Tag Archives: personal finance

Are you Financially Fit?

9 Jul

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How  money smart are you? Are you financially fit? Do you have the means to support your chosen lifestyle?

Take this simple test to check your financial fitness.

  1. Do you have enough savings to last you 6 months if, for some reason such as an illness or a job dismissal, you have to stop working today?
  2. Do you have any form of personal insurance, for example, accident or disability or life insurance?
  3. Do you have any form of personal medical insurance?
  4. Do you have any long term savings plan such as a pension or educational plan or any endowment or retirement plan aside from your contribution to 401k/SSS/GSIS?
  5. Are you saving or investing money regularly from your salary?
  6. Do you know how much you are worth today? Do you have your own Statement of Assets, Liabilities and Net Worth?
  7. Do you budget your spending and monitor your monthly expenses? Do you have your own Personal Income and Expense Statement?
  8. Have you attended any seminar or read any book on improving your knowledge on personal finance? Do you invest you time and effort on increasing your financial IQ?
  9. Is your monthly debt payment (for consumption purchases or credit card payments) every month less than or just about 15% of your monthly income?
  10. Do you have a personal plan with specific financial goals based on a specific timetable?

Here’s how to score  your financial fitness:

Give yourself 10 points for every “YES” and 0 for every “NO”.

0-40 points: You are financially unhealthy.

You will face serious danger the moment you lose your source of income. You need to review your expenses, particularly your debt payments.

You have to stop all unnecessary expenses immediately.

50-70 points: You are in a good position to be financially healthy.

You just need to improve your financial plan.

First, determine the personal net worth you want to have when you retire. Ideally, you should break down this target every 10 years. This means you have to choose the lifestyle you want to maintain.

Second, estimate how much you will need every year to sustain this lifestyle. This will easily let you fix your financial goal (or how much, in terms of earning assets you should have) every 10 years.

80-100 points: Congratulations! You are on your way to financial freedom.

You have the commitment and the discipline to achieve your financial well-being. Keep it up and don’t fail to exert effort to learn new things about how to further achieve your financial goals.

Don’t stop here. I encourage you to keep learning and start building your financial IQ. Just like your physical muscles, you need to develop those financial muscles. Before you know it, your financial plan is going to take shape. And you will be on your way to your financial freedom.

Life is Amazing!

LENY

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What Must I Do With My Money?

9 Jul

money questions

You have probably asked this question a lot. If you have started to think about settling down, or just about gotten settled, (yes, I’m talking to YOU!), here are a few things you MUST DO with your money:

MUST DO #1: Cut up your credit cards and start paying cash.

Cut-up-credit-cards

This should get you in the proper mindset that what you don’t have money to pay for, you don’t buy. Credit cards are “fake money” in the sense that there isn’t any money there at all. We still have not earned it yet, therefore don’t go buying in advance those gadgets you’ll never need. Cut those credit cards so you don’t get tempted to use them. No cash, no buy.

MUST DO #2: Start paying your credit card bills one at a time until you are fully paid.

pay off credit cards

This can lead you to a good start even before your family starts growing. You don’t want to begin your family life with a mounting debt. Begin by paying the full amount due if you can. Never settle for the minimum amount. This incurs penalties and interests that just makes it so hard to finish paying your bills off. Invest time to negotiate with the account officer of your bank to waive penalties and interests. They don’t go telling everyone about this but you are sure that they will allow you more room to move if you just go and try. This shows them your goodwill that you want to pay your outstanding liabilities and debts. They would much rather get paid than not at all.

MUST DO #3: Set aside at least 6 months worth of expenses for your emergency fund.

emergency-fund-300x300

This is for those instances and situations where you are caught off guarded: when you or your family member gets sick and have to pay hospital bills, sudden lay-offs, or sudden resignation (just because you can not take your work or your boss any longer). You don’t plan for these things to happen, but at least prepare for these eventualities. You don’t want to rely on your parents’ allowance, or stay with them, do you?

If you are married and have children, then these additional MUST DO’s are for you:

MUST DO #4: Get a personal term life insurance for you and your spouse.

Life-Insurance

You don’t want to leave your spouse, or your children burdened by your sudden death. If you are the breadwinner of the family get a life insurance first because of the potential income loss. If you and your spouse are both working, then get one for each of you. Explore and ask around the best life insurance for you. I suggest a term life insurance so that you get the best coverage but the lowest possible premium amount to pay. The rest of the money can go to your emergency or retirement fund if you haven’t done that yet. Stick to the big multinational companies. Look for long years of experience and success rate.

