Sunlife President Henry Joseph Herrera talks about how Filipinos can be financially free by age 60.
Every person has unique personal finance challenges. This makes writing about the topic quite tricky. However, going through the questions you send me tells me that certain age groups go through similar logjams. And similar exciting turns, too.
The best resource I’ve seen so far on financial planning through the ages is The Wall Street Journal’s Lifetime Guide To Money. I thumbed through it to share with you some principles that might help beginners going through the maze of life and finances. I adjusted some of them for Filipno-centric concerns. This could also work as a reminder to those who need to reassess their paths.
For 20 and 30-somethings
“Whatever your goals, the sooner you start saving, the less painful it will be. Once you have made a start, you will find that there is a special satisfaction in facing up to the challenge. Honest.”
Important things to remember:
- Automate your savings
- Start with saving at least 10 percent of your income and increase from there
- Start setting up an emergency fund up to six months of your living expenses
- Invest unexpected windfalls instead of spending them on gadgets or gimmicks
- Try mutual funds
- Inquire about your company’s retirement plan package
- Invest in stocks if you have the stomach for the roller coaster ride in the market. Over long periods, stocks have gone up much more than they have gone down
- Consider bonds if you are a conservative investor
- How much to invest for the long-haul? A rule of thumb says you should subtract your age from 100 and then add a percentage sign
- Just say no to debt other than a home mortgage
- If you can’t live without plastic, pay the entire balance each month
- If you have debt and have savings, take out your money from the bank and pay your debt. Paying off a loan can be one of the biggest investments you can make
- Review your health benefits at work to make sure you have the coverage you need
- Even if you are just renting an apartment, be sure you have insurance on the contents
- You do not need life insurance if you have no dependents. Once you have children (or if your parents are now dependent on you), you will probably need more than at any later time in life
- No-frills term insurance is usually the simplest and lowest cost option
- Think carefully about buying a house versus renting. Since the fees can be steep, buy a home only if you are going to live in it and do not need to relocate in a few years
- Buy only a house you can afford. A lot of people end up getting strapped for cash because of the tendency to stretch themselves to buy the biggest house they can
- Start thinking about writing a will
For 40 and 50-somethings
“These years can be a real juggling act, particularly for people who had their children in their 30s. With retirement beginning to loom in the horizon, these are the years when most people become more serious about setting money aside. Ideally, these are high-earning years in which you have plenty of income to sock away.”
Important things to remember:
- Take a hard look at what you can really afford, making sure you are providing for future needs
- Be realistic about retirement
- Watch out for tax-advantaged retirement funds that may begin due to the recently-signed PERA bill and prepare to maximize them
- Structure your portfolio for strong performance, while working to keep it simple
- Check your safety net (insurance) for holes. Find out whether you have enough
- Plan your career well. Leaving your long-time employer for a lucrative offer may affect your retirement benefits
- Consider getting additional academic training or start a sideline business that might grow into a new career
- Be extra cautious about trying to retire completely while still in your 50s because of the risk of outliving your money
- Talk with your spouse about how much of your children’s college costs you can bear while saving for retirement at the same time
- Beware of the temptation to dip into your retirement fund for a vacation or buy a new car
- Think twice about moving to a bigger, more expensive home that could seem way too large when the kids move out
- Go through the clutter of your investments to make sure they are working hard for you
- Think about how your family would fare if you are disabled and unable to bring home a check
- Even if you do not feel wealthy, figure out how much estate-tax bite would affect your estate
Your 60s and beyond
“The period of life that begins at 60 is characterized by sweeping lifestyle changes—and by some momentous financial decisions that can affect you and your family for many years to come.”
Important things to remember:
- Have a vibrant, active retirement but do not rush into it before you can really afford it
- Tend your resources carefully by investing prudently but not too conservatively
- Arrange your affairs so that a surviving spouse will be provided for and assets divvied up appropriately after death
- Review your medical coverage when deciding when to leave work
- If you receive a lump-sum payment from your employer upon retirement, that can be the biggest lump sum you will ever get. Make sure you learn all about investing and don’t invest it in scams
- Be wary of taking too much risk and too little risk
- Stick to time-tested vehicles such as mutual funds and bank accounts
- Watch for how fast you draw down from your accumulated savings. In the early years of retirement, unless your wealth is immense, you should use only a small part of your savings for living expenses
- Get help on estate tax planning
- Do not feel obliged to preserve all your wealth for others.
- Enjoy your retirement
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17 Feedbacks on "Financial planning through the ages"
omski
Thanks Salve for the summary, very impormative! My 4 simple list below in numerical order :
1. Live within means
2. Save money
3. Invest wisely (own business, stocks, bonds, real estate)
4. Enjoy life
hachiko
Fin planning thru the ages… Salve naman. I thought you’ll discuss about how people saved money during the Roman Empire hehehe
In those days there were no banks, insurers, mutual funds, pre-need firms, financial planners and moneysmart blogs to help you with fin planning. You just kept gold and silver coins in a banga and buried it underground. Your objective is to save enough denarius (dinero) so you won’t be broke when you reach the ripe old age of 50 
Salve
omski, yer welcome po
a simplified list works too!
