(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 27th, 2007 at 4:17 pm
Hallelujah. I stumbled upon this blog quite accidentally and boy I am glad people are finally realizing the fact that Credit Card are not the IT thing anymore. And when I finally realized, I used to have maxxxxxed all my cards and before I knew it I am buried deep in debt. Good thing I came to realization in due time.
It was irresponsible of me. So I decided that I will have to start savings. I signed up for membership in a Credit Cooperative. I followed the strict savings program (like a diet program) I rehabilitated myself. It took like some months lang naman what Bianca said that I was getting crazy that I have to cut cut cut down in my expenses. And started saving my salary.
Little by little I made investments, I was able still to apply for a credit with the Credit Cooperative I was in, but it was really carefully timed and planned. I was able to buy a house and pay for it. And now, I have still a few months to go and finally I could kiss my Land Title….
It takes a lot of discipline, focus and attitude if you really want to turn around 360 degrees and forget your past life. Go straight to your goal don’t hesitate, and look around and pause. Go on reach that goal. My Credit Cooperative membership helped me realized how simple life is after all and how peaceful it is! Kudos to those who made it out of the debt jungle.
October 26th, 2007 at 5:48 pm
Hershey, you can invest in stocks even when you’re in the US through online brokerages. The way the PSE is currently structured, you need to go through a broker. You need to know, however, that there are risks involved. Your sister is right, it IS risky. And things will be bumpy, too.
Stocks are sexy for many people, and it’s true that many have made money in the stock market. It is also true that many have lost a lot of money there. It’s definitely not for the fainthearted, and not always the answer to getting wealthy. But, maybe, like Will Smith’s character in that movie, the pursuit could be one hell of a ride
October 26th, 2007 at 5:47 pm
sheng, thank you for sharing your blog entry. your story is truly inspiring. i love what you said: 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.
You deserve a standing ovation. who knows, next year, you might actually begin investing!
October 26th, 2007 at 5:45 pm
paetechie, great going. many have the technical expertise and sometimes the desire, but not all actually do it!
October 26th, 2007 at 1:19 pm
Hi,
I myself, is very much interested in stocks but don’t know how to start..I really want to learn the ins and outs. My question is ” Can I invest in the Phils stock though I’m here in the States and how? I told my sister abt this but she’s so negative she said of high risk esp if the broker will not take good care of the money, I would end up with nothing…but I really disagree with her for as long that
you keep on eye on it…My other question is “Do I have to to go to a stockbroker or financial planner to trade?or can I do it myself? Others said I need a mentor to learn abt this. What inspire me was the movie “Pursuit of Happyness ” starring Will Smith that motivated me to try stock trading…Also, Mr Warren Buffet who made a fortune in this…I hope someday that I don’t have to work in a 9 to 5 job but with flexibility in life just by stock trading to earn generous amount of money…Ormaybe I can have my own business which is my dream…Help, I need yr input in this..