Making Long-Term Decisions

by The Happy WAHM

After addressing the short-term decisions, then it’s time to make long-term ones.

So what are the considerations that are considered as long-term?

Your house… Are you still renting, or are you paying a mortgage for your own home like we were then, or are you one of the fortunate ones who already have their own home before the need to plunge into a one-income household came?  If you are renting, can you still afford the rent with just one income?  Maybe you should also consider moving to a more affordable place to cut on rent expense.

Your children’s college fund… Do you have enough savings, or already paying up for a pre-need college fund?  In our case, we already completed our first child’s educational funds, and still paying for two, when the “tragedy” at Prudential Life struck.  Fortunately for us, I have a cousin who was working there, and she was able to give me sound advice to withdraw.  We were able to withdraw, at a loss on the two that we were still actively paying for, and a break-even on the one that we have finished paying for.  (Maybe in another post, I will share what we did with the money we were able to get back from Prudential, but suffice it to say that we did not spend that money, nor did we even think of making it part of our disposable cash.)

Your retirement fund… Have you started investing on a retirement plan?  Can you continue to save up for your retirement with just one income?

Those were the three major items that we focused on when we became a one-income family.  We had to weigh our immediate needs against what we need to prepare for in the future.

Giving up one income means a big cut on your old budget.  But giving up some expenses, like househelp, lunches out, designer clothes and such, and managing your utilities expense, like going for a lower postpaid plan on your phone, or maybe switching to prepaid, may not be enough to address your long-term plans, like college education and retirement.  You will need to save up for those.

So here’s what worked for me in terms of savings…

You see those ATM card plastic jackets?  I have several of those, and each one is labeled with “phone/internet”, “electricity”, “grocery”, “gas”, “doctor”, “allowance”, “emergency”, “savings”. etc, and each payday, I would put in the budget for each expense there, so that when the utilities fall due, I have the cash.  Notice that I have a jacket for savings.  Some see savings as what’s left after all the bills have been paid just before the next payday.  Not for us.  Savings should be taken out of the total take home pay before you even start budgeting what’s left for your household expenses.  However small, savings should be constant.  If you can afford to save 20% of your take home pay, go ahead and do so, then watch your spending to make the 80% work for the rest of the expense.  But of course, again, you should only decide on the lifestyle that you are willing to live, so maybe 20% is too much.  Try 15%, and if still it won’t work go for 10%.  The important thing is that you commit to that 10% no matter what.  Make it a regular thing.  Like in my case, I didn’t even think about my husband’s full take home pay anymore.  My mind was set to receiving just the net of the amount we have agreed to put on savings.

And speaking of husbands…

If your one-income family has the husband as the one going out to work, please don’t forget that the husband has to receive an allowance, too.  Agree on an amount that he will receive from the take home pay.  I used to give my husband his allowance at the beginning of the month, before the next payday cycle, and I’m proud to say that at the end of each month he would always have some amount left that he gives to me to be added to either our savings or to the emergency fund.

About savings…

It pays to have your money put in an account that you have no immediate access to.  In our case, I put it in an account with higher yield than a regular savings, like a time deposit, but allows for up to three withdrawals per month.  And then there’s what they call the maxi saver, where you get a yield much higher than a savings account for as long as you don’t make any withdrawals.  If you ever need to withdraw, then your account will be put on a regular savings rate, but leave it another full cycle without any withdrawal and you’ll be back to having that high interest rate.

Once you are comfortable with what you have in your savings account, meaning you have an amount that can cover an emergency, consider putting some amount in mutual funds.  In building a retirement fund, it pays to start an investment portfolio early, however small, because in growing money, time is your best friend.  Time, and compounding interest.

Until my next update on this series!

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Making Short-Term Decisions

by The Happy WAHM

Coming from finding your net worth, let’s talk about what you can do with what you know.  It’s time to make some short-term decisions.

I quit my well-paying corporate job at the time that we were heavily in debt from hospital bills, paying off the mortgage on our house, with a high-maintenance infant, a diaper-age two-year old, and a school-age six-year old.

But after some stressful nights, we came up with our numbers and those numbers became the basis of mapping out our financial future.

Before we could even begin to formulate plans on how we can decrease our liabilities and increase our assets, we have to deal with the immediate needs first.  We had to make short-term decisions.

What are our absolute necessities?

On top of our list then were child care, food, utilities, debt repayment and house mortgage.

Child care was steep at that point, because our newborn son was not completely out of the woods yet. We received some financial help from family and friends while our son was still in the hospital, and that tremendously helped us. Among our top priorities was the mortgage on the house.  There was no way we could consider skipping payments on that, or we would be sleeping on the street.

Where can we drastically cut expenses?

On top of our list then were lunches out, weekend trips, entertainment, and househelp.

Those items were really cut drastically.  Well, the lunches out and  and letting go of the helpers (we had two) was the highest source of savings for us, as two mouths to be fed were taken out, and all the expenses that go with having two extra bodies in the house disappeared all of a sudden.

Lucky for us, we were already comfortable with the monthly payments on our house and we knew that we could sustain it.  Our kids were never introduced to buying toys.  We’ve always had a simple life, and we started investing on educational materials while I was still pregnant with our first child.  We also have family who give us hand-me-down clothes, so the changes we had to make did not have too much effect on the lifestyle we were living.  But for those who are facing drastic changes, it pays to make a list of what really matters in terms of lifestyle, needs and dreams, then refine and prioritize your list until you are left with the kind of life that you are willing to love.  Again, I reiterate on deciding and settling for the kind of live you are willing to live.  You have to make your refining and prioritizing with choices that feed your soul.

That quote from Benjamin Franklin is so true.  In the same manner that a cent saved here and there can actually amount to something substantial.  So go ahead, brew your own coffee and stay away from Starbucks and CBTL.  Ask for water in restaurants instead of ordering drinks with your meal.  Or take the bus instead of driving to where you’re going.  It will not only impact your wallet’s health.  You’ll make Mother Earth very happy, too!

Here are some kuryentipid tips that have saved us hundreds, if not thousands of pesos monthly:

• Buy clothes that do not need ironing
• When washing school/office uniforms (which, of course, need ironing), do not wring them.  Instead, just let the water drip and put them in hangers immediately.  If you have to wring them (when in a hurry to get them dry), make sure that you shake them off well before hanging.  That will lessen the wrinkles, and will mean less time and effort in ironing.
• Cook one big batch of rice for lunch and dinner.  Just heat the viand come dinner time.
• Load large batches of laundry.  Electric consumption is almost the same for large and medium loads, so go for more clothes to wash in one load.
• Skip the spin/dry cycle when you can.  Take advantage of the heat of the sun to dry clothes.
• Paint the bathroom walls and ceiling white.  You won’t need to switch on the light in the bathroom during the day.
• Assign one room where the whole family can do activities individually or together, so you can limit the number of lights, aircon or electric fans in use at one time.
• Let go of that extra set of TV.

There’s a lot more you can do to relinquish unnecessary expenses. And while you’re watching your expenses, I would strongly recommend that you set up a system  for your monitoring.  Create a monthly payment schedule to remind you when payments are due.  And of course, you may also want to use this Excel file.

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