Trapped in debt? Here are 7 steps to free yourself

MANILA - Do you feel like you're drowning in debt? If you are, and you think there is no way to escape the debt trap, don't despair. With good planning, discipline, and a measure of sacrifice, you can retire your debt and be free from its burden.

Before you address your problem, try to look back and see how it started. You may be among thousands of Filipinos who are saddled with debt accumulated slowly over the years. This may be the result of living beyond one’s income, lack of planning, or sudden emergencies that force one to borrow, among many other factors.

For many, debt can creep up unknowingly. A personal loan here, a mortgage there, plus months of just paying the minimum amount due on your credit card, could add up until you one day find it beyond your control.

Whatever the cause, what’s important is that you take immediate action before debt paralyzes you financially and even legally. Your action will have to be on two levels – behavioral and financial – so that you can effectively cut down your debt.

 Here are seven steps to help you surmount your mounting debt:

1. Take a hard look at your finances.



This step is necessary since retiring debt calls for a sound plan that you can implement. Try to determine what you are paying for and how much. Just knowing how much you owe can surprise you. By doing this, you will also be able to determine which debt you have to prioritize, e.g. those that cost the most to maintain. You would like to retire the debt that charges you 20 percent a month ahead of the debt that charges you 12 percent a year. Understanding your finances will also allow you to come up with a workable solution.

2. Restructure the most expensive loans.

Today is a great time to restructure loans, given the low-interest rate environment. Are you paying credit card debt? Possibly with more than one credit card company? You will never get out of debt if you do not manage this. Talk to your credit card providers about restructuring the loan. You may also get a personal loan at a lower interest rate to help bring down your interest costs. Study all options available to you, while taking note of penalties and transaction fees.


3. Slash, not just cut, your monthly expenses.

Look at your lifestyle to find out where you can scale back. If you spend so much on entertainment, then cut this drastically. No more expensive night outs or fancy dinners for the time-being, unless you can find more affordable alternatives. Forget expensive vacations. Turn off the aircon and use an electric fan instead. Skip the expensive hair treatments. The cutbacks you can make will all count.

4. Sell assets. Raise cash to retire your loan by selling off assets, big and small.

Do you really need two cars? Do you need to stay in that very expensive house or would a smaller unit in a less luxurious part of town suit your purposes? Those diamond rings sitting in the closet may be your ticket to debt freedom. Even those expensive bags you picked up in your shopping sprees could fetch a fortune in the second-hand market. Selling off assets could help you bring down debt levels drastically.

5. Find additional income sources.
Find other cash sources so that you can put this toward retiring your debt. Are there additional projects you can take on or other jobs you can hold? Try tutoring children in your spare time, or baking cookies on weekends. Your creativity is your limit. This new income source will give you the elbow room to wiggle out of debt.

6. Live below, not just within, your means.

Sometimes you have to change your lifestyle drastically. You may need to dress simpler, consume less, and live a less luxurious life. You may look into selling your car and going back to taking public transportation to work, if your car loan is the cause of your debt burden. If living independently is causing you to bleed financially, think about moving back to your parents. Perhaps the kids could go to a less pricey school. The situation varies per individual, so take what is most appropriate for you.

7. Pay off as much as you can.

Try to retire as much debt as you can, to keep interest costs low and to hasten the debt retiring process. Pay more than the minimum amount due on your card. The longer you are in this situation, the more stressful it can get for you. Bite the bullet now and embrace the inconveniences and hardships it brings, knowing that this is necessary on your way to getting out of debt.

In all these, do not forget to stay focused. Don’t lose sight of your goal, which is to free yourself from debt that can affect you for life if you do not act on it now. By staying focused, you will be less tempted to spend on unnecessary items or to slack off in your debt retirement efforts.

Have a spreadsheet to help you monitor how close you are to your targets. Stay positive and remind yourself that freedom from debt will soon be at hand.

source: www.abs-cbnnews.com

Money Management

Money management is important for any individual. As long as you have income and expenses, it is vital that you are able to manage your money in order to remain financially independent. The good news is that money management is a skill that can be learned so even if you have been having trouble in this area, you can learn tools to help you manage your money more effectively.

