Budget Management

Cutting corners

noreply@blogger.com (Carlos Martin B. Velez) — Sat, 26 Jul 2008 13:39:00 +0000

With the oil prices escalating and forecasts pointing that there is a possibility of hitting $200 a barrel around 2009 to 2010, obvious costs will follow suit with the oil price increase like food, electricity and of course gasoline. As is the current trend, gasoline prices are increasing by P1.50 to P2.00 per weekend every weekend! Electricity may have just become cheaper as NAPOCOR has just decreased its rates by 0.036cents per kilowatt-hour, but this definitely won't hold for long as Napocor will soon feel the pinch of the increasing cost of production. Food costs are also on the uptrend, as seen in the rise in the price of rice.

And what can we ordinary folks do?

Make sure your emergency fund is getting fat. Past readers can possibly see that the emergency fund is really an important thing to have, as I have been repeatingly been advocating this topic. In the environment of inflation shooting up every month, we have to be prepared for price spikes especially in the prices of our daily necessities. This emergency fund can cushion the impact on your wallet when spending for these necessities, so we won't feel the pain of basic commodity price increases while we wait for the correction of our salary rates, hehe!

Get rid of stuff you don't need and earn for it I just sold my car (pictured above), since I haven't been using it ever since I started working in Makati. It was just left in the garage - a useless asset that doesn't help me earn, since it doesn't take to me work anymore, hehe. As I view it, you have to be smart about using your car nowadays, to save on gas and to save on repair and maintenance, because this will just drain your funds from much needed resources. Also, do a quick round around you living space and pick out things that you have no more value for, then hold a garage sale.

Cut corners

I reviewed my budget and looked at the places/ expenses that I can cut corners, and I saw our household phone and internet bill that I pay for (around 3k a month). Looking at our past usage of the internet, it would be ok to downgrade our DSL line, and so that's what I did. By next month, I'm expecting to save at least P1k from the downgrade. Give your budget and your expenses a review and check where you can cut the spending, and focus on saving for the hard times ahead.

Spend to save Sometimes you have to spend more dough upfront to cash in the savings in the coming years. The government just launched the SWITCH movement that advocates the use Compact Fluorescent Lamp (CFL bulbs) in place of incandescent bulbs program. CFL's are usually more expensive that those regular incandescent bulbs, but the savings you get from its electricity consumption and its lifespan makes it cheaper in the long run. Another example of spending to save is bulk buying. The underlying concept here is that you can usually get the item's price per piece at a cheaper price when you buy by bulk versus buying the item individually. Another advantage of bulk buying is that you freeze the price of that particular item for the duration of the stock of that particular item with you, thereby helping you escape the effects of inflation.

Get with the program The substitution effect is already making waves in the grocery stores. I suggest you join the club. Look for cheaper substitutes for the items you usually purchase to get more bang for your buck.

Do you feel the increase in prices already? Have you done anything to increase your cash on hand (to decrease your monthly expenses)? Share them in the comments! Thanks!

Pay yourself first

noreply@blogger.com (Carlos Martin B. Velez) — Wed, 23 Jul 2008 03:01:00 +0000

What is your most reliable earning asset? The answer is "yourself"

Here are some definitions (and some tips) I've come across based on the adage of 'paying yourself first'.

Savings - Every time you receive your paycheck or when your salary gets credited, pay yourself first before spending your hard earned cash. Set aside an amount you are comfortable with (which should be more or less proportionate to the importance you place on ensuring a future for yourself, hehe) and keep this untouched. You can assign this savings fund to be your emergency fund and move on to other investments when you've reached your emergency fund goal.
Investing on yourself - I doubt anyone wants to get stuck earning the same amount every payday for the rest of their lives -- make yourself more valuable to the workforce by paying yourself, or in other words by investing in your most reliable earning asset, which is yourself. Set aside or build a fund that will support your endeavors in increasing your market value, whether it be going back to school, buying a good book, learning a new skill or making sure you stay in healthy shape, etc.
Rewarding - Every hardworking asset needs a breather and/ or a pat on the back once and a while, for motivation to work or something to look forward to after all the hard work. Plus, "all work and no play makes Jack a dull boy." Every time I do something good at work or at home that makes me all fuzzy inside with pride or when I accomplish a goal I set myself out to do, I treat myself to my favorite snack/ drink, or I make contributions to a sinking fund that will help me purchase something I want (ex. now I am contributing to my camera fund - fisheye 2 you will be mine soon, hehe)

Do you pay yourself? If yes, how do you do it? If not, why not?
Share it in the comments! Thanks!

