12. Swabeng Dilemma: To be or NOT To be Insured

When I was young (around 20's), I have a different perception when it comes to Insurance. To me (back then), insurance is a bit complicated that my thinking was you need to have a lawyer to get insured (sounds weird right).

Also, my belief before that insurance was for the rich and wealthy people. Why pay premiums when you can use your money on the things that you may need right? Am I also alone on this?

I'm not alone!

There are also thousands (if not millions) who are also working yet uninsured. If my hunch is correct, most of the working class think that their SSS (or GSIS for Government Employees) would be enough for them. They would also think that Insurance issued by their respective companies (via tie-ups). This in fact would be one of the reasons why Filipinos don't have an insurance to protect themselves.

Here are some interesting reasons why most still doesn't have any insurance. Technical aspects not yet included.


1. The Habit of Ignorance.

Majority of the working class would rather not discuss about it as they would thing it is always been related to dying. They would just shrug it off and probably say they don't need it yet since they are still young and healthy.

Let's face it, they will most likely be contented on SSS (or GSIS for Government Employees) as far as they're thinking. Another factor is the list of definitions insurance term that seem to complicate them leading to simply ignoring it altogether.


2. Impressions of the Past.

Probably for some reason, they may have been misinformed by past insurance agents, and probably misleading them at some point. These are people who may have been scammed in the past with their former insurance agent.

Trauma from past experiences prevent some people from accepting the fact that they need insurance to protect their future as well as their loved ones.


3. The lack of funds.

Now this would be the most common reason (This was also my reason back in the past) why most people is not into having themselves insured. They would probably use the money on something they can be of use today than tomorrow. While there is nothing wrong with saving and investing, have you ever thought what happens when you are unable to save and invest?


As time passes by and I was getting a bit older (and more wiser), it is very important for us to get insured. I feel that this would be the best time (actually 2nd best time) to have ourselves insured.

But the next question would be, What kind of Insurance will work for me.

That would be on my next post.

11. Swabeng Strategy: Building up the Foundation of your Emergency Fund

When all of debts have been settled, the next phase is to build-up your emergency fund to ensure that you don't need to be in debt again in case an emergency happens.

By definition, An emergency fund is an account used to set aside funds needed in the event of a personal financial dilemma, such as the loss of a job, a debilitating illness or a major expense. 

So this only means that it should be a MUST for every working citizen (breadwinner or supporter). Anyway, here are some basic steps on building your emergency fund. 

1. Determine your monthly budget at its most basic. 

You need to calculate the total amount of your basic expenses. This includes utility bills (the most basic would be electricity and water), food for the table (excluding eat-outs at the malls and/or restaurants),  your kids' basic expenses (schooling). Sale at the Malls are NOT included in your emergency fund. 


2. Determine the amount you need to build your emergency fund. 

Once you determine your basic monthly cost (sale is not included), you need to know how much would you need (for how long). Most local (and foreign) blogs would advise to have at least 3 months of your basic expenses. Some would say at least 6 months worth of your basic expenses. But for me, I'd go the distance and recommend 9 to 12 months worth of your basic expenses. Sounds insane right? But for me, I'd rather be safe than sorry, 


3. Determine if you need a buffer for your emergency fund. 

While you were able to determine your basic budget for each month, You also need to consider the possibilities of encountering any unnecessary incidents. These incidents may affect your budget once it happens. A few examples would be expenses if your car broke down or if someone in your family got sick and hospitalized. If you decide to save 9 to 12 months worth of your basic expenses, a 10-20% buffer will do. If your saving for 6 months, a 20-30% buffer will do. And if your saving for only 3 months, a 50% buffer should do. The bigger your emergency fund, the smaller the buffer. Let me know in the comment section if you have other ideas on building your emergency fund buffer. 


4. Determine the amount of time that you need to build your emergency fund. 

Building an emergency fund takes time. It may take a year to a couple of years depending on your strategy. Patience is the key factor here because the bigger your targeted emergency fund, the longer it may take for you to accomplish it. The good thing is you don't need to be in a hurry saving up for it especially if you are still able and working. As I posted this, I'm still working on my emergency fund. =)


5. Determine the possible source of your emergency fund. 

Now that you know your basic monthly budget and how much would you need for a certain period of time, you need to know where would you fund your emergency fund until it hits your target goal. The first thing that may come to your mind is to fund it from your paycheck. You may allot 5-20% depending on your objectives and targets. If you want to speed-up your funding, try to freelance your work or do sell something that people need. That way you'd be able to reach your target at the soonest time possible.



I hope I was able to give you some basic guidelines on building your emergency fund. But were not yet on the technical aspect of it (this will be on another post). If you have other ideas on building-up your emergency fund, please feel free to comment below. =) 

10A. Swabeng Thoughts: Message from COL Financial

I'd probably break (just once in a while) this habit of posting once every 5 days as I just receive a message from COL Founder and Chairman Mr Edward Lee today. 

It was a very insightful letter as he reminds us the value of not just investing in the Stock Market, but also investing in yourself to be Financially Educated. 

Here is the letter that he sent me (and probably thousands of COL Financial Clients). I hope you'd be able to learn from his letter.

Dear COL Financial Client,

One of our biggest concerns at COL Financial is that many people start investing or trading in the stock market, even though they don't understand how to do it. Worse, some people even invest in speculative issues with no understanding of fundamentals, turning investing into gambling as they get excited at the prospect of making a high return.

This is the reason why people lose money in the stock market, and it's also the reason why people lose faith in the stock market.

People enjoy the rush of earning money from something they don't understand how to do, not knowing that the boring, slowly-but-surely way of investing is what works out in the long term.

It's why we are always encouraging everyone, not just COL Clients, to attend and learn from our investing seminars. We want you to understand the rules of investing and trading, so you don't end up wasting your hard-earned money.

