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I'm Proud to Be Financially Savvy: 6 Steps to Smart Spending

The rumors are true: Your money can work for you. You’re welcome.

by Christine Dychiao | Jun 13, 2018

Money talk can be a downer, but as many financially-savvy people know, it doesn’t have to. Here, we give you the key to guilt-free spending.

We’re with you: the topic of personal finance, debt and investments may be sending chills down your spine—because who wants to read about that next to stories filled with beautiful things and dreamy destinations? But allow us to shift your perspective: Money talk can be a downer, but as many financially-savvy people know, it doesn’t have to. What if I gave you the key to guilt-free spending?

Get the 4-1-1 from the most money-wise people I know to show you how to see the fun in funds. Because like any armed and ready Beyhive member who’s ready to plunk down the dough when Beyoncé comes to town, it pays to be prepared when that once in a lifetime moment presents itself.

HAVE A BUDGET

A budget is NOT a death sentence. It is also NOT about depriving yourself. It is in fact a useful tool for setting yourself up for a lifetime of financial security. According to Kris de Guzman, consultant and serial entrepreneur, “Your budget should reflect what you prioritize most in your life. You can enjoy little luxuries more when you know your hard-earned money has gone to things you truly value and has aligned with your life's priorities.”

If you’re looking for a benchmark, consider Alexa Van Tobel’s 50/20/30 rule. The Harvard Business School alum and founder of Learnvest.com breaks it down to 50% for essentials like food, rent or mortgage and such, 20% for savings and investments, and 30% for lifestyle – dining out, travel, shopping and personal care.



Eleanore Teo, author of Raising Heirs and Marketing and Operations Director at Caylum Trading Institute shares some practical tips. “Look at how much you can afford, review your history of expenses and start tracking your progress. Write it down or put it in a spreadsheet so you can immediately see where and when you are spending more than you should. That way you can scale it back.”

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Eleanore draws a parallel between budgeting and attempting to lose weight, “In order for you to face reality, you need to face the numbers.” Tough and true, and also absolutely necessary for your long term health.

PAY YOUR CREDIT CARD IN FULL

Former investment banker and now financial literacy advocate Rose Fres Fausto suggests the judicious use of credit cards. For her, it is best not to use a credit card to buy stuff or book a flight if one is unable to pay the amount due in full when the statement comes.

But what if you want to treat yourself for a job well done, and the cash isn’t here yet? Rose goes by this simple rule that she and her family members use as a yardstick for any luxury that they want to buy: "Buy luxury only if you can afford to buy 10 pieces of it."


For Rose, having a healthy sense of self-esteem goes hand in hand with financial responsibility. “Our kids should know that their worth is not measured by the stuff that they post or the places that they go to.”

She adds, “There is a certain degree of joy when you finally get yourself that luxury after you've worked hard for it, after you've waited, compared to getting it prematurely, especially if purchased with credit card debt that you will carry forever because you can only afford to pay the minimum balance.”

MORE THAN SAVING, START INVESTING

“We should not stop at the first Basic Law of Money, which is to pay yourself first.”says Rose. “I advocate investing for everyone.” She explains further, “The money that you will put in equity/stocks should be your long-term funds. Money that you will need in 5, 10 or more years. This is the asset class that gives the highest return in the long run and so everyone must participate because we all have long term needs.” Think of it this way. When Jollibee was first listed at the Philippine Stock Exchange in 1993, the initial offer price was P9 per share. That same share trades at the range of P250 to P300 today.

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If you think women are only good at budgeting and not investing, prepare to be blown away. Denzell Cham, an investment whiz and fund manager believes that women are wired to be financially savvy. “There is one lady right now here in The Philippines who is teaching and schooling me on how to make money from derivatives the right way. She has been doing this very successfully since the 1980s when she migrated to another country and had to manage her household, children and money with no helpers and no husband, because he continued to run their business here.” The proof? “When it comes to finance and investments, she's earned more money than her very successful entrepreneur husband did with their investments.”

Apart from stocks, consider investing in real estate as well. While there are dips in the market, it still provides dependable returns in the long run. Yvonne Jorgensen, an astute real estate investor who owns properties in Europe, Asia, and the US thinks of it as long term investments. For areas where the equity is slow to grow but with a big rental market, her strategy is simple. “Pay the deposit, let someone pay off the mortgage and wait for your investment to grow—albeit slowly but it will grow!”

