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On Emergency Investing..

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I basically agree with  Janet Kidd Stewart when she quoted me in Physicians and Practices about Emergency Investing.

Remo-tito Aguilar, an orthopedic surgeon in his third year of practice in the Philippines who writes a blog about his own and other physicians’ finances, says he was one of those debt-averse professionals. “I paid my debts before I even realized I needed an emergency fund,” he says.

I am more debt averse than inclined to start with an emergency fund. A habit that maybe good on the outside but could be potentially disastrous when  financial emergencies arises. “I might have a higher credit score, but I don’t have money for my emergency situation”. Lucky for me,

we all need an emergency

none of these emergencies came during that credit payment honeymoon period and thus I emerged with little financial scratch here and there.

Creating the blog as a way to educate himself on financial issues, Aguilar has since built cash reserves to the six-month level. It sometimes shrinks to three to four months, which he says he’s comfortable with because he’s single with no dependents and feels confident in his ability to stay employed.

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But most of our readers out there maybe on a different situation with me. Generally, it still wise to set aside a fixed amount for your emergency fund aside from “debt servicing”. In fact, most financial advisers say we should. Maintaining a sustainable, balanced deb servicing strategy and emergency fund allocation  protects us from extreme situations- a lower credit index because of poor debt servicing and a bankrupt emergency fund. Both of these two extreme situations are disastrous.

Again, the question of how much debt servicing and emergency fund investing  one should allocate, is a very personal one and is dependent on your goals. Personally, I prefer emergency funds in strict cash accounts  (PDIC insured of course) for ease of withdrawal or on liquid funds. I haven’t tried any of those certificate of deposits.

How would you handle emergency fund and debt servicing in your case? Leave a comment below and I’ll be glad to listen to your ideas.

Why I’m Living Comfortably with Frugality

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“Because you’ve got a stable job and lots of money.“

This is the answer I commonly get whenever someone ask me why I still live ‘comfortably” even during a personal financial crisis.
The reality is, I just live way below my means. A no fancy, uber disciplined frugal living.

I need not expound on this trait but if you’re just observant on the lifestyle of the true rich and wealthy people, you’ll probably be surprised on how many of them actually live way below their means! Of course they can (with their means)  buy those  luxury cars, live in sprawling high end subdivisions and all, but actually how many of them do buy those cars? or those that live extravagantly? If we’re talking about the real wealthy people, quite rarely.

The ones we actually see doing all those splurges of extravagant living are the wealthy emulators who show their luxurious living as a millionaire status symbol. I don’t have any problems with their chosen lifestyle, but I’ve long decided it’s not the lifestyle that I wanted for myself.

Frugal living is sometimes a pain in the ass, but it’s the ass that will saved me in dire moments. On the contrary they actually fuel the lifestyle I wanted for myself. Simple living. Who wouldn’t drool on that brand new car? Or that new gadget that just went off the window? Or that “happy-happy” drinking spree with  friends? I do. But even if I can afford them (meaning with my means I can get them) chances are, their sustainability and real benefits for me isn’t that convincing, save for that monthly amortizations and hangovers.

How? Discipline plays a big part in this. It is a habit I have to learn that from way before. Frugality is a common trait among our Ilocano countryman, and I certainly admired and learned that habit from them. But I didn’t stop at just saving for the sake of saving. I have to seriously set my financial priorities and fulfill my basic needs first. Whatever is left should go to saving for future emergencies and investments. What’s bloody of course is deciding  what’s basic and what’s not or what’s your needs are and which are just wants. That is something personal I think and one has to take a hard look on his financial status to lay down his priorities. There’s no escaping that process before you even begin frugal living.

Now despite the financial crisis this world is facing, I’m quite “comfortable” I can live through it. I don’t need so much to cover for my basic needs. If  I am really serious about what’s my basic needs are, there’s not much to spend really. Seriously,I’m quite surprised how I live comfortably on a bare minimum income. And I’m enjoying it!