Tips for saving on Gas

noreply@blogger.com (Carlos Martin B. Velez) — Fri, 04 Jul 2008 23:51:00 +0000

As fuel prices are soaring around the world, and for those who can't live without their car, here are some useful tips I picked up from bankrate that I'd like to share with you on saving on Gasoline.

Car Maintenance - making sure that your car is in tip top shape will ensure your fuel consumption is optimized.

Tire condition - wear, inflation, balance and alignment can all contribute to your fuel consumption efficiency.
Tune up - follow your car's schedule for routine maintenance, new parts, fresh oil, right timing will contribute to fuel savings.
Lose the weight - don't weight down your vehicle with the junk in its trunk. Remove all unnecessary stuff from your vehicle because your car will just burn more gas carrying the extra (unnecessary) weight.

Gas shopping - Knowing the when and what kind of gas to use will translate to big savings year round.

Octane rating - what the Petron ad said is true, use the proper Octane rating of fuel needed by your car. This will make sure the fuel you loaded is compatible with your car's engine's needs.
Don't top off the Gas - when you load a full tank, just ask the gas attendant to use the automatic stop. Filling your tank to the brim is just a waste because too much gas will just evaporate or spill out.

Driving habits - Developing good driving habits will lead you to savings with you thinking about it.

Plan your trips - if you need to run errands, plan them well so don't have to go back and forth from one location to the other, saving gas on the miles you don't travel.
Don't warm up too long - your car just needs a minute or 2 to warm up, any longer is just wasting fuel. Just make sure you don't accelerate too quickly, after a minute of warming up.
Ease up on the accelerator - quick acceleration and engine revving is bad for your pocket, and so is driving too fast.

As we don't see the end of the rise in gasoline prices yet (forecast is at 90PHP to 100PHP per liter by year end), it might be a better idea to carpool or commute to get the most savings from gasoline expenses.

Once you've noted the savings from your fuel spending adjust your budget to spend less on gas and more on savings.

Any other tips to add? Share them in the comments! Thanks!

I am getting fired this friday..

noreply@blogger.com (Carlos Martin B. Velez) — Fri, 20 Jun 2008 22:19:00 +0000

Knowing that I'll get fired by Friday, a few questions crossed my mind.

How will I pay for food, water and other household expenses?
How will I pay my bills?
Without my employer's medical benefits, how will I pay for any unwanted/ unexpected incidents?
Frankly I am tired of getting into debt, so I don't want to borrow money but how will I make ends meet?
Do I have enough funds set aside for the things above while I'm looking for another job?

Admitting to the fact that losing my job by Friday isn't an impossibility, I better start taking my emergency fund seriously, now that I still have work!

Whats my goal?
For starters, my goal would be to have at least 3months worth of my gross salary tucked away in my emergency fund.

Where am I right now?
Right now, I have a little more than a month's worth of my gross salary in my emergency fund. Hopefully, I'll be able to reach my goal before the end of 2008.

What will I do to reach my goal?

Put a priority in spending less than what i earn, or at least to stop spending unnecessarily.
Make sure i religiously put up monthly contributions into my emergency fund.
Flex my budget, to bump up my monthly contributions.
Inject windfalls or extra income into my emergency fund first, before anything else.

What will i do after I reach my goal?
Well, thats for another post, hehe!

I believe that Trent over at the simple dollar was right when he said that thinking about the possibility of losing your job soon will make us take our finances seriously. And this will be my mantra until I get my emergency fund fat enough.

Do you have an emergency fund? How near are you from reaching your emergency fund goal? Share your answers in the comments! Thanks!

Second thoughts

noreply@blogger.com (Carlos Martin B. Velez) — Sat, 14 Jun 2008 02:00:00 +0000

We should always think twice about the purchases we make.

When i used to go shopping with one of my good friends, i would always ask her to give her possible purchases a second thought, and/ or hound her with questions like, do you really need it? what are you going to use it for? are you planning to use it more than once? etc. or the other tactic i would use would be to ask my friend to think about putting off the purchase of a particular item and if she still wants that particular item after a week or two then she should go through the purchase.

Trent over at the simple dollar offers another question to think about before making a purchase, he says "you should ask yourself if you will be using the item until it truly wears out. if you're not sure or are pretty sure you won't.. do you really need that item?" Doesn't this get you thinking?

