Who doesn’t want to make money? Let alone save as much as they can. At any point of your career, financial freedom and savvy is what we want. From young professionals to even those out there who are seeing retirement in the near future, I bet there are still some money problems you haven’t found the answer to.
So as the first week of 2017 comes to a close (and as you realize pay day is still one more week away), we are going to set some habits to increase our savings without feeling cut-off and to make more money by working with what we already have. I talked to Danny Moynihan, financial adviser at SunLife Philippines and entrepreneur to answer a few questions about finances. Usually, talking about money is considered indelicate but I believe in this case, you wouldn’t mind the chatter.
#1 I don’t have a savings account yet. How do I start?
First of all, the amount of money you want to put aside is up to you. The idea that you should have a certain amount of money at a particular age is relative to each individual. Danny then says you shouldn’t be pressured on how much you should put aside. What you should consider is the bank where you will open a savings account. “Most people rely on their payroll account. This shouldn’t be, you should have at least another one. Money should be compartmentalized. When choosing a bank, consider you primary expenditures: Where do you shop a lot? What do you shop for?”
“There is often stock in opening an account which is tied up to a mall. You will first cut down on the service fee charged to your ATM card when withdrawing,” says Danny. Malls usually favor their own banking company when it comes to the ATM kioks plus they also tend to offer rewards programs to customers of their bank. “Those points really do help with groceries and shopping. Some even offer access to lounges inside the mall where you can get free coffee. If you’re a professional who holds meetings or works in coffee shops, membership to these lounges automatically cuts down your expenses.”
#2 What are the usual expenditures I should start cutting?
“Observe your consumable goods: food, toiletries, everyday items. Often, we forget to ask for a cheaper alternative when it comes to things we take for granted,” says Danny. For example: Soap, as an everyday necessity, might mean we don’t realize how we get carried away into buying the newer, fancier brand when the purpose is just the same with the inexpensive brand. Those choices can accumulate and cut down on your money fast. “Unless you have a valid reason to stick to the more expensive option, try to always look for the one that costs less.”
“When it comes to food, remember that eating fancy doesn’t mean eating healthy and vice versa,” says Danny. You don’t have to save at the expense of eating fastfood every day but you definitely need to be more creative when grocery shopping and going to the market. Cooking your own food or having it cooked at home cuts down on unnecessary spending.
“Don’t spend on stuff you can DIY, but always consider if the money you’re paying is worth the time you are saving,” advises Danny. “Laundry is a good example for this as you can spend a lot of time and money washing it on your own as opposed to simply sending it to a cleaning service. Your Uber or Grab trips are also justified especially if they cut down the one hour you spend commuting into half.”
Creating a budget is a multi-step process that you must do on your own if you want to save. There is no shortcut to it. “Sit down and create a list of all your bills and expenditures every month,” is the first step according to Danny. “You can then work on a spend, save, and share system. Spend is the amount you pay for your bills: food, electricity, water, rent (if any), and transportation. Once you have eliminate the money you need, you can now save or share the money left behind.”
Saving is tricky when you don’t have a goal. “It is up to you how much you want to save but you need to have a goal. A concrete goal helps you keep to the amount you are willing and capable of saving.” Can it be a crazy goal like living in Bora-Bora? “Definitely. It can be relatively crazy as long as it is concrete because people need to be constantly bombarded with a reason to save.” Apparently, “saving for future” is too abstract and you won’t be satisfied immediately. Having a goal, on the other hand, makes you feel a that there is a sense of accomplishment everytime you make that deposit.
“‘Share'” is also important when you budget. It is the money you set aside to be able to give back or to even just help out a friend. Danny believes that sharing helps you make more money. When you give something to someone, it boosts endorphins and makes you feel good; endorphins make you healthier and give you more energy to work and encouragement to make money. Sharing can be buying something for a friend or a workmate, like even a bottle of shampoo, to actually giving a donation to a charitable institution.
#4 I have some credit card debt that I can’t pay immediately. How do I recover?
“Having credit card debt isn’t bad,” says Danny. *sigh of relief* “You have to determine if what you owe is good credit or bad credit. Good credit is when you spent on something that will help you make money. A laptop to help you in your job or business which you bought via your credit card is good credit.” Otherwise, you have to reconsider your choices. “Spending credit on things which can’t help you earn money back is why you get into debt.”
I asked if the advice to use your credit cad for monthly expenses like groceries and transportation is still a good call. “Yes, in fact that shouldn’t be a problem as long as you limit and track,” he answers. As for paying your debt, learn to set a side a good amount every month if you can’t pay the full balance yet. What’s important is that you pay as to not accumulate interest but also cut down your use of the card until you no longer have debt. “You can’t fully save until you have debt, so get rid of it because it’s like walking around with a ball and chain.”
#5 Should I look into an insurance and investment plan?
Danny tells us, “Saving is never enough. The money you put aside will be useless because of inflation.” The value of your money can decrease over time so what you can afford every month this year won’t be the same as next year, hence the constant need for more money. Once you have some cash, immediately look into an insurance and investment plan. “People always assume you need to make big money to start and insurance or investment plan. What people should know is that financial advisers are here to help you make plans that fit your needs and your budget.”
If you have set aside some money and are looking into investing to make your savings grow over time, consult a friend who is a financial analyst or ask a referral from someone you trust. “It is important to get a financial adviser you can trust and be honest with when it comes to your finances. It will help you feel less uneasy about the decisions and you will have someone with your best interests in mind.”
#6 What small tools can help me save and better with my finances?
Downloading expense tracker apps like Ya!Man and Expense Manager help you at least monitor your day to day expenses. “It helps you see what you spend and what your spend it on so you can find your own ways to save,” says Danny. It also pays listen to a few experts. You can read the books of Robert Kiyosaki or listen to the talks of John Maxwell. These people don’t simply just talk about finances but also how to be successful overall. ‘They give you extra motivation and help you formulate goals to save up for.”