Now…it’s a whole different story when you’re living with someone, more so if you have add kids into the mix. I don’t claim to be an expert in relationships and money but I have definitely learned a few things from more than half a decade of being with another person…and handling money in the process.
Here are my top tips for talking about finances with your partner:
1. You’re in this together
While a lot of people (regardless of financial standing) would recommend separating finances and having a prenuptial agreement, I still believe in combining finances both physically and mentally.
Of course, it may be a totally different story if you started out with a lot of money and your partner doesn’t. In our case, both of us started with none and our current financial standing was built (or destroyed) together.
Still, no matter what your financial arrangement is, it’s important that you think of yourself as a team. Whatever you go through as a family is a result of both your decisions (hopefully) and you have to wade through the challenges together. Besides, two heads is always better than one.
And this applies to every issue that goes in your relationship, really.
Recently, I told the partner my feelings about a particular situation (not money-related) and he tried to dismiss it right away. Later that day, he told me he didn’t want to meet whatever I was feeling at that time head on, so he waited out until I was calmer (I didn’t shout or anything, of course) before he reassured me that I had nothing to worry about.
It took me a while to gather the courage to tell him about our credit card issue and thinking about it now, I realized I should have told him much sooner and we’d have been able to remedy it right away. I did have to wait until things were calmer so that he could process the major information I was about to tell him in a logical manner.
(Update: As of writing, we are one month away from finishing our payments for credit card #2 and will soon be tackling credit card #3 – both are already with the collecting agencies, unfortunately.)
3. Set priorities and learn to compromise
I’m pretty much a rebel and don’t always listen to what the partner tells me (lol) even when it comes to finances – and I don’t recommend you do that.
Time and time again, he would tell me to focus on one goal instead of aiming for a thousand impossible goals. I’m still at it but this year, when the collecting agency for one of our credit cards called and negotiated a repayment scheme, I went for it and focused myself on the goal.
To give you a little background: credit card #2 racked up a total of Php 75,000 balance but they offered it at Php 35,000 if I can pay it within the month. Thankfully, the agent spoke my language and it became easier to negotiate so we ended up paying for the same amount in a span of 4 months.
4. Use each other’s strength and weakness
I’d like to say that I’m awesome at making money, which is why the partner and I switched roles and I became the breadwinner of the family. And, now that I have somehow built my virtual assistant business into a higher (and steadier) income level, it made no sense to put him back to the work force.
Admittedly, I do control most of our finances as I am the one who pays all the bills that can be paid online – and I am also the one who makes sure that *most* of our investments/savings are funded.
I do know that the partner is awesome at budgeting and stretching our money so what we usually do is get him to withdraw cash and he budgets it for our groceries and other household needs. Most of the times, I just tell him when our next batch of funds are coming and he takes care of the rest.
Other things we do together:
Keep track of our cash flow. This habit actually started from a Mindanao trip back in 2016. Because we were on the road for 3 weeks, we had to keep close track of our money to make sure that we can afford paying for our food, accommodation, and transportation. The habit stuck with us and we’ve since moved from using spreadsheets to tracking them in YNAB.
Build each other’s credit. Our mortgage is under my name and was taken back when we were still both employed. Since transitioning into freelancing, we’ve gone through a lot of hiccups. Currently, we are rebuilding our credit history by repaying our (1) credit cards which are all under my name (I use our because the bills racked up were used/enjoyed by the whole family), (2) putting bills in each other’s names: house, electric bill and business are under my name; Internet, phone and condo under partner’s name; a car purchase will most likely be under my name, and (3) building our funds: this includes our savings and investment accounts.
Our future financial plans:
We definitely have a lot of plans in mind that it excites and scares me both at the same time. Basically, here it is in a nutshell:
Streamline our finances. We’ve already started by opening a checking account for my business which should flow towards his payroll account and maybe a savings account for me (all in the same bank). And then we’ll be building each other’s savings accounts from the other banks (these are already in place, just needs funding).
Build our credit further. Freelancing makes things complicated for us because of the lack of documents. We’ve addressed this by building my business and having him as an employee. Still, we need to prepare our records and actual finances for when we purchase a car and start paying for the condo mortgage.
