I must admit, I am not really big on saving money much less on investing. However, we all need to save and make money one way or the other; if we atleast care about securing our future or our children's future.
The only way I know then on saving money is the same way how most people still do now - apportion an income and place it in a bank. Very crude and ineffective. No wonder saving money takes so much discipline and effort to make it work.
But before we jump in, allow me to say that there are two key elements that must always be considered when saving money. Elements needed to make saving money to work for you, every time. First is doing it 'automatically' and second, protecting it from yourself .
1) Saving 'Automatically'. This means having someone apportion your money for savings on your behalf with no conscious effort. A common example may be automatic deduction by your payroll officer or automatic fund transfers by your bank.
2) Protect from yourself. These may be processes or programs that limits you from touching your nest eggs from unnecessary withdrawals for a specific period of time.
So what are other ways to save and how do we start it? Here it is:
1. Increase your monthly HDMF (Home Development Mutual Fund) contributions.
I am pretty sure that right now, you are paying only the minimum required by the government for your HDMF or PAG-IBIG. And, what still many of you do not know is that, PAG-IBIG also functions like a bank (a provident saving bank).
Increasing your PAG-IBIG contributions doubles or triples your money since this will be matched equally by your employer. So, say for example, your monthly contribution of 50 bucks is matched equally by your employer with another 50 bucks. That's easy money! Also, since it is a savings deducted together with your other obligations like your SSS; it is non-tax deductible and earns dividends overtime.
This means the more you contribute the more you earn overtime and without you even knowing it.
2. Get a savings-linked annuities.
Annuities are premium payments made on regular intervals like monthly, quarterly or annually. There are some non-traditional investment vehicles that are now linked to savings. A very good example is a whole life insurance where you pay annuities until the age when you plan to retire and a portion of these premium payments goes to your savings. This way, one is compelled to pay and save at the same time to get covered by an insurance.
I got mine at PruLife UK with a no-frill life insurance plan. Scout for a plan that fits your needs and make sure its linked to savings. To do this 'automatically', ask your payroll officer to do an automatic salary deduction and directly deposit the premium payments to the insurance company's bank account.
3. Save windfalls and extra incomes to savings-linked annuities or other investments.
Yes we do have windfalls once in a while and these may be in a form of bonuses or successful business deals. Windfalls or extra incomes provide for us an opportunity to advance our payments on mortgages, savings-linked annuities, or to buy more investments. The whole idea of advancing payment on savings-linked annuities other than increasing your savings is to protect you from difficult times such as unemployment.
But do not advance your savings-linked annuities too much as you might be putting all your nest eggs in one basket. An 18 to 24 advance payment will do the job and give you enough protection during hard times.
4. Simplify investment. Get a Managed Fund.
I've written in my previous blog article that I am completely opposed to putting my savings in a bank since it only earns very little interest plus other deductions. So it's really not a wise move if you do and it's only the banks that earns from your hard earned money.
So where do you put your money? Put it in a managed fund. I prefer managed fund because its simple, balanced yet yields higher returns, and less time consuming. This way, my money is diversified across different investments thus making it more secure in the long run.
5. Pretend that you didn't get a raise.
If you do get a raise, I highly advise you NOT to tell your wife or else... you know I mean. Since you and your family has adjusted to the lifestyle prior to your salary raise, keep your mouth shut and save the extra to any investment vehicles that you may have. Again, you may pay in advance your annuities or make another investments.
You can the again negotiate with your payroll officer to direct deposit the raise to annuities of your choice.
6. Buy Certificate of Deposits (CDs).
A certificate of deposit is a promissory note issued by a bank. It is a time deposit that restricts holders from withdrawing funds on demand. Although it is still possible to withdraw the money, this action will often incur a penalty.
CDs only offers a small annual rate of return, usually around 5%-6% per year but the good part is it prevents you from touching your money unnecessarily. It also provides another good option to place your windfalls or extra income since it only requires a minimum of five thousand (Php 5,000.00) pesos per certificate.
As you can see, there are ways to force yourself to save and there are still some more out there. So far, I only included those that works for me and still slowly increases my savings contribution every so often.
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