Creating a Budget

A budget is the first step in money management. This involves listing all of your income and all of your expenses. When it comes to your expenses, you need to list them in order of importance, including every amount you spend (magazine subscriptions, daily coffees, chocolates from the vending machine etc). If your expenses are greater than your income you will need to cut down on your expenses.

Cutting Down Your Expenses

Having made a budget, cutting your expenses will be much simpler. You may not have even realized you were spending so much money on small expenses. It is often a shock how quickly the small expenses add up and make the difference between financial independence and struggling financially. Look to the bottom of your expenses list and cut off the unnecessary expenses. Perhaps you could bring lunch from home each day or you could bring a coffee with you instead of buying it from a machine. Once your budget works, you need to make sure to stick to it and review it regularly.

Saving

Another important aspect of money management is saving. You should be saving money every month and should cut enough unnecessary expenses off your list in order to do this. Create a direct debit and make your savings one of your expenses to ensure you save automatically every month.

Paying Off Debts

Many people have debts that they are struggling to pay off and paying high interest rates for. If you are getting your finances under control you should sort out your debt as much as possible. Personal cash loans such as car title loans can help. Personal cash loans can be used to pay off individual debts or you can use a loan such as car title loans in Sacramento to help you consolidate your debt. This will involve you paying off your smaller individual loans, leaving you with one larger loan with a more competitive interest rate. This will help you manage your finances.

source: 20smoney.com

Overspending? Here are 7 ways to help cut expenses

MANILA - A quick click on the "buy" button of an online sale, a purchase of a small knickknack, or one eat-out too many--these all add up. Unplanned purchases can be excused every once in a while, but if this becomes a habit, you could fall prey to one of the more common obstacles to financial freedom: overspending.

Unfortunately, overspending can wipe out your earnings, prevent you from building a savings pot, or worse, plunge you into debt. Managing this requires taking deliberate steps to curb your desire to buy unnecessary items and services. It also comes with the realization that it’s not just the big-ticket purchases that can lead you to overspend. Small, seemingly harmless everyday purchases can also add up.

To help you rein in excessive spending, here are seven easy steps:

1. Set a fixed budget. Have a set budget for just about everything--your daily food expenses, utility costs, entertainment, and everything else. If you know that you tend to spend a lot in restaurants, having this budget will nudge you to choose those outlets with friendlier price points. For all you know, the set meal at the office canteen may turn out to be just as filling as the lunch set at that café in the corner, at just half of the cost.

2. Create shopping lists when going to the grocery or the market. Having a shopping list not only saves you time as you go around the store, it also ensures that you will only buy the things that you need. If you find this is too restricting, classify your purchases as must-haves (like meal ingredients for the week) and nice-to-haves (sweet snacks). If after the cashier rings up your must-haves, you find that still have room to buy the nice-to-haves, add them to your purchases one by one until you reach your budget cap.

3. Keep a diary of your expenses. When you follow steps 1 and 2, step 3 will be a breeze. Jotting down your expenses will let you know exactly where you are spending more than you should. Who would have thought that your morning espresso habit costs you P2,600 a month? The simple act of recording your expenses can tip you off that you are already close to breaching your monthly budget. Already spent P4,000 for your hair treatment? Then maybe the shoe purchase can be postponed to next month.

4. Live within, if not beneath, your means. Examine your lifestyle and identify patterns that cause you to overspend. Are you upgrading your smartphone just because “everybody’s doing it”? Perhaps you’ve gotten used to taking vacations abroad when you were still living with your parents, and you’ve carried this on even when you’re living on a fresh graduate’s income. Be true to your spending capacity. Identify alternative activities or products that you can afford and enjoy at the same time.

5. Use credit cards to track your spending. Credit cards are a very useful tool. It can help you manage your monthly spending and when needed, take advantage of pocket-friendly payment terms. If you have set a budget for yourself, your credit card can help you track your purchases for the month, or bridge the gap for utilities that must be paid against your tight cash flow. However, remember that your credit card limit is not additional spending money on top of your cash - always make sure you can afford the purchases you make, and pay your bill before due and in full as much as you can.

6. Don’t succumb to emotional shopping. A lot of mindless shopping happens when people are emotional--too tired, stressed, even hungry. If you’re one of these people, you may find out that your emotional outbursts are also causing a hole in your pocket. Be mindful of your emotions so that whenever you feel angry or tense, you would steer clear of retail outlets and do something else--like exercise, meditation, or plain relaxing at home.