Opening credit cards. Hate to admit it but it’s still a helpful tool for when we go full-force in our travels – and also in getting visa to certain countries. We’ll probably start with a secured one and possibly one for the business.
Having separate leisure funds. Since we are still straightening our finances and building our cashflow, much of our money has been allocated to the more important things for the family. We do splurge in things like travel, books and a few lifestyle items but it’s awesome if we can tuck away a certain amount everytime that we can use to build separate savings and spend it separately the way we want it, without the guilt.
If you have other tips on making finance talk easier between you and your spouse (or partner), share them below. We’d love to hear from you!
Why is it important to start calculating and keeping track of your net worth?
No matter what type of journey you decide to embark on, knowing where you currently stand and where you want to go are among the most crucial steps if you want to make forward. After all, you can’t make decisions on your next steps if you have no idea where you are.
Well, you can, but you’d probably be wandering aimlessly, like that scene in Bird Box where they go on a grocery trip…but even then, they had GPS in the car to help them navigate.
what steps your need to make in order to reach your financial goals.
I’ve been religiously monitoring our family net worth since July 2016 and I shamelessly posted about our journey so far in this post.
Money is something many of us are uncomfortable to talk about but let’s break that stigma and bring it to light. Why not start to openly discuss about money and learn from each other’s successes and failures, right?
Now, before you decide to go ahead and follow the family financial road map I’ve laid out for you, you need to make know where you stand first.
Here is how to calculate your net worth:
List down all your assets
Our assets are currently broken down into three categories: cash, paper assets, and physical assets.
Some people do not account real estate as part of their asset, especially if it’s not a rental one, but there are others who do.
In our net worth tracker, I included total assets with and without real estate (home + condo unit) as well as net worth with and without real estate in the computation.
List down all your liabilities
Ahhh…this is the part I personally don’t like to see but we all have to deal with this beast if we want to achieve financial freedom.
Currently, our liabilities are listed down under two categories: debts and debts from physical assets.
credit card debt
personal debt (loaned from family or friends)
Debts from physical assets include:
Mortgage (we have both for the house and condo)
We Filipinos are quite lucky because we don’t have to deal with student loans.
Simply subtract your liabilities from your assets
Now that you have all your numbers, simply subtract your liabilities from your assets.
How did you do?
Ideally, your liabilities should be smaller than your assets.
Otherwise, that means you’re currently broke (haha) and need to work on building your assets!
Ours is currently in the red (negative), if we don’t count our real estate properties as part of our assets.
No matter what your result is, don’t feel too bad about it. The fact that you actually took the first step to calculate your net worth already puts you in the right direction. Now you just have to make sure that you follow through this blog series so you can create better financial habits and achieve financial freedom fast!
We don’t need Mondays or the New Year in order to have permission to start things all over again but, let’s face it, there’s nothing more satisfying than making lists at the start of the week or year, right?
One of the things that really excited me for the New Year was setting goals and, of course, taking a hard look back at the past year.
2018 has been a very good year to us, reaching milestones for our business as well as our family life. And because this is a family finance blog, you can expect this post to be all about money.
Don’t get me wrong, it’s not always about the money – but I love talking about $$$ because they’re a good way to track successes and failures. You can’t go wrong with numbers; math is accurate and precise.
However, you should also take note that whatever I say here may or may not apply to you. Personal finance is still PERSONAL, as its name suggests, and even I do not follow to a T the rules that the gurus and experts tell everyone.
Nevertheless…let’s take a look back at 2018 – and also compare some previous numbers to give you a good look over our journey.
If you want to learn to calculate your own net worth, make sure to read this post.
Some things worth mentioning over the past two years that we’ve been tracking our numbers include:
Transitioning from employee to remote worker to freelancer (end of 2015), then back to remote worker (2016), then to full-time business owner (Oct 2017). In 2018, I reached Php 1 million in gross revenue, with a 70-80% net profit.
Traveling sporadically (3 weeks in Q4 2016, 1 week and 2 weeks in 1st half of 2018, staycations in between).
Moving to our house in June 2017 and giving birth to our second child in July 2017.
