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. =) 

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.

7. Swabeng Strategy: How you kill your Debt?

If you're in Debt, I'm sure you'll find time to read this post.

But if you're in deep-deep (pun intended) Debt, I'm sure you'll read this right now.

No matter how deep in debt you're into, there are several ways on eliminating it the right way.

I haven't been in trouble with my current debt (via SSS Salary Loan) and I don't want to go through a knee-deep debt like probably most of us here.

Anyway, here are some of the tips that I can share with you on how you can eliminate your debt. Just take note that were not on the technical side yet. This is just more on the mental conditioning for you on how to get rid of it. Once you are mentally prepared and able, the technical side of dealing with it would be much easier for you. =)


1. Acknowledge that you are in debt and be ready to eliminate it ASAP.

There are times that you are still in denial with the fact that you have debt and you need to face them. Whether you have debt to your friend or relative, you should acknowledge. Be it Credit Card Debt or Cash Debt, you need to do something about this and you should always consider debt as a serious matter no matter what.


2. Know the root cause why you are stuck in debt and why it took you some time to take care of it.

I'll guess one factor why one is stuck in debt is because of living the luxurious lifestyle beyond one's means. When one cannot say no to friends, he will find a way to get money to be with friends. Personally, I've never encountered this as I know my limits early on. You may also want to list down your debt in order (from the most to the least) so you would be able to come up with a strategy.


3. Look for ways to reduce debt until you eliminate them.

There are a lot of free sources (online) on finding ways how to reduce debt. All you need is a reliable internet connection and the motivation to get rid of debt once and for all. You may also seek advice from someone you know who has been there and was able to eliminate it so you would be able to have an idea on how he/she dealt with it.


These would be my tips for now. I'm sure you'll be waiting for the specifics. Just stay tuned.

5. Swabeng Strategy: How do you really set your budget seriously?

This should be your first step towards your financial freedom. This step has no time frame and should be done religiously for the rest of your life and make sure your next generation will learn from it too.

I have been reading some books as well as some blogs on how to set your budget. To be honest, there is NO universal distribution on how you should budget your paycheck on a monthly basis. It would still be up to you on how you distribute your budget.

Let's say you are the sole breadwinner for your family, it is crucial for you to be able to set a budget and make sure to follow them as religiously as you can. Given that your spouse works too, you may have a slight advantage with your budgeting unless your spouse has other plans. 

0. Determine your purpose of Budgeting

What is your main reason on why you have decided to budget? Is for a short-term goal? medium-term goal? or long-term goal? Whatever your goal is, what matters is that you have one (or more) that's why you decided to have a budget. Deciding to do Budgeting without any purpose is like planting a tree not knowing what fruit it will bear.


1. Determine all your sources of Net Income

This will be your base on how you will budget for a specific time frame (say 2 to 4 weeks). Your net income should be the entire pie or 100%. If your spouse would help you with the budgeting, so much the better. If you have more than one source of inclome, the better. The more sources of income you have, the bigger pie you'll be having.


2. Determine your Needs (Living Expenses) and Wants (Lifestyle Expenses)

Other books would say Wants and Needs. It should be the other way around. You have to determine what you need and what you want for a day, a week, or a month so that you would be able to determine how you would allocate your budget. Just remember that your need may be someone else's want and vice versa so be very particular in determining your needs and wants.


3. Allocate your budget according to your Needs and Wants

Your needs should have a bigger budget allocation than wants (Definitely!). The lower the percentage for your wants, the better (at least for now) until you have saved some for Emergency Funds (to be discussed soon). You may also set some room just in case you go over budget (atleast 5-10%) as your buffer.


4. Make sure to stick to your budget and review them periodically.

As I've set previously, budgeting is a lifelong skill that you need to sharpen as often as possible. There may be unexpected expenses along the way, but as long as you know your budgeting priorities, you're good to go.


I would soon show some examples on how you can allot your monthly budget according to your Needs and Wants.

For now, please take some time to plan and set your budget using the guidelines given. You may add some suggestions via the comment section if you wish to.

See you then.

3. Swabeng Strategy: Your Steps to Achieve Financial Freedom

In the last article, we discussed what really prevents you from achieving financial freedom and before you know it, you realize I'm right correct?

