Frugal Living

How is your anxiety level when it comes to your future and retirement? It is quiet understandable how the economic turmoil, job displacements and increasing price of basic commodities is causing alot of financial anxiety to families and even single people alike. Here is a list of 5 steps on how you can begin to ease that anxiety, today.

1. Beware of scams. This is so obvious. With the wake of recent financial scandals in the US causing major collapse in finance related companies, not ot mention the collapse of CAP and Legacy Group. Be aware of scams and stay away from to-good-to-be-true deals. There are 3 ways you can do to ensure you never fall and become a victim of fraudsters. First, if you have a financial advisor, never issue a check directly to him nor give custody to your assets to them. Second, never give your advisor a Special Power of Attorney over your bank accounts. Third, insist on getting monthly statements from the custodian (place where your trading accounts are held) rather from your advisor.

2. Do not dare predict the future. I do not think there is a sure fire way of predicting the future. No one can predict the future, do don’t try or you’ll just drive yourself nuts.

3. Invest 5-10 minutes a month and know exactly how much you have spent. Just track your total withdrawals from your accounts, chargings made into your credit cards with your income. Get everyone in the family involved. It would be easier this way. Not only that, you would be teaching and showing your children how to manage household finances.Getting their involvement will also make explanation easier in case you needed to do some cost cutting in order to make ends meet.

4. Do not withdraw too much from your investments. According to CFP Neal Frankle from Wealth Pilgrim, if you have a balanced portfolio, it’s generally safe to withdraw 4% to 5% annually. If your accounts have taken a hit over the last 12 months you have to re-evaluate your withdrawal rate. Just because you could safely take let’s say P15,000 a month out of your account 12 months ago doesn’t mean you can safely do this now. If your withdrawal rate is too high, you run the risk of running out of money faster. If your accounts have dropped 40%, your withdrawals may have to be reduced.

5. Take time to understand your investment time horizon. It’s easy to be very anxious about finances these days – but it may not be necessary. Let’s say if you are 60 years old, and you intead to retire next year, you may take away or withdraw 5% of your investment account just to make ends meet. If you are female, you can expect to live another 20 years! You have to consider and ask yourself if your money will last as long as you will. If you think about it, a person in this situation really have plenty of time to invest and work on your own portfolio. Just because you are retiring next year, doesn’t mean your investments should. Your money still has plenty of years to work for you. Make sure you don’t squander those years by allowing your money to lounge around in low-paying investments.

These are all easy and common sense steps. If you take the time to protect yourself, refuse to try to predict the future, track spending, make sure your withdrawals are appropriate and understand your investment time horizon, you’ll be far ahead of the game. More important, you can eliminate financial anxiety.

With the summer break coming up, I surmise it wouldn’t hurt to start planning for the summer break. How do you usually begin planning for a trip? I usually begin mine with my budget. If I have more money to spend, then I begin my search for trips possibly to prestigious resorts in the country (read: Panglao Island Nature Resort, Balesin) or somewhere off the beaten track (read: Bolinao, Rizal Beach: Gubat, Sorsogon, or Pagudpod)

Here are Ways to Save on Travel

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Salve at Money Smarts has made a couple of compelling entries about what to do when your pre-need company fails. Amidst numerous collapse of pre-need companies not only in the country, these kind of failure makes decision making regarding educational, health plans and the like more complicated.

So what should you do when your pre-need company fail?

1. As soon as the closure of the pre-need company has been made kown to the public, make sure you double check with the Securities and Exchange Commission for official announcements regarding your pre-need company.

2. Ensure your documents are in order. Locate all original documents and obtain copies of plan contract, certificate of full payment or receipts of payments you have made so far.

3. As per the advise of Money Smarts, planholders of Legacy Consolidated Plans, Inc., Scholarship Plan Phils. Inc., and All Asia Plans Corp., must file a sworn complaint on or before March 31, 2009 . This will increase your chances of getting back your money, so do this as soon as possible. I have yet to confirm if there are class action suit against these companies as of yet…

4. You also need to present your updated and complete mailing address and contact numbers. Go to the Non-traditional Securities and Instruments Department of the SEC. In Ortigas, the landline is 584-6058 and the head of the department is Director Jose Aquino.

5. Once the courts have approved the dissolution of the company, the SEC will appoint a liquidator and it is with this company that you will claim what is due you under your policy contract.

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I always encourage my children to eat vegetables. One of the surefire way to get them to eat variety of vegetables is to keep on serving them on the table even when they said they hated it. One of the advantages of living in a rural area is that local vegetables are cheap. I can buy a huge bundle of pechay here for P5.00, and a kilo of camote for P10.00. These are just some of the cheap vegetables organically grown here.

Green leafy vegetables are generally cheap. They can be versatile too. I usually like to saute those chinese kangkong with garlic and a dabble of oyster sauce. To add some punch on the vegetable dish, chop one sili, but scrape the seeds out if you are serving the dish to children.

