e-mail advice from Mamita
July 1, 2002 | 12:00am
Two weeks ago, Juanita Abad turned 21 and graduated from college. Abad received presents from her family and friends, which were more grand than usual, and an e-mail from her US-based grandmother. Here are excerpts of the e-mail from Abad’s "Mamita".
I know you’re impatient with advice. You’ve said it often enough that it sounds like nagging. But what I’m going to say to you will make sense now that you’re about to earn your own money. I call them my commandments towards financial freedom. They number five (a nice odd number for good luck) and half of the 10 the nuns taught you in religion class. You’ve probably seen your mama practice these same rules. Hopefully, she hasn’t broken more than one or two.
Commandment No. 1: Save. By now, your mama and daddy would have given you the passbook they opened a few days after you were born. (They didn’t open it the day you were born because your mama was very busy and your daddy was terribly worried about your mama). I’m sure you must have been very excited about the amount involved. Buy something pretty for yourself but keep most of the money where it is.
When you get a job, add to the amount – regularly. Set aside a certain amount of money for savings every month. Five to 10 percent of your take home pay is a good savings rate. If you want to buy something special, set aside more so you will be able to afford it after so many months.
Commandment no. 2: Budget. Although your take-home pay will be larger than your allowance – I’m assuming your mama and daddy have stopped your allowance after your graduation – you will now have to pay for all your expenses outside of food and lodging. This means you, not your mama and especially not your daddy, will pay for transportation going to and from your place of work, your clothes, your occasional night out with the girls and your manicure. (The exception is when a man asks you out on a date. Unless you’ve become more liberal since the last time I saw you, the Filipino male – may their kind increase! – still picks up the tab on a date).
As an adult, it will be shameless to ask your mama or daddy to help subsidize your lifestyle. After all, they already are not charging you for your room or your meals at home. (It may even be a nice gesture on your part if you offer to pay for your share of the electric bill when you use the air-con in your room).
Commandment no. 3: Borrow only what you can afford to repay. With your first job will probably come your first credit card. Again, don’t get carried away. Every time that you charge against your credit card, you are, in effect, borrowing from the credit card company. This means paying the amount you borrow plus interest a month or two later.
Pay – at least the minimum amount – on time to avoid penalties. You don’t want to be in the blacklist of credit card companies, many of which are owned by commercial banks (with whom you might want to eventually do business with, either for a personal loan to buy a car or a house or for a business loan).
Commandment no. 4: Invest. The money you save and the money you invest are two different things. Both are extra money after you’ve met your monthly expenses. You can dip into the money you save for emergencies or for unexpected bills. The money you invest is tied up for a certain period of time. To preterminate or to liquidate before the time is right means you lose money, either in unearned interest or in a lower than expected selling price. Think of the interest involved. The interest on your savings is normally lower than the return on your investment.
Commandment no. 5: Ask questions and investigate before you act. In anything that has to do with your money, ask questions so you can make the right decisions. This is part of doing your homework. (Yes, homework continues after graduation). You can ask mama or daddy and friends for advice but, at the end of the day, only you can make the final decision on how your money will be used. Don’t be intimidated by technical words. Ask what they mean. If you’re unsure how a particular product or service will help you financially, ask and ask again until you understand the implications.
I know that your mama and daddy have tried to instill some good financial habits in you and your sisters during your growing up years. Hopefully, you’ve also gotten some pointers by watching your parents use their money wisely so they have been able to provide you and your sisters a good and comfortable life.
When you get down to it, that’s what financial planning is all about.
I know you’re impatient with advice. You’ve said it often enough that it sounds like nagging. But what I’m going to say to you will make sense now that you’re about to earn your own money. I call them my commandments towards financial freedom. They number five (a nice odd number for good luck) and half of the 10 the nuns taught you in religion class. You’ve probably seen your mama practice these same rules. Hopefully, she hasn’t broken more than one or two.
Commandment No. 1: Save. By now, your mama and daddy would have given you the passbook they opened a few days after you were born. (They didn’t open it the day you were born because your mama was very busy and your daddy was terribly worried about your mama). I’m sure you must have been very excited about the amount involved. Buy something pretty for yourself but keep most of the money where it is.
When you get a job, add to the amount – regularly. Set aside a certain amount of money for savings every month. Five to 10 percent of your take home pay is a good savings rate. If you want to buy something special, set aside more so you will be able to afford it after so many months.
Commandment no. 2: Budget. Although your take-home pay will be larger than your allowance – I’m assuming your mama and daddy have stopped your allowance after your graduation – you will now have to pay for all your expenses outside of food and lodging. This means you, not your mama and especially not your daddy, will pay for transportation going to and from your place of work, your clothes, your occasional night out with the girls and your manicure. (The exception is when a man asks you out on a date. Unless you’ve become more liberal since the last time I saw you, the Filipino male – may their kind increase! – still picks up the tab on a date).
As an adult, it will be shameless to ask your mama or daddy to help subsidize your lifestyle. After all, they already are not charging you for your room or your meals at home. (It may even be a nice gesture on your part if you offer to pay for your share of the electric bill when you use the air-con in your room).
Commandment no. 3: Borrow only what you can afford to repay. With your first job will probably come your first credit card. Again, don’t get carried away. Every time that you charge against your credit card, you are, in effect, borrowing from the credit card company. This means paying the amount you borrow plus interest a month or two later.
Pay – at least the minimum amount – on time to avoid penalties. You don’t want to be in the blacklist of credit card companies, many of which are owned by commercial banks (with whom you might want to eventually do business with, either for a personal loan to buy a car or a house or for a business loan).
Commandment no. 4: Invest. The money you save and the money you invest are two different things. Both are extra money after you’ve met your monthly expenses. You can dip into the money you save for emergencies or for unexpected bills. The money you invest is tied up for a certain period of time. To preterminate or to liquidate before the time is right means you lose money, either in unearned interest or in a lower than expected selling price. Think of the interest involved. The interest on your savings is normally lower than the return on your investment.
Commandment no. 5: Ask questions and investigate before you act. In anything that has to do with your money, ask questions so you can make the right decisions. This is part of doing your homework. (Yes, homework continues after graduation). You can ask mama or daddy and friends for advice but, at the end of the day, only you can make the final decision on how your money will be used. Don’t be intimidated by technical words. Ask what they mean. If you’re unsure how a particular product or service will help you financially, ask and ask again until you understand the implications.
I know that your mama and daddy have tried to instill some good financial habits in you and your sisters during your growing up years. Hopefully, you’ve also gotten some pointers by watching your parents use their money wisely so they have been able to provide you and your sisters a good and comfortable life.
When you get down to it, that’s what financial planning is all about.
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