The underlying concept here is that the price of the purchase should be less than worth of the benefit derived from the item (or at least the price should be equal to the benefit). Are you prepared to shell out an X sum of money so that we can use a piece of clothing once? or are we going to spend our hard earned money on something that costs much more than the benefit we can get from it?

Think about it!

Do you guys give your purchases second thoughts before buying them? Share your answers in the comments! Thanks!

Zero balance

noreply@blogger.com (Carlos Martin B. Velez) — Mon, 02 Jun 2008 02:00:00 +0000

I am proud to say that I know exactly where all my money went last April.

Its been a trying time these past months, ever since I set up my spreadsheet budget monitoring system, to make my actual income equal to my actual spending (at least in the spreadsheet). Although I have my trusty T5 (where my monitoring spreadsheet resides) with me, most of the time, I often find it difficult to take it out and jot down my expenses at the end of the day. But now, I believe I can say that I am starting to develop the discipline of being mindful of where my hard earned money goes.

Now the challenge is if I can replicate this for the months to come! Goodluck to me!

Barriers to saving..

noreply@blogger.com (Carlos Martin B. Velez) — Mon, 25 Feb 2008 00:30:00 +0000

Aside from the most obvious barrier to saving which is spending to much, I have encountered another bump along the road to financial security which i would like to share with you, these are barriers to saving in a bank.

In my search for a checking account it has just dawned on me that accessibility to the bank should have been included as a priority. Having an 8am to 5pm desk job 5 days a week limits my depositing of funds over-the-counter (heck, even applying for the account) to my lunch-break time frame. This is one of the reasons I chose to open my savings account at Manila bank. Aside from bank location and banking hours, here are some other barriers I think I should bring to light:

I don't need a savings account! I need a checking account!
To open a checking account you need a six month year-old savings account in that particular bank. This is a unwanted hassle especially if you just need a checking account in bank where you don't have a savings account and six months is a pretty long hassle.

On the other side of the coin, I guess these banks are just taking a cautionary stance against those who might sign up for a checking account only to have it bounce around. And I think banks have already had enough of bad debt.

Isn't that me?!
In opening an account at most banks, identification just has too many requirements. Nowadays, your company ID is considered a secondary ID and most of the primary identification materials should have been issued by the government (i.e. Driver's license, NBI clearance, passport, SSS ID, etc.)

In most cases, the average working Juan dela Cruz, has his company ID and maybe his driver's license (and maybe his expired NBI clearance, which doesn't really count), and unfortunately this isn't enough for the banks! Although there are cases where the bank would still let you open an account, the banks will place a restriction (or a red flag) on your account until you provide another identification material to their liking.

I have found a few solutions to the barriers above:
In getting a checking account without a savings account -

Open a joint account with a close relative or friend that you can trust not to touch your money that has a pre-existing savings account in a bank.
Choose to open a savings account product that doubles as a checking account, but prepare for the higher initial deposit and the higher maintaining balance.

In opening an account -

Don't forget to get your SSS ID
Get a driver's license even if you don't plan on driving much
Get a postal ID! its an easy-to-get government issued identification material

Know of any other barriers to saving in a bank? or want to rant about the barriers you have encountered? Share it in the comments!

The emergency fund and why we need it

noreply@blogger.com (Carlos Martin B. Velez) — Sun, 10 Feb 2008 09:36:00 +0000

Have you ever been caught licking the dregs of the money jar when an accident happens or when something that needs your financial resources calls your attention NOW? Or have you been living from paycheck to paycheck, then suddenly your car breaks down?
What do you do? Apply for a loan? Get into debt?

I hope that I will never be put in this situation and to make sure I never will, I am currently in the process of pooling my own emergency fund.
In simple terms, an emergency fund is "the most valuable thing you can have because it protects you from the unforeseen things that can demolish all of your financial planning and throw you into debt." (The Simple Dollar)

Why?
The obvious reason would be so that big and sudden financial obligations do not catch you unawares. here are also some reasons why creating an emergency fund is critical: (from 21 strategies for creating an emergency fund and why its critical (@ zenhabits.net)

Stop getting into debt. You won't have to resort to borrowing money (and worry how to repay it!) every time there is an emergency expense.
Smooth out your budget. You won't have to readjust your budget every time an unexpected expense comes up.
Prevent late fees. When an unexpected increase in a bill arrives, you won't have to skip out on the payment of the increase just because your current budget can't handle it.

