Dream Big, Save Bigger: Learn to Manage your Money

Over the past year, the pandemic has caused so much trouble in our daily lives that we have to adjust everything, down to every single second that we will be out of our comfort zone. Money has been a great issue as well to most of us brought about by lockdowns that limit our chances to earn enough or more for ourselves and our loved ones.

During these periods where everything is unpredictable, it is very important to be ready - or better yet, ahead of the situation – as this will give us enough moment to prepare us for possible setbacks and challenges. Thankfully, I am surrounded by financial advisor friends who offer free consultations and guidance – and they have been very helpful to me ever since this pandemic started.

In one of the conversations I had with financial advisor friends, the topic of Emergency Fund was brought up and how it makes sense that having this kind of fund is very important, especially in an untimely situation such as this pandemic.
 
I was told that it is suggested that if you are a full-time employee like I do, you should divide your salary into three parts – Expenses, Savings, and Emergency Fund.
 
1. Expenses. 

If you think that you are working just to pay your monthly dues and bills, well, you are not alone. The majority of the working class are working to pay monthly dues, which include utilities, daily expenses such as food, transpo allowance, etc., and also debts. Since credit cards are quite popular among the working class, it's no news that most of us can’t afford to save to pay for our debts.
 
As my friend coined it, there are good debts and bad debts, and credit cards are included in bad debts. In my case, he highly suggests that I pay off these debts immediately to avoid interests. And if possible, due to some bank holidays, some credit card companies offer debt consolidation where you pay less or no interest. Debt Consolidation is pretty popular nowadays as it attracts customers to transfer from one company to another or lets you just pay your debt in easy installment plans. Debt Consolidation or some call it Balance Transfer, is a pretty basic concept, which you can learn more about by contacting your credit card company.

2. Savings.
Yes, you read it right, Savings is different from Emergency Fund. While saving is a real challenge to most of us, it is important to keep 30% of our salary to our savings. It is highly suggested to put it in bank account where you won’t have easy access. This way, this will keep you from spending it on some things that you don’t need urgently.

Savings plays a vital role in our lives – most specifically for our plans – as this will provide us liquidity and freedom as we mature. A few years ago, aside from opening a separate savings account on BDO, I also signed up for PruLife UK’s Insuravest, through the help of another financial advisor friend. And I think this is one of the best decisions I made in my life when it comes to managing my money.
 
Aside from the health and life insurance that goes with it, I will be also eligible to let my money grow through investment. To date, PruLife UK is the number one insurer in the country, and this gives me peace of mind at night.
 
3. Emergency Fund
In times like this, Emergency Fund is very important. Not just for an individual, but the whole family. I remember getting sick last year, and thankfully, I have extra money (not an emergency fund) to use, plus I have my health card, which was provided by the company I’m working for, and my Insuravest from PruLife UK.
 
I’m honestly saying that I’m one of those people who thought that “Savings” is also the “Emergency Fund.” There’s more to life than just Expenses and Savings, and I’m grateful that I have an eye-opening discussion with my friend who provided me real-life actions that I could start working on to make sure that in times of crisis like this, I have some funds to pull out because we will never know when undesirable things will happen and it pays to be prepared.
 
My friend shared with me that ideally, we should have an Emergency Fund that is not less than PHP50,000. This should be kept in a different bank account other than our savings account so that we can easily monitor it and access it in times of trouble. My friend also highlighted to me that this “Emergency Fund” is not a fund that I should use if in case I just want to buy new clothes, accessories, or gadgets. This fund should be used in real emergencies, and that I should increase its amount constantly to make sure that it can cover any emergency expenses that I might need in the future.
 
So, if you are wondering how to fix your budget and somehow unburden yourself from financial problems, I hope these three important things that I recently learned could help you through your budgeting.
 
Stay safe and stay secure!