PAY YOURSELF FIRST

(FROM A WEEKEND NOTE, THE EDITOR'S LETTER IN STYLE WEEKEND, A LIFESTYLE MAGAZINE PUBLISHED EVERY FRIDAY IN MANILA BULLETIN, 30 MAY 2008)

One late afternoon at the office, we had an enlightening visit from Joyce Chua, VP, retail branch head at HSBC in Quezon City. It’s quite empowering to have some expert guide you through some simple steps to determine your net worth and help you increase it over the years via sound investment that is tailor-fit to your particular financial circumstances, which include your risk attitude.

BLURB
Don’t put all your eggs in one basket. —Miguel de Cervantes

Well, c’est la vie! Apparently, risk plays a big part in the equation that spells your financial freedom or lack thereof. Personally, I used to find it so frustrating that you go to the bank for financial advice, but at every turn it’s up to you to go this way (returns are high, but so are the risk) or that (returns are low, but so are the risk) and you end up just putting all your eggs in one basket, most often a regular savings account that yields no more than two percent interest per annum.

Still, it’s always a good idea to save some (for a rainy day), knowing that in life it’s not summer through and through and there’s always a season for rain and even storms. But then, in the world of grownups, where money is all-important, not only for survival but for the quality of life, the “piggy bank” idea that our elders instilled in us when we were growing up just doesn’t cut it. The idea really is to get your money out there to grow, the more exposed to the risk of drastic fluctuations, such as in the stock market, the more likely it will lead you to abundance, that is if you survive the ups and downs. Ancient wisdom does give credit to falling as the opportunity to rise again, doesn’t it?

In her very charming, not-as-stiff-as-a-banker’s manner, Joyce seems to point out that the best way to go is to diversify, although the word diversify still sounds as Greek to me as portfolio, bonds, and stocks when used in the context of money. In fact, HSBC is offering this advice even to young people. In its drive to encourage saving up for the future among the youth, it has recently launched the product AutoSaver, which is supposed to put you in control of how much you save, even if—and especially when—“you can’t help spending.” I don’t really know how it works, but it appears to be a less intimidating way to start getting more aggressive with your dream of securing a bright future for yourself, since it earns three percent per annum on peso accounts. All you need is a commitment to save an amount of your choice every month, which can be as low as P1,000.

In these times of inflation, where basic necessities like rice and fuel are taking up more and more of our monthly income, P1,000 a month might seem too much to commit to for a long-term investment, but Joyce challenges us to look at it another way. “We have the tendency to look at our expenses first and whatever is left we save up,” she said. “But since you worked so hard for the money, the ideal way is to pay yourself first and then whatever is left you budget for your monthly expenses.”
Easier said than done, but the young HSBC VP shrugged it off, “If you look at your expenses carefully, you’ll realize you’re spending quite a fortune on unnecessary little things, like coffee or cigarettes or taxi fares.” True, if I were to pay myself for my hard work every month, I’d definitely set aside more than P1,000 a month.

And here’s where Joyce gets the opportunity to push her diversification agenda, saying that one’s savings should be divided among different products that offer different yields, from a regular savings account, so you have liquid cash to obtain in case of emergencies, to time deposits, all the way to bond funds and stocks. It’s not easy if you have no savings whatsoever at the moment, but then nothing is easy. Again we turn to ancient wisdom. Like any great journey of a thousand miles or so, it takes one small step—and a lot of patience—to get on the road to millions.

OK, there’s no way you can open a savings account with less than P5,000, but don’t burst your bubble just yet because there’s always the piggy bank to turn to in the meantime. Ancient wisdom does have all the answers, doesn’t it?

A
post me at aapatawaran@yahoo.com.