Emergency Fund…taken for granted no more!

Posted on by Bing Ledesma - De Los Reyes

Having an emergency fund is a must in any financial plan as we do not want to touch the savings we have for our children’s education or the retirement fund we diligently built-up when some unforeseen events happen.

Although the pandemic disrupted this principle especially those who lost their jobs or got saddled with sickness, this simple guide remains to be relevant: a prescription of at least 3 to 6 months of your monthly cost of living and if you have more savings, it is better to put the excess in an investment fund that gives you better returns.

But first, why is an emergency fund important? Quoting Zach Buchenau, a personal finance expert (https://bethebudget.com/why-is-an-emergency-fund-important/) “emergency fund is important because it acts as a financial cushion in the event of an unexpected expense. Whether it be medical bills, home repairs, or a family crisis, an emergency fund can help you steer clear of debt, protect your assets, and avoid unnecessary financial struggle.”

So how do we build an emergency fund? Here’s a simple guide: Read more at https://www.saveandinvest.org/military-everyday-finances/start-emergency-fund

  • Chart your monthly income and expenses. This will help you determine not only your monthly cost of living but can also help you identify where you can cut expenses in order to set aside for the rainy days.
  • Set your emergency savings goal. As I mentioned earlier, a quick guide is 3 to 6 months.
  • Develop a plan to start saving. For some, cutting costs is a must and tracking your expenses can help you find what items you can give up to give way to savings.
  • Put your emergency fund in an accessible place. A regular bank savings account is a good place for this as you can access it without paying penalties. As such, do not mind the very low interest rate as that is the reason why you can withdraw it anytime.
  • Stick to your plan. It may not be easy as there are lots of reasons we come up with why we can’t set aside the amount regularly until the fund goal is reached but resist the temptation and stick to the purpose of the fund – it should only be used for Emergency.

I must add that expenses like tuition fees are not “emergency” expenses as these are scheduled and can be planned ahead. There are health plans that can help cover medical expenses and it is always advisable to get covered for these expenses too.

Finally, this Covid-19 pandemic has exposed our financial vulnerabilities and has taught us so many lessons including ensuring having a sufficient emergency fund, having health plans and insurance coverage. Let us not waste these lessons by not acting on them and plugging the holes in our financial plan.

Let’s not take for granted setting up an emergency fund anymore. It’s one lesson from this pandemic that we must learn and act on.

Set it up early…ensuring your child’s future

Posted on by Bing Ledesma - De Los Reyes

“Education is the most powerful weapon which you can use to change the world.”

~Nelson Mandela

One thing I am truly proud of as a Filipino is how we value education and parents go through great lengths to have their children finish a degree as we believe that it increases the probability of our children having a good future.

My story is no different. The conversation I had with my father that fateful night when I was in second year high school continues to be vivid in my mind until now. He came home and saw me crying because I was not yet enrolled as he was still sourcing the money. He sat me down and told me that no matter what happens, I will be enrolled and he promised that even if it takes selling all that he has, he will make sure he gets me through school. He passed away when I was in my junior year in College and indeed, he left provisions so I could finish my degree. His life insurance policy made sure I continue my studies despite the unstable income of my mother from her “sari-sari” store (a sari-sari store is a small neighbourhood store that sells common sundry items; sari-sari is a Filipino word for variety).

Thank you, Papang for fulfilling your promise.

When it was my turn to have a child of my own, setting up an education fund for our daughter was one of the first decisions we made as parents. Both my husband and I got separate policies three months apart. Last year, after 15 years, our education plans matured so we now have her college fund ready (she will be entering college in less than 2 years). Since both my husband and I are still earning, we have the choice to re-invest a portion of it which she can use later after graduation or if we need it for some education requirements, we can do that too. Our decision to set it up early gave us the options now plus the peace of mind that no matter what happens to our ability to earn, she can finish her chosen degree just like what my father did to me.

Our bundle of joy at about the time we started her education fund

The key is to start early. As soon as your bundle of joy is born (or better still, before birth), start setting up his/her education fund because the more years you have to grow the fund, the less amount you need to start it.

Invest it in a fund that is not easy to access. Simply putting it in a savings account does not only put your money to sleep (as it hardly earns anything) but it also gives you easy access to it so the risk of diverting it to other things is high.

Make it grow. If you start it early, like ten years or more before you actually need it, you can be more aggressive in the funds you invest in. Aggressive funds like equity give more upside but may also be more volatile. However, the longer time horizon you have mitigates the risks. Do frequent top-ups so you catch the “downs” of the market and get higher returns. Don’t just invest one time. Invest frequently.

Having more children requires an even more deliberate approach to education funding especially that we have other needs to prepare for like our retirement. Considering the ever-increasing cost of education, it’s either you will compromise the comforts of your daily living now by cutting your expenses here and there or you compromise your ability to save for a comfortable retirement. Both require long-term planning.

So while you still can, start it now. Every delay has a price to pay.

For related blogs, please read the links below:

What is “Quality Life”?

Posted on by Bing Ledesma - De Los Reyes

By: Bing Ledesma – De Los Reyes

Everyone wants quality life but what does that mean?

How do you define quality life? What is quality life for one may not necessarily be quality life for another as it is really relative. A common definition though is this – when we are able to do what we want to do for ourselves and for others…that is quality life.

Being able to do what we want to do for ourselves and for others…that is quality life.

For ourselves: being able to eat whatever and wherever we want; buy not only what we need but also what we want; travel wherever and whenever and do our hobbies and passions so we continue to be productive and feel good about it.

For others: when family members need help, we can always help; when family members and friends have special occasions, we can be there to celebrate with them; we’re able to help the community and be involved in church and social causes we believe in.

That’s how I define quality life and it does not happen like magic. You’ve got to work for it. Of course there are those who were born into affluence which makes the process easier but for most, it needs to be planned and worked out.

Mine is such. Born to a poor family, my parents had to work very hard to make both ends meet. I’m grateful for having parents who believe that being born poor is not our fault but to die poor, we only have ourselves to blame. We can work ourselves out of poverty.

Putting value in education is my parents’ way of giving us, their children, a chance to live a better life. Being diligent as a student was my way of honoring them; ensuring I utilize my capabilities at work is my way of glorifying God who made it all happen and incalculating good values in my family is my way of paying it forward.

So how do we ensure that we live our kind of quality life? That is where financial planning comes in. I firmly believe that no one can live a comfortable life at every stage without planning for it and if you start early, there is so much you can do. If you do it right, you increase your chances of having your kind of quality life.

So start planning and start early.