Important things to consider when setting up an emergency fund

How much do you put in an emergency fund - you to have decide on amount you think will cover for you in sudden cases of financial need. The common suggestion in cyberspace is 3 to 6 months worth of your current salary. It might be daunting to save and set aside this much money, thats why the emergency fund is always a work in progress that requires discipline (to strictly follow your set budget guidelines to achieve your desired emergency fund level) and a belief in caution (that it is the right thing to do, to set aside money that will help you in unexpected events)
Define what is an emergency for you - is it when your budget has been stretched too thin that it cant handle the extra expense? or will you define "emergency" as specific situations like accidents, car trouble, hospitalization, etc.?
Where do you place your emergency fund - I would suggest to deposit the money in an account where your funds can be accessed easily, a savings account with an ATM and/or high interest per annum (due to the fact that you will leave the fund untouched until an emergency comes up)
How to replace the money you take from the emergency fund - Be ready to flex some items in your budget to accommodate the replenishing of your emergency fund, or you can wait for bonuses/ big chunks of income to replace the money (just make sure you won't have to wait for too long)

Hope this helps! Comments will be appreciated, thanks! :)

My saving account

noreply@blogger.com (Carlos Martin B. Velez) — Sun, 27 Jan 2008 03:18:00 +0000

I opened my savings account in Manila Bank (will become Chinabank savings in the near future) a month ago and it feels good!!

I feel that I took one step towards my goal of financial security by starting my first savings account! It's all part of my plan to take control of my finances. And now I am employing all the tools i need to set myself on the way to financial security!

Why I opened a savings account vs Investing the money in mutual funds, bonds and/or stocks?
I opened a saving account mainly because of the liquidity I will get by putting my money in such an account. The main objective for this account is to become the account where I will build my emergency fund. Placing money against mutual funds, bonds and/or stocks doesn't really give one the liquidity you need when something unexpected happens.

Sure, it can be argued that you can still withdraw from these investments, but at what cost? Withdrawing from these investments before maturity will bring upon your potential earning a tax cut on top of the 20% withholding tax! Ouch!

But I will never be satisfied in keeping all my money in savings accounts. I plan to place my money in investments as soon as I am able to build my emergency fund :)

Why Manila Bank?
Well I guess I chose to open my savings account in Manila Bank for the following reasons:

Comparatively high interest earned per annum - it will earn around 1.5%pa vs the current prevailing rate of 0.5% to 0.875%pa
Accessibility - a branch of the bank is located in the building beside my office!

What's up next?
Well I'm still searching for a checking account and i have encountered some barriers to hinder me from signing up. (for another post)
Hopefully by the middle of this year I'll be managing my savings account and my checking account.
And another hopefully, I will be debt free by the middle of this year!! and that will mean one less financial goal for me to achieve by the end of year

Any new steps you took to get a hold of your finances? Or any new developments in your financial plan? Please share it in the comments!

In search of a checking account

noreply@blogger.com (Carlos Martin B. Velez) — Fri, 30 Nov 2007 00:52:00 +0000

In the past month I've been formulating some plans for my finances.
Part of that plan is setting up a checking account that will:

Facilitate the payment of bills (cellphone and landline)
Facilitate the payment of my life insurance plan
Act as a general savings fund

With the above things in mind, i sought out for a checking account, among the banks that are just around the corner from my house, that can fulfill my desirables:

Online services - enabling me to check on my account when I want.
Interest earning - I intend to use the checking account as a general savings fund, so it wouldn't hurt to earn a bit.
Reasonable maintaining balance - so I can already start with the meager cash in my pocket.
Additional accessibility (e.g. ATM) - just in case a check won't cut it.

Here's are the banks I researched on:

Citibank Savings

No online accessibility - bummer..
Will earn 0.5% per annum with an average daily balance of 20k
Maintaining balance of 10k
No ATM

BDO - Smart Checking account

Has online banking
Will earn 0.75% per annum as long as the maintaining balance is met
Maintaining balance of 10k
ATM available on additional request

MBTC - MetroChecking Extra

Has online banking
Will earn 0.75% per annum as long as the maintaining balance is met
Maintaining balance of 15k
ATM available

Citystatesavings - City Max account

Has online banking
Will earn 0.75% per annum as long as the maintaining balance is met
Maintaining balance of 1.5k (reads hella low!)
ATM available

I'm kinda leaning towards setting up the checking account with Citystatesavings because of the high interest rate and the low maintaining balance and the additional accessibility of an ATM.

You guys have any suggestions?

