MANILA, Philippines - Everyone goes through difficulties and hard times in life. Because we do not want to think of them at all, we usually do not plan for them until they come and then we realize, it's too late.
Although it is not in our culture to think of these bad times, it is but practical, even helpful, to plan for them when we are still in control of circumstances.
While no one can really say when these events will come your way, what you can be sure of, however, is that you will encounter one of these moments in your life. You may never be fully ready for these, you can at least, prepare one aspect that you can control—the financial aspect.
Here are some ways to help you prepare for these proverbial rainy days:
Set aside an amount for savings regularly.
Instead of saving what is left of your money, put money into your savings before you start spending your salary. This ensures that you will continuously put money into your savings. If you simply save what is left from your regular income, you run the risk of having no money left over for savings at the end of a period. This may initially be difficult, but once you’ve made a habit out of this, it will become easier. If you get your salary through the bank, find out if you can work out an arrangement with the bank to automatically transfer a preset amount to another account specifically earmarked for your savings.
Create “pots” for savings.
We save for several reasons – for a planned vacation or a gadget sometime in the next six months, a dream wedding in the next two years, a house in five years. Most of the time, we have different timelines for achieving these. Delineate which part of your savings will go towards these goals, and even for long-term, medium-term, short-term and emergency needs. Create as many “pots” as you need according to your priorities.
Identify what is “a rainy day”.
When you have some money stashed away, it is easy to use it up for various reasons and call all these “emergencies”. For example, you may find yourself digging into your emergency funds to buy something that you have always wanted when it goes on sale – say the computer of your dreams. Before this situation even arises, identify what an emergency situation or a rainy day is, and stick to that definition when faced with a purchase decision. Most define “emergency” to include only those concerns that are of great importance or consequence, pertaining to safety, health, and basic needs.
Make your emergency fund grow.
You can make your rainy day fund grow by putting it in low risk, liquid instruments such as money market or time deposits that you can access anytime. Try to look for those investments that do not impose penalties for early termination. Also make sure that you know the process for withdrawing the funds from these accounts when the situation arises. Similarly, you may wish to look at instruments where you can separately put your long-term savings funds.
Pre-identify your other fund sources in case of an emergency.
Besides your savings, try to think of other sources of funds that you can tap when emergency situations arise. These may include credit cards, personal credit lines, office loans, and the like. Knowing all these things in advance will help you think and act quickly when the time comes.
Prepare a plan for loved ones to access these emergency funds. You can never really tell if you will not be able to access your emergency funds personally. This is why it is important for these funds to be accessible (but safe). You can write instructions that your loved ones can find in this eventuality, or take someone into your confidence.
Grow Your Money is an editorial partnership between ABS-CBNnews.com and Citi Philippines to promote financial education and provide helpful information to Filipinos on how to better manage their personal finances.
Visit www.citibank.com.ph for more information.