7. Stay away from sales. Don’t lead yourself to temptation. If you can’t resist buying needless stuff, take a break from window shopping in malls, retail outlets, and even online shopping sites. "Out of sight, out of mind" is very true when it comes to shopping. Instead, find other activities to keep yourself busy. Hang out with a friend, spend an afternoon watching television or playing with your nieces and nephews, or read a good book.

When you master cutting back on expenses, the next step of building up savings will be a walk in the park. Good luck!

source: www.abs-cbnnews.com

Ways Impulse Buying Could Easily Get You Into Debt

 

Avoid the Pitfalls of Impulse Buying

The way today's society is structured it is pretty easy to outspend your means if you are not careful. Between the ease of technology and the availability of buying on credit, nowadays commercial promotions are designed to get people to spend. Between credit and debit cards, pay later plans, and other forms of deferred payment, it is tempting to make purchases and worry about making payment later.

With these many conveniences available today, on the surface they might seem like terrific options for consumers. In many ways they are - as is anything designed with convenience in mind. However, the big drawback is due to the ease of purchase without worrying about payment right away, debt has a tendency to sneak right up on you. And, if you're not paying attention, interest begins piling on your balances and before you know it you could have creditors knocking at your door demanding payments you cannot afford to make. Ways impulse buying could easily get you into debt include:

You Outspend Your Income

Continuously purchasing items without planning for them financially can lead to debt if spending exceeds income. Chances are most people have a specific monthly income, or at the very least, earn the same average amount each month.


To avoid this pitfall, prior to spending your available credit on non-necessary and non-budgeted items, it is important to pay all outstanding bills first to ensure spending does not amount to more than income does. Debt can creep up if bills are not paid first; however paying bills can give a clear indicator of how much money, if any, is left over for spontaneous shopping adventures.

Overuse of Credit Cards

Many individuals who are compelled to impulse shop frequently use their credit cards. Credit cards are a terrific convenience, however the drawback is using credit cards can lead the spender on a very slippery slope, one that will land the consumer right in heavy debt if he or she is not careful.



When impulse shopping leads to credit cards bills that cannot be paid off at the end of the billing cycle, this means interest charges will be tacked on to the original expense. Depending on the card's interest rate, this could get costly - quickly.

Impulse spenders have to be extra careful when using credit cards because it could lead to excess debt which may be hard to dig up out from.

You Lose Track of Expenses

People who tend to impulse buy also often have a predisposition to not track expenditures until it is too late. As shoppers go from store to store or website to website to make purchases without really paying as close attention to spending, debt can tally up quick.

Online Shopping

The growth of e-commerce, and now mobile commerce (or “m-commerce), in many ways helps contribute to overspending because it is so convenient. With customized ads hand-delivered to pretty much any web page, including social media and flash sales designed to get people to buy impulsively with deals that (the companies are hoping) cannot be resisted. Then there are daily deal sites and other enticements all over the web.

Online shopping is quick, and this alone makes it much easier to compile debt because a consumer can visit many stores within the matter of minutes. Add location trackers and other geo-location details and retailers may send targeted ads or deals on the spot to mobile that people accept in the fear of missing out on such a deal.  In April 2015, Mobile Commerce Daily reported on the ways Twitter's "buy button" can change the dynamics of m-commerce.

Statistics on Debt

According to figures put out by the U.S. Federal Reserve, in the United States, total outstanding consumer debt was said to be $3.34 trillion. This figure includes car loans, student loans and revolving debt. Mortgages were excluded. Reports also indicate credit card debt is steadily on the rise. CardHub reports on American spending:

"Consumers ended 2014 with a $57.1 billion net gain in credit card debt, and CardHub now projects that we will incur more than $60 billion in new credit card debt during 2015 – a 5% increase. We’ve now had six consecutive quarters of year over year increases in our credit card debt load." 

Revolving debt, which is primarily composed of credit card outstanding balances was said to be $884.8 billion as of January 2015. ¹ On the plus side, the number of people who carry credit card balances from month-to-month in the United States is decreasing.

In Canada, statistics indicate total consumer debt  as of Nov. 30, 2014 is $1.810 trillion (unlike U.S. statistics, this does include mortgages). Fifty-two percent of Canadian households carried credit card debt in 2014. This is down 2 percent from 2013.

