Ways to be debt free: More on Savings Fund

source: http://www.dailymail.co.uk

Remember my blog post Allocating your salary or Earnings?

I would like to expound more on the topic on savings. I guess this post will make big wake up call for most of us.

Now lets understand how a normal YOU would do upon receiving your paycheck. First of all even before getting your paycheck you have probably already made plans where will you and your friends will go on gimmick. Or maybe you already called the store where the bag you wanted is being sold and asked them if they can reserve it for you till the night of payday. Or maybe your bags are already pack for a weekend getaway just waiting for your pocket money.

All of those are not bad, you work for your salary so you deserved to spend. So on your pay day you get your check and you invent all excuses to cash that check(if your employer don't do direct deposit). And then you pay the minimum required payment of your credit card, separate the money for whatever your plans for the weekend and the balance you give it to your wife, mom, or housemate for the utilities.

Yup that is YOU. Living from paycheck to paycheck.

You will tell me it is the only way you can de-stressed from the the toxic office or work you have. Or it is only the escape you can afford. Yeah I get you, it is but again why rush to this when you can actually just slow down. 

There is no need to go to out of town just to escape the toxic work or probably your toxic house or maybe the toxic people who will be part of your weekend. I know what you mean, I am human too I did and I am still experiencing the toxicity of people and everything but that action is just short term.

After the weekend getaway, after the buying spree or malling, or even after the gimmick where do you find yourself again? Isn't it you are back to the same toxic work that you hate, the same toxic people that you just escaped or left behind for the short moment, or even the same toxic life that you have. 

I have a suggestion. But let me warn you that this is not a quick fix and is not applicable to all. Do you understand the Law of Diminishing Returns?

Law what?

Yup its a law called Law of Diminishing Returns. This law is in connection to savings. 

Let me first tell you what is Law of Diminishing Returns mean.

Law of Diminishing Returns states that:

Decrease in the marginal (per-unit) output of a production process as the amount of a single factor of production is increased, while the amounts of all other factors of production stay constant.  

source: http://www.relationship-economy.com

Ok in layman's term: The satisfaction you get decreases when a particular factor is increase given that other factors remain the same.

For example as you increase your weekend getaway as time passes(meaning you increase the number of your getaway because you feel stress out every week in your work) it will seem that your excitement to go and your enjoyment going out lessens and at some point you don't feel your de-stressing at all. In the local term this is what we call "nakakasawa."

Back in my college years this topic was discussed in my economics subject(where were you when this was discussed?). The most example us is the bottomless Coke. In a certain restaurant there is a Coke machine where all customers who pay are given a single size cup and they can refill as long as they can and remember no sharing. The maximum a normal person can drink is up to 5 cups. With this restaurants already included the cost of this to each combo meal that comes with a bottomless drink. If you all already fed up at 3 cups of Coke they win because in reality you paid for 5 cups(remember the cost of such bottomless drink is included in the price you are paying for the meal) and if you go beyond 5 cups(you sure have a big storage there) they lose.

source: http://www.coca-cola.com

We have to apply such to our savings.

Yes you save for the gateway or anything that you want to buy that you think you deserve but do you think buying and buying such will make you happy in the long run? Probably for some yes specially for those who collects bags and treasure them like their babies. But it is a truth that you would eventually realize that it is a pointless spending when you don't find that happiness that such spending once brought you.

Here is the solution that I am talking about. Why don't you save and save and when it seems that you don't have that much liking already for the getaway or that bag, or that gimmick you set that saving aside for something more permanent? We call this delaying gratification.

Yup so many people and gurus have already talked about this and again I am reiterating their advice and adding something more; why don't you save up for something permanent. 

Is your work giving you stress? Then why don't you save up so that you wont work in that toxic work anymore? Why don't you be the boss of your own company. I know that is more stressful. Yup it may be more stressful running your own business but in this one you have control of everything.

If you are in my generation you night have also watched the Fullmetal Alchemist anime. Yup remember the rule of Alchemy: Equivalent Exchange.

source: http://media.photobucket.com

source: http://fma.wikia.com

Such is very true. What ever you save up has a value. Everything in this world is not free. If you want a comfortable life you have to sacrifice now to achieve it in the future. But then you ask me how come others are so rich that they don't worry and it seems they don't observe such Equivalent Exchange. To tell you the truth they actually did exchange something for what they are enjoying now.