Reaching my first Php150k-month ($3k) since starting my business in July 2018. When I started my business, I immediately increased my rates to 4x more and currently charge (Dec 2018) about 8x more than when I started.
Going through the first phase of our home renovation in August 2018.
Purchasing our first investment real estate – a condo – in November 2018.
Starting several savings funds and restarting our insurance policies in 2018.
Bringing up our mutual funds account to Php51k in total invested money in December 2018.
I love making IMPOSSIBLE goals so for 2019, here is our loooong list:
Fixing our business legalities – taxes, government contributions, etc. Also making sure that we are paying maximum contribution to each (useful for loans, retirement and other benefits).
Building our baby emergency fund to around Php50k. And hopefully doubling it by the end of 2019.
Paying off all credit card debts. Since they are sadly now with the collection agency, I’d estimate this to be about Php65k now.
Bringing down our mortgage debt to less than Php1million and down to Php800k by end of 2019.
Paying off Php200k for our condo downpayment by end of 2019.
Getting our car – secondhand or brand new, depending on how our loan application rolls out.
Opening a business checking account starting at Php30k and saving around Php60k-100k for my business by Q2 2019.
Opening PERA accounts of around Php25k each, and mutual funds account for each of our kiddos to correspond to their age by month – around Php84k and Php30k.
Upping our Pagibig MP2 account from Php500 to Php1k monthly contribution each. Possibly opening an SSS Peso Fund at Php1k monthly contribution each, starting at second half of 2019.
Increasing both mutual funds and stocks account to Php100k in VALUE each.
Continue paying insurance premiums (make sure partner’s is updated to current month/year).
Avail of HMO and senior health care (for partner’s mom) by second half of 2019.
Exploring other business and diversifying income: ebooks, e-courses, affiliate marketing, freelancing (personal and agency), dropshipping and e-commerce. Also considering opening two physical businesses – one shared with my family and another one our own – plus encouraging the partner to start trading stocks. We might also venture into real estate and insurance selling. I’m also exploring partnering with a gas station and becoming a co-owner – this will cost Php330k.
Ultimate goal: reach Php1 million in NET WORTH before I turn 30 or before end of 2019.
Of course, we have to keep in mind that we also have goals of getting the house renovated and making sure that we are able to travel every now and then. It’s all about balance.
Ahhh…I have such crazy goals, I’m not even sure how or when I’d have the time to get all this done.
One thing I know for sure though is that I think it’s totally possible as long as we are able to really focus and set our sights on the goal.
What are your impossible goals?
Are you joining us?
Our current goal in 2019 is to achieve Php 1 million in net worth before I turn 30 in October, or before the year ends. It’s a crazy goal and we are only a quarter through the journey.
I’ve always been a huge advocate for getting insurance.
It strengthened even more when I was in the midst of watching One Tree Hill and Brooke got so broke that she begged to get accepted for a job even if it were only to pay for her car’s insurance. It was THAT important to her.
And I realized that too, when I became a mom and was able to save around Php12,000 on maternity-related expenses and around Php24,000 on my daughter’s hospitalization expenses. Considering how little I paid for my HMO (through my former employer), it was a huge bargain!
So, when an agent introduced me to life insurance, there was really no need of convincing. I knew I was going to avail it one way or the other. I wasn’t the breadwinner of the family then and I was just around three months into my new job.
But there I was, signing up for everything. Haha! I had 2 million in coverage and multiple riders in my policy.
My Biggest Mistake
While I knew what life insurance was for, I had no idea what I signed up for. Okay, maybe I did a bit.
My agent probably did a great job at explaining things to me but I was probably on information overload. I signed up for a huge coverage and multiple riders which ended up with me paying Php3,000 per month. At the start, I was probably only earning less than Php20,000 after taxes.
A few months later, I found out that I was pregnant and gave birth to our daughter…and that was when all our priorities shifted.
At Php3,000 per month, I could no longer afford to pay for my policy and although I was the one with the higher income, I also could not NOT get the partner a policy of his own.
After computing our expenses – diapers, formula, bills, and other expenses – there was nothing left.
And so I ended up having to wait for my policy to lapse. Ten months later, my Php30,000 went down the drain…
How to Choose Life Insurance
And that was the time I realized, there are multiple ways to go about shopping for life insurance.
