By this time, you already know the basic foundations for you to achieve financial freedom at your own style.

To give you better views and understanding about the different aspects of a sound financial plan, I will share to you the updates or posts you can expect from the blog moving forward.

Monday to Thursday! Its Q and A Days!

From Monday through Thursday, I will try to answer the specific questions that you will asks about managing your funds or your financial plans i.e budgeting, investments and portfolio management just to name a few.

Friday – Our Portfolio Day!

To better appreciate our understanding in the financial markets, together we will start building up a portfolio of invesments. Every Friday, I will update you about the developments and the strategies we will make to achieve the goals we will set in!

Saturday – Special Fundamanetal and Technical Analysis Day!

We will be analyzing the financial market, specifically the bond and stock markets, and will try to predict or project the trends using fundamental and technical analysis.

Sunday - Special or Free Posting Day!

This is a free posting day! I will post something or everything under the sun except showbiz news, haha! Whether related to cars, sports, gadgets and other matters!

Hope the schedules above will help you enjoy your journey towards financial freedom. For questions, just post it on the comments section, or reach me through email and facebook account at mjinoncillo@yahoo.com.

Final Step! Your Safety Nets!

By now, you already know two (2) out of the three (3) basic principles in personal finance, which are budgeting and setting up your financial targets. Today, I will be discussing one last principle, building your safety net, which I personally considered will play vital role towards achieving your financial freedom.  

The final step towards your financial freedom is building a safety net! The safety net will help you prevent any financial disasters as a result of illness, disability and death. In personal finance, there are two main types of safety nets, these includes the emergency fund, which is for short term needs, and insurance.

Do you have any emergency fund or any Insurance policy?  

If you have both, then congratulations! If you have at least one or nothing, then this next post is for you!

First, let us talk about emergency fund.  

In my previous post about budgeting, I suggest that you should allocate at least 10% of your salary to the fund. Emergency fund is a fund needed to cover any unforseen expenses, like car repairs, illness, sudden loss of job or other major expenses.  

How much will you set aside for the emergency fund?

My mentor and most of financial planners suggest that the fund should be at least 3 months of your living expenses. For example, if you are earning Php13,000.00 a month and 50% or Php6,500.00 of are allocated to your necessary expenses, your emergency fund should be at least Php19,500.00. I recommend placing the fund in an account that you can easily withdraw, like savings or checking account as this is very important in emergency situations.

After establishing your emergency fund, let’s discuss about Insurance.

A study about Filipinos showed that 8 out of 10 still prefer to save in banks than to take up an insurance policy. Experts explained that the main reason why Filipinos do not engage to insurance is not because they don’t want to have one but the lack of knowledge about the products and benefits of it.

What is an insurance policy?

An insurance is a contract or policy in which an individual or entity receives financial protection or reimbursement againts losses from an insurance company. (Source: http://www.investopedia.com/terms/i/insurance.asp)

What are the main types of insurance policies?

In the Philippine market, there are numerous types of insurance policies to choose from depending on your needs and preferences. For this post, I will just discuss the two types that I feel every Filipino should have. These are Long term disability and Life insurance.

• Long term Disability Insurance – this will help replace your income if you are unable to work in an extended time due to illness or injury. I sugget this kind of insurance to those on the workforce or don’t have any other financial resources than their job.  
• Life Insurance - is a necessity especially if you have dependents who will suffer in case of death. 

How will you know if the insurance is right for you?  

When shopping around for an insurance policy, you should look at the best package available that is right for you! You should consider the premium payments, claim process, coverage and other matters that will feel you comfortable.

When is the best time to have an insurance policy?

The best time is NOW! Why? Because your age is important! The premium payments are directly related to your age, the younger you are! The lower the premium payments you are required to pay! Another thing, most of the insurance policies is payable within 5 to 10 years. If you are 25 years old today, you will finish paying your premiums by 30 to 35!  

For comments, questions and topics you want to discuss, do not hesitate to post it below.

  

Budgeting... First Step to Successful Financial Plan

After introducing about Personal Finance 101 last time out.  We will now go to the key areas that will help you achieve your financial goals.

Personal financial planning involves three key areas which include the following:

• Budgeting and saving – which involves monitoring of your finances that support and enjoy your life;
• Choosing and setting your financial goals – choosing your financial goals, course and targets such as buying a car and a house, sending your children to school and preparing for retirement; and
• Having insured – building a financial safety net to help you prevent any financial disasters caused by illness or other personal tragedies.

For this particular post, we will be focusing on the very first and basic foundation for a successful financial plan.  It will be a little longer but I will assure you that this is one of the key to your financial dreams and targets.

Now, why we should have a budget? 