Besides them sacrificing something along the way they have learned how to make money work for them that it came to the point that even if they are sleeping their wealth works for them a billion times harder than they did. 

How about you will you stay living from paycheck to paycheck waiting for the Law of Diminishing Returns to get at you and will feel it seems your stuck in a rut or will you be brave to sacrifice something in exchange for something so that you will be happy the rest of your life? 

I am working on it I hope you are also working on it as well.

Ways to be debt free: Allocating your salary or earnings

source: http://blog.mdsuburbanhomes.com

One way to be able to get out of debt and start investing is allocating your salary or earnings. 

Wait what did I say "allocating your salary?" Yup you can save and allocate your salary even if your salary is small. If you haven't read my post about starting investing even with a small salary click here.

The problem with most of us is cash management. Sometimes when we get our paycheck we pay it all to our debts leaving us cashless until the next paycheck thus forcing us to borrow so that we can pay for our daily living. Others save some but eventually touch that set aside money because some "sale" is so attractive(click here). Others put all their money in time deposit thus they are unable to get it out when they encounter emergencies thereby forcing you to borrow again. 

See my point.

That is why you and I have to allocate our resources or to put it direct our limited cash so that we have something to pull out without affecting other things that need cash. So how do you allocate your limited cash so that you wont be trapped and end up borrowing?

It is so surprising that the Holy Bible has something to say about allocating your money:

Ecclesiastes 11:2 

Give portions to seven, yes to eight, for you do not know what disaster may come upon the land.

It does not necessarily mean that you have to divide your salary or earnings to seven or more upon receipt but it is a good practice to do so. As for me I have initially divided it into six parts I called funds. You can make it into 4 or 8 but that entirely depends on you but as for me I am sticking to six and probably add another in the future when the need arises. Also it does not mean that each category should be equal because we have different needs base on our lifestyle, our age, and other factors. 

The concept here is to allocate a portion to each category or "funds" so that we have something ready for anything that may come up or befall us. As the quote in the movie "Mechanic" says "Amat Victoria Curam" which means "Victory Loves Preparation"

Let me share to you why I divided it to six:

One: Retirement Fund

This fund is for my retirement in the future. The value of your money now will be decreased as time progresses due to what we call inflation. In order to fight inflation we have to make money increase so that we can cope up with inflation. This fund could be set aside form time to time and when a certain amount is reached will be invested in stock, mutual fund, or a time deposit that gives a return above inflation.

Two: Investment Fund

You might wonder why do I have an Investment fund when I already have a Retirement Fund. Well why only save for retirement when we can increase more our current finances by investing it to other financial  vehicles like small business, stock investment, debt investment, or short term placement of cash that gives a fair return. This way you can have extra for the current time and at the same time add more to your already existing Retirement fund any extra you may make from this fund.

Three: Savings Fund

Again it may seem like this is already a duplication but hey savings fund are monies you set aside also which you can pull out for an opportunity that may give you a nice return. Also you can use this fund if you are saving for something that you have been dreaming to buy or take like a vacation in Bali or a 21 inch flat screen TV or maybe the latest laptop or an Ipad. This is the fund where you can put it and wait 

until it reaches the amount you need to purchase your wish list things.

Four: Emergency Fund

Yup this one is for those things that just pop up right in times you are not expecting like sudden hospitalization, disaster, and other "beyond control" events in our lives.

Five: Expense Fund

This one is self explanatory. You live thus it is logical that you spend money for some expenses that you do in order to live day by day. This might be the one with the biggest percentage of your salary or earnings.

Six: Tithes or Donations Fund

Hey you got to share your blessings. Most of the time you pass the opportunity to bless others because you don't have anything left for it so to make sure you bless others with your wealth you allocate some for this.

As for the additional fund I am thinking of creating a fund for insurance. This one might be another duplication with Emergency fund but this one is for something that we can setup so that besides the money save in the Emergency Fund we have more funds to cover such unexpected expenses. I am still in the exploratory stage for this. My beloved has introduce me to insurance and we are looking at the best options available out there. There are so many types of insurance thus a careful study must be done. Though I remember that my first investment has an attached insurance up to 60,000.00 pesos that wont be enough to cover me up as I aged.

Again save, allocate, and make these funds grow to outdo inflation. 

