Cash is King. Yan ang madalas nating marinig sa mga businessmen? Pero ano nga ba ang ibig sabihin nito? This expression refers to the importance of being liquid.
Liquidity describes how quickly you can convert your assets to cash. Being highly liquid, dapat may available cash ka anytime para mabayaran ang mga gastusin at mga obligasyon. But here’s the sad part, hindi lahat sa atin ay may available cash. There are lots of reasons why a lot of our Kababayan do not have sufficient cash. One of the reasons is our spending habit.
Our lifestyle will dictate our spending habits. After we receive our hard-earned money, we pay our bills, credit cards, loans, and other personal expenses, and whatever is left is considered as savings. This type of spending habit is quite common to all Pinoys:
SALARY – EXPENSES = SAVINGS
To correct this spending habits, we need to fix our formula. From the moment we received our salary, immediately ihiwalay na natin agad ang ating Savings.
SALARY – SAVINGS = EXPENSES
Pero ang tanong ng karamihan, kung maliit lang ang sahod ko or minimum wage earner lang ako, may matitira pa ba para sa aking savings? The answer should be YES.
Savings will depend on your current financial status. One of the most well-known rules in savings is the 70:20:10 wherein 20% of your salary will be your savings, 70% is for your expenses and 10% as you tithings for the Church. However, kung hindi kaya ang 20% to save, you can take this rule not on its numbers instead the concept of automatically separating your savings.
Take note mga Kabayan, savings is regardless of what percentage you apply as your savings, what is more, important is the habit that you are creating. Kaya kahit 100 Pesos lang yan or 1,000 Pesos, it doesn’t matter, for as long as you are consistent in separating your savings.
Since you already know how much your disposable cash after you separated your savings,you know how much to spend or in other words your budget. As the saying goes, learn to live below your means. Ibig sabihin matutong magkaroon ng budget at magkaroon ng disiplina sa paggastos.
So what’s next after Savings? You need to have a goal. And one of them should be creating your Emergency Fund. Hindi sapat na matutunan natin kung paano mag-ipon. If savings is your first step to financial freedom, creating your emergency fund is your first step in your financial planning.
An emergency fund is exactly the money you can use in an emergency. hindi emergency ang pag-upgrade ng lumang cellphone or to customize your motorbike or car or magtravel. An emergency fund is intended to use during unfortunate events, like (knock on wood) if you lose your job, have medical problems, met an accident or when you need to have house repairs brough by fortuitous events like natural calamity.
The general rule of thumb is to keep at least 3-6 months of essential outgoing money in your emergency fund. However, as we are in pandemic and in these most trying times, it is suggested to increase our emergency fund equivalent to at least 1 year of expected cash outflow.
Monthly expenses x 12 months = EMERGENCY FUND
As you build your emergency funds, here are 3 Essential features of Emergency Fund that you need to consider:
1. Low risk – Emergency fund is not the money you will invest in high-risk investments. Hindi ito ang perang nakalaan para sa pag-umpisa ng Negosyo, o pambili ng stocks, real properties, or pautang sa mga kaibigan at kamag-anak. Mainan na ang emergency fund ay nasa saving banks earning very minimal interest.
2. Liquidity – Cash in savings accounts, for example, is 100% liquid because the funds are readily available in cash. Kaya, ang lupang sakahan, kotse, alahas at gamit na pwedeng isangla o mga pautang sa kaibigan at kamag-anak ay hindi pwedeng iconsider na emergency fund as you cannot immediately convert them into cash sa lalong madaling panahon.
3. Accessibility – Emergency funds should be immediately accessible. Preferably you deposit your emergency fund to a savings account with both debit (ATM) card and passbook features. So that you can withdraw anytime, you need the money and, at the same time, monitor your cash movement through your passbook.
There you have it mga Kabayan, and I hope sa darating na sweldo, bagong formula na ang gamitin mo. Segregate your savings first above anything else. Create a habit of saving until you build your emergency fund.
