Paano ba mag-ipon? The Money Jars Concept

I was thinking of something to blog today when someone asked me this question "Paano ba Mag-ipon?" at sakto lang na may alam akong solution sa kanyang problema. 

Marahil akala ng iba ay marami akong pera kaya madalas ay lumalapit sila para mangutang. Sa totoo lang, hindi naman ako mayaman. Kumikita ako ngunit hindi pa ito sapat upang tumbasan ang lahat ng mga pangarap ko sa buhay.Hindi naman sa pagdadamot kaya bihira ako magpa-utang. Madalas ko sinasabi na hindi ko kaya magpahiram ng pera dahil hindi ito ang solusyon sa ating financial problem. Eto lang ang kaya ko gawin, (kung willing ka matuto) ay turuan ka ng LONG TERM SOLUTION for a SHORT TERM FINANCIAL PROBLEM. 

PAANO MO BA I-MANAGE ANG PERA MO?

It was way back in 2008 when I attended a course by T. Harv Eker, ang Millionaire Mind Intensive. in Makati.

It was a seminar attended by one of my early mentors in the Finance Industry and as far as I can remember, it costs Php 60,000 per head just to attend the seminar in Singapore. But because my mentor's vision is to spread Financial Literacy here in the Philippines, we started learning the course for FREE and eventually sharing it to the public for FREE.

This seminar (aside from Robert Kiyosaki's Rich Dad, Poor Dad book) opened me to the world of Investing. I have poor money management habits before but because I was open to learn and willing to develop the habit of managing my finances, I found the long term solution. 

One of my biggest take-away is the concept of the MONEY JARS. 

This is nothing new. Matagal na ang concept na ito. Nung bata ka pa, alam ko sinabihan ka ng nanay o lola mo na ipunin ang pera mo sa ALKANSYA, PIGGY BANK, o BOTE na palagi mo naman sinusungkit tuwing gusto mo bumili ng ice cream o candy kaya wala ka naiipon tama ba??? Gawain ko din yan noon at lately ko lang nalaman na importante pala na madevelop ang habit na ito.

PAY YOURSELF FIRST! 

This is the first rule in managing your money. This simply means, before you pay others (utang, meralco bill, water bill, cable, postpaid, rent, other expenses), YOU SHOULD PAY YOURSELF FIRST.

HOW?

You need to set aside a portion of your income FIRST, before spending it. This is the simplest formula:

SALARY/INCOME - SAVINGS = EXPENSES

It sounds simple but it is HARD to enforce. Dito na natin ipapasok ang consepto ng money jars. 

Again. Eto ang pinakasimpleng paraan kung paano ka makakaipon. The purpose of the money jars is to develop the HABIT of managing your money. :) Paying yourself first is a CHOICE that creates FREEDOM.

So what's with the MONEY JARS?

According to T. Harv Eker, to develop the habit of managing your money, you must have six (6) money jars intended for the following purposes:

10% Give 

Syempre, pag may blessing dapat we learn to share dba? That's why may GIVE account ka dapat. 

The sole purpose of this jar is for you to form the habit of TITHING. This is a biblical concept of giving and surrendering to God your financial obligations.

It is written in the bible, from Malachi 3:10

"Bring all the tithes into the storehouse so there will be enough food in my Temple. If you do," says the Lord of Heaven's armies, "I will open the windows of heaven for you. I will pour out a blessing so great you won't have enough room to take it in! Try it! Put me to the test!"

Tithing is bringing the first 10% of your income back to God through the local church. When we bring back a percentage of our income in the tithe, we thank God, and we show Him that we trust Him to provide for us and we fight Greed because we put him first in our finances.  

10% FFA( Financial Freedom Account) 

The idea behind this is to create your GOLDEN GOOSE. Balik tayo ulit sa GOLDEN RULE: Pay yourself first. Your Financial Freedom account should exceed your desired income and allow you to be able to live the lifestyle you want.You will use this money to put into investment vehicles that will yield Passive Income (Stocks, VUL, UITF, Mutual Funds, Business, etc). Therefore, BAWAL ITO GASTUSIN because your Passive Income should Exceed your Active Income. When you stop working, you get to spend the eggs but never the goose. Do not Kill the Golden Goose that will lay Golden Eggs for you. 

10% LTSS (Long term savings and spendings account)

This will be the fund that you will use to buy expensive items such as Car, House, Vacations or expenses that will take 6 months to one year paying period. You may also us this fund whenever opportunities arise, kunwari may naisip kang business or franchise, or may magandang investment. 

10% Educ ( Education account) 

This is for your personal growth. Eto ang gagamitin mo to buy books, attend seminars, or take up masteral, etc. Use this to improve yourself. Basta the main purpose of having this account is for you to have CONTINUOUS LEARNING because Learning is a lifetime process. When you stop learning, you stop growing, when you stop growing, you start dying.

10% EMER (Emergency Fund)

This was not included in the seminar but I'm including it because it is important to have an emergency fund in times of emergency. Sabi nga sa lumang kasabihan "Kapag may isinuksok, may madudukot!"

