

Aside from these, the Chinese pride themselves for being debt-free. They avoid it like plaque. Rarely will the Chinese borrow money from friends or even relatives. It is a shame to do so and to be in one. If the inevitable happen that they do need to borrow money, they’d pay the whole thing off as soon as possible. Failure to do so is even more shameful. They wouldn’t dare tarnish their good name.

From the time our ancestors first settled here up until this very moment, our money management philosophies remained unchanged. Even the consumption-mentality of the West did little to influence the quality that has defined us. Our identity held its own. We will continue to be perceived this way—“rich” and “cheap”. But behind all those admirations and labels, lies the dedication of the Chinese in pursuing financial success.

“Save a little each day, every day and see small things grow big,” says Bam Aquino, a social entrepreneur in a Sun Life advertisement. Yet, long before those words were popularized in a television commercial, the Japanese were already living that principle, which they called, Kaizen.

Kaizen came from two words, “Kai” which means to change and “Zen” which means for the better. Both words embody the philosophy of making continuous improvements in all aspects of life.

With a GDP of $5 trillion dollars, Japan is the world’s second largest economy next to the United States. Yet Japan didn’t achieve its status as a global economic leader dramatically; it took them 60 long years to recover and rebuild their country from the ravages of the Second World War. And one of the crucial factors that made Japan’s momentous growth possible was the application of Kaizen, a strong desire to be better and to be the best.

The principle of continuous improvement can likewise be applied in financial planning. So diverse is the field that we can always find something to improve on. In asset allocation for instance, portfolios can be regularly rebalanced for us to maximize gains and opportunities and minimize losses and risks. In debt management we can look for institutions that offer lower interests and more flexible terms. And in financial literacy, we can be wiser and smarter about the environment today than yesterday.

One of my greatest frustrations as a financial planner is that most of the people I have talked to do not want to undergo the process of financial planning. They feel it’s boring, old-fashioned and down-right slow. Guess what? They are right. It is boring, old-fashion and down-right slow! That’s why it is effective.

But for the others who heeded the advice, reaped the rewards. One of my clients, Celine Salazar a single mother of two who works in the training and development department of a business process outsourcing company started 2009 with nothing in savings. But I worked with her through a formal financial plan. She diligently saved P2,000.00 pesos every pay day. Within a year, her savings grew to more than P50,000.00 pesos. Considering all her obligations and the environment she is in, it was a great accomplishment.

Salazar will be the first to agree that it wasn’t an overnight success. It did take her quite awhile to accumulate that amount. But she was steadfast in her commitment and even when she was on maternity leave, she still saved that up. Two thousand may not be much, yes. But when added to the other two thousand pesos she saved before, it becomes significant.

Then there’s another client of mine who invests regularly in mutual funds. Not even the financial crisis that struck the world two years ago stopped him from investing. As a result of this practice, he was able to buy shares at lower prices. The result: huge gains when the market rebounded!

The Kaizen principle can also help us in being keener in spotting opportunities to make our money grow…legitimately.

Mr. Randell Tiongson, one of the most respected financial planners in the Philippines noted this paradox, “For a conservative country like the Philippines, a lot of people are getting scammed.”

True. Several years ago, a financial organization was offering lucrative returns for its investors. Enticed by the potential of growing money exponentially, a lot were lured into it. Despite tell-tale signs of it being a pyramiding scheme, nobody bothered questioning its legitimacy. As long as the investors were paid, everyone was happy.

A crackdown ensued and it was proven that the institution was indeed a scam. When the dust settled, the investors were bewildered. The masterminds were nowhere to be found taking with them millions and millions of pesos along with the dreams of the investors.

Several years after, another organization offered the same thing. Although it was a Ponzi scheme instead, the result was the same: investors lost money.

Financial planning never advocated get-rich quick schemes but rather a consistent saving and investing approach to achieve financial independence.

Kaizen is all about improvements, no matter how small, are still improvements. Vincent Van Gogh once said, “Great things are not done by impulse but by a series of small things brought together.”

The philosophy is applicable to money management as it is to any facet. Even if one is contented with his or her financial status, there is always a way to improve it further, to make it better; to look for a higher yielding investment, to spend a little less, to save a little more and to dream a bigger dream.

