In the 11 years that I’ve been working, I finally got to save a 6-month emergency fund.
In my case, my target was to save six times my monthly salary: should I find myself out of work, I will have six months to find a new job before I panic.
I hope I don’t make any use for it, though. *knocks on wood* Half of this is in UIT funds, which goes against the normal advice on the subject, which is to keep the fund liquid. To me, investing it may or may not be a good idea, depending on the following:
- How badly I would need the cash to be at hand in case of an emergency. In my case, my chosen funds take four days (COB) to settle a redemption order.
- The value of my investment should I need to withdraw it. The last time I had an emergency, I had to sell my stocks at a loss, because I badly needed the money
After weighing these cons, I decided to take the ‘risk’ and invest half of each of my monthly savings, hoping I won’t have to use my emergency fund soon. (The risk hasn’t paid off so far—stocks have been down for most part of Q3 and based on what I’ve read, they likely won’t recover until mid-2016.)
So the next goal is to raise the 50 percent so that my emergency fund is fully liquid—that is, kept at a savings account and easily accessible in its full amount anytime.
Why did it take me this long to save the amount? The short answer is that I’ve only barely managed to stretch my salary. For one, as a single guy with no kid, I am heavily penalized by the BIR even if I have my own huge responsibilities, too. It also pains me to think that due to our poor system, I’m paying the maximum income tax provided by the law, the same amount which is peanuts for CEOs and executives, but which I could really have a lot of use for. Hay. But what’s important is that I finally unlocked this achievement. I deserve a pat on the back! *pats back* Looking back at my financial journey, here’s how I managed to do it.
Aggressive saving. I’ve pegged my savings at 35 percent of my salary. It took me years to get to this point, but since my first job, I’ve worked on the following premises: I pay myself first before anything else; and I budget. I hate having an Excel file to account for all my expenses down to the last peso, so what I do is I give myself an allowance which I can spend on anything, minus bills and utilities. I find this less stressful than having to be anal with receipts and other expenditures.
Of course, one’s savings is dependent on the next point.
Having no debt. I always pay credit card bills in full. If I need to buy big-ticket items and I can’t pay in cash (or it seems wasteful to do so, since I can also let my extra money sit in the UIT fund), I raise 50 percent in cash and pay the rest on a zero-percent installment basis. If I go this route, I make sure I’m able to pay the balance in three months, max. If I can’t meet these criteria, then it simply means I cannot afford to make the purchase.
Understandably, there are loans you need to make in your life that might stretch for many years, such as a car, housing, or business loan. Personally, I’m uncomfortable about these. For example, as a single guy with no domestic partnership legal rights, I think I’m just going to rent for the rest of my life, but we’ll see.
Buying quality items. This sounds antithetical, but I actually prefer paying more—as long I’m assured of the quality*. This applies to everything, from appliances and gadgets to clothes, bags, shoes, and even underwear. The logic is that they’re supposed to last me for years. True enough, it’s been a long time since I’ve had to replace anything because something malfunctioned, got broken or torn, or ‘baconed’! Interestingly, before I got to publish this post, Quartz wrote an article on how the American middle class lost its taste for mindless consumerism:
The financial crisis and its aftermath made middle-class Americans distrust mindless shopping. Instead, a new set of values emerged. More is no longer better. The middle class is more concerned with quality and experience.
*This is also why I prefer Uber even when regular, theoretically cheaper taxis are available.
Splurging once in a while. This is where my personal allowance goes and it’s also based on my behavior: if I go cold turkey on unnecessary spending for say, more than a month, I lose a part of my soul. LOL. But seriously, I don’t like the person I become when I become very OC on spending: I get sad, angry, and very critical of myself and my choices. So since then, I make it a point to indulge myself, whether it’s on travel, art lessons and hobbies, to expensive meals and coffee. Even with aggressive saving, one should still have a life.
But also holding back. Every morning, I ride on the back of a tricycle in my corporate attire, squeezing myself into the tight space with one other person, hunched forward and with my head down because I’m too tall for the roofing. The sun is on to me like grill to a barbecue, and either pollution or body odor violates my circle. On some days, a car would honk and I’d see a friend from high school in his SUV and with his driver.
Every day, I whisper to myself that the money I save with my P20-morning commute is worth it.