For many, impulse buying plays a strong role.  As a result, it can lead to serious financial problems and, due to this reason, it is important to be sure to spend only within your means in order to avoid the financial hardship that comes along with excess debt. Even if you have to plan a budget. If not, they'll be financial consequences to pay.

Impulse buying can lead to excessive debt, but the good news is recognizing and avoiding the pitfalls of on-the-fly shopping can help allow you to spend and remain within your budget.

source: infobarrel.com

Bring financial order to your life in 2015

MANILA, Philippines - Have you ever felt that you are always at the mercy of circumstances where money matters are involved? For instance, are you always running out of cash? Do you feel that your bills are always piling with no reprieve in sight?

Perhaps, it’s time to bring financial order into your life. Financial order, in a nutshell, means being prepared to face your financial obligations without getting stressed to the point of anxiety. Although money matters are not exactly the easiest to think about and may cause you a measure of stress, they should not overwhelm you completely.

Financial order is important. At the very least, it gives you peace of mind. It also keeps you out of trouble and helps you avoid unnecessary expenses and losses. For example, if you missed funding a check you issued by only one day, you could be paying as high as P2,500 in penalties. Same thing holds true for credit card bills.

Creating financial order in your life is possible, but it entails careful analysis of your financial standing, your consumption and spending patterns, and your personal goals. It is both a process and a goal. You have to continuously work to keep financial order in your life, and you should always aspire to achieve or keep it.

Here are some concrete ways to achieve financial order:

Keep records.

By keeping records, you will be able to keep an eye on your bills’ due dates which allows you to plan accordingly. Over the longer term, your records will allow you to monitor your spending and debt levels. There are programs available online to help you do this. If you prefer to keep records the old way, you can get a large envelope where you can file your receipts, bills, credit card and bank statements. It would be helpful to organize these regularly.

Manage expenses.

Are you going overboard with too many expenses? If you keep financial records, you will be able to pinpoint areas where you can cut back or where you can better manage your expenses. Look at areas where you may be incurring unnecessary expenses like paying for too many cable channels you hardly tune in to or gym memberships you hardly have time for.

Have a savings plan.

Once you are better able to manage expenses, you can have a savings plan. Commit to saving a fraction of your income and to add to this regularly. As much as possible, try to allocate funds for savings before you spend your regularly monthly earnings.

Pay debt.

Try to keep your debt level to a level that is comfortable. To know how much debt you currently have, calculate your monthly disposable income. This covers your take-home pay, bonuses, and all other income coming from other sources. Next, compute your monthly payments on all loans. Then, divide this amount by your monthly disposable income and multiply by 100. This will give you the percentage of your disposable income that goes into debt payment.

Protect your income.

One source of financial stress is the fear of leaving your family and loved ones vulnerable if you pass away. This is why it helps to take out a life insurance, especially if you have young children or if you are the breadwinner in your family. Insurance will also protect your assets. If you own a car, consider getting an automobile insurance. If you own property, home insurance is a worthwhile purchase.

Know your net worth.

This is an exercise that everybody should do, regardless of economic status. To know this, add up the value of all your assets (property, stocks, etc.) and income. Deduct the amount of your debt from this amount. The resulting number is your net worth. Note that this may change every year, depending on the value of your assets (e.g. share prices may change) and the amount you owe.

Once your finances are in order, you will be better able to forecast your fiscal activities, and you will be able to create realistic goals that will lead you, eventually, to financial freedom. It’s never too late to start – and 2015 is as good a year as any.

source: www.abs-cbnnews.com

Want to manage your finances better? Here are some apps

MANILA, Philippines - Managing your finances can be made much easier with some of the financial planning tools that are now available through your smart phone. Tracking your expenses, analyzing your budget, and scheduling payment of bills are just some examples of the many things that are easier to do with the apps.

Smart phones and apps offer many conveniences. For one, they allow you to record your transactions in real time. Since you almost always have your smart phone with you, you don’t have to get home to record your transaction in your spreadsheet. There are apps that let you store your receipts as well.

It’s also a very handy way to access your financial records. If you need information about your finances while you are at the bank, for instance, you can simply check your smart phone. They also provide you with a good recording system. You can synch your phone with your PC, providing you with an automatic back-up system. Best of all, it’s a paperless system, so you minimize waste.