Eggs is something I cannot live without in the kitchen. Eggs generally cost P5.00 here in my rural town, so I tend to buy eggs by the tray from those huge egg stores in town. Rather than buying eggs from the sari-sari store, you can save more than P20 if you buy them by layer.

Fish is still cheap in our part of Mindanao. One can still find a kilo of galung-gong for P70 here. Since we live in a coastal town, fish is generally the main source of protein. In our home, I cook fish generally 80% at most time. We have avoided chicken altogether because my children are allergic to them.

Fruits. You can buy the fruit in season to save money. You can save more from buying bananas, papaya, pineapple from the local fruit stands as against to imported grapes or apples.

As for rice, we have cut down our consumption by 1/3 because I started dieting again.

Do you have other frugal tips to share?

The year is about to end, and I am determined to have a better year next year financially. Having started new accounts that will serve as my piggy banks for several funds, I am more than ready to begin a more productive 2009.

Here are a few pointers in determining your financial goals:

Set your goals

Like me, I have set more specific goals this year. Like for example, my main bread and butter is coming from the lease of our home in big Manila. But the lease contract is expiring on the middle of this year, hence there is a need for me to prepare for a few months of no income. I have created accounts wherein I have little by little set aside money to cover for future expenses like:

Short term goals

1. rental money for the house we are leasing now in rural Mindanao (good for 7 months)

2. money to pay electricity bills (good for 7 months)

3. money to cover phone bills (good for 7 months)

4. money to cover groceries (good for 5 months)

Long term goals

1. Continue to contribute P5,000 per month for my children’s ITF funds.

2. Start saving for retirement

3. Start saving for a lot in rural Mindanao

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Since I have decided to skip gift giving this Christmas except for a more practical gifts to the children, I am shocked that even at the economic hoo-haas, SOME people are still giving away extravagant and obsence gifts according to the recent article by the Money Comparison Experts at Money.Co.UK,

Here goes the list: (if you are even interested anyway…)

1. The $1.6m Christmas tree: This 24 karat gold tree, encrusted with 240 jewels and weighing more than 21kg is on display in a jewellery shop in Japan.

2. Movida’s Christmas cocktail: The Movida Club, a favourite hangout for celebrities, footballers and the ‘born rich’, holds the record for the most expensively pointless Christmas Cocktail. The drink, which blends Cristal Rose champagne, Louis XII Cognac and edible gold leaf, costs $71,011 a shot and is ironically named Flawless.

3. The Krebs Glas Lauscha bauble: Not one for houses with children, this bauble is covered with intricately crafted gold and diamond detail, and it’s made of glass. At $31,000 each, they had better come wrapped in a bit more than tissue paper.

4. Ferrari go-cart: A must have for spoilt kids the world over, this faithful replica of the real thing will set doting parents back a mere $50,000

5. The his and hers chocolate portrait: No doubt designed with chocoholic art lovers with too much time on their hands, this photographic portrait rendered in chocolate goes for $110,000. At least the money goes to charity.

6. Diamond Barbie: ‘The world’s most expensive Barbie’ comes in a gown encrusted with 160 De Beers diamonds and costs $85,000. Presumably it’s not for kids, but who knows?

7. The M&S Christmas Hamper: Stuffed with the exclusive food and drink for all over the world, the Marks & Spencer hamper retailed for $1,500. It doesn’t seem to have hit the stores just yet this year…

8. Vertu mobile phone: If ‘gadget crime’ isn’t an issue, then the diamond encrusted Vertu mobile phone is just the job – that is if you have about $75,000 to spare.

9. Amour Amour Dog Collar: Not to leave out the least grasping member of the millionaire family, this diamond dog collar costs a cool $1.8m.

10. 3D Motion Simulator: The ultimate in big boys toys, this $300,000 simulator puts Nintendo and Sony in their place, allegedly.

Ofcourse all these gifts are nothing BUT frugal so, let’s heave a sigh of relief or envy perhaps and yes, move on…

How do you usually prepare for the celebration of any of your family members?

I know this is a hasty generalization, but most Pinoy tends to break the bank in order to celebrate their birthdays. But with this strained economic time, lavish birthday parties is simply out. So how does a frugal mom plan and celebrate their children’s birthdays?

Honestly, not counting my children, I do not celebrate my own birthday with food anymore. Since children are still enamored with birthdays and cakes, I plan and celebrate my children’s birthday to the tee and ofcourse, breaking the bank is not an option.

Plan ahead.

Like any event of the year, I allocate funds for birthday celebrations 3 or so months before it happens. Since my children are still young, their social circle is smaller and the number of guests are minimal. And since it is my children’s birthday, I do not control the invitation list. Meaning, the guest list only contains my children’s close friends. No extra acquaintances. This is your children’s birthday– not yours. You will save more this way because I promise, if you have your own set of friends and your husband’s set of friends in your children’s party, the number of mouths to feed will increase not to mention the booze. A children’s party should remain a children’s party.

Make a Realistic Spending Plan.

Create a menu and allocate for them, then base your future birthday plan on the menu.

Example: (DAUGHTER’s BDAY)- estimated guests- 20 children

Allocate Funds and Stick with It.

