By Jay Ledesma

The 'Now and Tomorrow' fund

September 8, 2020, 4:44 pm

THOUGH the number of COVID cases continues to rise, it’s good to note that the economy is starting to recover in most parts of the country. While many are still challenged to make both ends meet, we also see people who have resumed work or resumed their business operations. But since we’re still under the “new normal”, staying afloat is a top concern for many. 
Two important things that we need to do to stay afloat and thrive during this crisis: find more sources of income and budget wisely!
While the pandemic resulted in job losses, it also opened a number of income opportunities to the creative and resourceful ones. My FB feed is flooded with all kinds of online sellers. Name it, they offer and sell it! From food to grocery items, clothing, plants, pets, paintings, webinars, consultations, etc.
And since most are in a work from home setup, a lot had the chance to do this online selling as a sideline and earn themselves an extra income.
As one friend put it, “basta lang may diskarte, mabuhay tayo!” And I totally agree! People will always need something to use and buy. We just need to know what that something is.
But having an income is just one side of the equation. What we do with what we earn is equally critical!
Allow me to share how I have been doing it. Though some were done before the pandemic, I believe the principle still applies today.
Question #1: Where should my money go?
I usually divide our income into two funds which I call the NOW FUND and the  TOMORROW FUND.
The NOW fund takes care of recurring expenses such as utility bills, food, clothing, mortgage, maintenance medicines, transportation allowance, schooling, and church donation.
The NOW fund also includes our R&R spends such as weekend getaways, movies, salon, spa, and derma visits and my therapeutic shopping.
On the other hand, the TOMORROW fund is for my savings and investments. Note the order, savings, and investment. It is not advisable to go direct to investing without having your savings first.
Savings is the money which you can take out on a per need basis or as the need arises. We save for our children’s tuition fees next year, for that HK family vacation, for a brand new cellphone, for the required downpayment for our dream car or house, etc. The Emergency savings fund is for the unforeseen or unexpected expenses such as sickness in the family, calamities, or job loss, or pandemic.
My Investments, on the other hand, are for my long term money requirements. They are in the form of stocks, mutual funds, insurance, and real estate.
This is the money used for the college education of our children, for those grand family vacations, and for major purchases. This is also my retirement money! 
Question #2: How much should I allocate for each fund?
There are varying opinions on this question. In my case, I followed the 70-30 rule. That means 70% of our income goes to the NOW fund and 30% to the TOMORROW fund.
For our Emergency Fund, we make sure that at any point, we have at least 6-12 months' worth of expenses.
Question #3: How do I budget and build both my NOW and TOMORROW Fund?
Following the formula “income minus savings equals expense”, Every payday, I would immediately set aside the 30% for our TOMORROW fund.
Now, setting aside the 30% TOMORROW fund on a regular basis is usually a big challenge since most follow the formula “income minus expense equals savings”. So more often than not, very little, if not none is left for the TOMORROW fund.
Strict self-discipline is required!
To help me build my TOMORROW fund, I have the bank for my short term savings while for the mid and long term, I use other investment instruments. I bought a number of insurance products for our children’s education and for our retirement as it required a payment/investment schedule and did not give me access to the funds until it’s maturity. Also, I enrolled in the auto salary deduction and transfer facility of our company where a specific amount is deducted from my salary and invested into a mutual fund. I had to do this because I still didn’t have the discipline when I started setting up our TOMORROW Fund. 
Don’t think that because it’s pandemic you cannot build your TOMORROW fund. Review where your NOW fund is going  and you’ll realize that you can have the money for your TOMORROW fund. 
Don’t think that you need to have a big income or salary to do this. I started with a small amount. What’s good is that we can now easily access savings and investment tools in the market where you can start even for as low as P50 (GCash Invest Money feature). It's not really the amount, It’s the discipline and consistency that matter.
The bulk of our income (70%) goes to the NOW fund. Priority should be on the non-negotiable fixed expenses such as amortization, tuition fees (if you’re paying monthly), rentals, and food. I include food in this list because I can scrimp on other items but not on food. But still, I believe we should have a fixed budget for this.
What’s left of the 70% can now be budgeted for the other variable expenses or those which we can control and reduce such as our R&R expenses, utilities, etc. Am sure you have read and used a number of “Tipid Tips” especially during this pandemic so I am not going to touch on those anymore.
One red flag though that we have to be mindful of. The current stay home arrangement exposes us to many unnecessary NOW expenses. Those online sales are very tempting, that if you don’t control, you may just find yourself adding more and more items to your cart and paying for those you don’t really need. How many lipsticks can you really use during this time? Do you really have use for that dress or bag or shoes now that you’re working from home?
It’s okay to be a “plantita” as it’s a good hobby and good for the environment. But unless you’ll turn them into a business, let’s not overdo it just to be “in” as we may just end up with wasted money on pots. Alis, do we really need both cable and Netflix? Or can we have just one for now?
What if instead of spending on these non-essential NOW expenses, we use the money to build our TOMORROW fund?
Times are challenging as it is! Not a few are in a very tight situation nowadays because, during the “good times” when income was there, they put everything on the NOW fund. 
Things would have been much easier if only they have their TOMORROW fund at their disposal. 
Don’t fret. Remember, it’s never too late to budget wisely your NOW to build your TOMORROW!


About the Columnist

Image of Jay Ledesma

Ms. Jay Ledesma writes about local tourism and business bits that delve on investments and insurance.