BUILD YOUR EMERGENCY FUND. Build it para hindi mo kailangan galawin ang savings mo in times of emergency. The value of your emergency fund should be equal to 3-6 months worth of your monthly expenses.

10% Play (Play account) 

You read it right, PLAY!. 

Syempre minsan minsan ay kailangan din natin i-reward ang ating mga sarili for all our hard work. This is the purpose of the PLAY jar. You burn the money that you put in it in order to fund for your LUHO or doodads as coined by Robert Kiyosaki. You get to consume it on anything that will give you instant gratification.

In summary,

GIVE = 10%
FFA = 10%
LTSS = 10%
EDUC = 10%
PLAY = 10%
EMERGENCY = 10%

TOTAL = 60%

When you receive any amount of money (salary, paycheck, business, bonuses, etc) divide mo agad, WITHOUT HESITATION into these funds. 

But wait, there's more! 

After paying yourself, there will be a remaining 40%. 

What about the remaining 40%?

40% Nec (Necessity account)

Basically, this is for your basic necessities or daily expense! This is for your everyday IMPORTANT expenses like transportation, food. bills, and other living expenses. Wag mo na asahan na mapupuno ito because this jar is intended to be used to fund for your daily needs.

EH PANO YAN, KULANG YUNG 40% na pang araw araw na gastos!

Track your daily expenses using an excel file or a spending tracker app so you can see what you need to cut-off from your expense list and also look for cheaper alternatives. Remember to Spend within your means not above your means! 

So I did this system and since then, I have achieved many of my short-term financial goals. 

Since I've been doing this method, it became part of my mental system. Every payday, automatic transfer agad, automatic 10% agad for tithes, automatic every morning input agad ng expenses from the previous day to track my daily expenses.

You can keep your money into these separate jars or open different bank and investment accounts. 

Once you get the hang of it, it will become a part of your daily routine. It will serve its sole purpose of developing your HABIT of managing your finances.

Remember, the universal principle of management is, "Until you show them you can handle what you've got, you won't get anymore."

Like what T. Harv Eker said, It is not when you have plenty of money that you will begin to manage it. It is when you begin to manage it that you'll have plenty and the HABIT of managing your money is more important than the amount. 

START TODAY. 

Why you need to track down your Expenses

Photo credits: https://www.keepek.com/blog/

Have you tried tracking down your expenses on a daily basis?

Well, I "tried" and repeatedly failed in doing this task because it is literally tedious. I often feel lazy to do it. I've tried it countless of times already, my wallet bloating with receipts that I keep which I fail to record most of the time.

Beginning March of this year when I enrolled myself in the Registered Financial Planner (RFP) Program, I committed to religiously track my expenses with the following objectives in mind:

1. To know how much I am spending.
2. To know what I spend on.

The first step to CHANGE is AWARENESS.
And the only way to be aware is to JUST DO IT!

Before I took the challenge of tracking my expense, I made my Personal Financial Statement Sheet which reflected my CASHFLOW on a monthly and a yearly basis. Anyway, that's another story so let's proceed to the expense tracking!

The first few days was challenging because I had a hard time remembering what I spent on. I created an excel file for it and categorized my expense into the following: Transport, Daily Food, Eating Out, Clothing, Tithes, Grocery (Non-Food), Entertainment/Travel, Gifts and Business Expense. You can choose to follow this categorization or feel free to make your own. If you don't feel comfortable using MS Excel for this, you can download different expense tracker apps in Android or Apple App Store. :)

And then, I chose to spend 10 minutes every morning to record my expense and for two months now, I was able to acquire the habit of recording my expense so I want to share with you the things I've learned aside from achieving the objectives I had in mind:
 
1.  You will become AWARE on how much you are spending on a daily, weekly, monthly and yearly basis.

That is the most basic objective. It is important to know how your old ways of thinking and acting have gotten to where you are right now financially. When you become aware, you will know what to do.

2. You will know WHAT you spend on and where your money flows.

I was able to clearly see where I spend my money. I found out that sometimes, I spend on things that I don't really need or can do without. I'm not an impulsive buyer but there are certain things that we thought we can't live without yet with the right awareness, we can actually do.

Think about this: Where does your money flow? Does it flow outwards (expense/liabilities) or inwards (savings, investment, assets)? Do you know where it goes each month? What is your biggest challenge when it comes to spending?

3. You will know how to budget and use your money wisely.

When people hear the word budget, they cringe. Budget is not a bad word. A budget is a tool to help us manage our money because it clearly shows us how much money is coming in and where it is going. It is very essential for a great money management.

When I started, I became aware that Eating out and Transportation were the biggest slices in my expense pie. Cutting my transport cost to reduce my expense is not an option because it is a necessity so what I did was, I bring my own baon everyday so I would lessen eating out. I stopped buying the Php 35.00 Black Brewed Coffee in Mcdo so I could save even more. Between March to April, I was able to save an additional Php 4,000.00. I'm thrilled to save more! Yahoo!!!

