To buy or not to buy? 7 ways to stick to your holiday budget

MANILA - This is probably one of the hardest times in the year to keep to your budget.

Around this time, salaried employees have most likely received a windfall in the form of the 13th month pay, and if you’re luckier, a Christmas bonus, profit sharing, and other cash incentives—all of which make you feel cash-rich.

Happily coinciding with what seems to be your increased spending capacity are lots of sales and bazaars, running non-stop just about everywhere you look. On top of these is the general feeling of festivity and generosity that is just so pervasive, with people lugging gaily wrapped packages and parties ongoing non-stop. All these can make you forget about your budget and spending plans, and potentially set you back in meeting your financial goals.

Since temptations lurk just about everywhere, and not just during the Christmas season, it helps to be prepared to deal with these more responsibly.

Here are seven tips to help you deal with those temptations that can get in the way of your financial well-being.

1. Know thyself.

Knowing your weaknesses and trigger points is the most important step in fighting temptation. Some of us shop when we are emotional, tired, or angry at someone. Others react to advertisements or are easily swayed by sweet-talking salespersons. Many find themselves buying things they do not need, often mindlessly. Knowing what tempts you, and what makes you break your plans, will prepare you mentally to avoid these pitfalls and keep you from putting yourself in a spot that you cannot get out of easily.

2. Set a budget.

Having a budget will help you keep spending in track. Set a specific amount (either in peso terms or as a percentage of your income) for everything—for the household, for entertainment, for Christmas. Set aside an amount that is realistic for each one, based on your actual lifestyle and spending patterns. This will let you plan out expenses. When faced with temptation, you would know exactly how giving in to temptation would affect your budget for different areas.

3. Make checklists.

Complementing your budget, spending checklists are important. These lists should contain only the essentials and planned expenditures. Bring along these lists when you go shopping to ensure that you get only what you need. For Christmas, prepare a gift list to help organize your shopping and to keep you within your spending limits.

4. Stay away from malls and retail outlets.

Out of sight, out of mind works well when you are an insatiable shopper or find it very hard to resist buying once you hit stores. Many of us tend to go to malls to meet up with people or to dine out, and end up buying stuff because the in-store advertising and shopping bug are just too hard to resist. Meet your friends elsewhere such as someone’s home or a coffee shop in the neighborhood. Dine in areas which are not located in malls or retail strips. If a trip to the mall is unavoidable, then don’t loiter around—finish your business and get out without window shopping.

5. Leave your cards at home.

If you are an impulsive shopper, staying on cash mode is an effective way to resist temptation. When you do not have your credit card and ATM card to whip out, you will be left with only the money in your wallet to spend, forcing you to stay on budget. This is not to say that you should throw away your ATM card and credit card; on the contrary, they are very helpful financial tools when used wisely. Not carrying them around when you are feeling vulnerable, though, allows you to think twice about a purchase and stops impulse purchases.

6. Remind yourself of trade-offs.

When you’re about to fall into temptation, think of what it means to you in real terms. For instance, getting this glitzy smartphone means I will not be able to come up with the condominium down payment in six months. Framing your expense within your personal plans will help you determine if it is worth giving in to this temptation, or if you’re better off walking away.

7. Go for other activities.

Spending can be therapeutic and entertaining to many of us, but it is not meant to be so. Distract yourself by putting time into other activities—an afternoon chatting with friends, bonding with siblings and relatives at a park or someone’s house, reading good books at home. Even better yet, pay a visit to or volunteer to help out in a charitable institution (orphanages, centers and schools for the marginalized)—you’ll find these very fulfilling and will even let you touch the lives of other people.

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Grow Your Money is an editorial partnership between ABS-CBNnews.com and Citi Philippines to promote financial education and provide helpful information to Filipinos on how to better manage their personal finances.

Visit www.citibank.com.ph for more information.

source: www.abs-cbnnews.com

5 financial goals in your 20s

Checklists and to-do lists are a lifesaver. They add structure to your life and pressure to start working on what's on the list. When you're on a roll and are ticking those boxes off, you feel more accomplished and happier. So why not put that to work in your financial life?