I learned it from countless personal finance blogs and books that I’ve read over the years and I hope to share it with you guys.
Getting a VUL
Different insurance companies offer different kinds of products with various names and benefits. VUL is one of them.
According to Investopedia, VUL (or Variable Universal Life) is a permanent life insurance policy that comes with a savings component. That means that each premium you pay to the company are divided into: your insurance and your investment.
Ultimately though, this type of policy is mainly insurance so while you might get *some* return on investment from it after around 10-15 years, it’s main purpose is to provide protection in case something happens to you. The investment part is just an added benefit but not its main component.
Thus, you also have to keep in mind that in most policies, the first 3-5 years of premium-paying is mostly allocated to the insurance component. After that, most of the premium already goes to the investment component.
I could be fuzzy on the details so make sure to discuss this thoroughly with your insurance agent or financial advisor.
Some of the things I learned along the way is that a VUL policy is best for:
those who don’t want to see their insurance premiums go down the drain (they actually go the same way, only the VUL has a savings component tied to it so you are able to get some chunk of money still)
those who cannot discipline themselves to set aside money for investments
those who cannot be bothered to find out where to invest
those who just want to set it and forget it
Advantages of a VUL policy:
Both insurance and investments get taken care of
There’s money you can withdraw because of the savings component
Your policy can pay for itself if you have enough funds in your account (especially helpful if you miss payments)
The monthly premiums stay the same
Disadvantages of a VUL policy:
You get bigger returns when you invest directly in mutual funds or the stock market
It’s more expensive than the traditional term life insurance
Fortunately, about a year after losing my first VUL, we were able to find another agent who *nearly* helped us get what we wanted, which was a term life insurance policy.
For some reason, we failed in the medical exams, so we ended up with a VUL with zero riders (we know better now; but also we WILL get them added once we have additional funds eventually). Thus, what we paid for in one month for my previous policy was equal to a quarter’s worth of premiums in this new policy.
We were now able to get two policies and also still have a bit more left to invest directly to mutual funds or in the stock market.
Update: My second policy lapsed (again lol) when we transitioned to a one-income freelancing household but I’ve already signed a term life insurance policy via Sun Life’s Sun Safer Life and have paid for it for one year. Yay! Also, my annual premiums for the first five years is only at Php7,850. Double yay!
This means, compared to my first VUL, I’d have saved Php28,150 which I could invest into mutual funds or stock market for retirement or for the kids’ education.
Some of the things I learned along the way is that the BTID approach is best for:
those who already have discipline to set aside money for insurance AND investments
those who want full control of their investments
those who want to periodically reallocate and balance their investment portfolio
Advantages of the BTID approach:
You have lower monthly premiums on your insurance policy
You have a higher earning potential on your investments
You have full control over where your money is invested (or partially, if you go for mutual funds)
Disadvantages of the BTID approach:
Insurance premiums get recalculated every five years – and thus go higher the older you get
You get nothing out of your insurance policy
Your policy could lapse if you miss a payment
You can totally do a BTID approach with Sun Life: check out their income protection plans here and their mutual funds here.
Which one’s for you?
Ultimately, the decision is all up to you.
Whichever approach you decide to go for, always keep in mind that insurance is for your peace of mind and investments is for growing your money.
If you are unsure which path to take, discuss it with your insurance agent or financial advisor – and make sure to talk with a trusted one who aren’t just after the commissions! 😉
One of the biggest reasons I wanted to push a blog that talk about money is because, as a young family, we’ve gone through a whole lot of financial successes and failures and we want to be able to share the journey with you.
Why so? Because really, there are nuggets of gold when you learn from the mistake of others instead of going through everything your way and then realizing 20 years later, that you are in such a huge financial mess. Right? Of course, you still get to make financial mistakes of your own but at least, you eliminate – or prepare yourself – for the biggest ones.
Our family’s story
Our little family started 2012, with me giving birth to our daughter in February 2013. Months prior, I had been in the denial – I was just starting out my corporate career and felt I had so much to accomplish – and, lo and behold, our daughter came as a surprise.
