MONDAY, 26 DECEMBER 2011 19:12
ALVIN T. TABAÑAG / PERSONAL FINANCE
ARTICLE FROM BUSINESS MIRROR
YOU are probably among the millions of Filipinos who feel richer during the holidays because of the extra cash from your 13th month pay and bonuses. There’s nothing wrong with using your bonus to make the Christmas season more fun and enjoyable for the whole family. You’ve worked hard all year and you deserve to reward yourself. However, it would be to the best interest of your family if you use some of the money on things that offer more valuable and lasting benefits. Here are 10 suggestions.
1. Pay off your debt. Begin the New Year with less financial burden by paying off some of your debts. Pay a significant portion of your credit-card debt or the whole amount if possible. You can also consider paying extra on your real-estate loan so you can pay it off faster. Strive to lower the level of your debt so you don’t use more than 20 percent of your monthly income for debt payment.
2. Buy self-help guides and reference books. Investing in knowledge is one of the smartest uses of your money. There are lots of good books out there that offer valuable lessons which can give your career, business or personal life a much-needed boost. Invest also in a few books that will help you manage your finances and teach you how to prepare for a better and more secure financial future.
3. Attend a seminar. You can also enhance your skills and acquire new valuable knowledge by attending various seminars that are being offered year-round. The amount you spend for these seminars is small compared to the potential financial benefits you will gain by applying the lessons. Some seminars help you start your own business which could be your ticket to getting rich. Consider also enrolling in a program that grants a professional certification which can help you get ahead in your career.
4. Open a savings account. Maintain this account for as long as you work and keep adding to it every month. If you want to achieve financial security, you will have to learn to save regularly and not only when you get a bonus. Consider putting some of your money in a long-term (five years or longer) time-deposit account. You may also invest in government securities which offer interests comparable to long-term TDs that are very safe.
5. Buy a life-insurance policy. Every working person should have a life-insurance policy, especially if there are people depending on you financially. Ideally, your life insurance coverage should be 5 to 10 times your annual income. But a lower coverage is all right if that’s what you can afford. You may also consider buying an investment-linked life insurance policy which includes an investment component. Even if your company covers you with a group-life insurance, it’s still a good idea to get extra personal coverage so that you still have protection even if you leave the company.
6. Buy a medical insurance/health-care plan. You are more likely to get sick or seriously injured before you die. Hence, you should also have a medical insurance or a health-care plan. Don’t just rely on your PhilHealth coverage; it’s not enough. If your company has an existing healthcare plan, you might still want to get additional coverage for you and your family.
7. Insure your home. If you own a home, you should have it insured to avoid a financial disaster in case it’s damaged by fire, lightning, typhoon, flood or earthquake. A few thousand pesos will already insure your home for a year. This is a small amount to pay in exchange for your peace of mind. A little extra payment can also get protection against explosions, damage by vehicles, robbery, riots and malicious acts.
8. Invest in a pre-need plan. Despite its tarnished reputation, pre-need plans still remain a viable investment option for Filipinos. Pre-need plans, which include pension, educational and memorial plans, can be considered as a form of “forced savings” and you will have to wait before you can get your hands on the proceeds. Pre-need companies are better regulated now so your money is safer.
9. Invest in mutual funds, UITFs or stocks. Mutual funds and unit investment trust funds or UITFs offer a simple, affordable and less stressful way to grow your money. Earnings in these funds are not guaranteed and you can lose money. However, it is a good long-term investment. You are likely to earn substantial returns if you hold it for at least five years. It’s not unusual for a fund to earn more than 30 percent in one year but it can also lose 10 percent to 20 percent within the same period. You may also consider investing directly in stocks but stick to the good ones with a proven track record.
10. Start a business. If you’ve been dreaming of becoming an entrepreneur, now would be a good time to set aside money to finance your own business. Before you venture into any business, make sure you have studied it well because it is a risky investment. Consider starting a small, part-time business and go full-time only after you’ve learned the ropes and are absolutely convinced that it can succeed.
As you continue with your celebrations, remember not to go overboard with your spending. You don’t need to spend lavishly to enjoy the season. Surely, you wouldn’t want to meet the New Year with a nasty financial hangover and wondering where all the money went.
Alvin T. Tabañag is a registered financial planner and a member of RFP Philippines. He is the founder and training director of Advantage Plus Training & Consultancy. To learn more about becoming Registered Financial Planner, visitwww.rfp.ph or e-mail mailto: info@rfp.ph info@rfp.ph.
ARTICLE FROM BUSINESS MIRROR