Remember that apps are just a tool that would make financial planning easier for you. While some of these apps would give you financial advice, they do not take the place of financial planning. Also note that these apps process data based on what information it receives. Therefore, you should take pains to put in complete and accurate data. Use whatever advice the apps give in the context of your financial goals or as inputs that would guide your decision making process.

Apps can either run on Android, Apple’s IOS, or both platforms. Although most financial apps have been designed to be secure, exercise the same caution as you would in doing any online transaction.

For starters, check your own bank for their apps. The services offered vary but most would offer balance inquiry, balance transfers, and bills payments. At the same time, the Philippines’ top telecommunications carriers also offer financial services such as mobile wallets and mobile payments.

Other than those, here are some of the most useful finance apps worth checking out:

Mint.com
Free app, Android and IOs

One of the first personal finance apps, Mint.com syncs with your bank records and will even categorize these for you. It keeps track of your spending and categorizes them, so that you have an idea of how your budget looks like. It sends bill reminders, alerts, and even advice to your phone.

Level
Free app, iOS

Another budget tool is Level. It allows you to record your spending and monitor your transactions, and then it analyzes this and provides you with budgets for the day, week and the month. It also helps you create a plan to save money, or tweak the budget that Level automatically provides. It even tells you if you have overspent.

Koku
iOS

This app downloads and consolidates all your financial records, including your checking accounts, savings accounts or credit cards (f your bank is included in its list of banks). All you have to do is just refresh your account. This way, you do not have to log on to different online banking sites just to see your balance. If your bank is not among those that Koku can connect with, you can import your statements into Koku. The app also provides an analysis of your income and spending habits. Since it automatically syncs to iCloud, you will be able to access your account from anywhere using your Apple device.

Expense Manager
Free, Android

This app that lets you track your expenses by week, month or year, in different categories. You can take photos of your receipts and store it using this app. It also lets you automatically save information to a Dropbox account, so that you can check this from another PC or mobile device. It also includes payment alerts, a currency converter, tax calculator, and a tip calculator, among others.

MoneyWise
Free, Android

Another expense-tracking and budgeting tool, this app let you monitor cash flow and set personal financial goals. You can keep track of your expenses across categories, and it converts these into charts for your reference. Data can be exported as HTML or into Excel.

Money
iOS

For businesses, Money is an app that tracks and balances cash, debit, credit and savings accounts by importing these files. There are tabs for your balance, transactions, budgets, and reports. It can convert currencies automatically. It syncs with ICloud, which makes the information available on other devices.

Unleash
Free, iOS

Unleash monitors your company's income, expenses, profits, cash, profit margin and valuation. It tracks collections, and lets you know when customers’ payments are overdue. If you want to compare how your company is performing against US small businesses in your industry, this app will allow you to see comparisons. It also provides a facility for making financial projections based specific scenarios, like hiring additional personnel or increasing sales volume.

Expensfy
iOS

For travellers, Expensify is a useful app that keeps track of your business expenses and mileage. It also lets you scan, upload and file receipts which can be made into expense reports that you can readily submit to your supervisors when you get back to the office.

Toshl Finance
Free, iOS and Android

Toshl is an expense and budget tracker. It works with any currency and separates your travel expenses from the rest of your finance. It syncs across multiple devices.

Other expense tracking apps worth looking at are Spending Tracker, Money Zen, and Spendee.

In using any of these Apps, make sure that your account information will remain private and are accessible only with strong passwords known to you and only you.

source: www.abs-cbnnews.com

13 financial resolutions for the New Year

MANILA, Philippines – With the New Year only days away, you should not only consider physical health in your resolutions but financial health as well.

ANC’s “On The Money” listed some financial resolutions to help you reach your financial goals:

Review your budget and spending habits
Making a list of the items and activities you spent for during the year will help you anticipate where you spend most on and where you can cut back.

Check the amount of savings you have at the end of the year
Pay off credit card debt you may have
Set your money goals
When you have accounted the saving you made for the year, use it to pay off any debts you may have to enter the New Year debt-free.

It will also help you set your money goals for the coming year.

“[Ask yourself], ‘This is how much I am making in 2013, will I ask for a raise this time?’ At least write it down in your head so you know where you are going, you know where your road map for 2014 is when it comes to your finances,” registered financial planner Rowena Suarez told ANC.

