Know yourself: the first baby step to financial security

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You’ve all heard of the expression “know yourself.” Experts believe this should be the first baby step of people who want to successfully get off their little gerbil wheel of consumerism, where it is custumary to work like horses the whole week and spend everything on weekends. No matter what investing prowess we have achieved, or what superior knowledge about wealth accumulation we have attained, if we skip this process, there’s a likelihood we may crash and burn and perhaps question whether financial independence is really an achievable goal.

Thing is, facing reality is tough. Nevertheless, knowing our inner financial blueprint could bring us closer to financial happiness or hinder us from getting there.

From the perspective of the financial planning professional, taking this route requires more work and dedication. Cookie-cutter financial plans will not work. A financial plan that folds in clients’ money personalities addresses their inner money demons and strengths, and hopefully builds on those strengths to create a more financially responsible and happy person. Seguir leyendo Know yourself: the first baby step to financial security…

Financial planning pioneer ‘pays it forward’

Augustus “Joe” Ferreria (Joe F. in this article) has all the trappings of a high-profile job. A big corner office in the Makati financial district, a nationwide sales team, and the solid name of the SM Group of Companies and Generali Pilipinas behind him.As senior executive vice-president of Generali Pilipinas, Joe F. is the revenue guy. In the first five months of 2007 alone, sales clocked in a 75% growth compared with the same period a year ago to P974 million.

That amount may seem tiny compared with Philamlife’s P14.5 billion in 2006, but not if you realize that Generali began operations in the Philippines only in 2000. Joe grew the company from a P400 million company to P2 billion in one year after he joined the firm in 2004. As an upstart in the insurance industry, Generali is playing a quick catch-up game. Seguir leyendo Financial planning pioneer ‘pays it forward’…

The importance of saving

Building wealth requires that you consistently save money over the years. Besides being one of most effective ways way to achieve true wealth there are three other important reasons why every Filipino needs to save.

1. Survive a financial crisis

Sooner or later every family has to face some sort of financial crisis. This financial crisis could be in the form of accidents, illness, loss of employment, failure of a business or sudden death of the family’s breadwinner. The amount of savings the family has will ultimately determine how well they can cope with a financial crisis. You may survive with little savings but chances are you will get into debt that could take years or even a lifetime to wipe out.
Sometimes the lack of savings can even make the situation worse, like a family member dying unnecessarily due to lack of funds for proper medical care. “Saving for the rainy days” will spare your family from huge financial losses and ensure your survival when a crisis strikes. You will have peace of mind and you can sleep better at night knowing that whenever a financial emergency comes your way. Seguir leyendo The importance of saving…

REGULATING FINANCIAL PLANNERS

Despite the phenomenal growth of financial planning services and the enormous influence that planners can exert over the investment of their clients resources, there is virtually no regulation of the industry or any uniform system of earning credentials.  Indeed, there is no agreement about either the functions of a planner or the training needed to perform them responsibly.

 As concerns mounts about the growth of the industry in both size and influence, a number of governmental and private groups— Congress, the Securities and Exchange Commission, and some industry organizations—are looking at ways of regulating it with a view to protecting the clients.  Thus far, however, no governmental regulations seems to be forthcoming.  One of the two major industry associations favors a policy of self policing by SROs—Self-Regulatory Organizations; the other apparently believes that enforcement of existing state laws will suffice. Seguir leyendo REGULATING FINANCIAL PLANNERS…

ACHIEVING YOUR GOALS

Fine-Tuning Your Budget

Once you have reached agreement on your goals and their timing, your next step is to examine your current budget to see whether your spending pattern is likely to lead toward  their realization, even though they may be years away.  Usually some changes are necessary.  If, for example, a young two-income couple plans to buy a home in five years but is currently saving nothing, both should cut down on some of their expenditures.
 Although adjusting your current budget will not by itself enable you to realize your long term goals, it will certainly move you in that direction.  And if you make these adjustments and as some of your expenditures decrease, you will be well on your way—provided, of course, that your goals are reasonable and possible to achieve.