I’ve always been a segurista.

I am never without an umbrella. The thought of traipsing all over the city in a pantsuit, oops, wet pantsuit, was never appealing to me. That or have a driver at my beck and call —-

then again, an umbrella is much more doable.

I am never without stocks of candles, instant food, batteries and flashlights. The rainy season in this country almost always translate to floods and brownouts.

I can probably go on with no TV but not without light. Or sustenance.

My OCD (Obsessive Compulsive Disorder) starts to kick in every time June starts. Rains and floods can be inconvenient, but their effects are a real pain. It is in these times that I begin inspecting my house’s ceilings for possible leaks as well as electric connections in danger of being damaged by rains.

What is my point, you ask? In a chitchat with friends over dinner last Friday, I realized that no matter how much effort you put into preparing, there are things you just can’t prepare for overnight. It was enough to throw me in into a fit of panic.

You see, my friend Anya recently got married. As they have slowly been easing into the cozy comfort of married life, my friend got pregnant and is now nearly the mother of a baby boy. She started talking about the expected expenses of having a kid. So I nonchalantly asked where she intended to send the baby to school. Since the dad was an Atenean, she said, the kid would have to go there, too.

Me: Would you need to sell everything by then when Siopito [my nickname for her little boy] goes to school

Anya chucked me a brochure with a charming kid’s face on it.

Anya: No, silly. We have a plan.

Me: How do you plan for something like that? Do you now how much tuition fees increase every year?!

Anya: Well, I came across Sun MaxiLink Bright, a real life-saver. First, It provides life insurance protection so at least my baby is secure no matter what happens to me,. then, it enhances my money’s growth potential so by the time Siopito has to go to school, I would have accumulated funds to cover his education

Me: [Here is the part where I sink in to a state of panic.] Gosh! I only have a number of years before I myself settle down and have a kid of my own to send to school! Is it too late for me?

Anya: When you finally have a kid of your own, you too can save for his college education through Sun MaxiLink Bright. It’s payable for as short as at least five years…so, no, it’s really not too late for you.

Me: [sighs] But it’s never too early to start either, right? Since I’m bent on having my own baby anyway, I might as well get a Sun MaxiLink Bright myself! And right away, too!

Now I know what the word segurista really means. Ultimately, it’s really about preparing for rainy days (literally and figuratively).

Retirement. The word springs to mind a thousand ugly words — wrinkles, weak bones, senior citizenship, bottles and bottles of health supplements and huge amounts of time pining for what has been.

It’s a mean feat in this country to retire. The common practice being — parents work day and night to send kids to school, kids graduate from school, are sent off to the real world and the parents have no choice but to retire ungraciously – with all their money spent on their kids futures, forgetting they too, have a future to think of.

I’ve seen how parents transform into dependents as soon as they quit work. They become slaves of their children, taking care of apos, and seemingly minding every nook and cranny of everyone’s lives. I’ve seen siblings fight with each other, pointing fingers on who should accompany mom/dad for their regular check ups, who will cover this month’s medicines. When they get confined, who’s to take a day off work to stay at the hospital or to drive for them?

It may be blamed on culture and old practices. But life moves so fast, there will always come a time when one is trapped with decisions that lead to pitiful consequences. If there was anything that the parents of our generation seemed to have forgotten, it was to think of themselves, too.

Take for example my friend, Pam. It’s only been three years since she started working and her parents have been ragging on her to provide for their household since it’s her turn to earn the big bucks. “Anak, siguro naman pwede mong suklian ang pagpapa-aral namin sa’yo, ” says her mom who recently retired , decided on being the one to take care of Pam’s yet-to-be-born daughter.

During a brunch date with my friends, Pam recounted how her mom would come to their house [she lived next door], and nag her to pay their bills. To this, Sophie, another friend, grunted in exasperation. Apparently, her mom ventured as well into retirement, confident that since her daughter was working in a multinational oil company, she could retire with probably an image of herself lying on a bed of money.

Thankfully, we can choose not to perpetuate it any longer. It’s not too late for me and you and every Juan dela Cruz who’s willing to brave the path of financial preparation.

