Friday, March 21, 2014

How much does your Hobbies Cost You?

Few days ago I came across a TV program that discussed about hobbies and their cost. In my own personal belief people need hobbies to take away stress. It may be painting, watching movies, traveling, cooking, baking, gardening, etc. (Yes, include shopping!)

Asking yourself how much it cost you on a monthly basis is a really tough question especially when you are enjoying the hobby and not minding how much money you put into it.

As far as my hobbies are concerned, I managed to put up a not so definite fund for each. For instance, my husband and I love traveling. Since I am in charge of our monthly expenses, I am setting aside a few thousand pesos each month for this hobby. Whenever we (I) feel the urge to travel, I usually look at our Leisure Fund and plan according to the amount indicated there. Sometimes we would join a bike ride, sometimes we would climb mountains or sometimes just chill out at the park. Traveling to us doesn’t necessarily mean boarding a plane or going to a place 3-4 hours from our house. For us, traveling means “going out.”

Other times I would try to cook a special dish. (Yes I love cooking!) If the dish is expensive then I can schedule it on a special occasion then adjust the budget for other dishes within the week. We have this mentality that we cannot just get what we want all at the same time. Sometimes we have to do some tradeoffs. For example we will buy tuna/salmon and cook it for lunch or dinner; we would have ginisang sitaw at kalabasa for the next day just to balance the cost. Of course my husband would not feel that I am getting stingy because I would serve generous portions of ginisang gulay.

Sometimes we will be spending more on our hobbies. But the thing is we know how to adjust. If we cannot afford it at the moment then we will probably save for it.

Maintaining our sanity is one reason why we have hobbies. But always bear in mind that our hobbies should not be the reason why we will put ourselves in difficult financial situations. Let’s have a sense of consciousness/awareness on things that are important and are more important. Setting priorities and smart goals will help us get into a healthier financial shape.

Till next time.

Sunday, March 16, 2014

Funding the Wedding

It’s wedding season once again and I think it’s high time I discuss about wedding related expenses and how you can fund them.

Less than a year ago, Paul and I got married in a small church in Baguio City (Philippines) surrounded by selected family members and friends. The wedding was so small that everybody can fit in a single snapshot. J

The wedding was paid in full before the day of the event. Except for the photographers since I told them that full payment will be made after the event. Mind you, weddings should be paid in full before the wedding itself. That’s how it is in the wedding business.

I personally like the idea of a small wedding. I only want the most important people in our lives surrounding us when we say our vows. I don’t fancy large crowds because it seems so chaotic. I want a peaceful and meaningful wedding and I don’t think inviting a few hundred people will fulfill that dream.

When Paul popped “the question” we didn't talk about the wedding budget or how many guests we are going to invite. We just enjoyed our engagement and saved for the wedding. It was few months after the engagement when we decided to finally settle things. We both wanted a church wedding in Baguio so we decided to book a church and a reception area there.

After booking the church and the restaurant in Baguio City preparations were put on hold because we were both busy with our jobs. It was February 2013 when we decided to carry on and finish everything.
During this time we were giving out money to suppliers. I myself controlled my expenses just so everything will be funded.

 It is a well-known cliche that “Wedding is just a day while marriage is a lifetime commitment.” Well we probably went on that train for the wedding expenses. We don’t really like spending too much on a single day event so we put all our best efforts to minimize cost but still have a wonderful banquet. Here’s how we did it.

First quantify your expenses.
The one and only golden rule we followed: Get local suppliers!
Church – Look for a church that suits you and book it early. We booked ours 9 months before our wedding day.
Reception Venue – I showed Paul this nice restaurant along upper Session Road and I had him approve the idea. After his approval we booked the date and gave 50% advance. We booked the restaurant 9 months before our wedding day.
Wedding dress (Includes my gown and my entourage’s dresses) – I have a schoolmate way back in high school who is into dress making nowadays. I contacted her and she gave me a fair price. We contacted her few months before the wedding. And she pulled it off. J
Photographer – We have a classmate in college who is now one of the best wedding photographers in Baguio City. We contacted him several months before the wedding and we were lucky his schedule was okay with our date. J
Make-up artist – The person who made my dress was the one who suggested my make-up artist. He is one of the finest I suppose. I was with Paul when I did the trial and he loved the look. So we booked him 2 weeks before the wedding. :D
Other wedding effects – Who needs professionals if you have friends who are willing to help? J I am forever indebted to my friends. J

