March 30, 2009

1/3 in 2/3 more

Posted in business, debt, extra income at 1:20 pm by kimsan23

This has been one of the hardest times, really!  Saving money has become difficult specially now that I’m paying for a lot more things than before.  One great thing going on for me is the possibility of really growing my business.  Tomorrow, I’ll be doing my “costing” for my new venture.  I’m gonna start with some small businesses first them see if I have the capacity to grow it a bit more.

My family once owned a large scale dimsum business.  This was closed in the 1980’s to give way to a new venture (which eventually failed).  I am determined to revive a part of that dimsum business to see if it can still survive despite the times.  Some of my family is trying to do their version but the problem is, they’ re not doing so well in terms of pricing and really providing great value to customers.  I intend to change that.  So, i’m doing my own thing.  Some of you guys, if you’re in Makati tomorrow will see me delivering dimsum samples to the steel “jolly jeeps” in Legaspi Village.  Wish me luck!!

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In other news, I have officially wiped out my credit card debt!  This gives me an extra 5k per month to put in the bank!

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April 30, 2008

Credit Card Balance Transfers

Posted in debt at 9:53 pm by kimsan23

I once was offered a unique opportunity by a bank.  They don’t do this anymore now I think because nowadays they prefer that the interest rate be based the full balances after each payment cycle.  This was a smashing good deal for me about 8 years ago!

There was a time when I closed one of my credit cards and transferred the balance to another card.  Instead of paying 2.5% interest every month, I enrolled in a balance transfer program where interest rate was 1.5% per month for 6 months (fixed rate installement).  The amount was 10k.  The balance transfer rate allowed me to pay a pre-computed installment of P1,666.67 + P25 (interest) = 1,691.67 per month.  In total, I had to pay an interest rate of P150.  My 10k debt would have been charged like this if I had continued paying 3k per month at 2.5% monthly interest.

Month 1

  • P10,000 – P3,000 (1st payment) = P7,000
  • P7,000 + P175 (2.5% of 7k) = P7,175 – payable the next month

Month 2

  • P7,175 – P3,000 (2nd payment) = P4,175
  • P4,175 + P104.38 (2.5% of 4,175) = P4,279.38 – payable next month

Month 3

  • P4,279.38 – P3,000 (3rd payment) = P1,279.38
  • P1,239.38 + P30.98 = P1,270.36

Month 4

  • P1,270.36 ->total payable

Total interest paid: P175 + P104.38 + P30.98 = P310.36

That’s a difference of P160.36

In retrospect, I am glad I did that balance transfer.  It did save me a bit of money.  Still, if you should ever plan to do a balance transfer, try to compute it first and see if you end up paying more in interest or less.  Some people I’ve spoken with ended up paying more in interest because of the time stretch.  That actually means that the monthly amount  they were paying at a higher rate was way over the minimum, enough to slash off a big chunk of the debt.  For example, if I has been able to pay 5k per month on a 10k debt, this is how much I would have paid in interest:

Month 1

  • P10,000 – P5,000 (1st payment) = P5,000
  • P5,000 + P125 (2.5% interest) = P5,125 payable next month

Month 2

  • P5,125 – P5000 (2nd payment) = P125

At this point, you can just pay the P125 excess of make it roll into the next month.

Month 3

  • P125 + P1.25 = P126.25 – Total interest paid

The difference is small but it’s loose change at the end of the day.

Now, this is just an example of what happened when I did my one and only balance transfer.  You need to check the following things with the bank before you compute.

  1. Formula for computation. The formula above is the exact formula I was given.  But different banks have different ones.  Some base the interest on total amount due after every payment, just like a regular card, only with a smaller interest and a shorter time frame.
  2. Payment plans and options. You need to know and plan your budget for a fixed installment like this.
  3. Penalties. If you miss a payment what happens?  How will it be computed?
  4. Cancellation. What happens when you cancel?  Is there a service fee?

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Looking to compare credit cards?  Click here!

April 16, 2008

Impulse Buying

Posted in debt, obstacles at 4:29 am by kimsan23

“Today I bought a 5MP Polaroid Camera at 1 peso shy of 5k…

To be perfectly honest, this is one of the worst bad habits I have in my book. I am terrible when it comes to controlling myself. It’s so effortless really; the way I could just whip out my credit card and buy something just because my credit limit allows me to do so. What kills me is really what happens next when I realize that I had bought something without alloting resources or planning for it. I’ve learned through time that I can only impulse-buy if I really do have the money for it — on hand. Most of the time though it gets very tempting to buy something you know you want at the very moment you see it. But you see, if you’re on a budget, do you really want to jeopardize your spending plan? What can you do when you feel the strong urge to buy something? Here’s my two cents worth.

If it’s something you can actually afford but don’t need, leave it at the display window and walk around the area a bit. See if you can shake off that intense “I-want-you” feeling. If it rubs off within an hour, you’re fine. If not, then I guess we all know what’s next.

However, if you actually are falling in love with an uber-expensive item — think.  Why not give yourself time to really assess whether you really want it or not. If you do not have the money for it but you want it, make it a planned expense.  For that, you’ll need to allot money in intervals. Give yourself a chance to save for it first. Once you have the money, decide if you still want it or not. If you want it, get it since it has just become part of your actual budget. If you don’t, then you end up with a hefty amount for savings!

Always pay with money you have. If you wanna use your credit card, try to see if you can get a no-interest scheme payment plan or pay in full when the card bill comes. This will help eliminate finance charges, not  mention give you rewards points on your card (only if your card has a gimmick like that).