The average Filipina/Filipino might think: How am I supposed to plan my retirement fund when I haven’t even gotten to prepare for the most basic necessities of life? I need a house, my kids’ educational fund…not to mention, the dogs’ grooming, a new car, newer laptops, a pro camera and the list goes on… Retirement is the last thing on my mind. And sadly with this being last, one will tend to forget about it totally. The next time one looks, he is retired and…poor.

Because I choose not to be poor when I retire [I can take old, but I don’t want to be old and poor], I evaluated my options  to plan for the perfect retirement.

1. Save away. I will start another bank account and dub it the “Retiring Gracefully Fund” and won’t touch it for however long I remain un-retired.

Or

2. I can avail of the Sun MaxiLink Prime product I stumbled upon my RSS feed this morning. Sun MaxiLink Prime is a VUL Product  that provides me with life insurance protection of 200% of the Face Amount plus the fund value of my policy. Even better, it gives me the choice to invest a portion of my premiums in 5 potentially high-yielding funds to grow my wealth and fund future needs such as retirement. Essentially, my policy’s fund value can be my retirement fund. Hello, retirement!

Not bad, at all. If anything else, the second option makes me excited to retire. Can you imagine all the ballroom dancing I can do with my time and money? I can go to the beach, read a book, travel about or sleep all day…I can do anything I want, except be a burden to anybody else!

Mommies and Daddies, this is the perfect time to introduce your kids on how to manage their pamaskos. They have the resources – all they need is proper and creative guidance to show them the value of saving money.

1. Give them the proverbial piggy bank. Or any alkansya for that matter, as long as there is no hole at the bottom for them to cheat out of this exercise. To lighten the shock of not being able to enjoy their cash gift, let them keep half the amount, while the rest goes straight to piggy’s belly.

2. Open a bank account. Several banks offer specific arrangements for their young clients. Or parents can simply compensate the deficit. Opt for the bank book, as ATMs represent a different kind of temptation for their eclectic hands.

3. Do an investment exercise. Give them the option to grow their money. How? By doing certain chores and special assignments, parents will give them a certain amount. But their parents will be the one in charge of their “seed money” and “salary”, to be given on a pre-arranged period.

4. Help start a business. Remember the lemonade stands so popular in Western sitcoms? A lot of opportunities are available today: ice candies, sago’t gulaman, and even a hamburger stand. Let them feel that they have a stake and responsibility as they become your business partners.

5. Donate to charity. Of course, the ROI in this is non-existent. But the lessons and values they’ll learn by practicing compassion to the less fortunate are priceless.

Single moms are definitely of different breed. The strength and resilience in being both a father and mother to their children is something that has continued to amaze others, myself included. Faced with motivations that are larger than their life, they find themselves digging to where others have never dug before.

Single moms provide more than just inspirational stories. As a matter of fact, they have the most well-thought and executed financial plan that I have ever witness prompting me to believe that all of us can learn more than just a thing or two from them.

1.) Insuring themselves

Single moms are presented with this nagging question-how can my children continue living even if I don’t? As such, life insurance has never been more important to them. While their relatives may take on the responsibility of taking care of their children as what is typical of Filipinos; it would mean additional expenses to the foster family that may be experiencing their own financial struggles. The proceeds from their life insurance policies can help mitigate these costs. The children become blessings not burden.

How much should a single mom be insured then? There is no straight answer to the question. The need of one single mom may totally be different from another. But one thing is certain: the bigger the insurance coverage of their mom is, the better it is for the children.

2.) Following a strict budget

All single moms agree that having a strict budget is of utmost important with needs and wants distinctly identified. One single mom plans her budget on a monthly basis while another plans it on a daily basis. Budget management depends on their respective circumstances with each single cent being accounted for and with no resources being wasted, with good reasons.

Furthermore, they all agree that they cannot afford to spend more than they earn lest they fall into a vicious trap of debt. One single mom narrates that despite being offered five-six consistently, she still refuses. “What good is the bag I want to buy if I can’t provide food for my children” she explains.

3.) Learning to be prudent

Savings from discounts are a big help to them. It can mean additional money for food. That is why one single mom buys in bulk especially the school materials of her children and other commodities that are needed in the household. Although they try to look for the cheapest, they don’t sacrifice the quality.

