Ignorance is Expensive, Cut Your Budget On It

Money has been the common stumbling block for people who want to start investing. Ironically, it’s their money problem that they want to solve with the idea of investing. Almost everyone would say they want to prepare for their families’ future by investing and getting a protection for emergency needs. But still a lot of Filipinos even at their middle age are not doing anything about it. The usual reason is because it’s expensive, they think. 

But if you look at some people’s lifestyle, even some minimum wage earners have that excess money to buy items which they call “investment to self”. They buy gadgets, they dine out, buy expensive coffee, watch movies, have “gimik” with friends, go out of town and a lot more. You know what I’m saying. You see them being shared in social networking sites. Though it’s every person’s right to choose where to spend their hard earned money, there are those occasions that these people who spend their salaries on these luxuries are the ones not giving other people their rights to spend elsewhere. When these people who do not spend and save their earnings wisely meet an urgent need for their family (i.e. accidents, hospitalization, calamities, illness, death), they have no choice but to ask help from others who they know have saved some. 

Of course, not all who ask for help are irresponsible. Sometimes, no matter how prepared we think we are, the worst things happen and surprise us. And it’s always good to help others. But talking about those who don’t help themselves first and run to other people for their emergency needs, I think it’s unfair for those responsible people who earn the same as they are yet try harder in saving for their own families’ sake.

The fact is if you really want to invest, you can start for as low as 50 pesos per day to get as much as Php 700,000 pesos in protection for your family and possibly Php 1,000,000 (yes, that’s 1 Million) for your retirement fund. That’s cheap, right? You just have to give up some of these “investment to self” that you really don’t need. Or if you can’t give them all up, you can at least downgrade some of them. Downsize your coffee, fewer 3D movies, drink only water when you dine out, travel in budget, cut on your beer bottles, etc. To start on your investment, all you need to do is prioritizing your spending then ask the right people. Then act. 

Truth is protection and investment are not expensive, irresponsibility and ignorance are.


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Start Your Investment (But How, Where, When, Why?)

Handling your investments includes the technical and non-technical aspects. And it also involves a lot of common sense. We usually leave this part while thinking that the how-to-dos are enough to manage your investments properly. But are we really doing it right?

People invest on many things such as cars and houses. By working hard and smart, they save enough money for the down payment and then have their jobs and savings keep up with the amortization. But we are all aware that bad things happen on the most unexpected time. Accident may happen to your car the moment you drive it out from the casa. And your house can be burned down to ashes on the first day you moved in. So to protect your investment, the first thing you do when you purchase a house or a car, you get insurance for them. So even if the worst thing happens the moment you get a hold of the keys of your car or your house, possible expenses will be covered by insurance. It is even now a requirement to get one before you can get a house or a car loan. That’s how valuable insurance is for your assets.

Can happen even if it isn't your fault.

Now imagine this. You decide not to get insurance right away. You choose to save money first in the bank or in other money investments like mutual funds, stocks, bonds, time deposits, etc.  After several months of saving, you were able to keep aside a bit of money. Let’s say a hundred thousand pesos.

And then the misfortune happens. You got into an accident. Either you got injured, get disabled or worse, you die.  Whichever of that happens, your family will surely need money for that.  Here are two scenarios that could happen to you after that unfortunate event:

Scenario 1: You get injured and need some time to recover

You will need money for your hospital bills. While you’re confined and resting to recover, your income will stop because obviously you can’t work. That Php 100,000 you saved will be needed. Then you hope that it’s enough to cover the hospital bills  and aside from that, including everything else that you were paying for from your monthly salary (bills for electricity, water, cable and phone, monthly rent or loan amortizations, food, etc). Good for you if you have a health card but still, it can’t cover everything. Unless you have reimbursement benefits from your company, you will also need to shoulder amounts for your medicines. And remember that you only have Php 100,000 for all of these while not having work for unknown period of time.

Scenario 2: You die from the accident

Worse is you may die from it and that Php 100,000 is the only money you have. Funeral services now are exorbitant. Let’s say Php 40,000 will be set aside for it. And your family will be left with Php 60,000. That amount for the rest of their life? Maybe you left some other assets like your home, car and others which I hope you had already paid in full or got Mortgage Redemption Insurance for them. And these might be subjected to estate taxes before being transferred to your loved ones. It could be worse if you’re the solo income earner in your family.

Start saving somewhere

But again, the good thing here is it’s not yet happening. You still have time to prepare for these possible scenarios. There are many ways to prepare for it.  And each scenario has its own solutions.

For Scenario 1, you will need to study all your expenses right now. Check out each of them and see which among them you can remove and live without. Maybe you need to avoid eating out most of the time. Start cooking your own for your “baon”.  Lessen your movie days and you might want to watch some of them by renting dvds and see them at home with your friends and family. The story won’t change anyway even if you’re late seeing it than others. You may also cut off some from your vices (less bottles of beer per month). Cut off some of your magazine subscriptions. Try commuting once in a while. I’ll stop there.  I will leave the specific money saving ways to you since you know your situation better. The bottom line here is you need to save. This will give you more money to keep and quicker time to grow your “emergency fund” (more of this in the next posts) for such needs.  Check your lifestyle and spend wiser. This will help you and your family to survive if scenario 1 happens.

On the 2^nd Scenario, you also need to do everything that was mentioned above. But one important thing you must add to that to prepare yourself and your family is to get an insurance policy. In purchasing cars and houses, we invest in insurance to protect our investment for any possible damage that might happen. So logically, you must do it for yourself as your body is your number one investment tool. In our scenario, you were able to save at least Php 100,000 before death occurred. In reality, a lot of us have difficulty to save that amount even for a long period. But most are able to keep small amounts from time to time. But due to lack of self-control, many are not able to keep that money intact. More often than not, we are tempted to spend it for other stuff which are more often than not, unimportant. So when the time comes that they need the money, they don’t have anything to show.

Are you and your family in good hands?

Good thing today is that insurance policies offered by different companies are made to fit the different needs and capabilities of different people. There are still those traditional life insurance policies which most of us are familiar with. But better things now are being offered especially for the young ones. You can now start getting an insurance policy and at the same time start a long term investment which you can use as your retirement fund or for business start ups later on. Those small amounts that you’re able to keep and are tempted to use in buying unnecessary things can be put into better use in this type of investment. More on this type of investment in the next posts as well.

If we are really serious in thinking about our family’s future, it’s not hard to identify what we really need to start doing. On the next posts as mentioned above, we will talk about what we call the “emergency fund” and “insurance + investment” types of policies. But if you are raring to go soon about these things, just send me an email at laymaninvestment@gmail.com or at rogie_ylagan@yahoo.com and I’ll be happy to share with you whatever that is which I also learned from others. Good day and God bless.