As with the Chinese proverb, “the best time to plant a tree was 20 years ago. The second best time is now,” it’s best to start working on your financial checklist as soon as possible. For those in their 20s, getting your finances in order today will have lasting effects decades down the road.

Here’s a checklist you can use to help guide you on how to handle your finances, and if you’ve ticked off a couple or more, then you’re doing a great job.

For even more financial goals to aim for in your 20s, read our in-depth article on the topic.

Mobile users can view the desktop version of this slideshow here.

source: www.abs-cbnnews.com

Investing for beginners: 5 steps to get started on stock investing

MANILA, Philippines - With the Philippine Stock Exchange index hitting new highs, many Filipinos are now realizing the advantages of investing their hard-earned money, versus simply parking it in a savings account or time deposit.

If you’re new to the investing game, you’ve probably wondered if you should be putting some of your savings in the stock market to take advantage of the trend.

Investing in shares of stocks or equities is one way to increase your wealth, but note some have also lost it overnight.

Stocks can grow in value, providing you with returns that may be higher than what you can get from putting your money in savings instruments or the money market. However, that is just half of the story — stock investing also comes with a measure of risk and if you are not careful, you may lose some, if not all of your capital.

Here are five steps to get you started on investing in equities:

1. Assess yourself.
Before you begin to invest in stocks, it is important to know what you need and want, and to determine if equity investing is for you.

Here are some questions to ask yourself:

What are your financial goals?

Before investing on anything, know your financial objectives vis-à-vis your current financial assets and your life stage. This will give you an idea as to how to craft your investment strategy. The investment strategy of a 50-year old retiree with real estate, money market placements, and insurance plans will obviously be very different from a 21-year-old who has just received his first bonus. Once you have an investment strategy in place, then you can decide on what investment vehicles are best for you, including equities.

What is your appetite for risk?
Stock investing, it must be stressed, is not for everyone. Equities carry risks, and the money you put into shares of stock is not insured by the government. Therefore, if you are not in a position to lose part or all of your investment money, stocks may not be a suitable option for you. Equities are best for those who are willing to take on a degree of risk in exchange for larger gains.

What other investments do you have?

Investing in equities should be seen in the context of your entire investment portfolio, with a goal to diversify your holdings in order to manage your risks.

What is your time frame?

Studies have also shown that equities tend to grow in value over a long period of time. Stocks are best for those without time pressures to deal with.

Do you have the time and the capacity to manage your stock portfolio?

Stock investing requires understanding how the market works, as well as the companies whose shares you intend to buy. If you do not have both, then you should look for a broker to help you manage your stock transactions.

2. Find a stockbroker.

The Philippine Stock Exchange has a list of brokers that you can refer to. There are also brokerage houses that allow you to do online trading, which some find to be a more convenient way of handling transactions. Some banks also offer stock broking services. Brokers differ in the range of services they offer, as well as in the minimum investment amount that they require.

The larger brokerages servicing institutions and high-net-worth individuals typically offer research services on top of trading, while smaller ones can simply offer trading services. Ideally, your broker would take the time to ask you about your investment goals and ask about your appetite for risk.

3. Open a trading account.

Your selected broker will give you a list of requirements to fulfill. Make sure you understand its conditions well. Take note of transaction fees and other rules, like how to transact. If you will use an online trading platform, take the time to familiarize yourself with how it works.

4. Monitor your investments.

Periodically monitor the movement of the stocks in your portfolio. Closing prices may be monitored online, on TV and in business newspapers. Keep yourself informed of any dividend announcements, which may entitle you to cash or additional shares of stock.

5. Evaluate your investment strategy regularly.

Does it still dovetail with your financial goals? From time to time, you may wish to continue to add to your stock portfolio, or if it is time to allocate some funds to other investment platforms, based on changes in your personal circumstances and goals.

One last but very important point: Do not think of stock investing as a form of gambling.

