How to Save and Budget Wisely

How to Save & Budget Wisely

MAY 14, 2013 BY PESOS AND SENSE TEAM 

Practical Money Tips for Filipinos

How can you invest, if you do not have enough money to invest? Ipon muna!

Aside from acquiring knowledge, knowing how to save and budget wisely is one of the keys to smart investing. Failure to do this simple step properly might prevent you from investing regularly.

We have mentioned in our previous blogs that investing is a journey. (Read our top blogs here) If your chosen investment is the vehicle to get to your destination, saving and budgeting is the fuel that will keep it going.

The Saving Habit of Filipinos:

RECEIVE salary – SPEND salary = SAVE the leftover

“I will start investing once I have extra money.” Sounds familiar? This is a common scenario once the salary is received. But after spending, more often than not, there won’t be any leftover and investing is put off until next month.

This was also Pong’s excuse as to why he started investing really late.(Read the article The Social Cost of Investing posted July 21,2013) As we always teach everyone, the earlier you start investing, the more time your money can grow. But what makes it very difficult to start is because of the misguided saving habit we Filipinos got used to.

Unless you make saving a priority, it would be really difficult to start investing.

The Ideal Saving Habit:

RECEIVE salary – SAVE & INVEST = SPEND the leftover

No matter how small, learn how to save a portion of your salary for the purpose of investing. You may have heard about the 10-20-70 principle before. To help you accomplish the ideal saving habit, we recommend that you do the same thing.

Upon receiving your salary, divide it accordingly: 10%, 20%, and 70%.

Take the 10% which you can save for your emergency fund, or for paying off debt. Or if you are religiously inclined, you can give it to where you receive your spiritual nourishment. This is what they call tithing.

Next, set aside the 20% for your savings and/or investments. Separate it immediately and deposit to a different bank account or into your investment.

No matter how small, keep on saving until you have enough to start investing. Did you know that you can start investing in the stock market for as little as P5000?

Ideally, only 70% should go to expenses. The key to do this successfully is to prioritize your important expenses first like bills, utilities, grocery, and food items.

This might be very difficult to practice at first, since you got used to spending all your salary. It may mean adjusting your current lifestyle to accommodate your new investing habit. Do you really need to buy that Starbucks coffee or DVD?

If the 70% will not be enough to cover everything you need, you can be flexible in doing this just as long as you set aside even a small portion for your investment.

Remember, saving and investing for your future requires discipline. It is not easy, but this small act can make all the difference.

More Filipinos are getting Life Insurance!

Posted on June 10, 2013 by marvingermo in Insurance, Money Blog

This fact just blows my mind away!  Truly the Philippines is at the brink of even greater things!  In just 6 years our country’s yearly insurance premium income have more than doubled from just 55 Billion Pesos in 2006 to a whopping 119 Billion last 2012!

This statistic tells us that:

1.  More Filipinos are seeing the value of insurance as a need rather than a want

2.  More Filipinos see that getting Life insurance is the responsible thing to do

3.   More Filipinos are willing to include Life insurance as part of their yearly budgets

4.  Financial literacy and education works

5.  There’s so much money moving in our markets that Filipinos have more money to set aside for insurance!

Looking at this I am confident and proud that there are greater days ahead and in store for our country!  I look forward to the day when majority of our population will be adequately insured!  And I believe that time is coming is sooner than we all think!

We are seeing amazing growth in stocks, the economy and now our insurance industry is posting amazing figures  What can I say the best is yet to come for the Philippines!  This is our time under the sun to show the world that we are a great and awesome country!  If you don’t have Life Insurance yet a highly recommend that you study this so you can also take part of this growth and also protect your family from any curve balls that may come your way!

Lastly I would like to thank,all the insurance agents, staff, and executives who are giving the finest years of their lives to make this country a better place!  I believe we would never achieve this great feat without the help of all of you from the insurance industry!  Thank you.  You do not know how much of an impact you are making in lives of our countrymen!  I hope that you never stop and quit if rejections come your way.  You guys are our heroes — making this country a better place!

Here’s the ranking of life insurance companies for 2012 based on their premium income!

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Is PH stock market bull run over? Why is the Market falling?

Got this Excerpt FROM:

Money Matters

Is PH stock market bull run over?

By Henry Ong
Philippine Daily Inquirer

4:41 am | Wednesday, June 12th, 2013

Why is the market falling despite all the good news about better-than-expected GDP and investment upgrades? 

All of these have already been discounted by the market, as reflected in the share prices. The market has anticipated this that it was willing to pay premium for future earnings at 26x P/E, making Philippine stocks the most expensive in Asia.

Now, the market has been falling because of fears that interest rates are rising soon after the US Federal Reserve hinted it might cut purchases of bonds and treasuries in the market under the Quantitative Easing (QE) program.

The QE program is a non-traditional monetary tool used by the US Federal Reserve to stimulate the economy by printing money to buy bonds from banks and provide them available cash for lending. Reduction in bond buying will mean reduction of liquidity in the system, which will increase interest rates.