Get income protection through insurance
Health insurance
“Without [health insurance], you cannot work anymore if you are sick, and another thing is the high cost of medical expenses,” said Suarez.

Set a spending budget and review it regularly
Create an emergency fund equivalent to 3 to 6 months worth of expenses
Suarez said if your expenses reach P100,000 a month, then you need to have around P300,000 to P600,000 in your bank account for emergency funds.

“Don’t touch that,” she stressed.
Figure out your financial needs for retirement
Set up an automatic payment plan to pay yourself first
An automatic payment plan will also help you save every month, Suarez said.

“Sign up for an automatic savings plan system. Like every month, take out P5,000 or P10,000 from your account, and that’s like paying yourself,” she said.

Adopt a healthy lifestyle
Meet regularly with your family to discuss finances
Become financially literate
Suarez noted that becoming financially literate is key in reaching financial goals to prevent joining savings programs that don’t yield good interest.

“Get educated when it comes to financial programs. You have to look around and scout around, and study. There’s so many programs right now that gives free learning,” she said.

source: www.abs-cbnnews.com

Credit card users told: Shop wisely this holiday season

MANILA, Philippines – The Credit Card Association of the Philippines (CCAP) has urged shoppers to use their credit cards with caution this holiday season.

“Using a credit card for holiday shopping is truly a practical and convenient choice, but cardholders need to be smart and safe,” CCAP spokesperson and executive director Alex Ilagan said.

Ilagan said to prevent overspending using a credit card, shoppers should make a list in advance, set a budget, and only charge within your means.

“Credit cards are an ‘avail now and pay later’ facility…they should not be treated like ‘free money’,” Ilagan said.
“As such, the same budgeting rules apply: compute how much you can realistically afford, and use that number as your guide.”

CCAP said December is the strongest month in consumer spending using credit cards issued by CCAP member banks.

Data also showed that consumer spending using credit jumped 6 percent from P445.12 million in 2012 to P471.76 million this year.

“The great thing about credit card shopping is that many banks provide zero percent installment promos on purchases that would otherwise leave a dent in your wallet…The ability to spread out expenses over a period of time has proven to be very useful for countless consumers,” Ilagan said.

As the incidence of credit card theft during the holidays is higher, Ilagan offered these safety tips:

For those with multiple credit cards, bring only one or two
Avoid lending out credit cards, especially to children or friends
Put your card away after each use
Avoid putting it in your pocket
Don’t linger at the cashier with your credit card exposed
“We’ve had reports of people standing in line at checkouts for the sole purpose of memorizing credit card numbers,” he warned.

Ilagan also urged consumers to pay their balances in full come January to avoid incurring interest charges.

“That's the great part about setting a budget and charging only what you can afford, you’ve managed your Christmas expenses, and start the year debt-free,” he said.

source: www.abs-cbnnews.com

What's your money personality?

MANILA, Philippines – People have different personalities when dealing with money matters, a financial planning expert said.

Joe Ferreria, the president of Money Doctors Inc., said the personalities range from being challenged to being permanently wealthy.

A financially challenged person, Ferreria explained, is someone who simply doesn’t have enough money to buy what he or she needs.

“You need to work harder or cut down a little bit more because you are challenged financially,” Ferreria told ANC’s “On The Money.”

A person with a “normal” money personality has enough money for every expense that he or she has, but this person does not have any money set aside for emergency situations.

“They’re able to pay for the bills but if you ask them, ‘Do you have 2 years worth of expenses in the bank?, [they don’t]” said Ferreria.

A “wealthy” personality is someone who has saved at least 24 months worth of expense money. Ferreria said a recent Forbes survey showed that if you have P5 million in the bank, you are considered among the ranks of the wealthy.

However, Ferreria stressed that the wealthy differs from the “permanently wealthy,” which have money that is greater than all expenses.

Ferreria said what people should aspire for is the “stable” money personality.

“If somebody gets sick or you need to do something that will require money, you have money in the bank to sustain it. If you lose your job, you have 6 months or a year to look for another job,” he said.

He explained that someone who is stable sets aside an emergency fund and has at least 2 years worth of expenses in the bank.

“You should stabilize yourself, meaning you are spending within your means, you’re saving 30 percent of your income, and the money in the bank allows you to go through financial traumas,” Ferreria said.