Aside from arming yourself with investing knowledge, I also encourage you to manage your risk.

Start by deciding how much money you are comfortable placing in the stock market. Then, rebalance your portfolio regularly, at least twice or thrice a year, so that the amount of money you have in the stock market is always an amount you're comfortable with.

Finally, I would like to remind you that what matters is how long you're in the market----- not timing the market. While we're not certain what will exactly happen in the stock market this 2017, know that the long-term growth story of our country is strong and intact.

Thus, regularly investing in the Philippine stock market will bring good returns in the long term. It may not be as exciting as following a hot stock tip, but as George Soros says, good investing is boring.

Sincerely,

Edward K. Lee
Founder & Chairman of COL Financial


Please note that I'll be sharing some of my knowledge about the Stock Market in the coming months as I just need to follow my outline in posting. 

10. Swabeng Dilemma: Do I Really Need Emergency Funds?

Let's say you were able to clear out all your debt within the time frame that you've set. Congratulations!

Then what's next? Would you borrow again to get new debt and pay them again?

At this point, do you really want you financial status to be that way? Get Debt, Pay Debt over and over until your done?

I hope you'd realize that if you never get out of that Debt Cycle, your future generation will be the ones to suffer in the long run. Which means that in case something happens to you while you're still on Debt, Who will take your place to settle them? It would have been easier that your entire debt will be wiped out once you're done but that's not the case here.

Do I Really Need Emergency Funds? First timers would answer NO for the following reasons


1. I have all the time in the world.

Being young (say you just finished college and just started your first job) would be the first excuse of not saving up for emergencies. I'm sure most (me included years ago) of you are still dependent on our parents as we still live with them and they still cover rent (or mortgage), food and all the basic utilities (water, electricity, cable, etc). In the event that something unfortunate *knocks on wood* happens to either one of them (or both) do you know what happens next?


2. I don't earn that much yet for me to save some.

Personally, this was my excuse when I was starting. I kept on saying I'll start building my emergency fund when I'm earning a heftier salary. I realized that If I can't save money early in my career, I would have a hard time during the same right now.


3. I'll just worry about money when there is an emergency. 

While you have your parents, relatives, friends, and even your credit card, never assume that they're always be there to take care of you in case of emergencies. You should realize that they have their own financial obligations to take care of. Also do not consider your credit cards as your emergency funds, remember that if you pay the minimum and/or on a delayed basis, its interest will pile-up until your debt doubles. Would you want that?

On my next post, I'll show you how to build your emergency fund so you'll have a peaceful sleep every night.

9. Swabeng Thoughts: How young you should really start investing

There is a saying saying that "The Best Time to Invest was Yesterday. The Second Best Time to Invest is Now. And the Worst Time to Invest is Tomorrow"

These were the words I live by when I started my journey towards Financial Success.

I remember when I started working, the only way I knew back how to make my money grow back then is by depositing it in banks. That was during the turn of the century, or should I say the turn of the millennium.

I remember being invited in talks on business only to realize that its more on MLM or what we call Multi-Level Marketing rather than promoting the business itself. It was kinda disappointing after hearing every talk which made me lose more interest during that time. I was in my late teens back then.

I didn't realize time flies so fast and I'll be 40 years old after a few more years. That was close to 15-20 wasted years (well almost) that I should have even attempted to learn Financial Literacy at least once during the turn of the century.

Anyway, if you're still single and just started working, I suggest you start investing NOW. How much you invest shouldn't be an issue to you. While starting, you should also invest in yourself by having yourself insured, getting fit and healthy and try to learn as much as you can. Investing as early as NOW (plus if your in your 20's), it would give you a lot of years to go to maximize your gains.

And if you're already in your 30's and above, start NOW!

8. Swabeng Dilemma: Does age matters?

In Love and Romance, people say age does not matter as long as they love each other. Isn't that sweet?

However, that is not the case when it comes to Financial Planning.

I'm not saying that if you're old, don't plan. What I mean is, time may not be on our side anymore especially if we keep on contemplating and procrastinating when is the time to start.

Wise men say the best time to start your financial freedom was yesterday. The second best time would be today. And the worst time would be tomorrow.

Let me share you an example some of the popular excuses why most people hold of starting their way to Financial Freedom and their corresponding ages

20's: I'll do it next time since I'm still young and have a long way to go. 

Most millennials have the mantra of YOLO (You Only Live Once). Nothing bad with it. But if you neglect its greatest advantage (TIME), you may never be able to fully maximize your gains in the long run. 

30's: I need to save-up for my wedding and expenses for my future family. Maybe next time. 

Well most newly-wed couple would say building a home and having kids are their top most priorities. Again, there is nothing wrong with it as long as you know how to prioritize and be able to save and invest whenever possible.


40's: My kids are already studying. I'd probably start saving when my kids are finished schooling. 

This is where it starts to really get difficult. Your kids are growing which means they would need more of your financial assiatance.

50's: It's really expensive to send my kids to college. I may not have enough for investment. 

You may be probably in your 60's by the time your kids are done with college. I'm sure this is the age group where financial responsibility is at its heaviest. You may also begin to feel weak and tired more often than when you were in your 20's or 30's. 

60's: I guess this is the right time to invest but I'm retired already. 

Come on! You had 40+ years to start but you didn't even make that first step. While I know its not yet over till its over, but realistically speaking, it is. Even as early as your mid-50's you may encounter some health problems ranging from the not so serious to the critical ones (you know what I mean)

You have to remember (and make sure to remember) that TIME is MONEY You can get more money but you cannot get more Time. 

The Best time to start SAVING and INVESTING is NOW and NOT TOMORROW!

So you know now that age matters when it comes to saving and investing because of the power of compound interest.

Till my next post.