Savings program for ‘kasam-bahays’

By Dr. Johnny Noet Ravalo
INQUIRER.net

Al was already borrowing money on January 6, so early into the year. When he started working at P7,500 a month over a decade ago, he did not save despite having his living expenses fully covered. Today, he makes double that - not counting non-monetary benefits - and he still has no savings.

Grace sends money to her relatives every so often. Although something is better than nothing, the amount she remits really pales in comparison to what she earns. Grace doesn’t spend for her living expenses but she pours much of her income on cellphone loads.

Al and Grace are “kasam-bahays”. We could debate whether their problem is that they cannot save (capacity), do not want to save (willingness) or do not know how to save (awareness). That debate though would be for another time.

For now, what is on my mind is their saving habit: should employers take a pro-active role in developing the saving habits of their kasam-bahays?

If there is something I know quite well, it is that financial planning is not an inborn talent but more of an acquired discipline. Saving is difficult because it constantly tests our resolve and challenges our ability to react to changing market conditions.

The reality is that very few of our kasam-bahays have a saving plan. Many of them manage their day-to-day cash without thinking longer-term. The challenge then is to show them the longer-term benefits of saving without severely constricting their present-day liquidity.

How then do we move forward?

I think it boils down to our our kasam-bahays wanting to save, not just in words but in deed. This is first a mindset issue because there may be a perception that the saving plan is just an ingenious way to avoid paying our our kasam-bahays their due in income. If it gets to this point, then everything else becomes counter-productive and the working relationship is contaminated by mistrust.

Knowing that cash is important to our our kasam-bahays, deducting part of their existing income will not be a good way to start. This saving will just be felt as a loss in day-to-day liquidity without any perceivable gains.

Perhaps employers may consider advancing the saving and treating this as part of their our kasam-bahays benefits. For example, instead of giving a straight increase in pay, the full-year equivalent of the increase can be invested as a time deposit and periodically rolled over within the year. The beneficial owner of the time deposit is still our our kasam-bahays and they get to see their money grow within the year without any direct loss in day-to-day liquidity.

For our our kasam-bahays who have young children, one variant of this would be something like a trust fund. The fund grows over time for the benefit of our our kasam-bahays without any risk that the money will be depleted as day-to-day expense. As the child gets good grades, give cash gifts to further boost the outstanding balance.

Hopefully, our our kasam-bahays will be encouraged to save part of their income once they see the benefits of their saving plan. Employers can match every peso they save up to some pre-determined limit.

As a community of stakeholders, banking associations may wish to get together and offer special programs for new savings from our kasam-bahays or even other targeted constituencies such as families of OFWs. Certainly, tie ups with government agencies may eventually be needed to formalize these programs. Whatever these arrangements may be, we all benefit from broadening the saving base, increasing our saving rate from its present levels and providing more for our respective futures.

We need to bring saving to the level of those around us. We can talk about financial literacy or great saving schemes but unless we can execute these into actual mobilized saving, I doubt if there is anyone out there that would consider great talk as a success indicator. We need to help ourselves and those around us, just as everybody else helps us in one way or another.

I don’t think we have to look very far. After all, everything starts at home.

No savings at 30?

INQUIRER.net

Q: I just turned 30 years old and realized I have been working for almost a decade and have little to show for it. I'm ashamed to say that I don't have much savings. Although I work, there doesn't seem to be enough left to set aside. What should I do?


A: Working is one of life's simple joys. With it, we can put to use our talents and learn more about the industry we are in and its impact in the economy. By working, we can meet new friends and contribute to society. Plus we get to earn from working which can help provide for our families' needs.


Because we cannot predict the future and cannot be assured of a job forever, it is important to save money. This will tide us over should we lose our jobs, or get sick, or the time comes when we need to retire from active work.


At 30, you should start saving for your future now, and more so since you weren't able to start earlier. Ideally, saving should have been a habit begun while still a child. This would then become a well-ingrained habit throughout life. But do not worry, it's not yet too late. The important thing is you have realized how important it is to save, and commit to do so beginning today.


You actually raised an interesting question: How can you save when there doesn't seem to be enough left for savings? This is a dilemma most people face. How can you save when all your take-home money is used up by the end of the month (and may even be living on credit until the next pay day)?


The answer is quite simple. Instead of waiting until there is money left after paying your bills and other expenses, do it the other way: Save first before spending a single peso from your take-home pay. This is what financial experts mean when they say “Pay yourself first.” It means treating savings as a bill which you have to prioritize over any other bill or expense. By doing this, you will be able to stash away money for your savings which would otherwise have been spent on something you think you need but actually can live without.


You may think it's easy to say but hard to do. The truth is, saving can be done by anyone. Here are five easy steps on how to build up your savings easily:


1. As soon as you receive your salary, take out a certain percentage, start with 5%, and put this in an envelope you will mark “Savings.” Live on what is left of your salary.

