Financial Strategies for the New Year

Howdy everyone!   This is my first post for the year 2011, November was the last post I made last year which is more than a month of absence from the blogosphere.  Not planning on permanent absence though, it was only because I had to rearrange my priorities.  Felt I needed to unload and take some time off from doing and spending on things that I love.  There are really times when we have to stop a while so we can reflect sincerely on things that we should give more consideration to be able to move on.

Middle of last year when my house helper left…it was really too hard to let go an efficient maid, but there was nothing I could do to keep her since she was destined to face another chapter in her life.  We had difficulty finding a replacement with the same qualification as her but luckily the kids could at least get by on their own without a nanny so my husband and I had to agree on some terms about household chores.  In September, we were faced with more challenges when family members were down with illness one after the other. My son and daughters were sick and were confined at the hospital.  We were thankful that my son survived the deadly dengue and my daughter got well but inescapably that unpleasant event left us with unforeseen financial burden.  It was another realization for us that although we felt we were saving enough for emergencies and seem to come prepared for it, life would still turn out differently when you are already at it.   With that my husband and I needed to study well our financial position and learn more techniques in budgeting and financial forecasting.  So taking budget planning seriously we both agreed on the following strategies to recoup our losses:

1.    Cut down on expenses – virtue has it that one should live only within one’s means so if we do not have the money to spend for something, we must not be lured by those zero interest or pay later schemes that shops usually offer.  Or even if we do have the money but the purchase is not very essential, we must drop the idea at once.  We also agreed to downgrade our subscription with our telephone, internet as well as journal providers to free up some monthly bills.  We haven’t totally given them up though but only took advantage of the prepaid option which is a cheaper alternative.  That was also the reason why I very seldom went online as aside from the fact that we only use the internet when the kids need it for school (have to set an example of course), we also need to limit electricity consumption.  But since we have school children, we cannot totally give up those journal subscriptions, we only replaced them with equally informative but low-priced magazines instead.  

2.    Pay off interest-bearing loans - as those really pull our resources to the drain, what with more than a thousand in interest every month which could already be used for groceries or other essential things for the home.  Also, leaving those credit ballooned in amount could drown us in compound interest that will make it harder to rebound from debt. Essentially, paying off loans means hiatus from more borrowings.  Sounds too good to be true but nonetheless, we need to be firm about it lest we find ourselves with nothing but more bills to pay. But if borrowings would be impossible, we might as well consider refinancing of loans, we would just ensure that we do not loan with higher interest than our existing ones.

3.    Save now, spend later – So even if we are going to cut down on expenses and pay off loans, of course it doesn’t mean that we will take savings for granted.  We still need to set aside a portion of our income no matter how small it could be, that is putting into heart what I learned from Mr. Francisco Colayco’s book to pay ourselves first for all of our hard work and to still follow his equation to deduct first the savings from the income to payoff expenses and not the usual way of deducting expenses first from income and whatever left is the savings.  Very practical advice indeed but would require a lot of discipline.  As how my best friend puts it “another year, need to start to save again so there will be money to spend later”.  We need to follow her advice to keep ourselves from more financial worries.

I am optimistic that we would pass through the hurdle effectively and our life will still be happy just the same, after all, money is not everything.

If you have financial strategy that you have proven effective, we will be very pleased and grateful if you could share them with us.  You can just leave your message on the comment page.