Anyway, let us not dwell further on what prevents us from achieving our goal and now we learn the steps on how to achieve financial freedom. The steps I'll show you here is more of a goal setting (for the rest, I'll try to discuss them chronologically). 

It took me a few weeks of reading to determine what should be the steps on how we should achieve financial freedom. Believe me or not, I've read close to a hundred articles (locally and abroad) just for this topic and believe me, everyone of them have a different take on it. But here's mine:

1. Acknowledge the Need for Financial Literacy

If you were born to parents whose advocacy is to educate people on financial literacy, then consider yourself very fortunate. But in reality, not all of us are born having them as parents. Your objective now is to get yourself to learn and you should take action NOW! You have to admit that you need this for you (and your family) to have a better future ahead. You should also know why the need and how to make sure to accomplish them. Don't worry, I'll do my best to guide you in every step.


2. Get your family involved

You should also inform your family members about your decision to achieve financial freedom by having yourself literate first. Some may accept your decision while other may be hesitant. You just let them know that you're not just preparing for your future, but also for their future as well. Whether they would help you achieve it or not, the fact that you have already told them of your plans would mean that you are serious in securing your family's future.


3. Set your Goals

Once you were able to do the first two steps, this would be the right time to set your goals. Generally, there are three types of goals in Financial Literacy: the Short-Term, the Medium Term and the Long-Term. Depending on the time horizon, it is important for you to set your goals depending on the need. I may discuss this in further details sometime soon.

4. Start reading books/e-books. Watch video clips 

For you to learn the basics (to advanced) of financial literacy, you need to start somewhere. You have already acknowledge the need for financial literacy. Now you have to start. How? Most beginners read books, e-books on financial literacy. You can buy (or borrow) them and give yourself a few minutes to an hour (or two) to browse though pages of them. You can also read blogs of well known financial advocates here and abroad and I'm sure you'll learn a thing or two from them. There are also several video clips (from youtube and vimeo) that you can search and watch. 

5. Attend seminars and look for a mentor and like-minded individuals

Given that you have read several books and attended a few seminars (free or with a fee), you should be able to determine who would be your mentor in your quest for financial freedom. You may also join forums found on social media that has the same goals as you are. That way, you get inspired/motivated by other people who could also get some motivation from you. 

6. Track your progress

This would be your diary in determining whether you are still on track to your financial freedom or you need to do some fine-tuning. Don't worry if you get side-tracked while on your way. What matters is you keep record of your progress and learn from it.


I think were probably done with goal-setting at this point. Now its time to execute the plan that we made and let's aim for financial freedom for our family. 

2. Swabeng Dilemma: The things that prevents you from achieving financial freedom

I'm sure a couple of years back or even a decade ago, whenever we think about financial freedom, it means that when one has a bank account or if we have an OFW relative (be it an immediate family member or a distant relative), we are assured of our future.

I can enumerate what prevents you from being financially free. However, I'll just tell you some of the things (in general) that hinders you to your financial success. Here they are:


1. Financial Ignorance

With today's technology, it is impossible for you not to even google what financial literacy is all about. If you decide not to act on it, then my friend you are considered financially ignorant. Its a matter of choice whether you take action and get it on or just get stuck (in poverty or worse).

It took me more than 30 years to realize that being financially literate is a very important factor to ensure not just my future but for my child's future as well. Right now, I can't afford to be financially ignorant and so do you.


2. Society's Influence

Every time you receive your salary during payday, are you influenced by your peers to go out on lunches, gimmicks, out-of-towns, or get the latest stuff money has to buy? Is it hard for you to say no to them because if you do, you're out of their inner circle?

If saying no to your friends gives you a hard time, then my friend you are easily influenced by your peers on your spending habits. You might even have the wrong set of friends for preventing you to achieve financial freedom. Think about it.


3. Too much dependency on your relatives

When you're starting to earn money on your own and say you ran out of cash, what do you do? I'm guessing that you'll ask for help from your parents. While some parents (and some relatives) won't mind providing assistance to their children, we should never be dependent on our parents (especially if we are working already) nor on our OFW relatives whom we think they're doing well in life.

If you are nearing your retirement (or if you are retired already) you should never rely on your children for your retirement expenses as well since they have their own family to take care of now.

These are the things that I know (for now) that could hinder you from achieving your dream to financial independence. I could add more in the near future but anyway, on the next post, I will show you the steps to achieve financial freedom.