Then came our first financial success: saving up around Php50,000 in cash in just 3 months, in preparation for giving birth.
In the Philippines, childbirth is not *usually* covered by insurance so unless you have those executive plans, enrolled in a hospital’s maternity package, or have a very small hospital bill, everything is covered by Philhealth, you have to prepare paying for it out of pocket. (I had a *regular* HMO plan, was too late to avail of a maternity package and thus, my Philhealth insurance could only cover so much. We ended up paying around the same amount for a private doctor and *privately-priced* hospital facilities.)
But having a baby turned out to be a blessing, because it helped set our priorities right. We learning more about managing money – savings, investments, purchasing a house, and so on. We opened up a mutual funds and stock market account, and also started looking into affordable houses, which we finally started paying for in 2015 (we found one the year before but ran into problems; but that’s for another blog post haha).
We made A LOT of financial mistakes along the way despite reading on a bunch of blogs and books. Thank goodness we learned to put a stop to it right away (but we’re still paying for it argh).
In 2017 came another surprise, which is baby #2, which helped us get the ball rolling on our house (we finally moved) and my business (check out my first year journey here).
Setting Priorities Right
While we are still paying for our mistakes, I have to admit that those things helped bring us where we are right now.
Thankfully, our financial mess is not THAT big – it could have been worse. And, with me still in my late 20s, there’s still plenty of time to make up for the wrong decisions.
Which is why I wanted to share with you a financial road map especially made for new families.
Because really, it’s a whole different situation when you’re planning your finances around another person and a little human (or more).
Keep in mind though that everyone’s financial journey is never the same. It’s called personal finance for a reason. Nevertheless, it’s good to create some guidelines and road maps to keep your goals in check.
The Family Financial Road Map
1. Provide for the basics
There’s no question about this. Once you have a family, you need to prioritize the basics: food, shelter, clothing, basic health and safety.
You can’t forego food and other basic needs – but you can control how much you spend for each of these things.
While you’re at it, make sure that you also calculate your net worth as it will help you know your current financial standing and create goals.
2. Pay for all the bills
This means paying for all your utility bills on time: electricity bills, water bills, phone bills and so on. Doing so will help prevent your financial situation from going haywire.
In some countries, this could even help you maintain a good credit standing – in the Philippines, companies are not that strict although I’ve heard of certain situations where outstanding balances can affect your employment.
If you can get rid of certain bills (eg. gym memberships) or lessen them (eg. electricity and water bills), then that will help you tame your budget.
3. Create a budget
We started tracking our cash flow and net worth in 2016, when we stayed on the road for 21 days with our daughter. Little did we know, it was in preparation for living on our own – because we moved out of our house seven months later!
Tracking our incoming and outgoing money did help us get a bigger picture of our income and expenses, and helped the partner master his grocery budgeting. It also helped me figure out how much we truly needed in order to have a more comfortable lifestyle.
In October 2017, I decided to run a service-based business to increase our household income, because there is only so much you can reduce in your budget.
We’re talking about HMO here, which, if you are employed, is something you no longer have to worry about.
If you have dependents, you might notice that this takes up a slightly bigger chunk of your payroll compared to your single peers, but at least you have the peace of mind knowing that everyone stays protected in case of hospitalization and other medical emergencies.
From personal experience, I was able to save around Php12,000 in personal expenses (related to pregnancy – OB consultations, lab tests, and a 3D echo for my heart, etc) and around Php24,000 for my daughter’s hospital expenses when she was admitted 3 days in the hospital for gastroenteritis.
If you are self-employed like we are now, you may have to find a good company that provides ample coverage within your budget. (I will update you once we find one!)
5. Build your baby emergency fund
I’m following Dave Ramsey’s advice here, to save for a smaller emergency fund before doing anything else, and I’m giving you three-ish options:
Dave says to save $1,000
Since we’re in the Philippines, you save Php50,000 (regardless of current exchange rate)
Or save one month’s worth of expenses
That way, if TRUE EMERGENCIES happen, you have funds that you can use instead of pulling out your credit card, or taking a loan from your family, relatives, friends, banks or loan sharks.
Ideally, your emergency funds should be somewhere liquid and easy to get such as a savings account. If you can get a high-yield savings account, then all the better.