Spending less than you Earn

noreply@blogger.com (Carlos Martin B. Velez) — Wed, 14 Nov 2007 01:07:00 +0000

This is a dream i have yet to achieve!! -- to spend less than what i earn.
This is easier said than done! Especially if you find yourself living from paycheck to paycheck, or in debt, or if you have a lot of/ expensive "luho" (frivolous stuff you buy/ spend for on a regular basis that has no "real benefit" except to punch a hole in your wallet - and this spending pattern ends up looking like a vice, ex. shoes, jewelry, magazines, etc), or all of the above!!

Here are 2 ways to help you spend less than you earn:

1. Stick to your budget
Spending less than you earn is all about self control, and sticking to your budget is the best example of self control.
Armed with a budget you can make sure that you'll keep the spending under control, thus making sure you'll have savings after your expenses, just make sure that you budgeted for savings!

2. Earn more!!
By earning more you widen the difference between your monthly income and your monthly expenses; therefore you end up spending so much less than what you earn!! (of course with the assumption that your monthly expenses will still stay the same!)

There are 2 ways to increase your pay checks
a. get into a higher paying job - this is a no-brainer. time to move on and move up!
b. diversify your income portfolio (multiple income streams how they can work for you @thesimpledollar) - By collecting income from multiple sources, you gain additional earnings even if you stick to same job and you spread risk of losing your source of bread on the table (i.e. even if you get fired or you resign from your primary job you can still rely on your other income streams for your monthly expenses.)

Here are some benefits you can get from Spending less than you Earn:

Discipline in spending - you will have to measure the priority of spending obligations
Learning to put more value in items to purchase - In making purchases within the limit of your set budget, you will think twice before spending your hard earn cash.
The difference of your income and expenses can be set aside to create an emergency fund - for those unforeseen circumstances or events
The difference of your income and expenses can be pooled as capital for another source of income - to increase the number of your streams of income
The difference of your income and expenses can be set aside to eliminate debt.

Do you Spend less than you Earn?

How to fulfill your D.R.E.A.M.S.

noreply@blogger.com (Carlos Martin B. Velez) — Mon, 12 Nov 2007 03:02:00 +0000

To fulfill your D.R.E.A.M.S. you have to prepare for your D.R.E.A.M.S.

D - Disability. Do you have financial support or resources tucked away in case you find your self disabled/ unable to work for a few months?
R - Retirement. Do you think you can retire by the age of 60? Do you know how much you need to sustain you after you reach age 60?
E - Education. Are you saving for a graduate degree? Starting family?
A - Asset allocation. Are your financial assets in order? are they growing?
M - Major purchases. Do you have financial resources tucked away to make sure your major purchases will not rattle your financial security?
S - Survivor Income. When we leave this world, are we sure that those left behind will be financially well taken care of?

The best way to prepare for your D.R.E.A.M.S. is to SAVE!!!

Some tips on saving

Act now and SAVE!
Evaluate your spending sprees - Needs vs. Wants
Learn to live with less
"too much month at the end of the money" - when you find out you still have more monthly bills to pay when you just used up your last centavo.

*These are notes from the talk of speaker Ms. Robbie Panaligan, a sales associate from Manulife, given last October 22, 2007 at UA&P.

My Goals and Tools

noreply@blogger.com (Carlos Martin B. Velez) — Thu, 27 Sep 2007 09:56:00 +0000

Photo by: jaredpazky

To ensure that I am walking down the path to financial security I set down the goals I wish to achieve and the tools I use that will help me achieve my goals.

My Financial Goals
Without looking too far ahead, maybe at the end of 2 years I should be able to:

Get out of Debt - this is what i believe to be the first step to financial freedom, with debt out of the way i can redirect my resources for saving for the future.
Put up an Emergency Fund - knowing that life is full of surprises, I'd like to be at least ready for the worst of it.

My Financial Tools

Budget - my "shopping list" to aid my spending per paycheck!
Spreadsheet for monitoring Budget - what's the use of the budget if you don't know if you follow it, or how would you know if adjustments are needed if you can remember what you actually spent your money on - i prefer using a plain-old spreadsheet rather than the other specialized software, here's why = the good and bad of microsoft money and quicken and why i usually point people towards a spreadsheet instead (@the simple dollar)
Bank - where my cash will be kept out of my spending hands!!

These are my goals and tools, care to share yours in the comments? thanks in advance! :)

Budget Management

noreply@blogger.com (Carlos Martin B. Velez) — Wed, 05 Sep 2007 08:10:00 +0000

Welcome to Budget Management!

As one using a budget to get rich and to get out of debt, I wish to share my experiences and learnings to help you get rich and out of debt as well :)

Cheers!!