Since you have a spending budget for the birthdays, you can allocate funds for it 3 or so months prior. Since the budget is P2,670 or P3,000 for the food, you might want to allocate and save for P3,000 per birthday. In my case, I have 4 children, so I have to allocate for P12,000 a year for birthdays.

I have opened a savings account for celebrations like these. Since P12,000 is alot, I pledged and allocate P1,000 each month for the birthday funds. To make things easier also, I have automated my contributions, and I have authorized my bank to deduct P1,000 every 7th day of the month from my main account to the events fund. This makes everything hardly noticeable. You can make the same plan for Christmas noche buena celebration and other celebrations for the year. Darn, if I can do this, anyone can…

Do you have other spending and saving tips? Share them with me at frugal.pinoy@gmail.com

One of the key in having a successful budget spending plan is having a weekly menu and following it to the tee. So, how can you effectively make a weekly menu? In my case, I only shop once a month, so instead of a weekly menu, I make a one month flexible menu. Flexible meaning I am amenable to inter-changing the menus since I have 4 children to feed and sometimes I heed to their requests once in a while.

To avoid protests during meal time, include your children with the menu planning. Make the menu planning a family affair. Give each of your children a chance to suggest their special dish. Not only that, you can include a kitchen helper schedule in the menu. You might also want to include your children’s favorite dish once or twice a week. Just make sure they know that you have the last say on this. And to be able to accomodate your children’s wishes, make sure you make your meal combinations wisely to avoid overspending.

The advanatge of menu planning is simply staggering. Having a plan not only removes the stress of not knowing what to cook for dinner, but it will also help you from not eating out or ordering dinner over the phone. Not eating out will obviously help you maintian a healthier and leaner budget. Menu planning will also make shopping easier, not to mention, time saving and yes, cheaper since you will only buy what you will need for the duration of your menu. Having control with your day to day consumption will free you from the stress of meal preparation daily. Not to mention that when you have a shopping list to follow, the risk of impluse buying can be avoided.

If you are busy mother, one of the advantages of meal planning is that you can cook some meals ahead of time and save time doing so. You can prepare your stock in the freezer. Or in my case, I marinate my daing na bangus and keep it in the fridge ready for frying. Doing so will save me spices and seasoning. Not to mention that hey, the bangus cooked this way will guarantee clean plates and tons of rice…

My cellphone broke the other day. Oh, perhaps that was an overstatement since it still work but the other half just sort of hangs out with only its internal wiring holding both shell of my very old Nokia Clamshell phone I inherited from my dead mom. I am so tempted to ran to the cellphone store and buy another one, albeit cheaper phone. Some candy bar phone that sends and receives messages and calls… I can dream can’t I?

Anyway, I went to the city today with my son to see the doctor. That was another story, but after we went to the hospital clinic, I decided to give in to the urge to see some phones. Bad idea…not exactly…

I saw a myriad of phones and sales ladies wearing Santa’s bright costume including short red skirts. The store was a buzz and to think that the US is in recession actually did not stop people from giving themselves immediate gratification in getting some shiny cellphone that can play MP3s and can take pictures.

I actually took the time to observe the activities around me and saw that the store is actually filled with customers and almost all sales persons are attending to wannabe cellphone owners. Money doesn’t seem to be the problem, or we are simply just being Filipino. Eh?

I know that is what we Philosophers call hasty generalization, but don’t get me wrong, Filipinos are probably the worst when it comes to celebrations and holidays. Why do you think we tend to use holidays and other events as an excuse to splurge? Have you bought something that you totally thought was great when you were in the store and after a month, the item you bought started to accumulate dust somewhere around the house? When was the last time you actually bought something you did not even need?

Ofcourse, I always say that stores and the mall are there to tempt us to happily part with our money. Inexchange for our money, we buy items that makes us happier and content. You might say, hey, I really needed that iPod! Or that new phone. But sometimes our urge to splurge carry alot of meaning. Perhaps you felt a little annoyed and pressured at the office and just the thought of buying something expensive gives us some sort of high.

I can understand this alot. Before I separated from my husband of 7 years, I used to use shopping as a means to get out of my dissatisfaction on my married life. This holds true to alot of women. We tend to use shopping, going to the groceries, buying clothes we did not even wear, and silverware that ends up under the sink.

So how can we learn to separate our emotional needs from our finances? I actually learned about this the hard way, but hey, its better late than never, right? So, here’s the trick, when you are upset with anything, do not go out of the house or if you do, go somewhere to unwind somewhere where you do not need to spend anything. Go take a walk at the beach, the park or even the library. Stay away from the mall or even those expensive designer lattes.

Use other ways to curb your own frustrations by gardening, or even taking a long quiet bath. If you are finally settled, you will probably forget the reason why you wanted to buy anything in the first place.

Practice and relax before going to shopping. A calm person in the mall is a reasonable person. I promise you, you will more likely spend less.

So what about the cellphone? I ended up going out of the store with a smile on my face and yes, with my money in tack intact and yes… a half-broken phone. (smile)