6. Secure life insurance
Filipinos are not believers of life insurance, by nature. You see, it’s something that you pay for regularly but never really get to use (God forbid you have to use it) – but it gives you the peace of mind knowing that your family has funds they can use just in case the worse happens to you.
There are two main ways you can go about purchasing life insurance but regardless, you need to make sure you have this once you have dependents relying upon you and your income.
Confession time: we still have a five-figure consumer debt we need to tackle. It’s something that is already ruining my credit history but also something that we are fully aware of – so we hope to get rid of it ideally by the end of 2018, but realistically, maybe somewhere mid 2019.
Earlier this year, we had already paid off debts we have incurred from borrowing money from friends and we plan to stay away from doing that again (and hopefully, not have to borrow from my parents again hahaha).
However, since I’ve lost access to my credit cards (only had two, really), we’ve realized how powerful cash can be and how possible it is to make all your purchases done through cash. We’ve lived our cash-basis lifestyle for maybe two years now and we hope this will continue until…hopefully forever!
If you have don’t have credit cards, then good for you! Better stay away before it consumes you!
If you do have them, just make sure you are able to pay off the entire balance – and not just the minimum – to prevent yourself from incurring huge fees on interest alone.
8. Save for big purchases
Time to save up for the big purchases!
In the Philippines, you don’t usually need a huge chunk of money to get started on your dream house or car, unless you build them from scratch or buy them second-hand.
With car sales plummeting lately, you might just be able to see zero downpayment cars left and right! (Yikes, but be careful – that means HUGEEEE monthly payments.) For real estate, you usually just need as low as Php10,000 to reserve your slot and then you can start paying for your downpayment the month after and until the next three years, usually.
When we bought our house in 2015, we made zero plans prior. In fact, we paid for both downpayment (equity) and loan (mortgage) starting on the 4th month because we had no idea what we were getting ourselves into.
Thus, a few tips before you take the plunge:
make sure you save up for the downpayment (equity) first – ideally, this should be around 20% of the total contract price for your house and lot or your car
make sure you have emergency funds – in case you lost a job (we transitioned to a one-income freelancing household late 2015), you have some backup funds you can use
shop around for options – ideally, get a house or condo unit that is still in pre-selling mode (AND from a RELIABLE developer) because this is the cheapest that they can go; if buying cars, second-hand is a great option
For the next few steps, you can choose whatever order you like but I would suggest checking out each item the way it is ordered below:
9. Continue building your emergency fund
There are multiple ways that you can compute your emergency fund.
For some, it means saving around 6-12 months’ worth of expenses. Others, they add in multiple expenses such as the most expensive surgery/operation you can avail (or something along these lines).
I suggest going for the former to keep things simple. You also do not want to have a huge chunk of your fortune in your emergency funds alone because you could be missing out in letting your money work for you.
10. Secure long-term health insurance
For those in the sandwich generation like we are, there are two groups of people you need to secure this with: your parents and yourself.
We’ve come to realize that because the partner’s mom isn’t financially secured (we also aren’t, really, and I’m not sure what my parents’ status are as well), any real emergency could topple the still-fragile foundation that we are trying to build. Thus, we have to think about securing a senior citizen and two nearly senior citizens – and also ourselves. Whew. That sounds like such a huge burden.
So far, I’ve only seen Kaiser provide health insurance for seniors although they can be really costly and I’m not quite sure about their policy for pre-existing conditions.
11. Start saving for retirement
You’re never too young to save up for retirement.
Truth be told, we didn’t quite follow this road map – which is why I’m laying it all out here so you learn from our mistakes, and also as a reminder to ourselves so we stay focused on our goals.
We still aren’t clear whether our mutual funds account or our stock market account is for retirement but nevertheless, we will continue to religiously save up money and build our funds there.
I do have one tiny objection here: don’t wait for your retirement to enjoy your money!
Right now, we’re doing our best to put in some fun and leisure while the kids are still young. We don’t want to put off traveling when we’re gray and old and the kids no longer want to join us. Where’s the fun in that?
But definitely, think about the leisure activities you can enjoy during retirement and save up for it!