As 2018 draws to a close, it’s time to leave all regrets and mistakes there and start fresh in 2019. If you want to make better choices with your finances, here are some five money moves to make in 2019.
1. Start an emergency fund.
Before you even consider investing, please make sure to first start an emergency fund. An emergency fund is always useful in these situations. It must be liquid and ideally, cash.
Where: Place the cash in a high-yield passbook account with a reputable and stable bank. Even if you have an existing bank account, it never hurts to shop around interest rates. Be aware of dormancy charges. Banks charge horrendous amounts if your account has no movement for a set period of time. I say this from a previous bad experience with a certain bank.
You may also choose to take this a step further and place a large portion of your EF in a short-term certificate of time deposit (CD). CD terms vary from 30 days, 6 months, 1 to 5 years. The longer the term, the higher the interest rate. As this money is for emergencies, you will want something short term.
How much: I subscribe to Suze Orman’s cautious 12 months of expenses. Note that I say expenses and not your monthly salary. Take your fixed monthly expenses and multiply that by 12 and that is your ideal EF.
Replenish. If you somehow used up your emergency fund in an emergency this 2018, 2019 is the time to replenish it! Speed up your EF allocation for the first few months of 2019 until you fill it up again. Take a pause on your online shopping and prioritize your emergency fund.
2. Uninstall that online shopping app.
Online shopping can be fun and all. It certainly allows Pinoys access to products that are not sold in this part of the world. The rare times that I buy online, I use an internet browser and pay cash on delivery. I rarely pay online as I have internet hacking paranoia.
Downloading shopping apps may be useful for the discount code but please uninstall after you’ve used it up! UNINSTALL. These shopping apps are convenient and all but they certainly trigger that urge to buy stuff that you don’t even need. Those major online sales are the worst as the volume of products being sold usually results to sellers’ subpar delivery and products arriving in horrible, fake or even damaged condition.
3. Invest – bonds, equities, forex, real estate, etc.
Now that you’re done with your online shopping habit and have established a 12-month EF, you may start investing. Dip your toes in slowly. Start with what you are familiar with. If you are unfamiliar with anything, read and educate yourself. The internet is free!
This 2019, start small. Start with one type of investment. And no, bitcoins are not an investment. Try bonds, shares of stock (those are the only type of equities we have here in the Philippines anyway), foreign currency, and real estate. Read more about them here.
4. Even if you have no plans of retiring at 40, start planning and living like you are.
If you’re a millenial like me, retirement feels like it is decades away. This 2019, start living like you will retire by 40. Allocate some money every month for retirement. Sock it away in your SSS or a private retirement account like a PERA account. Retirement accounts are tax free and should be placed in equities given their long-term nature. You will want to put them somewhere where they can grow.
5. Tag a “fun” bank account for those fabulous plans like an overseas trip, shopping spree, or whatever.
Get over the thought that finance is just for boring losers! It can be fun and you may even save up for that overseas trip or shopping spree or whatever big ticket item you want to get! Tag a bank account for fun money where you can save up for that upcoming big ticket item.
The key is to get that thing in cash. Don’t charge it to your credit card, don’t borrow money. Wait. If there isn’t enough money to get it in cash, please be patient and wait. Good things come to those who wait!
Fun money presupposes of course, that you have set up your EF, invested, and hold a retirement account.
What money moves will you be making in 2019?