Salve
hachiko, oo nga no??!! hahaha.
alijeffty gonzales
Hi Salve, a suggestion for the 20 to 30 somethings or to anybody who has not started a regular savings program yet.
economists in general normally attribute to “incentives” the reasons why we do the things that we do, a lot of people i talk to seems to have difficulties in starting a regular savings program because they tend to focus on the absolute amount and the “smallness” of their first intentions in savings.
for example if i am somebody to brings home a bi-monthly paycheck of Php 5,000-10% of which is Php 500-setting this aside will mean a reduction of the same amount of immediate enjoyment, some people cannot accept the trade-off because they see the Php 500 as not compelling enough to give up on a certain enjoyment of Php 500 worth of goods or services now as against an uncertain amount of enjoyment in the future.
My advice is for them to look beyond the first few months of savings which is normally the hardest-because in six months they would have accumulated more than a month worth of income. the key is to look at the “total” potential future benefit rather than trying to rationalize each and every act of savings they make, this way it becomes a better trade-off and is now more likely to be implemented.
thanks,
regards sir henry,
hachiko
o yea eto pa… n d Roman period u didnt really need much money outside food clothin n shelter. just need enough for:
1 taxes - o yea, govt bureaucracy is such an old institution!
“give to Caesar” daw di ba?
2 dinero to pay the oldest professionals. yup. starts w/ a P
3 dinero to watch ur favorite gladiators be eaten by the lions hehehe
Pol Ebreo
Kudos to all of you to whom I’ve presumed were lucky enough to have parents who have had invested in you through good schools. How many percent of the entire Filipino household today have the time or chance of discussing financial planning. I don’t know the per capita income of the Philippines but probably a little bit better than Bangladesh. My point is, let the young generation and the next to follow be given the tools from basic to advance understanding and/or discipline on financial planning via public and private schools. I am willing to join you to do voluntary mentoring or relating my own story to our kababayan. I know I can do this. I’m retired at 63…and humbly financially independent. See me here in Norridge, illinois.
reyna elena
hey salve: off topic, i was looking on your blog if you wrote something about PERA, the latest bill passed. i’d like to find out where they are on this one.
i’d appreciate if your readers could give me a shout!
dios mabalos!
sunjun
@Pol Ebreo
That’s a good idea! I think it would do the country good if financial education is taught in the schools (high school) as well.
How about the rest of the group, what do you think about this guys?
@Salve
This a great post. salamat.
Make your Money Work for You.
The Pinoy Entrepreneur: Start your own business
Aspiring Entrepreneur
It’s really good to start early just like what I did! The younger the better!
Eric Barroquillo
Good day to you, Ms. Suplito. Thank you so much for the very helpful articles that you have been writing for the Inquirer. I chanced upon your article “Paying yourself first: Does it really work?” last August 25, 2008 at Section B2. I want to let you know that I use some of your tips there when I conduct my financial wellness seminars to employees of our corporate clients.
You see, I work for the Bank of the Philippine Island and we feel that it is part of our corporate social responsibility to educate our customers on how to make their money work harder for them. We hope to somehow make an impact on the influencing Filipinos’ saving and investing habits.
One recommendation that you included in that article, which also appears in this blog is “automate your savings.” This is a very good advice, which we also give to our clients. In fact, as a result of it and following the principle of “paying yourself first,” our bank has developed a new product called BPI Direct Save-Up account.
This product allows our ATM account depositors to automate their savings. They choose the amount (minimum of P250) and frequency of transfers that they would like subscribe to. hence, our clients are given the freedom to choose what they feel would be suited for them.
What’s more, this account comes with a free life insurance, the coverage of which would depend on the average daily balance of the Save-Up account up to a maximum of P4M! Many of us would like to be insured; but we do not want to pay insurance premiums. This product addresses both concerns.
I just hope that your readers would follow the advice of automating their savings and paying themselves first! If they are BPI accountholders, they could go to our nearest branch and ask about our BPI Direct Save-Up account!
One point that made me smile reading your article was your comment that if one’s bank could not automate his savings, then he should transfer his money to another one! I am sure glad that BPI is one of those banks such individual may considering transferring his money to!!!
Thank you again for your very helpful articles and blogs. May God bless you to help out more people in becoming more financially literate towards the road to financial independence!
Salve
Jeff, i love tips like this because it tricks our minds into saving with more determination! I would keep my eyes focused on the total annual figure and force myself to stay the course.
my husband and I are still trying to live off one income and saving the other’s, and sometimes, when rationalizations creep in, it’s easy to lose sight of the final goal! thanks so much for sharing.
Salve
hachiko, people really pay to watch those gladiators? urrrrk. humans are so weird no? hehe.
Salve
Pol Ebreo, the PDIC, BSP and the DEPED have started financial literacy courses and trained elementary school teachers to teach basic knowledge about financial planning to elementary school children. REsults of this investment in time and resources will take years to show, so the more private individuals to join the movement, the better!! Let me know if I can help you become a part of this advocacy.
Salve
reyna elena, working on it, friendship
Salve
Aspiring Entrepreneur, starting young beats starting with lots of money!
Salve
eric baroquillo, glad to know my articles are helping people like you who have taken on the advocacy of financial literacy as well! the more of us, the merrier!
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