"Amat Victoria Curam"

Ways to be debt free: Keeping your goals

 source: http://creditrepairtipsandadvice.com

I guess this is the last step in achieving debt-free status(or should I say this is the unending step) that you and I has to do. Let us recap the steps:

1. Accepting that you  are buried in debt

2. Make an inventory of what you have

3. Discipline

4. Setting Goals

If you think the rich has no problem keeping their goals because they have a lot of money your wrong. People who are truly rich(as differentiated who are just rich) struggle the same way simple person like you and me  in keeping one's goal. 

But there is a difference.

Persons who are struggling to keep their goals who are buried in debt worry asking themselves where in the world where will they get money to solve their debt problem. 

 source: http://www.learnvest.com

Truly rich people on the other hand worry how are they going to generate money from their money to pay off current spending.

 source: http://mamacanon.blogspot.com

If you have read Robert Kiyosaki or Bob Procter this is what they call "the role of money" in one's life.

For people buried in debt or financially illiterate, they work for money. Day in day out even though they have earned billions or even trillions but they are still buried in debt so they keep working for money thus they become slave of money.

 source: http://i38.tinypic.com

What should we be doing then? We must make money work for ourselves by becoming the master of money. 

You might blurt out the Bible says "Love for money is the root of all evils" and I agree with you so you ask why then you want me to be the master of money?

Here is one truth: Money is neither good nor evil, its the person using it that is good or evil.

So let us make things straight, whether you are rich or buried in debt we face the same struggle in keeping our goals. If you are debt free your goal is to get out of debt. When you do get out of debt and become rich never ever stop keeping your goal to be debt free. Continue that goal and whatever extra you have save it and make it work for you. 

 

When you finally become rich my friend please do me a favor. As the master of money use it wisely. 

There is another truth I have learned and I want to share it to you: The best way to enjoy blessings is to share it. 

When you are at the giving end it feels so good and it creates that "ABUNDANCE MENTALITY" thus you struggle more not to get out of debt(because you are not anymore) but to make money work for you so that you can give more.

Ways to be debt free: Setting goals

Its a new year and most of us have written their new years resolution which I believe you gave up on following on Jan 3, just kidding.

source: http://www.diabetesmine.com/

Many of us can't and won't be free from debt because in the first place it was never our goal to be free from debt. That is a very absurd thinking you may say but  it is actually happening. 

 source: http://blogs.ktk985.com

So in order to not to fall to deeper manholes of debt set your goals. Put a deadline(I know nobody wants a deadline) and follow it to the letter.

 source: http://blog.madd0.com/

 It doesn't have to be a giant step goal. As Confucius said "A journey of a thousand miles begins with a single step." Take it one step at a time.

The questions one has to answer are these:
1. When and how often to save?

Save in a week, in a month, or in every two weeks. 

2. Save how much?


20 pesos, 50 pesos, 100 pesos.


3. How to save.


Stop buying gourmet coffee on the way to work, cutting the cable, selling old stuff, starting a small business on the side, continuously setting aside money for a loan already paid, and so much more

Many of us really don't save. Saving doesn't have to be a one time big thing like saving your entire paycheck for this month in order for you to buy that latest phone next month.

source: http://www.chowking.com/home

 

Save little by little.  If you buy a Chowking breakfast meal with a halo halo the next time only buy the breakfast meal. And after buying only the breakfast meal for two weeks eat at home before going to work. 

source: http://www.telegraph.co.uk

Or if you smoke a pack of cigarette a day only smoke half the next day and the other day smoke 1/4 of a pack and on the other 1/8 of the pack until you only smoke one stick a day and probably with God's grace totally quit smoking in 6 months.

Saving abruptly just gives you a withdrawal syndrome so do it little by little until your body adjust and accepts the new lifestyle.

source: http://www.moneytomoney.org/

P.S. I have conceptualize some book project regarding savings. I will share it as soon as I start the very first pages of that book. And like I have said I am also doing it one small step at a time. I hope to see you downloading it once it is out... promise its free :)

Ways to be debt free: Setting goals

Its a new year and most of us have written their new years resolution which I believe you gave up on following on Jan 3, just kidding.

source: http://www.diabetesmine.com/

Many of us can't and won't be free from debt because in the first place it was never our goal to be free from debt. That is a very absurd thinking you may say but  it is actually happening. 

 source: http://blogs.ktk985.com

So in order to not to fall to deeper manholes of debt set your goals. Put a deadline(I know nobody wants a deadline) and follow it to the letter.

 source: http://blog.madd0.com/

 It doesn't have to be a giant step goal. As Confucius said "A journey of a thousand miles begins with a single step." Take it one step at a time.