While you might have heard of people who have amassed a fortune overnight over a single stock, this is the exception and not the rule. Investing in stocks and in everything else requires an understanding of your goals, patience, and a lot of ground work. This point will be the common thread in this series of four articles on how to get started on investing in different financial products.

source: www.abs-cbnnewws.com

8 financial mistakes you want to avoid

(Editor's note: This article was written by iMoney as part of a content partnership arrangement with ABS-CBNnews.com.)

MANILA, Philippines - Financial security depends on crucial decisions that you make through the years. From the degree you take in college to the job opportunity that presents itself because of your background and education, the choices you make can have a profound impact on your financial security.

But what are the most common financial blunders that you could commit? There are many money mistakes that Filipinos normally practice but are unaware of. These little things, when ignored, can build up and haunt you for years to come.

1. Using your credit card

A credit card is a handy tool that anyone can use for everyday transactions. Using it is also necessary if you want to build your credit score. It can give you the freedom to purchase things, but if you let your spending go out of control, it can send you into a crippling spiral of debt.

So before you use your credit card, make sure you’ve considered all of your needs and wants. Aside from this, you also need to understand the basics of paying for your credit card bill. Always pay on time and more than the minimum to avoid incurring even more fees, and always think of a credit card purchase as a loan to pay later.

Also, learn everything you can about your credit card. How much interest will you be charged per month? What are the penalties for late payments? Are there annual fees? The key is learning about the specifics of the credit card and being responsible in paying it on time.

2. Allowing friends/relatives to borrow money

Helping friends and relatives when they’re in need is a strong trait of the Filipino culture. But when the help they need is financial, you should step back and consider the circumstances. Filipinos tend to have difficulty saying no to most requests of relatives and friends. This includes financial requests. Even if they don’t have enough funds, they still tend to help relatives looking for financial assistance. The sad reality is that there are instances when you don’t get paid back.

If this happens to you, it might help to ask what they need the money for. If they are borrowing money for a business venture, for example, advise them that they might be better off consulting with a bank. If it’s for something else, offer to help them research the best loans available. Even if you can’t help them financially, you can still give them helpful advice.

3. Not having a safety net for your health

How much does a visit to the ER cost in the Philippines? If you will be headed to a competent hospital such as Makati Medical Center, don’t be surprised to have a P9,000-P10,000 bill for just a 2 hour visit. In these types of hospitals, the professional fee is almost at P4,000 in the ER. As for consultation fee, you will be paying at least P500 per visit, and pay more for the diagnostic procedures.

In the Philippines, the out-of-pocket mode of payment is a common scenario. Though you can visit public hospitals, be prepared for long lines, and at times incomparable service compared to the private hospital facilities such as Makati Medical Center, Medical City or St. Luke’s Medical Center.

To avoid these nightmare scenarios, look for a decent HMO that could get you and your family covered. You can get covered for as low as P700 a month, but always check the plan to see if it’s best for you.

4. Not investing

You may have heard the saying ‘a penny saved is a penny earned.’ But is it really the case? With inflation, your money saved today may no longer have the same value the next day, so it’s important to learn the basics of investing. Investing in the stock market, bonds and other sources of passive to active income can come in handy especially when you are about to retire.

You can start by putting aside a little money every month to invest, or by reading about investments. Consult with financial professionals to ensure that you’re investing your hard-earned money in the right places.

5. Not pursuing further education

Whether it is a new trade, or a master’s degree, you should always try to grow as an individual through further education. You want to always update your skills in order to present yourself as an asset to your company.

Additional skills gained from education can increase your market value. And at times, achieving certain positions requires specific qualifications. Though further education can cost you some money, if it is relevant to your career goals, you should see it as an investment in yourself.

6. Not buying a house

Eventually, you will end up retiring and when this day comes, you may not have enough money to pay for the current rent that you are paying. Buying a house saves you this trouble; however, buying a house costs a lot of money, especially now that real estate development has boomed over the years. The appreciation of real estate has barred a lot of individuals from getting a house with decent land area enough to raise a family. So how do you effectively buy a house?

You can check banks for foreclosed properties that are up for grabs, check the current housing loan rates, or check the requirements of PAG-IBIG for a housing loan.