RESEARCH

How does a beginner start investing though? You can start with as little as P5000 for a starter account at COL Financial. But how do you get to the point where you become confident in making sound investment decisions?

Eleanore, who comes from a family of stock investors, started trading at 18 but was lucky to have learned from parents who passed down the value of earning and investing early. Nevertheless, she did not stop at that. “I took up plenty of free seminars back then to stay informed regardless of how boring they may have initially seemed to a college student, and read plenty of books on the topic.”

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“Today, we have so many resources at our fingertips right now whether its an online course, Google and YouTube or a multitude of onsite free seminars or workshops to choose from. We need to learn about it before we get into it so that we know the difference between an investment method that can legitimately help us improve financially or if something is a total scam.” She cautions.

Kris, who started relatively late in her 20s while working in a multinational, was schooled by a colleague a decade younger than her, a brand assistant who put 50% of her salary in mutual funds every payday. “I wanted to invest early on—Ayala Land was just P2 a share, but my mind and heart were weak—I was too preoccupied with buying clothes or going out with friends.” Feeling embarrassed because she had nothing to show for all her years of working, she got the number of her co-worker’s agent and started investing in mutual funds too.  

To educate herself further, she read the One-Page Financial Plan by Carl Richards; attended financial workshops by COL Financial; and turned to older friends and experts who seemed to have a handle on their finances.  

Of course, experience is still the best teacher.


Denzell recommends beginning investors who cannot commit time and effort to buy a stock index fund with the lowest annual fees, aim for the long term and be willing to stomach a consecutive negative year or two. “As time goes by, it has been proven that a low cost index fund over 10 years or more will beat 75% of professional fund managers investment results. And if it takes time to make money, you should start immediately or as early as possible.” He explains.

The same goes for beginners who are willing to commit the time and effort. “The sooner you start, the sooner you will learn.” He suggests opening an investment account from reputable discount brokerages or reputable banks and learn from both the most successful investors and also the ones who failed. “You can learn from other people's success and failures as early as possible. Read their books if they have or talk to them if you can.”

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Rose suggests opening an investment account with the bank that handles your payroll account or with online brokerage firms where you can register your payroll account or the bank account where you put your earnings. “Decide how much you will invest on a regular basis, say monthly. Automate it. Let it grow and do not mind the ups and downs of the market.” She encourages.

GET INSURANCE

Most people are comfortable with pre-need plans, and that’s okay. While it shouldn’t be the main chunk of your holdings, its value lies in giving you peace of mind. Apart from your long term investments such as stocks and real estate, having medical insurance for health expenses, vehicle insurance for financial protection in the case of accidents and term life insurance to protect your dependents cushions the impact of unforeseen expenses in the short to medium term.


ENJOY YOUR MONEY

Once you’ve set aside funds to secure your future, feel free to do as you please with your disposable income. Kris believes her best investment was on improving herself. “I attended several life coaching sessions with The One Core. By discovering who I am and what I value, I developed a stronger sense of self, which really helps me make better decisions. This has greatly impacted my buying habits.”  

For Eleanore, “What is left is what you can consider as your reward for being an extremely responsible woman who has already taken charge of her family and her future. Do what you will and do what you love with it. Life is a balancing act. We need to know when to enjoy it so that everything we do to prepare for those moments is worth every penny.”

Denzell however cautions about going all-out with luxuries, even if you can afford it. While he grew up being indulged in first class travel and almost limitless shopping as a child by doting grandparents, he realized that investments last longer and provide a more interesting and beneficial life experience.

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His advice? “Spend more time, effort and money shopping for bonds, stocks and deposits. Prioritize your shopping allocation for them over travelling and personal shopping. Take comfort in the fact that the more bonds, stocks and deposits you have, the more capacity you will also have for luxuries.”


After all, when you have enough savings and financial assets built over time, you will not have to save for life's little luxuries. You can travel all over the world on a whim, without fear of having to dip into your retirement fund.

As my wise friend Jacqui says, “Just like any Net-a-Porter sale, good things come to those who wait.”

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