2. Do not touch your savings if funds are running low a few days before your next payday. Instead, adjust your spending so that your funds will be enough until payday.

3. Open a separate savings account in the bank and deposit the funds you have set aside in your “Savings” envelope.

4. Deposit to your savings account every payday to ensure that the money earmarked for your savings will not be spent.

5. Once you have built up your savings a little bit, transfer some of it to a time deposit so it can earn a higher rate of interest. Later on, you can also move some of your funds to a mutual fund or unit investment trust fund so it can possibly earn even more interest. These investments have a risk attached to them, so discuss first with the bank or financial advisor if these are right for you.


One other important thing to do is to make a budget or spending plan. Write your projected income and expenses and see where you can cut down on spending. For instance, look at how you spend for your lunch every day. If you regularly buy food, think of bringing baon lunch to work. The excess funds freed (maybe about P500 a month) may then be added to your savings.


What can you use your savings for? It can be money for your retirement. You might think that at 30, retirement is so far away. However, saving for it now can make your money grow faster for you even if you put in only a small amount of money regularly. It is due to compound interest, which lets your money earn interest on top of money that has already earned interest.


Your savings can also be your emergency fund. This should be equal to three to six months' (even more) worth of expenses, which should be helpful when sudden unforeseen events occur: a job loss, an illness, etcetera.


Savings is doable. Start today and keep at it for a long long time.


*Disclaimer: Readers are solely responsible for their own investment decisions and should thus conduct their own research and due diligence and obtain professional advice. INQUIRER.net will not be liable for any loss or damage caused by a reader's reliance on information obtained from our web site. INQUIRER.net receives no compensation of any kind from companies or industries or funds that are mentioned here.

10 money questions couples should ask

By Lynda C. Corpuz

1: Why do we fight about money?

Melvin Esteban, a registered financial consultant, explains that couples fight about money because they do not have enough of it. Toti Tanchoco, Jr., Cocolife senior vice president for finance, says, “They fight about spending it – not money per se.”


Fr. Ted, Gonzales, S.J., Center for Family Ministries (CEFAM)-Ateneo De Manila University overall program coordinator says couples undergo counselling for a lot of reasons. “Money is one of the issues, but not the main issue. [The] money issue is maybe a symbol or a mirror of the quality of their relationship for it historically traces how they view money,” he says.


2: How do divvy up financial duties?

Melvin points out that the wife is the default keeper of the purse, especially if the couple is starting out. “Generally, females are more budget conscious,” he reasons. Toti, however, says the wife should not be handling everything. “It’s incidental she’s handling the finances but it should not be ‘binigay sa iyo, bahala ka na (It was given to you, you deal with it),’” he says. Fr. Ted explains, “Although that is not always the case, we still have the tendency to repeat the same old patterns. But a mature couple should be together in managing their household finances.”


Couple Bambi and Francous Groleaus share money responsibilities by simply doing what they’re best at. For instance, Francois attended to the particulars of their wedding venue while Bambi took care of the entourage’s needs. Planning a year in advance, and targeting a P500,000 budget, she prepared the spreadsheet while he ended up filling it in. Culturally, Bambi says Filipina wives usually budget for everything while Francois says French men often take charge of investments.


3: Should we really have to tell each other about each purchase we make?

It is just fair to tell your spouse what you buy, but there is no need to detail small purchases, Melvin says. “Just make sure you tell each other if the purchase is big, like a car, a house, or an educational plan. Both of you should decide on that big purchase,” Melvin says. “It is always best to be open with each other,” Toti points out.


4: How do deal with our personal luho? (frivolities)

It’s important that a couple sets the right priorities. Buying that new designer bag or getting yet another gadget isn’t a priority. “The way we use money is how we prioritize what is important. The couple should really sit down and talk about their priorities,” Fr. Ted says.

With two pre-teen children, Bernie and Coralu Santos follow the adage of living within your means. “For me, if it’s not yet a necessity, I won’t buy it. I’ll just look and look at it, but I won’t buy it immediately,” Bernie says. “We wait for the right timing, and if we can afford it already, we buy,” Coralu adds.


But that doesn’t mean you should never spend on yourself. You just have to put a lid on it. An allowance system is a good way to budget and limit discretionary expenses. Toti says it is wise to set aside money not just for basic requirements like food, utilities, and children’s education, but also a little for recreation. Melvin recommends 50% of one’s income go to a common fund, 30% to allowance, and 20% to savings. “As income increases, savings should also be increased. Bonuses can be used to treat yourself to your personal luho once in a while,” he says.


5: Should we only have a joint account?

