Monday, September 17, 2012

10 Practical Tips: (Be) Home, Happy, and Financially Free

1. Set "SMART" financial goals

SMART = Specific – Measurable – Attainable – Relevant – Timebound. It's not enough to just say, "I want to be rich someday. When exactly? What does being "rich" mean to you, exactly?

2. Know your financial position

Before you can take the first step towards where you want to go, you first have to know where you are. Estimate your "net worth" by listing and valuing everything you own and subtracting what you owe; the result is some kind of personal balance sheet. Next, estimate your capacity to add to your wealth by subtracting your regular expenses from your monthly or yearly income and creating a personal income statement. This exercise should be able to help you come up with a SMARTer financial goal.

3. Create a budget and stick with it

We are used to this form of the savings equation:


But this implies that expenses take precedence over savings or that savings are just what's left over from spending. So maybe focusing on this form instead:


will help you meet your target savings and help you better control your expenses.

4. Identify needs vs. wants

Avoid impulse buying. Before making purchases, sleep on it--you may not want it anymore the next day.

5. Learn to say no

Turn down unreasonable remittance requests. You are not responsible for everything and everyone.

Look after yourself. Know how much you can remit without sacrificing your own financial goals.

6. EmergenTHREE

Set aside at least three months worth of living expenses for emergencies.

7. Get insured

Make sure you have enough protection: life insurance, health insurance, accident insurance.

Questions to ask: How much is the premium? What are you insured for?  Until when are you insured? How can you claim expenses? Who are the dependents, beneficiaries? What is and isn’t guaranteed? How reliable is the insurance company?

8. Control your debt

Know the terms of your loans: principal, interest rate, maturity. Keep your total monthly amortization payments to no more than 20% of your monthly salary (as a rough rule of thumb).

Pay off your most expensive loans first. Pay off any debt that charges more interest that what you can earn from an investment before you invest.

9. Grow your money

Put your money to work--invest.

SHORE – five things to think about when investing :

Scrutiny – do you understand the mechanics of  the investment?
Horizon – can you afford the lockup period of the investment?
Objective – does it fit your financial goals?
Risk – are you aware and can afford to take the risks involved?
Experience – can you take advantage of any existing experience with this investment?

10. Believe in yourself

If you don't, who will?


This list was prepared and presented by Project Be for an event for Filipino overseas domestic workers in Hong Kong on September 16, 2012.

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