To be able to control and monitor our expenses, we need to have a budget.  For most of us, “budget” seems to be a nightmare every mid and end of the month.  When pay day or salary day comes, most of us say “Parang dumaan lang yung sweldo ko!” or “Sweldo na ba? Di ko ata naramdaman?” Funny, right?  But if we are serious and really want to be financially free in the future, we need to control our spending.

Is salary really matter in an effective budget? 

I will share you one important thing that my mentor always remind me.  He always says “whether you make thousands or hundred thousand pesos a month, a budget is necessary as it is the first and most imporant step you can take towards achieving your financial dreams”.   At first, I don’t understand what he is trying to say, but looking deeply in the statement reveals that it is the ability of one person to manage his/her money that separate the rich, the middle class and the poor families from each other.  

So, how can we control or manage our finances? 

Used an investment jars or simply “JARS”!

I first encountered the Jar system two (2) years ago in a blog.  It was introduced by T. Harv Eker (Please click here for full biography ).  Harv emphasized that the most important thing is to separate your income or salary into different accounts for specific purposes.  

I agree with Harv’s principle that it is better to focus your time and energy on allocating amounts of your income/salary regularly through JARS than spending your hard earned money without accounting for it.  Below are Harv’s concepts of JARS:

·        

•  Necessary Expenses.  Take 50% towards paying for your necessary living expenses.  These expenses may include your daily meal, transportation, rent and other costs necessary for you to survive.
• Long Term Savings Fund.  Take 10% for long term savings funds. This fund will be used for contingency measures  to cover unexpected expenses aside from your necessary expenses.  An example of it are car repairs and home maintenance.
• Financial Freedom Account.  Take at least 15% of your monthly salary and set a financial freedom account.  This account will be then invested to different investments available like stocks, bonds or properties.  Remember, if you want to retire as a Millionaire and financially free, “You should  never, ever, ever touch the money that you invest” even the profits that come from it.
• Education. Take 10% towards saving some money for your education.  Increase your value by taking up Masteral Classes, Seminars, Training Courses, buying books.  By doing this, you will not only invest in yourself but have a potential of earning more in the future.
• GIFT.  Take 5% towards gifts and helping others.  It is also important to value others and not just your personal life. 
• PLAY.  Take 10% and put it towards an account that you can do whatever you want with, but you HAVE to SPEND it and REWARD yourself!  Does something luxurious like buying gadgets, having a travel, go to malls and other things that you want to do.

To suit it on your style, you can change the percentage to be allotted to particular account.  For me, the concept of this one helps as you actually monitor your expenses and you also automatically saving portion of your income/salary (Long term and Financial Freedom Account)

I have implemented this system, not with actual jars as suggested by Harv’s, but by putting it in the excel file, and it really helps me to remember what my actual finances should be at the end of the month.

To see how it works, let us assume you are currently earning Php 11,000.00 net of tax salary per month.

		Monthly	Yearly	5 Years
Monthly Salary		11,000.00	132,000.00	660,000.00
JARS/Account
Necessary Expenses	50%	5,500.00	66,000.00	330,000.00
Long Term Savings	10%	1,100.00	13,242.43	67,148.67
Financial Freedom	15%	1,650.00	20,542.38	121,236.81
Education	10%	1,100.00	13,200.00	66,000.00
Gift	5%	550.00	6,600.00	33,000.00
Play	10%	1,100.00	13,200.00	66,000.00
Savings Account Return	0.70%
Financial Freedom Return	8%

The good thing about the system is that you are restricted to allot portion of your salary to the savings and financial freedom account.  As you can see in the illustration above, you will have an emergency fund of Php13,242.43 after a year and a financial freedom account of Php20,542.38.  Think about this, if you don’t have a proper budget, where these funds will go?  I will just leave you the answer to the question.

Next article will focus on Step 2.  Building your financial goals.

For comments and suggestions, just post it in the comment box below.

Personal Finance 101 (A Brief Introduction)

Majority of us do not have a deep knowledge or understanding about Personal Finance or in simplest term managing our money.   Maybe it’s because of our culture and we think managing our finances is such a deep word and not easily understood by all of us.

  

Don’t worry, I will try to explain it in simplest form as possible. 

As presented above , Personal Finance covers a wide variety of topics which may include budgeting, managing expenses, debt, saving, retirement planning and insurance among others. 

Now, why we need to understand it?  Understanding these topics will help us know how work they together and affect each other.  Also in will serve as building blocks and foundations to achieve your financial freedom at your own style! 

For the next couple of weeks will define the importance of budgeting, saving, insurance, investments and retirement planning.  These topics need to be explained separately for us to better appreciate its relationship to each other.  For example, we need to understand budgeting for us to have better savings and how those savings will help build our wealth strategies.  

Now that you know its meaning and importance, on my next post I will introduce you to one of the most important part of building wealth  which is Budgeting.  

For any questions and any specific topics you want to know, feel free to post it in the comment box below. 

Welcome to your financial freedom!  God Bless us all!