I have just finished watching the video of Bo Sanchez’ teaching “Control Your Cash”. I believe it’s true that cause of the most financial promblems is people fail to control their cash. I too find it very hard to control my cash or cash flow 1. I, too, find it difficult to control my cash, specially that I am barely earning enough (at least that’s what I think for now)
In this talk he shared four steps to control or manage your cash. These are:
Stop Borrowing - perhaps it is true that one of the common cause of being poor is, people borrow too much. People tend to borrow money to buy things they want to have now and did not consider how that debt is paid. I have known some people who earns at least PHP 20,000.00 a month for their gross salary but recieves only about 30% of that (or even less) because of loan deductions. Some even gave their ATM cards to private lending companies as colateral. Where the lending company will withdraw your salary and after deducting your monthly amortization, will give to you your salary or the remainder of it.Buying on Installment Basis or Through Credit Cards. Another pitfall that most people fall into is buying items on installment bases. Items like, appliances, furnitures, and vehicles are more attractive when buying them on installment basis. Question is do you need them? Can you really afford the monthly amortization? I, for one, fell into this trap when I bought my motorbike a few months ago. I chose a Honda CB-110, with a monthly amortization of PHP2,700.00 (with a rebate of PHP200.00 if I pay on time). At the time, me and my wife spends at least PHP 100.00 a day for our fare. So, paying PHP 2,500.00 or PHP 2,700.00 is justified. I spend PHP150-PHP200.00 for the gasoline. I have PHP 400.00 a month gasoline allowance from my company. However, there are other models that I could have chosen that have less monthly amortization. Ture, I needed the motorbike to save money for my transportation, but I could have chosen one that could have saved me a few more hundred pesos.
Protect your assets – buy term insurance or term life insurance is a form of life insurance that provides coverage for a specific period of time and invest. Bo, did not elaborate this one, and I think I need to do some research on this on my own.
Live on 70% of your income – I think most people would find this one very difficult to do. Yes, it is difficult but not impossible. I think the very first step in order to do this is to list down where your money goes, every little things that you buy. In my experience, it’s those little things that I buy almost every day are the most difficult to track and sometimes that’s where a considerable portion of my income goes.
Next step is, determine the unnecessary expenses and stop spending your money on them. Number one would be the vices (e.g., cigarrette, liquor, lotto, etc..). I don’t have these vices, except perhaps for my craving for sodas and coffee. I can’t stop my coffee drinking entirely though, since I always get migraine attacks when I don’t get enough in a day, but perhaps I can minimize it. Softdrinks, I think I stop this one.
I actually tried doing this several times, and I admit I can’t seem to
sustain it though. However, I still believe that I can do it, I just have make the right choices. (More on this soon)
Set aside the 30% of your income for four special Funds. These are:
Freedom Fund – pay your debts in advance (6.66%) – This seems to be a very good advice. Again, you might find this very difficult to do (I do too), then again, this is already part of the 30% you have set aside. One benefit of this is, after a few months, you have saved enough to for another month of payment for your debt. For example: Let’s say you are saving PHP 1,500.00 a month. 6.66% of that is PHP100.00. Let’s say you are paying PHP1,000.00 a month for your debt. So on the tenth month, you have another PHP1,000.00 to pay in advance.
Emergency Fund – (6.66%) this is about 3 – to six months of your salary for emergency. When my Mom was diagnosed with colon cancer (may she rest in peace), me and my brothers had difficulties in dealing with the expenses. None of us had any emergency funds. Though one of my brothers (there are four of us) had a business that earns just enough for Mom’s maintenance and her caregivers. If it were not for my Mom’s siblings, we could have afforded the hospital bills and other expenses. Only if I have set aside some amount, no matter how little, that could have helped.
Wealth Fund – (6.67%) – This is the most interesting fund.This is for your future! Once invested properly, this wealth fund would help you grow your income. What is important is, learn first where you will invest this wealth fund. I know at least one way and I’ll share the link before I close this post
Tight Fund -10 % – Of course, all our blessing came from God and it is only right to give back to Him a portion of that. In my experience though, the amount you give to the tight fund, always comes back in a number of folds.
1- Cash Flow – The in and out of your money, simply put, your income and expenses.
You can download the Power Talk Video: Control Your Cash – By Bo Sanchez if you are a member of the Truly Rich Club. As a member, you will access to his teachings and videos on how to manage your finances and how to invest on the stock market. Plus, you will also recieve regular stock updates and advices.