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.

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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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

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)

After my marriage fell apart, I was shocked to the core to realize that I was penniless. Stripped of any access of our family account, I was almost to my knees when I knew that I should have prepared for this. But that was the should-have-beens. I am now separated from my husband and beginning to learn the basics of saving for the future.

Here are the basics of saving and how I managed to jumpstart my children’s fund and my very own emergency fund.

Make Savings A Habit

Saving should be a habit. The easiest way to save is to set aside a portion of your income regularly. Pay yourself first. Allocate the rest of the money as you do in an envelope system or whatever system you think works for you. In my case, I have an accordion file that I bought years ago from the bookstore. I slip in allocated fund for everything I needed to pay for the entire month. Each pocket is appropriately labelled, ie. labandera, electric bill, phone bill, transportation, children’s allowance, groceries, house rent, etc. As soon as any utility bill or services has been paid, I slip the receipt on the pocket as proof of payment, and later, the payment will be entered into my expenses log via Quicken.

Automate

You can check with your bank if they can set up your payroll account so that your savings will be deducted every payday. That way saving becomes automatic for you. In my case, since the rental of my house in Manila goes into my main account, I have authorize the bank to transfer a percentage of my income to my secondary account– the account where my debit card is connected. This way, my emergency fund is tucked away in another account, and the money in the debit card is my spending cash for the month.

Start Small

Start by saving an amount that you’re comfortable with from your salary – 5 to 10% is a good bet for a novice. Don’t be overzealous and set aside half of your pay immediately; saving is a skill that you have to develop over time. You would have to unlearn a lot of wasteful spending habits first before your nest egg can truly grow. I started my own emergency fund for P500. I have now increased my allocation to P10,000 per month. I am more earnest in keeping with my pledge so I can be free from financial anxiety.

Think Long-term

To sustain your progress, your savings program should have a purpose. Your mindset should be that the money you save now will be used for your expenses in the future: your child’s college tuition, your safety net should you become sick, or your retirement fund when you’re no longer working. Knowing that the money you are saving will be used for your family’s well-being will keep you on track and motivated.

Do you have other money saving tips? Share them here by making a comment or email them to me at frugal.pinoy@gmail.com

After my marriage fell apart, I was shocked to the core to realize that I was penniless. Stripped of any access of our family account, I was almost to my knees when I knew that I should have prepared for this. But that was the should-have-beens. I am now separated from my husband and beginning to learn the basics of saving for the future.

Here are the basics of saving and how I managed to jumpstart my children’s fund and my very own emergency fund.

Make Savings A Habit

Saving should be a habit. The easiest way to save is to set aside a portion of your income regularly. Pay yourself first. Allocate the rest of the money as you do in an envelope system or whatever system you think works for you. In my case, I have an accordion file that I bought years ago from the bookstore. I slip in allocated fund for everything I needed to pay for the entire month. Each pocket is appropriately labelled, ie. labandera, electric bill, phone bill, transportation, children’s allowance, groceries, house rent, etc. As soon as any utility bill or services has been paid, I slip the receipt on the pocket as proof of payment, and later, the payment will be entered into my expenses log via Quicken.

Automate

You can check with your bank if they can set up your payroll account so that your savings will be deducted every payday. That way saving becomes automatic for you. In my case, since the rental of my house in Manila goes into my main account, I have authorize the bank to transfer a percentage of my income to my secondary account– the account where my debit card is connected. This way, my emergency fund is tucked away in another account, and the money in the debit card is my spending cash for the month.

Start Small

Start by saving an amount that you’re comfortable with from your salary – 5 to 10% is a good bet for a novice. Don’t be overzealous and set aside half of your pay immediately; saving is a skill that you have to develop over time. You would have to unlearn a lot of wasteful spending habits first before your nest egg can truly grow. I started my own emergency fund for P500. I have now increased my allocation to P10,000 per month. I am more earnest in keeping with my pledge so I can be free from financial anxiety.

Think Long-term

To sustain your progress, your savings program should have a purpose. Your mindset should be that the money you save now will be used for your expenses in the future: your child’s college tuition, your safety net should you become sick, or your retirement fund when you’re no longer working. Knowing that the money you are saving will be used for your family’s well-being will keep you on track and motivated.

Do you have other money saving tips? Share them here by making a comment or email them to me at frugal.pinoy@gmail.com

Grocery shopping is actually one of the easiest way to save money. When one is shopping, you always have a variety of choices to choose from. Products have become more competitive and cheaper brands does not necessarily mean ineffective products.

Here goes:

1. Do your shopping once a month. Small trips are expensive. Less trips to the store means you save on transportation and gas.

2. Make a shopping list. And since household shopping is indispensible, I bet my savings that you have a flexible grocery list already and can run along the aisles of the grocery store even with your eyes covered. Make sure to write down the estimated price (base it on previous month’s purchase) and tally everything so you would know more or less how much everything would cost you.

3. Double check bar codes and prices as declared on the shelf. This is important. Its known that the bar code system in the shops are convenient for the stores and not necessary for you. Double check the bar code at the back of your items against the code and price on the aisle.

4. Try store brands. Many store brand items actually come from the same factories as named brand items. They are just packaged differently. Store brand items can save you 20 to 30%.

5. Stock up. Buy and stock up items you know your family consistently consume like eggs, rice, milk, noodles, oil and diapers if you have babies.

6. In season items. When it comes to fruits, buy fruits that are in season and shy away from imported fruits and vegetables. Like I say, buy local.

If you have other frugal shopping ideas, please email me at : frugal.pinoy@gmail.com