One way I discipline myself is to first fill out my financial template.  Second, put money in separate labelled envelopes that match the item entries in my finance template, And lastly, see if I can allot any extra money I might have to a fund for the item that I want.

Always think well before deciding to buy something you want. Ask yourself some guide questions:

1. Do you need it?
2. What is it’s benefit to you?
3. How long will the benefit last?
4. What other needs can you fill with the amount you’d like to spend?

Of course, the hardest is part is answering your own questions where you will, most of the time see, that whatever you want to buy has great potential of hurting your on-hand cash as well as your budget.

Give youself time to decide. You know what they say: “If it’s meant to be, it’s meant for me.”

…thank god it was a planned expense!”

April 9, 2008

Getting the Best Loans

Posted in debt, loaning at 2:47 pm by kimsan23

Loaning is something I would try as a last resort. As much as possible, I really want to be debt free. From experience, I have tried loaning and I was okay in paying and in case I’d ever need the money again, I would probably look to the best loaning agencies around.

My two cents on each loaning source:

1. FAMILY: I’m not too crazy about loaning from family members unless we’re really really close and I know I won’t get tied into something I might regret someday. Money is the root of most family wars, be careful when using this avenue. Whenever I get approached by a family member for a loan, if I do give it — I consider it gone.

2. FRIENDS: If you have REAL friends in high places – they would not mind too much unless they’re sensitive about money. Make sure everything is clear when you borrow from friends. Offer to sign an IOU form with them so that they feel secure about your intentions of paying. Get a lawyer to help you with papers. Believe me, your friends will feel better about things being in black and white.

3. LOAN SHARKS (“5-6” and the like): As much as possible, you don’t want to do this. Loans sharks ask for 5-6 – that means the interest is pegged at 20% of the total amount loaned. Many of these loan sharks are shady characters, they demand payment within a very small amount of time and some of them could very well harass you if you’re unable to pay. And by harassment, we’re not talking collection phone calls and credit statements, we’re talking unwelcome house visits and threats. However, they’re also the easiest to hide from — if you can afford to go and hide among some tribe in Africa.

4. BANKS: Bank rates vary depending on the type of loan. What you need to look at here are interest rates. Annual rates, monthly rates — make sure the interest rate is clear to you and that it was explained well by the person processing your loan. The good thing about bank loans is that they can approve high-amount loans, much higher than government agencies and credit card companies.

5. CREDIT CARDS: Many credit card companies now offer personal loans that could be carried into your card bill. This is dangerous. Most credit cards charge an interest rate of 1.5-2% per month. Whereas, if you loan from a government agency, you’d only be charged about 12% interest per year. When you add your card interest all together, it could add up to about 16-24% interest per year. However, you must admit that credit cards and banks are more efficient in keeping track of payment records. They’re normally up-to-date and updated in real time. Aside from that, credit cards also have very good customer service, most of them are 24/7. The approval time is also much faster than banks or government agencies.

6: GOVERNMENT: If you loan from a government agency, you’re sure to pay the lowest interest rates in the market and at the same time, you help the government too (well, that is, if you want to). If you have GSIS or SSS, I suggest you take out a small loan, not to spend it or use it but just to make sure you’re the one using your benefit. I’ve heard stories about people who try to take out an SS loan only to find out that someone else took out a loan in their name! Talk about cheating! To be practical about it though, government is on of the best choices when considering to take out small loans. The only catch is, the process is too slow for some people who prefer quick approvals. But money wise, this is the best choice.

I have tried taking out a loan from a credit card company at a discounted rate (they gave me that because of my good credit standing). That worked for me but only because I had no other debts. Think well before you borrow money from anyone! If your expenses can wait, wait.

April 8, 2008

Dealing with Debt

Posted in debt, obstacles at 10:40 am by kimsan23

The truth is, AVOID DEBT.  If you can, don’t borrow money.

However, if upon reading this, you have already accumulated a debt…read on.

I once had this huge debt of 70K (on my credit cards) — I was making 24K per month, most of which went to rent (5.5K), food (5K), phone (1k) gas (4K), parking (2.5K), laundry (1K), weekend fund (2K) and the debt.  I hardly had money for clothes or shoes — even for home stuff.  I was clearly deep in my knees in debt.  Every month, I had to pay a minimum balance of 3K — that was pretty much was was left of my salary.

I had to do something to help myself!  What were the steps I took?

1. Kept my job! If you’re in debt and you don’t have a job– GET ONE.  You need a source of income!

2. Analyzed my budget.  I asked myself these questions.

– What are the things I can do without?
– What lifestyle changes must I make to lessen my expenditures?

3. Came up with answers.

– “I can do without a car for a while.” I just used public transport. And instead of spending 220 pesos per day on transportation including parking fees, I ended up spending just 100!
– I had to wake up earlier and walk a bit more but it was worth it! I slashed my transportation expenses by more than half which gave me a savings of 120 pesos per day which translated into 2.4K per month.  

– I also slashed by food allowance by 30%. I decided to bring home-cooked meals to work instead of buying at work which just cleaned up the daily allowance I gave myself.

– I made my cellphone bill go down too by 200-300 pesos per month by minimizing calls and texts.

4. Looked for other sources of income. No, I didn’t gamble but I did a lot of things (refer to my post on Adding To Your Income).

5. While all this paying off the debt was happening, I actually was able to save a miniscule 200 pesos per month.

6. I also put all the bonus money I received from work into paying the debt.

7. I even called the bank to ask for a special installment plan…and yes, they gave me one.

With all these things– I was able to clean up my entire debt in 8 months. 40K from all the payments I made, and the rest was from the bonus money I got from work.

It was a lot of work but there is no feeling greater than that sigh of relief from being DEBT FREE.

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