Fresh from college almost 2 decades ago, I was eager to earn my own money so I can FREELY buy the things I wanted. Lucky to land a first job that paid more than what I needed, I was able to satisfy my material interests while fairly stashing my bank account with savings. But when I got married and my first born came to the world, I saw my savings depleting.
Fortunately, I had moved jobs. I landed in the financial services industry which taught me how to handle my money better. 13 years in the business, I am no expert in financial planning, but I still wish to share what I do to help me get to where I want to be in terms of achieving my financial goals.
For the longest time, my bank account was just my payroll account. As the kids grew up and the family’s needs increased, I opened a separate bank account without an ATM to ensure I would still have savings even if my spending increased. Every time my salary is deposited, I transfer part of it to my “hard to withdraw from” bank account. I protect my money from myself and learned that Savings is not equal to Income – Expenses. It’s Expenses that is equal to Income – SAVINGS.
I buy long-term financial products because Pre-Need is a lot cheaper than At-Need. Setting aside money for a financial need way before it happens is a lot cheaper than paying the actual cost of that financial need when it happens in the future. This is why I got my first education savings policy. I appreciated the fact that a target amount of say P100,000 education fund after 7 years, can be realized by investing only a fraction of the cost that day. Had I not bought the policy then, I would be paying the full P100,000 in school expenses every year.
It is not enough to save my money in traditional bank instruments. While it may seem that my money is kept intact, I eventually learned that it is losing real value because it is not earning as much as the inflation rate. Since then, I have been putting my money in instruments that is influenced by the movement of the stock market. I welcome its high earning potential, even if the returns are not guaranteed. After all, I am saving for a future need. I do not need the money now. If the market is down, I have the time to wait until it recovers.
When I was starting to save in insurance products, I got one which gave guaranteed cash benefits every 2 years until I was alive. I got this policy to answer part of my children’s education expenses. Then my last grandparent passed away. Based on the illnesses of my lineage, I do not have the healthiest of genes. Because premiums increase depending on the age, I compelled myself to secure a health plan immediately (I was 35 then) to cover any future medical expense I may have.
Right now, I’m zealously working on paying up these two policies already, so I can start on my retirement fund.
I have young kids. There are still so many years between now and the time they can fend for themselves. I don’t know but it’s probably inherent to a mom more than anyone, to ensure that the children will be ok, just in case I won’t live long enough to see them through adulthood. Sure their dad will take care of them. Thank God, they also still have a complete set of grandparents. But just to be sure finances won’t be the reason they cannot fulfill their dreams, I’ve learned towards insurance policies as my savings instruments to build up the funds I need… at least, for now.
(Originally written by Johanna Coronado at http://www.savingstips.com.ph)
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