MANILA -- Whether you clock in 8 hours, or 10, 12, 14, even gasp, 16 hours every day, you deserve a break on May 1. And since most Filipinos have the day off as Labor Day is a national holiday, why not take the time to do 5 simple things to check on your financial health.
Yes, this may sound like a damper on your holiday plans, but there is real urgency behind this. The unemployment rate is inching up and latest data shows its at 5.2 percent as of January 2019. Meanwhile, the population continues to rise and is targeted to go from the 104.92 million recorded in December 2017 to 120 million in 5 years or by 2024.
The peso is still weak next to the US dollar, but inflation has finally fallen within government targets of no more than 4 percent range. However, if your money sits in a savings account and the bank pays you a 0.02 percent interest, you don’t need to be a Math genius to know you are losing out.
And then there’s the public sentiment that it’s getting harder to simply make money these days. In our neigborhood alone, businesses close all the time. You will see one restaurant open in one corner, only to disappear a few months later. The same is true in established shopping centers where stores are shut down from lack of consumer sales.
So you can sleep better at night, work on this checklist and make adjustments as soon as you can.
1. Will your emergency fund be enough for emergencies?
It used to be that 3 months of your salary is a good size for an emergency fund. That could cover hospitalization expenses if someone in the family falls ill, or cushion for you to find another job if you lose the one you have. But now, financial experts are saying 6 to 9 months is the new target because people now need that long to get another job and yes, medical bills have become so expensive.
Check on your emergency pot balance and see if you are comfortable with what’s there. If not, plan for ways to grow your fund immediately. How much do you need to set aside from every paycheck for the next six months to reach your personal target? Write that down and make it happen.
2. Check your insurance policies
Things can get lost in the mail, and not just the post office mail but even electronic mail. Make sure that all your policies are up to date, and your premiums are paid on time to avoid penalties or worse, cancelled coverage because you missed the deadline.
It’s also a good time to assess if you have enough insurance, or with your growing family and expenses, will need to buy additional coverage. For non-life insurance, check the premiums you have been paying every year. With depreciating assets like a car, the amount should become less and less. You can also try and do some rate shopping. I once called five insurance companies to compare for our car insurance and their rates were far apart. I settled for one that was not the cheapest, not the most expensive, but rated highly for customer service.
3. Sign up for free customer rewards programs
The key word here is free. There are now so many customer rewards programs, and nearly every store offers one to keep tabs on their clients. I am wary when I am asked to pay a membership fee to enjoy rebates or discounts. Unless the rebates or discounts will realistically pay for the membership fee in a short time frame (not over a year of use), I say no.
Mandaue Foam, one of my go-to furniture stores, offered me their loyalty card with a P700 price tag, but it’s a one-time fee and the card has no expiration. I was buying then a P30,000 sofa and with the 20 percent discount from the card, I would recover the P700 plus enjoy another P5,300 in discounts. I said yes, but only after doing the Math.
Of course, if it’s free, take it, take it. You can reap cash rebates, discounts or free items in exchange for being a loyal customer. Just be careful that you know the brands behind these offers and only share limited personal information to safeguard your privacy.
4. Any debt piling up?
It can happen to anyone. You miss one payment and then find it harder and harder to catch up in the next few months. You discover that their interest rate is not your friend.
If you have unpaid bills and the balance keeps growing, time to look for options. If you have credit card debt, consider a balance transfer program with better rates to help you pay it down over a 12-month period. Or you can talk to your card company to stop the interest charges so they can help you pay it off. Don’t worry that they may say no. If you don’t ask, you’ll never know, and they want to get paid too right? In the meantime, keep your credit card under lock and key as using it will just pile on another balance to the mounting bill.
5. Is your money working hard for you?
Right now, most of your money, if not all, is likely coming from active income. This means income you make from performing a work service. But no one can work forever. As you mature, you need to build your passive income, which is income you make from money you already earned.
An example of an active income would be your salary, while passive income is the interest you earn from the bonus you received last year which you wisely invested. A retired friend enjoys passive income from his rental properties. He bought these with his active income and now just waits for rental payments each month to cover his needs.
It can be a long and hard road between moving from active to passive income, and many fall short of their expectations. But you would hate to realize this when you are few months shy of your retirement. Make an appointment with a professional financial planner and see how you can start that journey and make your money work harder for you.
Disclaimer: The views in this blog are those of the blogger and do not necessarily reflect the views of ABS-CBN Corp.