The questions one has to answer are these:
1. When and how often to save?

Save in a week, in a month, or in every two weeks. 

2. Save how much?


20 pesos, 50 pesos, 100 pesos.


3. How to save.


Stop buying gourmet coffee on the way to work, cutting the cable, selling old stuff, starting a small business on the side, continuously setting aside money for a loan already paid, and so much more

Many of us really don't save. Saving doesn't have to be a one time big thing like saving your entire paycheck for this month in order for you to buy that latest phone next month.

source: http://www.chowking.com/home

 

Save little by little.  If you buy a Chowking breakfast meal with a halo halo the next time only buy the breakfast meal. And after buying only the breakfast meal for two weeks eat at home before going to work. 

source: http://www.telegraph.co.uk

Or if you smoke a pack of cigarette a day only smoke half the next day and the other day smoke 1/4 of a pack and on the other 1/8 of the pack until you only smoke one stick a day and probably with God's grace totally quit smoking in 6 months.

Saving abruptly just gives you a withdrawal syndrome so do it little by little until your body adjust and accepts the new lifestyle.

source: http://www.moneytomoney.org/

P.S. I have conceptualize some book project regarding savings. I will share it as soon as I start the very first pages of that book. And like I have said I am also doing it one small step at a time. I hope to see you downloading it once it is out... promise its free :)

Ways to be debt free: Discipline

source: http://drunksongs.blogspot.com

So here I am again talking about being debt free, well who doesn't want to be debt free?

To recap we discussed acceptance that one is buried in debt and one has to take inventory of personal assets and liabilities.

So we start the third one which deals with what we call discipline.

As usual lets define discipline and I got this definition from http://wordnetweb.princeton.edu

• S: (n) discipline (a system of rules of conduct or method of practice) "he quickly learned the discipline of prison routine"; "for such a plan to work requires discipline";
• S: (n) discipline (the trait of being well behaved) "he insisted on discipline among the troops"
• S: (n) discipline (training to improve strength or self-control)

Why one needs discipline to be debt free? Well in all activities we human beings do we must always have this trait. To be disciplined means having a system that one follows strictly to achieve self-control.

Discipline will be one's day to day guide. It will be the reminder that one will see the moment they wake up from sleep. It is self control.

I know its hard to not to tame the "buy it now" attitude of most of us. We buy things we don't essentially need now even if we don't have the capacity to purchase specially when you are buried in debt. 

The very best means that I made to tame myself from spending money is to see where it is going and how much is it as time passes by. I got this idea from Bo Sanchez's book   Simplify and live a Good life. 

 source: http://www.shepherdsvoice.com.ph

When you see how much money you are spending you will have thoughts  of unbelief after seeing how could a small amount spent for something insignificant  became budget eaters when presented in accumulated basis and at the same time how will one appreciate on savings made on stopping or avoiding spending on unnecessary things.

source: http://www.thirstyblogger.com

Here is what you gonna do. Buy a notebook small enough to fit in your pocket or better yet if you have those Starbucks planner use it for this one. Carry a pen always and the moment you make a cash out or spending write it down. Put the date, the nature of spending, and the amount. Do this for all spending you make including credit card purchases.

source: http://squatchabyss.blogspot.com

After a week list down this spending data and organize them into similar expenses and categories like cash or credit card etc. After a week you can see where you are spending. And I bet you this will be an eye opener.You might find out that you might be spending Php 1,000.00 on cigarette which for me is a very non-essential thing and yet you are very willing to spend for. Imagine if you could have quit smoking you could have probably bought a new Levi's pants in 4 weeks.

Do you see what I am driving at? Probably small spending does not hurt or even does not require your attention. But if such is accumulated over a period of time you will realize what a waste it was.

Back then I wrote all expenses even the jeepney fare I pay for. After summing up all my expenses I was able to see my spending pattern. For their I was able to make my monthly budget(since my salary back in my old job is monthly) after deducting my "average" spending it shows that I have a saving of Php 500.00 for my monthly salary...and that is so small saving.

Well after knowing all that I search means and ways to be able to have savings of Php 1,000.00 a month. This means cutting of my unnecessary spending which was Internet usage in Netopia and cutting my coffee addiction to half. It doesn't mean you have to cut all your unnecessary spending all at one time I tell you that would be traumatic. 

