Ways to be debt free: Allocating your salary or earnings

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source: http://blog.mdsuburbanhomes.com

One way to be able to get out of debt and start investing is allocating your salary or earnings. 

Wait what did I say "allocating your salary?" Yup you can save and allocate your salary even if your salary is small. If you haven't read my post about starting investing even with a small salary click here.

The problem with most of us is cash management. Sometimes when we get our paycheck we pay it all to our debts leaving us cashless until the next paycheck thus forcing us to borrow so that we can pay for our daily living. Others save some but eventually touch that set aside money because some "sale" is so attractive(click here). Others put all their money in time deposit thus they are unable to get it out when they encounter emergencies thereby forcing you to borrow again. 

See my point.

That is why you and I have to allocate our resources or to put it direct our limited cash so that we have something to pull out without affecting other things that need cash. So how do you allocate your limited cash so that you wont be trapped and end up borrowing?

It is so surprising that the Holy Bible has something to say about allocating your money:

Ecclesiastes 11:2 

Give portions to seven, yes to eight, for you do not know what disaster may come upon the land.

It does not necessarily mean that you have to divide your salary or earnings to seven or more upon receipt but it is a good practice to do so. As for me I have initially divided it into six parts I called funds. You can make it into 4 or 8 but that entirely depends on you but as for me I am sticking to six and probably add another in the future when the need arises. Also it does not mean that each category should be equal because we have different needs base on our lifestyle, our age, and other factors. 

The concept here is to allocate a portion to each category or "funds" so that we have something ready for anything that may come up or befall us. As the quote in the movie "Mechanic" says "Amat Victoria Curam" which means "Victory Loves Preparation"

Let me share to you why I divided it to six:

One: Retirement Fund

This fund is for my retirement in the future. The value of your money now will be decreased as time progresses due to what we call inflation. In order to fight inflation we have to make money increase so that we can cope up with inflation. This fund could be set aside form time to time and when a certain amount is reached will be invested in stock, mutual fund, or a time deposit that gives a return above inflation.

Two: Investment Fund

You might wonder why do I have an Investment fund when I already have a Retirement Fund. Well why only save for retirement when we can increase more our current finances by investing it to other financial  vehicles like small business, stock investment, debt investment, or short term placement of cash that gives a fair return. This way you can have extra for the current time and at the same time add more to your already existing Retirement fund any extra you may make from this fund.

Three: Savings Fund

Again it may seem like this is already a duplication but hey savings fund are monies you set aside also which you can pull out for an opportunity that may give you a nice return. Also you can use this fund if you are saving for something that you have been dreaming to buy or take like a vacation in Bali or a 21 inch flat screen TV or maybe the latest laptop or an Ipad. This is the fund where you can put it and wait 

until it reaches the amount you need to purchase your wish list things.

Four: Emergency Fund

Yup this one is for those things that just pop up right in times you are not expecting like sudden hospitalization, disaster, and other "beyond control" events in our lives.

Five: Expense Fund

This one is self explanatory. You live thus it is logical that you spend money for some expenses that you do in order to live day by day. This might be the one with the biggest percentage of your salary or earnings.

Six: Tithes or Donations Fund

Hey you got to share your blessings. Most of the time you pass the opportunity to bless others because you don't have anything left for it so to make sure you bless others with your wealth you allocate some for this.

As for the additional fund I am thinking of creating a fund for insurance. This one might be another duplication with Emergency fund but this one is for something that we can setup so that besides the money save in the Emergency Fund we have more funds to cover such unexpected expenses. I am still in the exploratory stage for this. My beloved has introduce me to insurance and we are looking at the best options available out there. There are so many types of insurance thus a careful study must be done. Though I remember that my first investment has an attached insurance up to 60,000.00 pesos that wont be enough to cover me up as I aged.

Again save, allocate, and make these funds grow to outdo inflation. 

"Amat Victoria Curam"

How to start investing even if you have a small salary

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source:http://fasttrackhomeowner.org/

Many of us back in the Philippines might be shock if you told them that you are investing in stocks.

Most people think that you need lots of money to start investing. Let say maybe in their head the minimum is Php 250,000. But in reality its not the amount that makes investing hard, it's the discipline to put aside money for investing. Just like in my previous post the question is how much money do you have now?

So how will you start investing even if you don't have that much? I have a motto before that I always read when doing something. It goes like this "Start small, Think BIG!" In reality everything starts small. Maybe you saved 20 pesos last week or maybe you got a bonus this year of let say 5000 pesos. Are those amount big?Yup your right it's small. But if you really save this amount instead of planning to spend it by buying a new phone or buying a new pair of pants in the long run it will accumulate. 

Try to re-examine your spending. What are expenses that in  reality are not needed. You only get to spend because maybe your friends  has this coffee after work habit, or maybe you have conditioned your stomach to eat a burger before going home because of the traffic in Pasig. Try to see were your money goes and you'll realize you have been a spender. From there little by little cut it down and shift it to savings. In a short span of time you would have save money enough to open an account at an online stock broker. 

Another thing is you must have the discipline in investing. One effective way is to look at investing as one of your bills. I believe your paying something right now right?Maybe you borrowed money for your car or your house or it so happens that you overused your credit card ending into a credit card debt. And every paycheck you have always made sure that you pay at least the minimum payment in order to avoid penalties right? Why not think of investing like that only in a positive way. 

They call this concept paying yourself first. Here is what you do. Before paying any of those bills and before thinking where will you spend your paycheck first think of an amount to put in your savings that will be invested maybe weekly or monthly. Think of this amount as payment to yourself, a treat. Make sure that when you segregate this amount you will not think of it anymore or maybe think in the back of your mind that in case you got short you can pull this out. Remember this is your treat to yourself so don't touch.

When you have reached a certain amount that you have set to invest go ahead and invest it. Buy the best stocks. Remember as well the concept of cost averaging. The stock might be high but there are times that the price is low does buying on a regular basis will lower your average cost and when the price is right, again remember to compute if you are more than break even, you can sell your stock at a profit. 

Remember to pay yourself first, accumulate, invest regularly to  lower average cost, and take profits when the price is right.

PSE Website Part 6: Disclosures & Company Filings

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Any corporation listed in the Philippine Stock Exchange who has changes or any reports submitted to the Philippine Securities & Exchange Commission(SEC) must inform their shareholders and potential shareholders. The PSE website includes such to their Disclosure link in the Stock information page.

Regular information like Statement of Changes in Beneficial ownership, Quarterly Financial statements, Dividend declaration are found in the Corporate information link under Company filings.