“You work to live a life. You don’t work to pay the bills,” he added.

A person’s money personality is formed by parents, life experiences, and influence from media and friends.

Ferreria said understanding oneself is key in determining spending habits which can evolve from being challenged to being permanently wealthy.

source: www.abs-cbnnews.com

Protecting your income: How much life insurance do you need?

MANILA, Philippines - At one point or another, you've probably been approached by an insurance specialist offering products designed to protect you and your family.

Before making a choice, a good question to ask would be if you actually need one. Life insurance is something that is usually paid out upon your demise to answer for the needs of your dependents, as well as cover debts you have left behind and even funeral expenses.

Following this logic, those without any dependents and those without any debts may not have a need for it. Remember, though, that your needs change over time. You may not have dependents or you may have no debt now, but how sure are you about how things will be ten years down the road?

If you have dependents, then there is no question about it: you definitely need life insurance.

Note that there are two kinds of products offered by insurance companies: whole and term insurance. Whole life insurance is in force for the lifetime of the insured and needs to be paid yearly. In the Philippines, arrangements are often made for the policy to be paid up in a number of years.

Term insurance, on the other hand, covers you for a specific period — from a year to up to 5 or 10 years. Think of it as something like car insurance. Once it lapses, you will need to get a new one or your coverage expires. Since its coverage is much shorter and is defined, it is much cheaper than whole life insurance.

One thing to remember about insurance is that it is much cheaper to get when you are much younger. If you’re 25 years old, you will be paying far less insurance premium for the same coverage than a 45-year old. For this reason, you may consider purchasing insurance even if you are still without any dependents.

If you have decided that it is time to get insurance, your initial question would most likely be how much insurance you should get and which of the variants out in the market will be best for you.

The amount of insurance that each person needs is an individual matter — what person A needs is different from that of person B. You will have to do an honest assessment of your current needs and project your future requirements to come up with an estimate of how much insurance cover you should get.

A simple way to do this is to look at your monthly expenses. List down everything that you have to pay for — food, utility expenses, household expenses, children’s tuition expenses, transportation, entertainment expenses, dues, rent, and amortizations. Assume that your monthly expenses come out to, let’s say, P30,000. That is the amount that your insurance will have to cover on a monthly basis. In other words, your family will need at least P360,000 a year in the event of your demise.

Most experts say that you will need insurance coverage of at least 10-12 times your annual earnings. This should provide for all your liabilities and represents your future earning potential.

If, in the above example, your expenses equals your earnings, then you will need insurance coverage of at least P3.6 million. Theoretically, this amount should, if invested, fetch a regular income for the surviving members of your family so that they are able to maintain their current lifestyle. More specifically, if the P3.6 million is invested, then it should fetch an amount that can tide your family, until the time comes when they are financially self-sufficient. Assume that this amount will earn 10% per annum, or P360,000 a year. This should be sufficient protection for your family.

Note, however, that your lifestyle will change as years pass. In all likelihood, your cost of living will go up as your family grows and as your income increases. This means that you should revisit your insurance coverage regularly to know if it is still realistically enough to cover your needs. Do this every time there is a life change — when you marry, when a new kid is born, when you have acquired property. In fact, do this every year as a matter of habit.

Remember to consult with financial experts in determining your insurance needs as well as in assessing your financial status. By constantly evaluating your financial status, you will be more enlightened on your needs as they change throughout your life.

source: www.abs-cbnnews.com

Working at a BPO? Here's why you should start saving now

MANILA, Philippines – Employees of business process outsourcing (BPO) firms in the country should consider saving for their future and planning for retirement as early as now, an expert on financial planning said.

Joyce Tankeh, a financial planner at Sun Life-AIM, said savvy BPO employees who are in their 20s and 30s tend to spend more because of their hefty paychecks.

Fresh college graduates can get paid a monthly salary of P20,000 at BPO firms.

“A lot of them are in their 20s, 30s, and not a lot of BPO companies really prepare for their employees’ retirement. So it’s a concern also. If they could just sit down and do their pencil pushing and reflect on the benefits that they get from their companies,” Tankeh told ANC’s “On The Money.”

Tankeh said the path to financial freedom for BPO employees begins at setting specific goals.

