Tuesday, April 24, 2018

Time Deposits ~ Review and Our Take



Today is the maturity of our first bank peso time deposit as a couple. It has been locked for 5 years with 3.5% interest and exempted of  withholding tax. We didn't actually have second thoughts of withdrawing the full amount of P59,389.45. Our P50,000 has earned a whooping P9,389.45 in 5 long years. :)

To give you a background, it was the money we have earned on our wedding day. You probably have an idea why we are so clingy to it. Yes, the earning was a miniature compared to having it invested in the higher risk investment. However, at that time, we are still too afraid to test the waters with both our feet. Thinking that we would eventually lost it. More so, our knowledge on handling money and personal finance was limited. 5 years seems too long to keep the money, at that time, but we dove into it nonetheless. As we go along, we have learn that of the same amount, there are better ways to earn  greater than just putting it in the bank. But like, anyone else, we made mistakes and continue to try to be better.

These bank time deposits are basically for conservative investors, where you wanted to keep the capital and earn small amount ranging from 1 to 3.5% annually. It is one of the safest form of 'keeping' your money. However, with the current inflation rate, our money is losing its value over time. Of course, we do not want that to happen.

If you still wanted to have this type of 'investment', you can check each banks to determine which give the highest interest rate for a certain period of time. Also, look for those with tax exemption. Remember to read the papers.

I am pretty sure, we won't do this anymore in the future, unless for the Emergency Funds. In a shorter period of time.

Take note that IN the emergency fund, there should be an amount which is readily accessible. We all know, that savings account alone is barely earning. Mostly, it has 0.25% less 20% of withholding tax. Yet, we really need it to be liquid.

Next to savings account, you can always tier it with time deposits which has only a month lock in or two. Yes, there are banks which offer this. Eastwest Bank is an example. They have terms ranging from 30, 60, 90, 180, 360 days, up to 5 years.

The problem with having to tier it, is monitoring. Tedious. But, of course, the bank can just roll it over on the next month, if you do not want to be bothered going to the bank. This will still serve its purpose as Emergency Fund.

Why? For sure, the amount you have put in the savings account as an emergency fund covers at least 3 months of your living expenses. The standard, well, there is really no standard when it comes to Emergency Fund, but more often, the book will tell you it should be equal to 6 months worth of expenditures. There are some, who goes up to the extent of one year. By the time, your liquid money was exhausted, your time deposits which was lock in for 1 or 2 month/s can now readily be withdrawn without any pre termination fee. Sounds good, right?

This may work to some. To others, it won't. Different strokes for different folks. Find strategies which works for you. Don't give up if it is difficult at first. Continue working on it until it is already part of your system. And don't forget to continue educating yourself.

For now, we have put the amount in our joint savings account and waiting for the next opportunity to invest it. Maybe, on a corporate bonds, an RTB, or on a Cooperative which we have been studying since 3rd quarter of 2017. I'll keep you posted. :)

Thursday, April 5, 2018

Don't Forget To Have Cheat Days

Our first quarter of the year, saw us with lots of spending. Literally.

January. My birthday month.

February. Bonding with my brother and her family and bringing my family to Tagaytay for the first time. We don't usually go out of town so this was a treat in over a long period of time. No regret anyway.

March. Step up ceremony of my little girl from Nursery to Kinder. Well, the spending in this month was unexpected. I'll probably blog about it separately because right now I am still in cloud 9.

The good thing all through out these, was that I received a good amount of windfall at the end of February, which has covered the expenses and left the savings untouched. Thank God for all these abundance.

Anyway, we have been debt free since November, but having that mindset has somehow clouded my judgment these early months of the year. This actually is, bringing me back to the old self of having-money-enough-to-spend. I have to set up reminders to myself for this, 'hey, if I continue doing this, I might end up in debt again by the end of the year'.

Holding myself was difficult even though I have managed for a long time to somehow live frugally as I can. I think, the idea of being penny pinching for such a long time has taken a toll on me and my spender-natural-self is kicking in.

I just hope that I would be better again in our finances this second quarter.

Just like any subject or journey we embarked, there will be this time, when you have to let loose. I think, that I missed that when I was starting up. I was so fire up in achieving something big, that while I am travelling I forgot to give in to my cravings or in diet program - the cheat days.

But then, these are the lessons I am about to learn while working on those dreams. Yes, I have read about all these but experiencing it personally is way different. They would say that all questions pops up when you are already on it. I guessed, I belong to that group of people. And I need to develop that trait, that when I am presented with an idea, I have already put myself on that shoe before it even started.

It's a long way to go.

There are still a lot to learn. I should start with refreshing myself on why I have chosen to work on my finances back in 2014. For now, let me reflect again. :)