7. Not knowing good and bad debt

Do you know the difference between good and bad debts? A good debt is an investment that increases in value over time, such as a student loan, a mortgage, or an auto loan (if a car is necessary to your work or life).

In contrast, a bad debt is for things that quickly lose their value and don’t generate income over the long term, or debts with punishingly high interest rates, such as credit card debt.

To avoid bad debt, just keep in mind: if you don’t need something, don’t put it on your credit card. And before taking out a loan, consider whether your debt is going to be good or bad.

8. Not getting the necessary insurance

Car insurance, health insurance and even life insurance are some things that a lot of Filipinos view as added expenses. However, when faced with actual risks that turn to unfortunate events, it is the only time they realize that prevention is better than a cure.

There are a number of insurance companies that can provide the necessary safety net for different aspects of your life. Make sure you’re covered for any eventuality by insuring your car, your home, your health and your life. A few monthly payments now can save you a lot of trouble later.

But of course, you need to know the terms. For instance, during the 2009 Ondoy typhoon, there were cars that weren’t covered by their insurance companies since it was an event of nature that caused the damages. However, it has been recorded that during the same incident, insurance claims hit a record high of P11 billion. So always check your coverage before making claims.

Avoiding all these mistakes might seem like a tall order, but if you lay out your financial goals and start cutting out these mistakes one by one, you can be well on your way to financial stability.

source: www.abs-cbnnews.com

Why you should make a 'money roadmap' for 2014

MANILA, Philippines - All motorists understand that a good map is worth its weight in gold, especially if you are navigating in difficult conditions. In this age of GPS or global positioning system, charting one’s course has never been easier. Are you doing the same with your money?

The best way to open the year on the right footing is to have an idea of where you’re going. This is why the beginning days of 2014 is a great time to work on a personal financial plan. This could serve as a roadmap that will guide you in the year ahead.

Why do you need a personal financial plan?

In a nutshell, it’s your map that would guide your spending and investment decisions to help you reach your goals. Simply put, how to get from A (your money situation right now) to B (your goals).

A personal financial plan may also be likened to a blueprint of a house that you are building. While it may be fun to think of how to decorate individual rooms and make your choice of toilet fixtures, you cannot create a sound house without having an architectural plan first.

Similarly, making spending and investment decisions that are not part of a personal financial plan could keep you from achieving your goals of having a secure financial future optimally.

What goes into a personal financial plan? It should have your goals on one hand, and your personal financial profile on the other. Here are some tips to get you started in working on the different components of your personal financial plan.

Your goals:

Look at every facet of your life and try to come up with comprehensive goals. These could cover the following aspects:

Intellectual goals.

This could include continued education, whether graduate studies or short courses. You may wish to add accreditation tests that will help further your professional career, or learn new skills to enhance your capabilities. Consider if you would like to venture into new or related disciplines as well. Also think of your educational goals for your children—possibly university education abroad or extra courses.

Professional goals.

If you are employed, think of where you would like to be in the medium and long term. Do not limit yourself to just positions within your organization, but consider what other companies you may want to work for. Also think of other disciplines that you may want to move on to. You may also be thinking of putting up your own business. Include this in this plan.

Lifestyle goals.

This would cover your aspirations on how you plan to live. It includes leisure, travel, and entertainment. Perhaps you plan to celebrate your 25th wedding anniversary or intend to have yearly vacations abroad with your family. There may also be sports that you plan to take up, or hobbies that you would like to pursue.

Relocation goals.

If you intend to move out of the country, this should be part of your personal financial plan.

Going through the list above, think of what you would like to be and what you want to have very soon, in the near future, and in the distant future. These will constitute your short, medium, and long-term plans. Define these by a timeframe – short term could mean the present up to the next three months; medium term could mean the next three years; and long term may mean anytime from five years and above.

Estimate how much you would need to achieve your different goals. For instance, if you plan to buy a car in the next six months, indicate how much you think this would cost.

Your financial profile:

List down your current income streams.

This would include your monthly pay (if you are employed), your earnings (if you have a business), interest or investment income, rental income, and all others as the case may be.

Do an inventory of your assets.