“They have to know what their goals are. The short-term, medium and long-term goals. It’s not just the physical goals. Let’s say if you like to travel next year, it’s doing something about it on a regular basis and not being impulsive,” she said.

Tankeh highlighted the importance of saving up for short-term goals, which include an out of town or out of the country trip and buying a gadget worth P30,000.

“It’s no joke saving up for a P30,000 gadget knowing that a lot of people only get to save P1,000 a month. It’s really something you need to plan on,” she said.

A medium-term goal includes buying that dream house or dream car while a long-term goal is retirement.

“Let’s say if you’re 25, how can you retire by 40? How can it be realistic?” she said. “That’s a common thing. I have a lot of clients who are in their 20s who say they want to retire in their 40s.”

Tankeh said setting goals are important in saving up, but it has to be backed up by a plan. She said goals should be accompanied by a clear plan on how to reduce expenses.

“Knowing expenses is important because it’s useless to have goals then not translating how you are going to push through with it. What’s the game plan?” she said.

Tankeh said failing to save up could be a result of bad habits like excessive credit card use and unnecessary personal loans.

She said the transition to becoming a saver from a spender requires a change in mindset, focusing on specific goals and being firm on reaching them.

“It’s telling them, are you really serious in making sure that you are getting what you want at a certain period of time? Then we work together, that’s where [a financial planner] comes in,” she said.

source: www.abs-cbnnews.com

Four Real Folks Who Overcame Their Debt

If you’re one of the millions of people engrossed in debt, it may seem like financial freedom is a distant dream.  The number of individuals living with debt in the UK has grown exponentially. In part, this is because of rising living expenses and unchanging wages. Based on a recent study, one in three Britons is in debt. That equates to £1.424 trillion in outstanding personal debt, this year alone. Although these statistics may sound menacing, it is possible to reduce and even eliminate your debt.  To prove that it’s possible, here are four average people who won their fight with debt.

Carrie Smith

Carrie Smith’s financial wake-up call occurred the instant she acknowledged her situation. At 28, she found herself with a staggering £9,300 in credit card debt. Eager to regain control of her finances and financial future, she managed to pay it all off in a year through hard work and strict budgeting. Carrie’s approach was to start with the cards which carried the highest interest rates. Most people immediately tackle the cards with the highest balance, but it’s wiser to evaluate the interest rate fees on a monthly and annual basis because that’s where you’ll be hit the hardest. To stay on track Carrie even made a timeline of her progress using a payment tool. And of course, she had to cut her frivolous spending– holidays, salon visits, cable, and dining out. The spending cuts were temporary, but the results enduring long past that year, Carrie points out.

Shari Gordon

Armed with a Master’s degree and a mountain of student loans to accompany it, Shari was unsure how she would repay the £20,000 she owed. She admits that at first she was in debt denial. When bills arrived, she barely paid the minimums. She soon realised that this approach was making no real headway so she broke down the balances into more manageable amounts and created a strict budget. In time, she was promoted at work and started looking for side jobs to make some extra money. It wasn’t easy, but Shari paid off her debt and now advises others on how to do the same.

Grayson Bell

Grayson Bell had dreams of owning his own business with his wife Jane. To bring his dreams to fruition, Grayson financed £33,000 with four different credit cards. When the economy took a turn for the worse, Grayson’s business unfortunately went under, leaving him with no substantial cash flow. As the debts piled up, Grayson continued to spend in hopes that the business would eventually recover. Two years later, his finances were still in ruin so he made the conscious decision to seek help. Grayson opted for debt consolidation as a way to fast track his financial recovery.  Consolidated Credit provided him with the tools necessary to create a budget, lower his balances, and pay off his cards. Today he’s proud to be debt free and on the road to building a new business.

Kate Flanders

Maxed out and looking for a way out, Kate was in over her head by age 25. With very little in her bank account and bills pouring in month after month she did what most people dread—moved back in with her parents.  Within a matter of month, she eliminated all the shopping trips, weekend getaways, and drinks with friends. After 6 months, she saved enough money to pay off her cards in full. Kate’s advice to people suffering from debt is to ask for help sooner rather than later.

Whether you have to create a budget, cut your spending habits, or seek debt consolidation it’s important to get a handle on your debt. It won’t resolve itself so it’s your responsibility to do your part in management and elimination.

source: everythingfinanceblog.com