Prudence doesn’t mean deprivation though. They still set funds for them to enjoy a little bit of pleasure. Dining out and trips to the spa and parlor are just some luxuries they can afford to spare.

4.) Being entrepreneurial

If the current income is barely sufficient, they look for ways to augment it.  Baking pizza, pastries and cooking up other delicacies to sell is what one single mom does to earn additional income. At this point, a mother’s instinct goes into overdrive focused only on providing for the needs of her children. How does she sell it? One way is through her kids. It may well be the best way for her to teach business to them.

5.) Starting early

One single mom shares that she did regret not saving when she started working several years ago.  Single and with no dependent, it was the perfect t time for her to accumulate substantial savings. But unfortunately, it didn’t work out that way. When she was thrust into motherhood unexpectedly, saving and accumulating became a more arduous task and not even prioritize. After all, excess funds are for the child.

The financial plan they execute can well be applied by any individual. Imagine how much you can accumulate by merely emulating them. Good luck!

Storms happen every once in a while in life. It may come in the form of unfortunate, man-induced events such as robberies, job loss, significant medical expenses, or literally, a storm that can leave one without any possessions at all. The saying “Save for the rainy days,” is proving to be a gospel truth now, more than ever.

If you’re one of the significantly few people who’ve had the discipline to set aside money regularly for an emergency fund, please feel free to navigate away from this page. If not, do stay on. It may be good for you.

Where do you put your emergency fund?

In order to serve its purpose of saving you in times of, uh, emergency, this fund should be placed in an investment that is liquid, safe and has no holding periods.

How Much Should an Emergency Fund Be?

Experts say that the advisable amount to build should be 3 to 6 months’ worth of your salary. If you’re the breadwinner, or have pending loans and payables, the amount may have to adjust. The rationale behind is that should you lose your job, or any other substantial source of income, you’ll be able to maintain your lifestyle and don’t go hungry while looking for a new one. One way to see it clearly is by listing all your monthly expenses for one month. This includes your household bills, grocery bills, rent or amortization.

A perennial problem in starting an emergency fund persists: How?

Start small

A three to six months’ worth of salary doesn’t need to appear in your bank account on the get go. Start by setting aside a small portion of your salary every month. I know a certain person who kept loose change, often 5 peso and 10 peso coins in his piggy bank. Originally, he only wanted to get rid of the coins in his pocket. But after a few months, he was surprised to find he had Php 10,000 in it. Can you imagine how much it would have been if it was Php 100 every time? As Bam constantly say, “Don’t forget about the beauty of the small.”

Keep Track of Your Expenses

Do you ever keep notice that as your salary goes up, so does your everyday expenses? Wants and needs come up more frequently than the urge to go to the washroom nowadays. With malls springing up everywhere, the expenses brought about by things you only want and not need, will balloon if you’re not careful. So start keeping notebook in your bag where you can jot down, even the littlest of your expenses and see where you’re going overboard. There you can see, too, where you can cut down. Do you gulp more than one cup of gourmet coffee everyday? Maybe you can limit it to one a day and allot the rest of the money to your emergency fund instead.

Ever heard of perceived obsolescence?

Recently, a telecoms company launched a rebate program wherein you can avail of a brand new mobile phone or a two-year well, rebate. In a heartbeat, a normal Filipino would choose the phone, right? But in two years, does the phone’s value account for how much you could save if you chose the bill rebate? By then, how many other cellphone models have Nokia, Sony Ericsson or Samsung would have released to make the offered phone obsolete? Think about where you can benefit more. Especially if your current phone is perfectly working, the money you save on the rebates can go directly to your emergency fund.

Automate it.

If you’re decidedly aware that you’re capable of setting aside X amount of money, then by all means, automate it. A number of banks are now offering saving programs where money can be automatically deducted from your salary every payday. Not only it becomes less accessible, it becomes okay if you forget to save because the bank does it for you, yay!

These are not the only ways to be able to save for an emergency fund. For all we know, the most effective way for you is to use a piggy bank, or hide the money in your safety deposit box. As long as you are making a conscious effort in beefing your EF up, then you’re on your way in covering a financial requirement.