4. You can distinguish WANTS from NEEDS.

Most of the time, what we want isn't what we need. We need only need the basic: food, shelter, clothing. But most of the time, we want EVERYTHING else. You think you need the latest mobile phone? What you need is a device that will help you to communicate. You think you need a car? What you need is to get from point A to point B. You do not need fancy dinners or someone else to prepare your meal like a restaurant chef. What you need is food to fuel your body in order to live.

Contentment is contingent in our attitudes, not on our bank account.
When you can easily distinguish a need vs. a want, you will be able to Simplify.

5. You will acquire the habit of successfully managing your finances.

I believe that having money is a blessing and God would want us to enjoy our money. We are only stewards of this blessing so the universal principle of management is: Until you show you can handle what you've got, you won't get anymore. It is not when you have plenty of money that you'll begin to manage it. It is when you begin to manage it that you'll have plenty. Being a good money manager means being cautious and aware of your spending habits.

Remember, the habit of managing money is more important than the amount.

The key is Involvement. When you commit 10-20 minutes per day to manage your finances, God will bless you with more. :)

May you be blessed!

"Now it is required that those who have been given a trust must prove faithful." 1 Corinthians 4: 2

"From everyone who has been given much, much will be demanded; and from the one who has been entrusted with much, much more will be asked." Luke 12: 48


Need help in managing your finances? Contact me for a free One-on-One Personal Finance Coaching. :)







 

AMBITION, are you prepared to make it REAL?

A few days ago as I was eating my meal inside Mcdo, a family sat in a table beside me. 

I did not have the intention to eavesdrop but I heard their son say, "Pa, I want to become a doctor!"

The dad replied, "Of course anak, you can become a doctor!"

It made me smile and think of the future that I want to give to my son/daughter once I already have my own family.

Have you ever thought about it too?

I remembered one of my business mentor's story about how he and his wife would always tell their son that he can be anything he wanted to become simply because his college education is already secured. Isn't that amazing? I actually felt a bit envious about it because I did not come from a rich family who can afford to let me study abroad or even in the top universities here in the Philippines for it was a time where we underwent financial crisis and I had no choice but to go into a state university and even had to work part-time and earn a scholarship just to get myself through college. 

Nothing against my parents who had little savings but there had been a time in my life where I wished I was taking up business in Harvard and even studying in an Art School abroad but we cannot afford it during that time. Don't get me wrong, I am grateful for what we went through for it made me into the person that I am today. 

The point I want to drive here is that, five to ten years from now, I am certain that education will become even more expensive due to the rising interest rates caused by inflation. The question here is not about the school where they will study, the question is, if that time comes in your life that your child will ask you that kind of question, will you be able to AFFORD IT? If you want your child to get the BEST education, how do you plan to prepare?

If the cost of education remains the same, perhaps your current income can support quality education for your children as they grow.

But the challenge for most parents is not having enough savings to keep up with the rising cost of quality education, like what happened in my case. 

Consider the cost of college education by taking a look at some schools in the country today with 12.25% yearly increase based on CHED:

Aside from the regular tuition fee hikes, we must also consider the K to 12 Basic Education Curriculum (BEC) Program which is now in effect.

As you can see, your child now enters college at age 18, instead of 16.  These extra years equate to higher and additional education costs, which requires us to set aside more funds in order to ensure the best future for our children. 

I had a client who said that it's too early to plan for his daughter's college education because she is still in Nursery pre-school. I told him that it is best to start as early as now while he is still capable of preparing for her educational fund. 

The secret to building funds for the future rests on 3 factors: TIME, MONEY and INTEREST. When it comes to TIME – we must start saving as early as we can.  When it comes to MONEY, we must save as much as we can, as regularly as possible.  And when it comes to INTEREST, we should find interest rates that better-than-inflation. 

Maximize your time, money and interest, and you can build that education fund for your son/ daughter.

To give you an idea about educational planning, in this example, the client's child is at age 1 and has 17 years to go before college. The parents estimate the current annual tuition fee to be 100k in their chosen university.  And we also followed CHED’s annual rate of increase of 12.25%. This is what we will use to project the future value of college tuition. 

Client: Emmanuel Espiritu 

Age: 35 

Child: Anton Espiritu

Age: 1 

Assumed Annual Tuition Fee: 100,000 

Projected Target Education Fund: 3,400,000

Production Solution: Sun MaxiLink Prime providing life insurance coverage plus fund accumulation for education 

Life Insurance Coverage: 1,000,000

Annual Premium: 151,440 for 10 years** 

So, how much are you willing to set aside to allocate for your son's/daughter's educational fund?

Make a BRIGHT Choice today by: 

1. Meet up with me for educational planning so we can develop a financial plan.

2. Change your spending and saving habits to achieve a Brighter Financial Goal. 

3. Commit to the plan. 

Let's make it happen! 

Cheers to a brighter life!