Why reduce liquidity? The US Federal Reserve noted that the US economy had started to improve following strong employment data results last month. When an economy is recovering and you have a situation where there is too much liquidity in the system, higher demand for goods and services may trigger inflation to rise very fast. This is one reason why the US Federal Reserve plans to taper off the QE Program as soon as further data would later on indicate that the US economy is on its way to recovery.

The reduction in QE has not happened yet but investors are already anticipating this by taking profits. Uncertainties will push investors to unload and raise cash for the meantime. Less liquidity in the system  will eventually bring back market P/E to normal levels. The current market P/E of 20x may still be expensive under this scenario hence there may still be room for further decline in the future.

If this kind of sentiment will linger in the next few months, the market may trade sideways on downward bias as investors will prefer to stay on the sidelines. Current market rally should be limited up to 7,000 initially. A breakout is possible but be careful. Watch the volume carefully. Any rally must be supported by strong volume. The recent low of 6,393 will be tested as support should there be another round of massive selling again. Once this is broken, there is a possibility the market may lose another 1,000 points to 5,400.

If you have some stocks that you want to get rid of, you can take advantage of any rally as a selling opportunity. Sell at the best price possible to minimize your losses. Raise as much cash as possible for your next trade.

In a volatile market like this, there are many opportunities for profitable trade. You can trade the market by buying oversold stocks, that is, when a stock is heavily beaten and sell them when they recover on the way up. You may need to use chart as a guide to identify your support and resistance.

For those who are more conservative, this is the best time to employ the peso cost averaging strategy. This strategy works best when the share price is falling. Under this strategy, you can allocate fixed amount of investment regularly to buy a certain stock.

You will buy stocks regularly regardless of the share price. If the share price falls, you will be able to buy more shares. If the share price increases, you will get less number of shares. During a period of consolidation, you should be able to get good cost average that will beat the market.

Why can't I afford more on my Enterpreneur's income?

Why can't I afford more on my entrepreneur's income?

By Mike Aquino for Yahoo! Southeast Asia | BDO Money Matters – Thu, Jun 13, 2013 5:08 PM PHT

Question: “I own a business, but compared to my entrepreneur friends, we can’t afford to travel even once a year. What am I doing wrong in my business? How can I correct this?”

There's a certain fly-by-the-seat-of-your-pants mystique to entrepreneurship, but it's incredibly easy to overestimate your own earning abilities if nobody's keeping track.

When you're always suspiciously low on disposable income, the problem may not be in your business, but in how you spend your income. The experts suggest it may be time to do a reality check.

Look at where your money's actually going. "The point where someone asks 'Why can't I afford X?' can possibly be due to undirected spending habits," explains April Amba, a registered financial planner with RFP Philippines. "Without a plan, people tend to make purchase decisions on a per transaction basis, deciding that they CAN afford something for as long as they see cash in their wallet, or for as long as their credit card limit would allow."

The first step to correcting the situation, April suggests, involves a cold, hard look at your spending. "I would prepare an income statement, and look into your spending habits to objectively verify what you really can and cannot afford," she says.

Reformat your priorities. 
What you find through that first step will guide you through the next: creating a spending plan "that ensures you afford the things you need first, then schedule purchasing the things you wanted when you can eventually afford it," April advises. Expenses like travel, for instance, become something you save up for instead of buying on impulse.

"It's good to tie specific goals to your budget, like: 'I want to raise a P100, 000 down payment for the car I will buy in eight months'," says April. "Concretely, this means that I will budget savings of P12, 500 per month for the next eight months. Clear, measurable, time bound objectives motivate people to stick with a budget."

If your income still falls short of even the most down-to-earth goals, then it might be time to take a different tack.

Also read: How to expand your small business

Increase your inflow. Assuming you're not in danger of going out of business yet (if you were, looking for spending money for that family trip would be the least of your worries), you should explore ways of increasing your inflow.

"One way of generating more income is for you to control your expenses," explains Jayson Lo, entrepreneurship-focused author and keynote speaker (www.jaysonlo.com). Jayson is mindful that much of business success can boil down to happenstance—so "you should focus on things you can control, like expenses. The small things will beat you, not the big things."

If you want to take income generation head-on, then Jayson suggests you look at new ways of marketing your business. "These days, it's not really how good your idea is; networking is important," Jayson says. "You don't really need to advertise—you have word of mouth, you have social media, you have PR."



Then again, do you really need that family trip? "There's a good book out there, it's called the Millionaire Next Door," Jayson tells us. "In the book, they had a survey among the real millionaires—they found out that among the top reasons they became rich, the first and second are tied: honesty and hard work."

Far from enjoying the fruits of their wealth to the fullest, real millionaires "are not ostentatious—they buy second-hand cars, they buy simple houses," explains Jayson. "To them, reinvesting their income into their business is what's important. Ikot lang ng ikot, with patience and perseverance."

If you have your own money-related question, share it with us in the comments section below!