MINDFUL

By Jay Ledesma

THERE’S no doubt that the past 15 months have prompted many to take a serious look not only at their health status but at their financial standing, as well. The surge in the number of searches and researches on life and medical insurance, investment, and other financial programs over the internet and the growth experienced by the local life insurance industry, were proofs of this growing public interest and appreciation.

When given the chance, who wouldn’t want to experience financial independence and not wait for age 60 or 65 to enjoy retirement? Sadly, not everyone who desires it, achieves it. The challenge is always on setting and acting on the “hows" to achieve and staying on track. 

After the global financial crisis of 2008, when my own job and financial securities were put at risk, I really took a serious look at how we are preparing for life’s risks and uncertainties. Soon after, I came across the FIRE (Financial Independence and Retire Early) movement, a lifestyle movement which promotes extreme savings and investment program to allow one to retire much earlier. This was very popular among the millennials at that time (I wasn’t a part of this generation). Though I did not subscribe to all the “hows" it was promoting, I still gave it serious consideration as it aligns with my personal goals… to become financially independent and be able to retire early. 

In this issue, I will be sharing how this girl is now on FIRE, in the hope that my own personal narratives on this important subject matter may be able to help you achieve your own.   

Set financial goals, both short and long-term, and act on them. Setting one's financial goals is the easiest part.  But having a clear idea of what you will do to achieve it, acting on it, and sticking to it, are entirely different stories. In our case, we made sure that regardless of the size of our income, a percentage was earmarked and allocated for our savings, emergency funds, educational plans, and retirement plans. The right percentage for each depends on your personal needs and wants. During the earlier years, a bigger percentage went to savings, emergency, and educational funds. Later on, it’s heavier on investment and retirement (though as we get older, it's more on lesser-risk portfolios). We only did major projects such as house construction and travels when we were already confident that we have enough funds for our above priorities and we can fund the projects without needing to take out a loan.     

Always pay credit cards in full. Just like most of you, the first time I had my credit card (cc), I was also paying it in installments. But when I computed the interests I was paying, I realized how the credit card companies were making such a huge profit from me. From then on, I only charge to my credit card the amount which I know I can pay in full come due date. Basic to owning a credit card is knowing your own spending habits. I love to shop especially when traveling abroad. I have the tendency to be an impulse buyer too. Knowing this, allowed me to control myself. How? I rarely charge my overseas purchases to my credit card. Since there’s no money out in cc, we sometimes have this false belief that we have not spent as much. The horror and shock will come once you receive the bills. For others, bringing cash is not practical.  But it worked for me. I have a specific budget of cash when we travel. That way, I would know if we are within or spending out of our budget. Plus I don’t have to worry about the currency conversion when it’s pay time (which is usually much higher than the regular conversion). That saved me a few bucks. I still bring my credit card in case of emergencies. But as I become a mature spender, I use my cc more often now as I did before. But still, I pay my bills always in full.     

Take a long-term investment outlook and plans. Coming from my bad experience during the Asian Financial crisis in 1997, when as a newbie investor, I panicked and withdrew some of our investment placements, I learned to view my investments long term. Being clear with my investment goals and timelines, helped me to make more objective and rational decisions and actions when faced with market volatilities.  Instead of panicking and being emotional about the performance of our investment whenever the market drops, we take this as an opportunity to get into the market at a discount.

Our biggest investment win was when the market recovered 2-3 years after the 2008 global financial crisis. When most people were scared and getting out of the market in 2008, we invested. That decision gave us a very good yield. We all had a similar opportunity last year.  Just ask anyone who went into the market at the start of the pandemic in March 2020 and you will be amazed at how their investment has grown since even at this time when the market has not fully recovered. Aside from creating and growing our funds, our investments afforded us some windfalls that we used to finance our major travels and purchases. That’s what we call making our money work for us.

Create regular automatic savings via salary deduction. Sometimes, though our intent is there, we still overlook making our regular savings. Either you got busy or you spent the money on something else. To avoid falling into this trap, I requested our HR to make an automatic deduction from my monthly payroll a specific amount and deposit the same to my mutual fund account. This went on for years without me noticing it anymore. When I had my early retirement in 2017, I was surprised that I had a substantial additional retirement fund from that auto-payroll deduction savings scheme that I created years ago. I know some have created a separate bank account where they also requested their HR Dept to credit to a certain amount from their payroll. Until we have developed the discipline, it’s okay to look for our enablers. Again, the amount is not important.  It’s the consistency that matters.

Live within and even below our means. It’s an everyday temptation to splurge and indulge in things within or beyond one’s means. After all,  we all work very hard to have comfort and convenience in life. We work hard to reward ourselves with simple luxury and indulgence. But these are the same reasons why some people are still not able to save properly even if their income size improved. For these people, a 20% income increase equals a 20% increase in their expense also (for some even higher).

Remember, it’s not how much you earn that matters, it’s how much you’re able to save. My husband and I made sure we have just enough… we live comfortably, our children get the best education, we take our annual family travel, etc… all within and even below what we can afford. This mindset allowed us to have the extra funds to save and invest. Always find a way to bring your expenses down. Being clear with what you really need versus what you want is a big help.  It’s not a mortal sin to give in to your wants once in a while. But always make sure to do it not at the expense of what you really need.  We can actually live life to the fullest with less. That is something we have discovered and experienced.       

The above has helped me achieve the FIRE that I am experiencing now. It may not fully guarantee your own but they may help you develop some healthy habits that can lead you to make your own FIRE.

I proudly say that I was able to retire at the age of 55 and am enjoying my financial independence! This girl is on FIRE… and I’m loving it! Guess what? You can too! 

About the Columnist

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