This will include your savings accounts, real estate, cars, insurance plans, shares of stock, your retirement fund, and all others as the case may be.

List down your debt.

This will include your credit card debt, amortizations on real estate or car purchases, and other personal debt that you may have taken.

Examine your expenses.

Based on your past months’ expenses, determine how much you spend on different things: utilities, rental, education, transportation, entertainment, etc. This will be helpful as you make a financial plan that will help you achieve your goals.

Your financial strategy:

Looking at your goals, now expressed in peso terms, against your current financial profile, project how much you need in savings or investments to be able to have these in the future. For this, you would need an investment plan to grow your wealth, and a spending plan, to manage your expenses.

Take note of your current life stage. Your financial strategy is determined by your current life stage—you may have just started working, you may have just had a baby, or you may be just a year away from retirement. This may also determine your risk appetite, which refers to your willingness to invest in high-yielding, but high-risk investment instruments.

Seeing your goals and financial net worth on paper will make it easier for you to design a financial strategy. If you need help in coming up with a financial plan, consult a professional financial planner. Banks and other financial firms would be glad to provide these services to you, and help you on your path to a more secure financial future.

Happy planning!

source: www.abs-cbnnews.com

5 Reasons Why You're In Debt Up To Your Eyeballs

We've all seen the LendingTree commercials where the guy sarcastically says: "I'm in debt up to my eyeballs. I can barely pay my finance charges. Somebody help me!"

If that sounds like you, read on. Here are a few reasons why you're swimming in debt and what you can do about it.

No spending plan. Without a plan or financial goals, you're headed down the road to digging yourself deeper into debt. A spending plan establishes goals and principles. If your goal is to save $20,000 for an emergency fund, then you need to avoid more debt along the way. Since debt must be paid back, it would take away from funding the $20,000 goal.

Keeping up with everyone else. Your neighbor just pulled into his driveway with a new Ford Mustang, and you immediately think about buying the new Infiniti luxury sedan. That's what we know as keeping up with the Joneses. But it doesn't stop there. Your sister tells you she just picked up the latest purse in the Louis Vuitton spring line, and you think about that Chloe bag you didn't really want until now. We do this to ourselves because we don't want to feel we're missing out on the finer things in life. But what we miss is the reality of the Jones' financial situation. If they're living on credit, you'd never know because you're so blinded by their bling. Take a step back and assess the real reasons behind your newest impulsive purchase, and then take action.

Lack of discipline. Just as you begin to think about purchasing a new car because your neighbor recently bought one, hopefully you have enough restraint to consider the impact on your spending plan. If your goal is to get out and stay out of debt, then discipline will play a major role in your daily financial life. Financial discipline will help you assess your goals and consequences when faced with a decision that could potentially take you off the plan. Discipline is your friend. Embrace it.

Buying a new car every few years. Remember the car your neighbor bought? Well, let's just say you're about six months from paying off your current vehicle, but you've now convinced yourself that it's time to get a new car because "I deserve it." This is a classic reason why so many people dig in and remain in debt. Most people relish the idea of not having a car payment, and others relish the new car smell and feel every few years. You must decide what's more important to you -- living a debt-free life or cruising in the latest model.

In your world, credit is king. You enjoy a little retail therapy because you've had a hard week.But your bank accounts are overdrawn. Not to worry, you've got good ole MasterCard coming to your rescue. The problem? Your cards are mastering you and not the other way around. You've become so addicted to the plastic that you hardly recognize your spending plan anymore. As with the guy from the LendingTree commercials, your life is largely financed by your debt. But it's driving you crazy and will cause many sleepless nights ahead.

Here's the thing about getting out of debt: It requires a strong but realistic spending plan that you can stick with through the end. This is a "living" plan that will change along the way, but that's the beauty of it all.

Forget keeping up with everyone else, and cut up your credit cards. Spending your time trying to impress people who don't factor into your bottom line is a waste of money and will impede your financial goals. Assess your financial goals, and decide if having a new car is truly worth the money spent. Remember, it's no fun being stressed because your finances are out of control. Take control now, and enjoy the fruits of your efforts along the way.

source: dailyfinance.com