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Financial Planning: Future-Proof Your Finances

Happy last Friday of 2017!!!

So how prepared are you for 2018??? :D

I recently met with a financial adviser who shared with me the basics of financial planning. 

I won't discuss everything in detail, because I'm not really in the position to do so, but I'll share what I can. :)

First, there's what we call FINANCIAL TRIANGLE: 


Then the three major risks in life namely: 
1. Dying too soon
2. Living too long
3. Sickness/Disablement 

Now the big question is, how prepared are you for these risks? 

During the BDJ Launch Weekend, I got to listen to Cheska Sarausad and she shared the following worries that most adults have: 

1. Can I take care of my aging parents?
2. Can I send my children to college?
3. When I am unable to work, who will take care of my family's needs?
4. When will I afford to get a house for my family?
5. If I get critically ill, will I be able to pay the bills?
6. Will I be able to afford to travel outside the country?
7. Will I have budget to spare to give gifts to my loved ones?
8. Will I be able to retire with the savings that I have? 

Who can relate?

I do. And if you're like me who isn't able to answer "YES" (yet) to most of the questions, then it's really time for you to be serious about taking care of your finances. 

Ideally, you should have the complete financial triangle. And the earlier you start, the better. In my case, I only started in 2011, and admittedly, that's one of my greatest regrets in life. But the more important thing is I chose to begin. Everything is still a work-in-progress for me, but it all begins with a decision - to improve my life, to be able to give more to my family and the people I care about, to be financially free. 

And when can I say that I've reached financial freedom? It's when I no longer worry about the things mentioned above. But the Bible says, "do not worry about anything", right? I just need to pray about everything and the Lord will surely provide. 

RIGHT. 

And WRONG. 

Remember the story of the paralytic who suffered for years just because he couldn't get himself into the pool which was believed to be a source of healing? (John 5:1-15) 

He had nobody to bring him there and whenever he comes near, somebody else would get in before him. Imagine how desperate he already was when Jesus saw him. 

But what did Jesus do? He didn't bring the man to the pool and had him bathe there. He simply told him, "RISE UP. TAKE UP YOUR BED. WALK."

The power is NOT in the "pool". The power is IN YOU. Because GOD is in YOU. And who is God? He's the source of everything. And he tells us that the only way to get out of that paralysis (no matter what it is) is to MOVE. Don't wait. Make the first step. NOW. 

So how are we going to future-proof our finances? 

Here are eight simple steps shared by Cheska (with additional inputs from me :D): 

1. Account all incomes and expenses. Be brutally honest about it. First you need to know where you're at. 

2. Set a goal and a timeline. You know the rules in goal-setting: write them down, break them into specific milestones, create daily action steps to accomplish those milestones. And of course your goals have to be SMARTER: specific, measurable, attainable, realistic, time-bound, ethical, recorded (because when you write them down, you can get them done :D)

3. Set aside an emergency fund worth three (3) to six (6) months of your expenses. Since you need this fund to be ever-ready, then a savings account with a reputable bank is the recommended option. Side note: Security Bank has a "build up" savings account which offers the highest interest rate of 0.5%. BPI Family Savings Bank also offer the same interest rate. Do some research to evaluate which would be most useful and convenient to you. 

4. Adopt the 80-20 behavior: 80% expenses, 20% savings. 
That's the common rule but we know a better approach: 10-20-70 (in that order)

10% tithes: Pay God first. This is our way of thanking Him for everything He has given us. How are you going to pay God? Through the church and the institutions that help the poor. Remember the beatitudes and the famous verse from Matthew where Jesus said, "whatever you do to the least of my brethren, you do unto Me." (Matthew 25:40)

20% savings: Pay yourself second. This is your fund for the financial triangle. Whatever you earn, make sure to set aside a portion of it for investments, savings, and protection. 

70% expenses: Then you can pay for everything else - loans, amortization, basic daily needs. 
In order to do this effectively, you need a monthly budget. Microsoft Excel has a template which you may want to check.

Here's a template from the Financial Management workshop I attended last February: 

Whatever savings you have, put it on your savings/investment accounts, and try to really live within the set budget. 

5. Protect your dreams. Consider life insurance. There's just a lot. Read up and see what's best for you. 

6. Consider growing your savings by investments. You can start with BDO EIP. I'll share more about it in the coming days. :)

7. Begin TODAY. Again, there's no better time than NOW. 

8. Choose to live a brighter life. This is the Sunlife's tagline, but it just means to say that the choice is YOURS. YOU have to make the decision to future-proof your finances. And I couldn't stress this enough: NOW is the time. 

Disclaimer: I am no financial expert. I can only share and testify to what I already know. If you need more details or you want professional help, please contact a licensed financial adviser. Let me know if you need recommendations. I'm blessed to have known some of the best ones. :) 
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