Finance 101: Having Your Cake and Eating It Too!

I was busy cleaning up my yahoo email account when i stumbled across this article I made five years ago. See I used to be the How-To Girl in a local community website for women, and now I want to share what I have written before.

Gash, I can't believe I wrote this, hahaha. I think my target audience was single women with thriving careers. I didn't edit it so read on, learn, and laugh!

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Finance 101: How to Have your Cake and Eat It Too!


After being barraged by three credit card balance statements all at once almost two years ago, I had a sudden realization: My debt amounted to something similar to the cost of a simple Bulgari watch, and my savings? The shoes I was wearing that time even had a higher cash equivalent. Yes, after three years of work, I had no savings, no investments, no security for rainy days. I decided back then to do something about it, and was really obsessed with sorting my finances properly and build my nest egg.


Two years later, thanks to Quicken Software, Excel, and the book “Three Black Skirts”, I am glad that I have found the right techniques on how to budget and save, yet still enjoy the fruits of my labor. Read on to find out my tried, tested, and successful techniques!


Set up a Budget

1. Know your net worth. Net worth means the total amount of money you have against the total debt you owe. This will gauge whether you are down on the reds, barely afloat, or financially sound (if this is the case, good for you girl!).
2. Check your balances. Enumerate the amount of money you receive every month (monthly income, receivables, interests earned from your investments, if any) and find the total. Then list all your expenses. If you want more realistic figures rather than mere approximations, file all your expenses for one month, then put together similar expenses. Segregate these whether they are fixed (meaning those expenses you can’t avoid, such as groceries, rent, debt payments, insurances, etc) or variable (entertainment, dining, clothes, cosmetics, salon trips, etc). Get the total of each type of expense, and subtract them from your total monthly income. The resulting figure is the amount that’s left for you to either save or splurge.
3. Set your goals. Take a hard look at what you scribbled in #2 and then determine how much money you want to save, either for the whole year, or per month. They say save at least 10% of your take-home pay, but of course, you can do more than that. Keep this in mind and incorporate this in the next step.
4. Set up a budget. This is simple really. Determine first the period of your budget – monthly, every 15th day. Then, based on your actual expenses, look on what areas you can save, then set limits on how much you will only spend on a particular category, i.e. PhP 1,000 a month for clothes, PhP 500 for entertainment. At this point, incorporate your savings goal. Or you can do the reverse. What I did first was to subtract my fixed expenses AND my savings goal, then budget the remaining amount to the different splurges I incur. Remember, be austere but be realistic.
5. Keep track of your progress. I know this will sound tedious, but make an account of your daily expenses. It is best to use a program such as Quicken (thank God for this!) or make a simple accounting using Excel. I use both, the former for more extensive scrutiny of my financial dealings, the latter for easier overview of my progress. This part is very important, as this tells you whether you are within your budget or totally way off.
6. Stick to your budget. Every quarter however, check if your budget is still working for you or if you need to adjust some parts, like adding more to your savings if your income increases or if you have spare money because you already zeroed-out your credit card debt.

How to deal with Credit Card Debt

1. Pay more than the minimum amount. Whatever happens, always remember this rule. In your budgeting process, set an amount for paying off your credit card debts, then stick to this until your debt balance states “0.00.” Never sacrifice however the amount you want to save – you may reduce this a bit for a certain amount, but never let a month go by without you putting something to your savings. And lastly, always pay before your due dates. Late payment fees are a pain in the neck.
2. Know yourself. Use your credit card with diligence and control. Two years ago having my credit cards is a big temptation. After setting my goals, I now bring them around for emergency purposes and without having the itch to swipe. If you are not that confident though, leave your credit cards behind or cut them! Minimize use of your credit card by using debit cards instead. These cards subtract your expenses from your account the day itself (thank God for BPI Express Payment!). As much as possible, pay your bills in full, as they may incur interests (ouch). If however you have outstanding balances, pay your usual amounted budget PLUS all other additional charges you have made.
3. Consolidate debt into just one credit card. Many credit card companies offer this option and give you lower rates. Plus, it is easier to pay and lower the risk of you forgetting to pay other credit card accounts.

Pay Yourself: Saving and Investing for the Future

1. Pre-need and insurance plans. There is a difference between the two, although some insurance plans incorporate living benefits similar to pre-need plans. Pre-need plans include pension plans, education plans, and memorial plans. Insurance plans are those that give money to those who you will leave behind when you pass away. When it comes to all these, know the details of each plan and benchmark. Be practical and get a plan that fits your lifestyle and your wallet. Remember to incorporate this as part of your budget, and consider this as one of your savings and investments.
2. Window shop. Not the usual exercise we do at the malls, silly! What I mean is check out the different products and services banks offer to their clients. Place your idle or excess money in either time deposit accounts or special savings account. These accounts can at least be left untouched for specific time periods, and even though the rates aren’t that inspiring, just think that at least your money earns something. Lastly, add more to it every month and make this grow!
3. High risks, high rewards. For those who are more adventurous when it comes to investing, remember that high rewards often entail high risks. You can invest your money on stocks, government bonds, or in trust funds. Do not neglect these investments. Monitor them and be aware of the factors that can raise or lower your investment’s worth. Seek advice from a financial asset manager, befriend your stock broker, and keep abreast of the latest scoop on the financial world.
4. Find other means of generating income. If you are talented in the arts, do some freelance work! Some teach in universities at night or every Saturdays. Some do graphics and photography. Look into yourself and check what else you can do, I’m sure you’ll find one! Note however that what you get out of your sidelines, allot some or all of it to your savings.

Don’t be too stressed when it comes to trying to be financially sound. Tracking your money should be fun, entertaining, exciting, and a learning and disciplining experience. What is important is for you to enjoy your hard-earned money today, but also to prepare yourself for the future and unforeseen emergencies. This should not stop you from buying the shoes you’ve been eyeing or spending time with your best friend over a couple of martinis! Discipline, control, and prioritizing are the key elements to be a winner in letting your nest egg grow.

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