Calculating Your Net

Once you have made adjustments in your budget, your next step is to calculate your net worth—that is, the amount you have left after subtracting your liabilities (everything you owe at the moment) from your assets (everything you own).  Seguir leyendo ACHIEVING YOUR GOALS…

Sample Goals and Benchmarks at Specific Ages

Putting It on Paper

Even when you recognize the need for financial planning, you may do little more than think about it at odd moments.  But this kind of sporadic attention is more likely to culminate in a vague resolve to do something about it one of these days rather than in a specific

Table 7-1 Sample Goals and Benchmarks at Specific Ages

20-30 Years
 Establish Credit
 Open bank accounts
 Purchase health, life, and auto insurance
 Begin to formulate tax strategies
 Set aside one tenth of income savings
 Invest in an IRA or pension plan
 Make a will Seguir leyendo Sample Goals and Benchmarks at Specific Ages…

SETTING YOUR GOALS

If  you have a savings account, a life insurance policy, or a will, you have, in fact, done some financial planning, because all of these items are future-oriented.  The first makes possible your plans for future spending, and the last two protect you against future contingencies.  Once you understand this, you can see that financial planning is simply a more detailed and more systematic version of what you have already begun.

Anticipating Change

One of the limitations of an annual budget is that it may temp you to believe that your current pattern of spending will continue almost indefinitely, even though the actual dollar amounts will change.  This belief is totally misguided, because over the years your needs and wants, as well as your discretionary income, are likely to change. Seguir leyendo SETTING YOUR GOALS…

FINANCIAL PLANNING

Working out a budget is a short term project.  It involves little more than adjusting your expenditures to your income for the next year or so.  Continuing the process is relatively simple because neither expenses nor income is likely to change very much in any one year.  Financial planning, by contrast, is more complex.  The time span it must take into account may be as long as 40 years—a period during which almost every element of your spending pattern, as well as the sources and amount of your income, will inevitably change.  But, difficult though it may be, financial planning enables you to choose the changes your prefer and to prepare for those that are inevitable.
Seguir leyendo FINANCIAL PLANNING…

Separate checking accounts, or keep them joint?

I’ve read a number of articles dealing with the dynamics of personal finance with couples, and one suggestion that pops up pretty regularly is keeping separate checking accounts for discretionary spending, or even for regular monthly bills that are in one person’s name or the other’s.  The big motivations for doing this are freedom (”This is my money to spend, save, or invest how I like”), protection (”It’s in my name alone”), and convenience (each person has a checkbook and access to funds at all times).  There may be other tax-related advantages that apply to some couples if they have their funds separated, but I don’t often read about these.  Most of what I read about talks about the budgetary advantages of maintaining separate accounts, mainly as a means to simplify and define who spends how much.

I don’t buy into this.  My wife and I for the large part pool our finances.  She has access to most everything I have and do, and I have access to everything she has and does.  Separate checking accounts might keep a spendthrift husband from ruining his joint finances with his frugal wife (or vice versa) for a while, but this is a quick fix rather than a long-term solution.  Seguir leyendo Separate checking accounts, or keep them joint?…

What to do when you lose your income

Well, it happened.  I can’t say it was a surprise.  Sales were down, and my husband was the new man on the totem pole.  He lost his job yesterday.  At this point we are officially without an income, and we have about one month’s worth of expenses left in our emergency fund before we have to break open our retirement savings.

So how are we handling this?  There are several things we’re doing to make our way through this financial mess.   First, we realize that we are on the same team.  It won’t do any good for me to blame my husband.  And it’s not any good if he blames himself.  The situation is what it is, and we need to work together if we hope to get through this without hurting our marriage.  We’re off to a good start.   Seguir leyendo What to do when you lose your income…