(This post was written by Bianca, a MoneySmarts reader who was chosen among a long list of candidates to be part of our Money Makeover. In Money Makeover, we match financial planners with reader-volunteers and chronicle their one-year journey to their financial goals. Generali Pilipinas’ senior executive vice-president Augustus J.V. Ferreria has agreed to coach couple Bianca and Diego for 12 months pro-bono. In Money Makeover, we aim to show readers that finding financial freedom is really possible. Read previous Money Makeover articles here.)
I do not do math.
Addition
It started simple enough. Joe wanted us to list all of our expenses every day forever. He did not warn us that our hearts could suffer anxiety attacks because, for one, we were confronted by the fact that our expenses overshot our income by some P30,000 every month. He also provided no explanation as to how we could have survived all this time – but our zero-balance savings, credit card debts, frequent lifeline calls to mom and dad could possibly provide a clue. It is a stressful exercise trying to figure out where our money went every day because with it comes the understanding that it went to excesses of the flesh and vanities. Want and need are becoming very delineated concepts at this time (but concepts all the same).
Joe had us make a list of our monthly expenses. He then took out his scissors and cut away the expenses, which exceeded our monthly income. This included my gym membership (to which I signed up for one year minimum!), auto repairs (we have 7 and 14 year old cars!), clothing, movie trips, restaurant trips (the stuff life is made of) and altruistic pursuits (read: gifts). Joe said that if we wanted them, then we would have to reduce our spending for the items above the scissor line. It would mean no aircon nights, commuting, and probably the househelp has to go.
Despite the pain, one important thing I learned from this exercise is that I should pay myself first. That is, from the collective salary my husband and I receive every month, we should take 10 percent of it (the Japanese do 60 percent!) and put it away. The key word is away – it should be where it is not in any danger of being spent. It could be in a simple savings account, a high yielding deposit account or a time deposit account. At the end of the year, Joe said we should have a definite plan on what to do with this money. Joe does not believe that we should be misers. Money, after all, is there to improve life. (I breathe a sigh of relief here.)
Division
Joe divided our expenses between my husband and myself and assigned us specific bills to pay. I found this extremely hard at the beginning because my husband usually surrenders (yes, it is the right word) all of his salary to me and I pay everything. Doing it Joe’s way made me feel like I was losing control. Moreover (stress ball in hand), I have to remind my husband every time to pay his share of the bills, and he hates to be reminded (but needs to be reminded). We are still works in progress on this one.
Multiplication
This is the fun part.
Joe introduced us to the magic of stocks so that we can multiply our income a hundred-fold – well, that is the goal.
He gave me P1 million in virtual money to invest in the stock market for 30 days. The exercise had me looking at the waxing and the waning of the 10 stocks that I chose every day (okay, there were misses). But in a day, I made P9,000, and then my profits were up to P30,000 in two weeks! I sold all my stocks and narrowed down my choices to just five. At the end of the month, I found that I had an extra P170,000 in virtual money. I was in a world of infinite possibilities! Oh, to what good use that P170,000 would have gone to!
Through Salve and Joe, we found ourselves in the place where it all happens - the grand arena of the Philippine Stock Exchange. Leo Quinitio and Jay Penaflor of the PSE’s Market Education Department, Capital Markets Development Division were there to guide us and answer our every question.
There, all of it came to life! The board blinked at us, numbers turning sometimes green, sometimes red. Traders were on the phone and on the computer, talking incessantly. The bell that signals the beginning and the end of trading was on one side, silent, bearing witness to the money that is being made and being lost.
Leo and Jay say that the PSE also has an online stock game that everyone can play (see www.pse.com.ph). Like in Joe’s exercise, investors are given P1 million in virtual money to invest. In this one, though, the program even calculates the broker’s fees and the taxes so the feel is more real. Leo and Jay also tell us that PSE offers securities courses to the Filipino investor, beginners and experts alike. We hope to be part of it very soon.
Money and math. Interesting, heady, nerve-wracking, daunting, extremely satisfying. In our own way, in our own time (well, hopefully by May 2008), we hope to have understood more, made more, put more meaning into our lives because we give more and worry less, and to finally put those two words – money smarts – down to pat.
October 26th, 2007 at 9:51 am
Hi Salve! Am sharing with you my entry in my multiply.com blog. Very often, I get inspired and moved by your posts and the bloggers feedback. So, here I am giving back what you have influenced me - - a paradigm shift.
I had been following the money smarts blog of the inquirer for the past months now. It is because I feel that I need to start looking for my finances and be truly financially independent.
I earn a very decent pay. However, through the years it seems to me that I haven’t gotten past the threshold of being on the brink of being broke and saving enough. There are days that I feel I have so much and some days I found myself in want.
I thought that I already have a good attitude towards money. It is because I adjust my lifestyle accordingly where ever the wind blows for me. I could live with so much and really lavish myself with all the comfort and conveniences I could afford, in good times. And when money is scarce, I live a spartan life.
I felt that I can always “sacrifice” because it never last long. When the next pay comes, I could splurge again.
It’s a never ending cycle for me. I’ve been working since I am 18 - I finished college early. It has been a decade now, and I have gone from a minimum wage earner to receiving a decent salary - my contemporaries could be envious of. And yet, am still what I am yesterday and today… barely making a life.
As cliché as it sounds, the fact is, it is not how much you make but how much you save. And I have known this a long time ago. But I haven’t gotten out of the hole I am in yet.
And as pathetic as it sounds, I’ve taken some baby steps towards taking control of my finances. I have started to keep track of my expenses by faithfully listing every single expense, cash and card, into my worksheet.
I had to painfully tame my shopping splurges even to the point of rebutting myself out of my supposed need to buy one. I have said goodbye to my daily dose of caramel macchiato. Although, I give once in a while if only not to deprive myself of the joy of sipping my favorite drink.
Some people feels that time flies too fast, I, however, want it to fly faster. I want for December to be just around the corner. I can’t wait for my bonuses and leave conversions to be credited to my account.
It’s not to do mindless shopping, mind you. I have committed this to writing off my bad debt from my credit cards. Well, the whole amount is still not enough to totally wipe it out. But I figured that by summer of 2008, I will be able to breathe again.
It means that I have very little debt remaining which could be paid off before the year ends.
And this should prompt me to celebrate sans the champagne. It’s an unnecessary expense. I might just go for a margarita instead.
When it happens, I could truly turn a leaf. Touché!
October 25th, 2007 at 3:33 pm
Hey Bianca by tackling the multiplication part you’ve gone quite a long way, and yup we all confirm here it’s fun! Fin indep becomes more attainable thru investing rather than just saving n scrimping. Just like exercising for good health rather than just dieting n starving.
October 25th, 2007 at 12:19 pm
wow… the multiplication part does sound fun!
October 25th, 2007 at 11:41 am
bianca, see it’s easy to make money in stock market. Why don’t you do it for real?
mzkuro, i recommend “A Random Walk Down Wallstreet” by Burton Malkiel and “Beating the Street” by Peter Lynch.
October 25th, 2007 at 10:06 am
i have an excel file of my cash flow and it’s fine and getting better. I don’t have a credit card. I also played the virtual PSE stock market game and I also earned close to P200k of virtual money at a time when the stock market took a nose dive during the hello garci scandal. i came from a low income family so i know how to properly manage my expenses now that i have a respectable income.