I have read so many websites, blogs, and books. The tendency is to be confused with contrasting teachings of these self-made financial guru’s. With the current financial crisis, many are now questioning what the best move for their hard earned finances. My twenty five cents? It depends on what applies to you. More confusing? Let me share my own personal experience and try to see if it fit yours.
1) Save first. This is the sure ball way to attain financial growth, albeit the slowest. Before dipping your hands to investment, build-up your emergency fund at least 6 months worth of living expenses. This will cover food, shelter, clothing, and other regular expenses for the month in case of emergency.
In my case, I already have 6 months worth of reserves tucked in a Time Deposit, but I’m planning to shop around as my TD rate is not earning enough. The idea is to have readily available cash in case of urgent need, so don’t place it on Mutual Fund and Stocks because you cannot withdraw your money immediately. Also, if the stock market crashes your reserves will definitely be depleted. Having this reserve stashed in a bank will also give you peace of mind if your investments turned sour.
As to the mode of savings, paying myself first (putting aside an amount before spending) works for me. It is very workable. I started when my salary was still Php10k. Once you have the habit you will get used to it. This system limits me to spend, and I have a rule to use my plastic on weekly grocery items only, which gives me an almost constant bill at the end of the month. It maybe hard, but you have to look the other way when you pass buy Starbucks, iPhone store, Macbook outlet, or Nokia center.
2) Invest the rest.
After building your 6 month reserves, it is now time to invest. There are lots to choose from, but my twenty five cents is to try it one at a time. By trying it, you will get the actual feel of doing it, and then you can decide if the investment vehicle is right for you or not.
I started with a government corporate bond. It is tax free and the rate that time was 8% per annum (now it is only 5%). Because my salary was very low I only managed to place P10k. P800 was not bad earning for starters, right?
Then I tried stocks through a friend (rider). I was able to earn 30% of my investment (around 10k also). I tried it again but bear market came. Now, I’m still waiting for the market to turn around, but my investment is also not that big.
Then I tried Mutual Fund. I tried Philam through GSIS kinabukasan fund, but their service is not great. However, the fund (a balanced fund) gave a fantastic return last year. Now, it is affected by financial crunch, and all I see on ICAP website is red. Again if you have the patience for their service (delayed statements, not responding agent), then try it.
What I enjoyed most is Sunlife. They have online notification via email, regular statement, and clear prospectus. I’m tempted to put all my money there, but diversification rule says do not put all your eggs in one basket. Maybe its time to shop around for other MF when the market bounces back.
3) Business. Or sideline/part-time job that can increase your income. What’s hot now is seasonal business. Christmas season is a great opportunity. It makes you earn for the season but not tie you up for the rest of the year. Join bazaars. Buy your stuffs from Divisoria or Quiapo. Your doing your costumers a favor by bringing their products closer to them.
Here’s my initial twenty five cents on personal finance. I will add more soon.