Thirteen years after their marriage, the Santoses opened a joint account just two years ago. “Bakit kailan lang? Kasi wala kaming ganoon, `yun lang ang dahilan (Why just now? Because we didn’t have that before, that’s all),” Bernie says. But apart from their joint account now, they still have their personal accounts.


Meanwhile, the Groleaus started early. “When we got married, we started to contribute to the common fund for our household needs. We still continue each of our personal accounts,” Francois shares. “We put an equal amount for the common fund. When there’s extra money, Francois is the first to put in additional funds,” Bambi shares. Although they have personal accounts, it does not mean they are keeping secrets about where their money goes. “I still tell Francois how much I’m putting in my account,” she cites.


The two couples are doing an acceptable compromise. They have a joint account for common expenses and personal accounts for individual expenses. Melvin adds that having a joint account is good because you can still have access to the family’s wealth in case of your spouse’s incapacity or death.


6: How do we deal with financial crises like being victimized by a scam or piling up a huge debt?

Fr. Ted says it’s always a danger when one spouse gets into a financial mess. “Like an addiction, you don’t want to let it out with your spouse since there’s some shame about it. Those can break up the relationship and leave deep wounds. It’s truly traumatic to have creditors running after the spouse,” he says.


Toti says tendencies or habits like these should be known early on. “These should be discussed before getting married so you can agree to discipline each of your spending, saving, and investing habits,” he says.


Fr. Ted says the guilty spouse will have to be honest about the unmanageability of the situation and go through a genuine recovery. “Because if there’s no real examination of life, and a real surrender of that behavior, it will drain the whole family of their patience, resources, and understanding,” he explains.


Always remember your spouse loves you very much that he or she is willing to marry you, Melvin says. “No matter how grave the situation is, your spouse will always be your partner to help you. The more you keep it a secret, the worse it gets,” he says.


Fr. Ted says, despite everything, trust that something good will still happen and be ready to make amends. “Making amends is righting the wrong. But when you love tenderly, you will know your strengths and weaknesses, and you can act justly,” he says.


7: How do we handle power struggles related to money?

Couples should review their values if they keep on fighting about money, especially in the context of who has the bigger income, “because it can sometimes be a power to some, an excuse to dominate or lord it over the other person,” Fr. Ted says. “But if you really look at it, a family is just one unit regardless of who’s earning more.”


“The best way is to talk and there should always be a compromise for everything,” Melvin says. If the wife earns more, the husband should take it as a constructive challenge, he adds. “If the wife is earning more, it should be an inspiration for the man, especially if he is insecure about it. But should he really be insecure about it? It’s all about role-playing, and one should accept each other’s role,” Toti says.


8: Is it possible for us to live on one income?

While it is ideal for one spouse to stay at home to focus on the children and household matters, given the times, living on a single income can be difficult. The wife should only stay at home if she cannot earn more than a house help, Melvin says. “Otherwise, both should work. Of course there are other reasons to be considered, thus the saying, ‘a mother’s love is always priceless,’” he says.


The Santoses found it necessary not just to work full-time but find extra sources of income. Whenever their workload allowed, they accepted sidelines to add to their finances. Money they saved from these sidelines automatically went to their children’s accounts.


It may be difficult, but not impossible. It takes a lot of financial discipline to live within a single income, but that works easier if the working spouse is earning an adequate amount of money.


9: How should we deal with parents who are financially dependent on us?

The Santoses are helping their relatives. “Tumutulong din kami. Hindi puwedeng mawala `yun sa monthly budget naming(We help out. We need to include this in our budget),” Coralu says. Fr. Ted says the questions here are: How much do you give? And how regular? He adds that some in-laws are becoming too dependent, as in the cases of migrant workers who have the whole barangay of relatives waiting for their salaries. “Assess if there is an abuse already and what is the effect of this constant shelling out for the relatives. If unmanageable, this will drain the couple’s budget,” he warns.


Dealing with in-laws and relatives about money has emotional strains to it, Melvin says. He suggests if you are earning more than you are actually spending, it is but right that you support your parents and in-laws. “Remember, you and your spouse would not be where you are now if not for your parents,” he says.


Toti, however, believes that couples have to meet their own needs first. “It will not help in your planning as a couple and it just tolerates the parasitical situation. But if you know you’ll have to still provide for your parents, don’t marry yet. Becoming independent is the idea why you’re starting a family,” he says.


10: How do I deal with an uncooperative spouse?

Melvin subscribes to what the best sales people believe is “your 99.” “That means, 99% of the time, you’re thinking of what’s good for them. So you have to convince him or her on anything,” he says. Fr. Ted advises to first exhaust all means, like counselling or attending marriage encounters. But if it is really unmanageable, the Church will look into the marriage’s viability. “The Church wants a couple to have a relationship grounded in love. But it also tries to be objective in considering certain relationships that are out of control, especially if there were already hints of unmanageability before the marriage,” he explains.