✨It's another Financial Friday with Patsitivity!✨
Are you thrilled to learn, unlearn and relearn something new today? I hope so because I am beyond ready to share my two cents for today!
Let's keep the ball rolling! Shall we?
A friendly warning
I have met so many people and I'd like to categorize them into three types, namely: (1) Contented, (2) Enlightened, and (3) Insane.
Contented
If you're happy spending thousands after thousands on things you can live without with no an emergency fund, without a single penny in the bank, without money working for you (interest), if you're in this state and you're happy and contented, then, by all means, continue what you're doing. No one's stopping you!
Enlightened
But, if you're the same person spending here and there but has recently been contemplating why you've been working so hard year in, year out and haven't seen any progress in your Finances - no savings, no emergency fund, no life insurance, no real estate, no huge purchases over the years and wanted to change your current state, this article and the rest to come is for you. So read on, we have so much to talk about. 😉
Insane
If you are the person who always complains about why you haven't seen improvement in your Finances and, at the same time, consciously buy things I'd like to label as "useless" for lack of a better term, drinking that expensive cup of Starbucks Coffee every single day and buying just anything you feel like buying when you're bored, you are insane kiddo! You may opt to continue reading this post, but I warn you, you might not like what you're about to read. And as early as now, I am telling you, you don't have the right to complain. Truth slaps hard.
I will elaborate more on the concept of Insanity in terms of Finances and Self Improvement in general in another post.
And before I forget to mention, I am not a Financial Planner, although my degree has introduced me to Financial Management, all that I've shared in my last post and in this post as well are all based on my acquired knowledge and personal experiences only.
HEAL: Tips to Navigate Our Finances through the New Normal
I've been open about how the company I'm currently affiliated with has tremendously helped me with the various workshops I, and the rest of the workforce, have been sent to year after year.
With the clamor from the employees to hold a Learning Session on Financial Literacy, our company organized a seminar led by Edric Mendoza last September 22, 2020. Edric and her wife, Joy Mendoza, are famous for their advocacies on Homeschooling (something not so popular in the Philippines yet) and Financial Literacy to name a few. Edric is my boss's classmate back in college so we had no difficulty getting him as a resource speaker.
The seminar was entitled HEAL: Tips to Navigate Our Finances Through the New Normal. Edric used the acronym HEAL to guide him in his points of discussion. HEAL stands for:
H ave the basics in place
E xamine your goals
A djust for uncertainty
L ook beyond the finances
I'll be using this framework from Edric in the next Financial Fridays content. However, I have a different take on which one to talk about first. As you may have noticed, in Edric's framework "Have the Basics in Place" is the first one he's given priority to discuss. In my opinion, tho, examining one's goals whether financial or not should always be the starting point before planning and executing any action plan.
Why set Financial Goals?
Generally speaking, not having a goal is like going to war unsure if you want to kill your enemy or if you want to be killed by the enemy. So to start with, if you don't have a goal, we have a big problem. But the good news is that it's a problem we can solve if we decide to.
I have a strong feeling that people ditch goal setting because they're afraid of accountability. They don't want to finally sit down and answer the question "What do I want to achieve?" because once goals are in place, commitment through discipline and hard work is difficult to sustain. If there are no goals to start with, then there will be nothing against which we can measure things after a year or so.
And if that's the case, we can go on living life not feeling guilty or shame of anything because there were no rules, no guidelines at the outset.
You see, our resources are limited. Time, money, energy, and even our days on earth are limited. With limited resources, we can only do so much that's why we have to decide where we put our money depending on our goals.
Limited resources teach us that we can't have it all; we gain some and lose some.
Therefore, every single action, every single effort, every single sacrifice (if times require) should always be directed to "What do you want to achieve in a certain period of time?"
The Idea of Time Buckets
Goal-setting can be grueling especially when you think of the years ahead. To make it easier, there are time buckets we should consider, namely Short-term, Medium-term, and Long-term. The same goes for Personal Finance.
SHORT-TERM FINANCIAL GOALS
According to Edric, short-term financial goals are the things you want to do with your money within the next few months up until two years. Some key short-term goals include setting monthly and quarterly budgets, setting up a fully-funded emergency fund, paying off debt, buying appliances, saving for international travel, and minor repairs and home improvements.
MEDIUM-TERM FINANCIAL GOALS
Medium-term Financial Goals are the goals you want to achieve within 3-5 years such as buying a lot or buying a car.
LONG-TERM FINANCIAL GOALS
According to Lauren Schwahn, long-term financial goals are "usually your big-picture costs. These goals may take several years or even decades to reach." Edric defined long-term goals as those goals that you want to accomplish within 5 years onwards.
The following are normally classified as long-term financial goals: building a house, retirement plan, paying off a mortgage, starting a business, saving for your child’s college tuition to name a few.
SURVIVAL TERM
With the pandemic taking the limelight last year, Edric added a new time bucket. He labeled it as Survival Term. Under this time bucket are the immediate needs arising due to the pandemic such as the increasing need for sanitation (alcohol), safety (mask and face shields), and healthcare (vitamins and healthier food).
What's the next step?
I hope I've enlightened you as to why you should set goals and introduced you to the idea of financial time buckets, the next important thing to do is to make time to examine what you ultimately want to achieve in terms of your Personal Finances.
How much money will you be needing to complete your emergency fund? Do you plan to buy a car in the next three years? Is it on your list to retire at forty (40)?
Once and for all, I hope you take the difficult road, sit down, examine what you want to achieve and we'll talk some other time about how you can achieve those financial goals.
Can't wait to share more about Personal Finance with reference to Edric's framework as shared earlier. I hope to see you in my next Financial Fridays post! Drop any comment, insights, and even violent reactions! Haha! 😁
✨Happy weekend everyone! ✨
Living life intentionally every single day, she believes that there’s no limit to one’s potentials. Right now, she’s on the loose for the pursuit of endless holistic self-growth and development. She wants to light the way for others. She believes there’s no better way to leave a legacy than to pay it forward.
Her ultimate goal in life is to reach the state of enlightenment where there’s nothing but peace, love, happiness, and contentment - nothing more, nothing less.
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