Do small steps.

For example what I did was to only access Internet every two weeks  and cutting my coffee to only in the morning( I drink coffee when going to work and after work... this was my only addiction :) ). So savings from Php 500.00 went up to Php 1,000.00.

This is what we call discipline. It doesn't necessarily mean it's a punishment by not getting or cutting of your usual things. It just requires one to practice it on a small scale daily basis which in the long run will train one to live it as if its already second nature.

So from now on jot down those spending and you might find where to discipline your spending to save more...

Ways to be debt free: Discipline

source: http://drunksongs.blogspot.com

So here I am again talking about being debt free, well who doesn't want to be debt free?

To recap we discussed acceptance that one is buried in debt and one has to take inventory of personal assets and liabilities.

So we start the third one which deals with what we call discipline.

As usual lets define discipline and I got this definition from http://wordnetweb.princeton.edu

• S: (n) discipline (a system of rules of conduct or method of practice) "he quickly learned the discipline of prison routine"; "for such a plan to work requires discipline";
• S: (n) discipline (the trait of being well behaved) "he insisted on discipline among the troops"
• S: (n) discipline (training to improve strength or self-control)

Why one needs discipline to be debt free? Well in all activities we human beings do we must always have this trait. To be disciplined means having a system that one follows strictly to achieve self-control.

Discipline will be one's day to day guide. It will be the reminder that one will see the moment they wake up from sleep. It is self control.

I know its hard to not to tame the "buy it now" attitude of most of us. We buy things we don't essentially need now even if we don't have the capacity to purchase specially when you are buried in debt. 

The very best means that I made to tame myself from spending money is to see where it is going and how much is it as time passes by. I got this idea from Bo Sanchez's book   Simplify and live a Good life. 

 source: http://www.shepherdsvoice.com.ph

When you see how much money you are spending you will have thoughts  of unbelief after seeing how could a small amount spent for something insignificant  became budget eaters when presented in accumulated basis and at the same time how will one appreciate on savings made on stopping or avoiding spending on unnecessary things.

source: http://www.thirstyblogger.com

Here is what you gonna do. Buy a notebook small enough to fit in your pocket or better yet if you have those Starbucks planner use it for this one. Carry a pen always and the moment you make a cash out or spending write it down. Put the date, the nature of spending, and the amount. Do this for all spending you make including credit card purchases.

source: http://squatchabyss.blogspot.com

After a week list down this spending data and organize them into similar expenses and categories like cash or credit card etc. After a week you can see where you are spending. And I bet you this will be an eye opener.You might find out that you might be spending Php 1,000.00 on cigarette which for me is a very non-essential thing and yet you are very willing to spend for. Imagine if you could have quit smoking you could have probably bought a new Levi's pants in 4 weeks.

Do you see what I am driving at? Probably small spending does not hurt or even does not require your attention. But if such is accumulated over a period of time you will realize what a waste it was.

Back then I wrote all expenses even the jeepney fare I pay for. After summing up all my expenses I was able to see my spending pattern. For their I was able to make my monthly budget(since my salary back in my old job is monthly) after deducting my "average" spending it shows that I have a saving of Php 500.00 for my monthly salary...and that is so small saving.

Well after knowing all that I search means and ways to be able to have savings of Php 1,000.00 a month. This means cutting of my unnecessary spending which was Internet usage in Netopia and cutting my coffee addiction to half. It doesn't mean you have to cut all your unnecessary spending all at one time I tell you that would be traumatic. 

Do small steps.

For example what I did was to only access Internet every two weeks  and cutting my coffee to only in the morning( I drink coffee when going to work and after work... this was my only addiction :) ). So savings from Php 500.00 went up to Php 1,000.00.

This is what we call discipline. It doesn't necessarily mean it's a punishment by not getting or cutting of your usual things. It just requires one to practice it on a small scale daily basis which in the long run will train one to live it as if its already second nature.

So from now on jot down those spending and you might find where to discipline your spending to save more...

An introduction to the Philippine Stock Trading in Video

While net surfing to find other blogs where I can promote my blog I stumbled into an old video about Philippine stock market.

Hope we pick some points about the nature and the ins and outs of stock investing and trading.

An introduction to the Philippine Stock Trading in Video

While net surfing to find other blogs where I can promote my blog I stumbled into an old video about Philippine stock market.

Hope we pick some points about the nature and the ins and outs of stock investing and trading.