Second, set your expectations.
Setting our expectations mean that we should be realistic with respect to our budget. We need to tell ourselves that we are going to have a small gathering and only the most important people can attend. Although we would like to invite more, we were bound by our wedding budget and we should only spend according to our spending plan.

Third, set your budget.
One thing I realized while preparing a wedding on a budget is not exposing me to the sellers out there. I did not attend any wedding expo for my own wedding. I just sorted out my own list and focused with my local suppliers. That way I controlled the wedding expenses and kept my wedding preparation from scrutiny.  

Fourth, fund the wedding.
It was a blessing that we had ample time to fund the wedding. We saved most of our salaries to create a wedding fund in order to avoid borrowing for wedding-related expenses. We disciplined ourselves to save more and spend less. We made sure that there is ample amount saved for some extras and surprises along the way. An extra 20% of the total amount will be enough to cover.

Paul and I are disciplined savers. We have lots of friends who are willing to extend help (as in labor) and we really appreciate what they did to us. We really saved up for our wedding because we like to have it our way. I think the most important lessons I got before, during and after the wedding were the following
1. Spend only what you can afford to lose. Do not expect so much from the wedding so treat it as an expense.
2. Give importance to people who are dear to you.
3. Borrowing for wedding related expenses is not an option. If it’s not in the budget then don’t.
4. Spend money on more important things. For us it’s the food that we serve during the reception.
5. Prepare for the married life.

Friday, March 7, 2014

Preparing for your Kid’s Education through Mutual Funds

Every parent aims to provide quality education for his/her kids. And of course it takes a lot of effort to produce such a huge amount if you are not going to prepare for it early on. Taking into consideration the current situation in the Philippines, the tuition fee for college students are growing steadily for the past years. Please see link here and here

So in order to address the ever inflating cost of education, I will show you how you can fund your child’s college education through the help of Mutual Funds. 

For example you have a child who is turning 1 this year. You decided to make monthly investment of 2000Php (24000Php/year) in an Equity Fund that earns 12% interest per year. How much would you have after 15 years?

So for the next 15 years, parents would save and invest a total of 360,000Php. Before the child’s first year in college the fund would have accumulated a total of 1,000,000Php which accounts to almost 300% gain.

Now you ask me, “Is that possible?”

Let me show you the historical performance of a Mutual Fund Company named PhilEquity Fund Inc. Click here to know more about PhilEquity.

This shows that for the past 10 years the compounded annual growth rate of the fund is at 19.49%. So the computation above is very much possible based from the past performance.

Now here’s a tip

It’s always good to prepare ahead of time. The earlier you prepare the smaller the amount you need to save and invest every month.

Let’s say for example you have a child who is now 5 years old. You would like to have at least 1Million by the time he goes to college. Question, how much should you save and invest in order to do so? Answer, that would be 43500Php per year or 3625Php per month for the next 11 years.

If you delay further, say for example you are going to prepare for your child’s education by the time he is already 10 years old, you will need to save and invest 112,000Php every year or 9345Php per month for the next 6 years.

So you can now see the importance of starting early. The earlier the better.

Here’s another tip

For instance you would like to prepare for your child’s education early on but would only want to save for 5 years. Your target amount is the same 1Million pesos. Simple analysis would tell us that because we would only want to save for 5 years for the college fund, we should increase the amount to be saved and invested per month.

Table above shows that you need to save and invest 46,000Php per year or 3850Php per month in order to do so.

For complete list of Mutual Fund companies, please click here.

Please note:  Past performance is not indicative of future performance. Mutual Fund investing involves risks.