Why Christmas is best time to build a financial foundation

MANILA, Philippines – A financial expert said the holiday season is the best time to build a solid financial foundation for employees because of the 13th month pay and other bonuses they receive.

Dr. Jamie Lorenzo, executive director of International Marketing Group, said that to have financial “peace of mind,” you must first build a financial foundation.

“It’s just like building a house. Before you can build the second floor, you must build the first floor first, pero syempre before that, you must build the foundation,” he told ANC’s “On The Money.”

Lorenzo said protection is the first step in building the foundation, which means investing in life insurance and health care.

Once you are protected, Lorenzo said the next step is to pay off all debts and set aside 3 to 6 months’ worth of emergency funds.

He said bonuses by year-end should be split to pay off debt and for savings.

If you plan on splurging during the holidays, Lorenzo suggested increasing income and cutting expenses before the season even starts, so that additional cash from bonuses will not be touched.

He shared that he and his wife follow a “holiday formula” on how to use their bonuses.

“October palang, na-budget na namin ‘yung for the holidays. So once we receive our bonus or any lump sum that we get in December, 10 percent I give to tithing, 10 percent to calamity victims, and 80 percent to investments,” he said.

Lorenzo said that while some save their bonuses, most have the habit of spending it all. Others, he added, manage to spend their bonuses before they even receive it through credit purchases.

Lorenzo recognizes that most Filipinos will rather spend all their extra money to buy gifts for their loved ones, but he said there should always be a balance in spending and saving.

"It's the thought that counts. You don't always have to buy expensive gifts to your loved ones...Your real friends will understand and they will even encourage you to save for your future," he said.

source: www.abs-cbnnews.com

How to spend 13th month pay wisely

MANILA, Philippines – It’s that time of year when employees across the country receive their “bonus”, or the mandatory 13th month pay. Suddenly awash with cash, the temptation to splurge will be very real as you consider the many things you can do with your windfall.

Before you hit the stores, why not stop and think twice about how you can turn this one-time gain into long-term winnings?

While it is important to enjoy this reward for all your hard work, at the end of the day, you may find that the latest mobile phone or that huge plasma television will not bring you the kind of financial security that an informed investment can.

Surely you would not want to use up the entire amount on unnecessary expenses, so plan what to do with your bonus before you start spending. Think of what you really need and want to spend on. This could include events and other needs that might come up in the next few months – possibly a planned vacation or party, a wedding, school expenses, a major car check up or a health procedure. Then, list down how much each will cost you. This should help you come up with a priority list of expenditures. Using this, you can choose where to apportion the bulk of your bonus.

Here are some more pointers on how to best use your bonus to your advantage.

• Save. Start a seed fund for large expenses you have planned for the near future or recurring ones such as tuition payments or a vacation. Even better, use part of your bonus to start a savings fund that you can grow monthly. Consider time deposits or savings funds with special rates. It’s never too early (or too late for that matter) to begin your nest egg.

• Pay off debt. You can also use your bonus to pare down your existing debt and save on interest expenses. Consider pre-paying loans such as balances you have accumulated on credit cards, or cash advances that you have made. However, there is no need to bring down your debt to zero, as it can also be healthy to use credit to your advantage.

• Invest. There are many investment instruments tailored for retail investors such as mutual funds. If you are thinking of an investment in real estate, your bonus can go towards your downpayment. Before making investments, make sure to first study your personal financial profile vis-à-vis your wealth preservation and growth objectives. In other words, do not just put money into stocks or any instrument arbitrarily. Even if you think the amount you are investing is small, it is still a good idea to go through your financial profile and evaluate your options before making the move.

• Invest in your skills. Consider using part of your bonus into developing some of your skills. If you think you’d like to hone your language skills, or you would like to learn painting, or even a sport, your bonus could help you pay off these courses. Although they may not show up in your resume or in your personal net worth, these intangible investments could reap rewards in a different way — by improving your well-being, expanding your horizons, and possibly opening new doors that would complement your present career now and in the future.

• Pursue a small business venture. This is not for everyone, but for those who have already planned something out, have a business plan, and are just waiting for some capital to get the ball rolling. Perhaps, you’ve always wanted to start a small baking business but lack funds to start out. Your bonus could help you pursue your entrepreneurial bent.

And of course, don’t forget to celebrate. It’s perfectly all right to treat yourself to something you have always wanted. Set aside a portion of your bonus for something that is purely for your enjoyment. Life is short and you do have to reward yourself. This way, you would not feel deprived and would get to enjoy your bonus, as you should.

Lastly, why not share your blessings? There are a number of reputable charities that count on the generosity of Filipinos to be able to shelter, clothe and feed their beneficiaries. They would welcome whatever portion of your bonus you can share.

source: www.abs-cbnnews.com