MUST DO #5: Buy a personal health care insurance for you, your spouse, and your children.

health care

If you are working and your company covers your health plan for you and your family, then you need not worry. But for those whose coverage are limited to the business aspect of the performance of their work, and limited only to the employee, then you MUST get a health care insurance to pay for those sudden visits to the doctor or trips to the hospital. You don’t want your income to just get flushed out by high hospital bills and professional fees.

MUST DO #6: Invest in educational plans for your children.

educ plan

You will do your children great favor when you secure their education and future as early as now. There have been many instances when children had to stop their schooling or downgrade their school because of the demise, or retirement, of an earning parent. Look for a plan that will answer the needs of your children when they get to high school or university.

MUST DO #7: Look for a funeral and internment plans for you and your spouse.

funeral-plans

You want to leave this world with peace of mind knowing your family will have the money to pay for those inevitable expenses. Since these things are unplanned, you also do not plan for its accompanying expenses. But the burden to bear is left to your family. Where will they get the money? Will they borrow from relatives, or pawn/sell their valuables? If you have set aside a fund, you are not leaving them with worries, but only the much needed time and space to grieve.

MUST DO #8: Build your retirement fund.

Piggy Bank with retirement savings chartIf you are in your 20’s or 30’s, then you still have half your lifetime to build your retirement fund. This is the best time to start. Start planning and take a look at different investment vehicles such as the stock market, equity funds, real estate or even T-bills or bonds. But if you are nearing 40’s or even in your 50’s, then you are in danger of overtime. Even if you have your retirement package tucked in well, you still have to worry about rising medical costs and living expenses because, let’s face it, you are getting older, and you won’t have a job to lean on. Unless you plan on working till you drop dead, you better start planning on saving for your retirement fund. As a word of caution: do not invest in vehicles you do not know about. Do your homework. You don’t just want to give your life savings away.

If you have done all this by now, then CONGRATULATIONS! You are on your way to financial freedom. You have a plan, remember to STICK TO IT!

Life is Amazing!

LENY

Top 5 Money Lessons You Wished You’ve Learned

8 Jul

Money is not the root of evil. It is the love of money. Money can help you achieve happiness and joy by using it to bless others. I’d like to share with you how you can manage your money well so you can be a source of joy not just to yourself, but to your family, and to others as well.

Here are the top 5 lessons I have learned about money early on in life:

Lesson #1: Know the difference between an asset and a liability

In the old definition, an asset is something you acquire or purchase, like a car or a house and has money value. A liability is something that you can claim against an asset, like a credit card bill, debts, loans or payable. The new definition of an asset is something that puts money in your pocket, like a rental apartment or a business and funds your luxuries or liabilities. A liability is something that takes money out of your pocket, like jewelry, car or your house, and something that you purchase or acquired.

Lesson #2: Mind your own business. 

Buy and grow your assets. Some of these assets to develop or grow are: businesses that do not require your full time or presence, company shares or stocks, bonds, T-bills or SDAs (Special Deposit Accounts), income-generating real estates such as a rental apartment or dormitories, royalties from intellectual property from music, scripts or patents, and anything that has value, produces income and has a ready market.

Lesson #3: Pay yourself first

Set aside at least 10% from your income to build your business or fund your emergency money or investments. Then make saving or tithing as your next priority. This is the Power of Discipline. I know this is painful. But as the saying goes, “No Pain, No Gain.”

Lesson #4: Make choices everyday. 

How you spend your money is a reflection on how you use your most valuable resources: time, learning, and money.  Use your valuable resources wisely. If you want to predict a person’s future, just look at his expenses. Do you spend it in the latest gadgets, the latest fashion, or the latest accessories?  This only build your expenses, debts, and liabilities.

Or do you use it to invest and build on your assets, like seminars on investing and personal finance, personal coach/mentor, books, gym memberships to keep you healthy and fit, and donations to charities and churches?  This is the Power of Choice.

 

Lesson #5: Use your assets to pay for your luxuries, your liabilities.  

Acquire assets, or things that put money in your pocket, by paying yourself first. Then, you can purchase your liabilities or your luxuries by the income and cash flow generated by your assets. This is the power of focus. So many people today have money to buy their luxuries first but never seem to have any cash to purchase their assets. They get into debt simply because they keep on buying more and more luxuries, and they never stop to think that these are in reality, just liabilities.

So are you ready to apply these lessons so you can start blessing others and multiply your joy?

Life is Amazing!

LENY

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