Personal finance for Yuppies

By Randell Tiongson on April 10th, 2013

When should one be serious about finance? The earlier, the better. When you understand about time and investing, you will really want to start being money smart from the day that you get your first paycheck (or your profit) right? The reality is, young people often start being financially astute much later than they should — and I’m speaking from personal experience. I really have a few regrets of my youth (seems so long ago), the only ones I can think of would mostly relate to financial issues — not saving as much, borrowing too much and not investing enough.

Here’s a very helpful blog written by a good friend of mine, Jesi Bondoc. Jog, as we fondly call him, is not only a Registered Financial Planner (proud teacher I am), he is also a certified yuppie himself. When I see young people like Jog becoming more and more financially enabled, I am hopeful that the Pinoys will be financially at peace sooner than later.

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PERSONAL FINANCE FOR YUPPIES

Jesi Bondoc, RFP

I had the privilege to speak before a handful of young professionals last month in the financial wellness week of a Telco company. It seems that more and more companies nowadays realize the importance of personal financial management for their employees’ professional development.

During the course of our workshop, we have identified several key behaviors in order to enhance employees’ income to create their own financial pipeline. It is my hope that every young professional embrace these behaviors and benefit from them.

1. Always begin with the END in mind. The journey towards financial freedom begins with a solid financial goal. A financial dream may sound similar with a financial goal but they’re not. Financial goals serve as your road map in achieving your financial desires. Your financial goal should be specific, can be quantified and should have a deadline.

2. Be comfortable with money. According to the famous writer Oscar Wilde, “the only people who think more about money than the rich are the poor”. The way you view money will greatly affect how much or how less of it you’ll have. Too much attachment to money is the reason why many people struggle to make money. Once you’re attached to something, you grow emotional about it and the more emotional you are, the less control you have. Detachment is a major reason why rich people get richer. They don’t care so much – they’re not desperate. If you don’t have money, you need to be relaxed enough to know you’re going to get it. When you have it, you need to be comfortable enough to keep some of it – and know there’s more to come. Being comfortable with money doesn’t mean that you recklessly spend every peso you earn and pray that the Lord will bless you with some more. No! Being comfortable with money simply means that you know exactly what to do once you have it.

3. Beware of the “Income Trap”. As young professionals, it easy to get caught with the idea of increasing your income will equate in improving your lifestyle. Not necessarily. Most of the time the higher your income goes up the higher the probability of ending up in a financial mess because your expenses will eventually catch up if you do not understand how to manage your spending wisely. What matters is not how much income you receive but how much surplus is left from it. Start implementing a spending plan to keep tabs on your cash outflow. Effective spending plans are great tools in managing the way you spend your money. It will help you to form smart spending habits that will eventually lead in reaching your financial goals. Spending plans should not be restrictive and difficult in nature. They should be simple, fun and comfortable to follow. You just have to allocate more portions of your spending to things that really matters to you.

4. Pay yourself first. This simply means save first before paying your bills and other discretionary expenses. It sounds simple yet many of us still struggle in embracing the need to set aside a portion of our income for our savings before spending it elsewhere. Set up an automatic savings program where a portion of your monthly income is transferred automatically to an investment or bank savings account dedicated in building your nest egg for the future.

5. Learn how the rich play the game of money. The only difference of a rich person from a poor person is the asset column on their respective balance sheets. The rich buy assets while the poor are accumulating liabilities like credit card debt, car loan, home loan, etc. To create your own financial pipeline that can augment your employment income, you need to learn how to buy assets that can generate more income for you. Investing in paper assets like stocks, mutual funds or UITFs are simple ways to start improving your asset column. Paper assets generally require lesser time to manage compared to other investment instruments making them a great investment tool for busy young professionals.

 6. Giving back. There’s truth to the saying that if you want something, give it away! It may sound insane to others but it is true that through giving you’ll get more. In Hong Kong, I saw fishermen attaching a small fish to their hooks to catch more fish. Farmers give away seeds to the soil to get more seeds. Try slapping someone and you’ll get a slap on the face in return! Same with money, if you want more money try giving some of yours through tithing, donations or adopting a scholar.

 

Jesi Bondoc is a Registered Financial Planner and Certified Investment Solicitor. He is Jesi Bondoccurrently the Director of My Wealth MD and Partners, Inc. specializing in investment advisory and oversight. He also conducts wealth planning seminars and workshops for various corporations in the Philippines. You can reach him at [email protected] or [email protected] and for more info about Registered Financial Planner, please visit www.rfp.ph or email [email protected]

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7 thoughts on “Personal finance for Yuppies”

  • Great advice, specially number#1.

    It’s hard to save without knowing what it’s for, and it’s very easy to spend money that you don’t know you will need. But of course, it’s pointless to just accumulate without reaping the benefits. A goal is really important.

  • I definitely agree with #6.

    This is one of the most powerful ways to attract more money.

    By giving away (at least 10% of your GROSS), you will end up having more.

    I know it defies logic, but just go ahead and do it.

    Then, be amazed 🙂

  • It’s true, you’re only young once. However, it’s not an excuse to be financially irresponsible. If you make the right financial decisions, you can still spoil yourself and enjoy finally making money – instead of just having student loans to live off!

  • I often work with financially successful young clients who build a financial plan that looks quite rosy. Their incomes are high, their expenses are modest and retirement at age 50 looks quite probable. That said, the wealth effect tends to change their spending patterns, and therefore, their road to financial independence becomes steeper. Suddenly, an early retirement isn’t so likely. In practice, few people do retire when they’re 50 – the wealth effect is to blame.

  • 3. Beware of the “Income Trap”. As young professionals, it easy to get caught with the idea of increasing your income will equate in improving your lifestyle. Not necessarily. Most of the time the higher your income goes up the higher the probability of ending up in a financial mess because your expenses will eventually catch up if you do not understand how to manage your spending wisely. What matters is not how much income you receive but how much surplus is left from it. Start implementing a spending plan to keep tabs on your cash outflow. Effective spending plans are great tools in managing the way you spend your money. It will help you to form smart spending habits that will eventually lead in reaching your financial goals. Spending plans should not be restrictive and difficult in nature. They should be simple, fun and comfortable to follow. You just have to allocate more portions of your spending to things that really matters to you.

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Personal finance for Yuppies