Money Mat­ters

Ex­pert ad­vice on how to man­age your fi­nances—now

Good Housekeeping (Philippines) - - News - JOHN PA­TRICK SARMIENTO is a cer­ti­fied Reg­is­tered Fi­nan­cial Plan­ner, a keynote speaker, and a stock mar­ket/forex trader and in­vestor. He has eight years of ex­pe­ri­ence in the Philip­pine fi­nan­cial in­dus­try.

QI’ve ac­cu­mu­lated more debt than I can re­pay with my cur­rent salary and ex­penses. Should I get a loan to pay it off?

It would be a good idea to talk to your cred­i­tors first and present a plan for how you can pay off your ex­ist­ing debt. Ne­go­ti­ate if you can pay it off for a fixed pe­riod of time, then see if the cred­i­tors, based on their as­sess­ment, can waive fur­ther in­ter­est charges given your cur­rent sit­u­a­tion. Get­ting an­other loan might just place you in a cy­cle of debt, which you should avoid. While it could con­sol­i­date all your debt, the fact that you are in­ca­pable of re­pay­ing debt with your cur­rent salary and ex­penses will re­main a prob­lem.

QHow should I save for my child’s col­lege ed­u­ca­tion? Are there fi­nan­cial prod­ucts I can con­sider?

Con­sider how long you need to save up for it. If you are look­ing at more than five years, you can con­sider get­ting into ag­gres­sive or semi-ag­gres­sive forms of in­vest­ments, like eq­ui­ties or bal­anced funds, and then switch­ing to con­ser­va­tive forms of in­vest­ment when the tar­get year gets closer. On the other hand, if you have less than five years to save, fixed in­come in­stru­ments could be the bet­ter op­tion to avoid the higher risk for loss.

QI use my credit card to cover ex­penses that my salary can’t cover. How do I break this cy­cle?

Ac­cu­mu­lat­ing debt is a sign that you are liv­ing be­yond your means. There are two ways to break this cy­cle: You need to ei­ther cut down on ex­penses or in­crease your in­come to fit your life­style. Track your daily ex­penses and cut down on the un­nec­es­sary items. Also, look at your monthly bills and see if you can find a way to re­duce costs.

You can also find a way to in­crease your in­come through a bet­ter-pay­ing job or by be­com­ing a part-time en­tre­pre­neur, for in­stance, so that you can fund your de­sired life­style.

QI used to have a mu­tual fund in­vest­ment but I with­drew it af­ter I needed the money for an emer­gency. How do I get back into sav­ing, in­vest­ing, and main­tain­ing it this time?

Re­visit your monthly bud­get, and start al­lo­cat­ing a fixed por­tion of your in­come for sav­ings. Pri­or­i­tize build­ing an emer­gency fund, which is worth three to six times your monthly ex­penses. Once that’s es­tab­lished, you can get back into in­vest­ing without hav­ing to worry about pulling out your in­vest­ments in case of an emer­gency. Hav­ing an emer­gency fund gives you solid fi­nan­cial ground, which pro­tects the in­vest­ment for your long-term goals in case of short-term cri­sis.

Don’t know how to pay off your debt? Try to ne­go­ti­ate a pay­ment plan with your cred­i­tor.

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