by Jet Villamor
I would like to share with you some financial ideals that we should be looking at. This will serve as a guidepost and/or anchor which we should refer to every time we make a personal financial decision. These are rules of thumb that we should always keep in mind, like when we monitor our ideal weight, ideal blood pressure, ideal blood sugar or ideal relationship. To be financially healthy, we need to set these high goals for a financially free future.
ON DEBT: Should be less than 20% of your annual take home pay. Try to consolidate all your debts, including all the money you owe, credit card balances, car loan and any other forms of credit. The total of which should not exceed 20% of your annual take home pay, lest you find trouble redeeming yourself from it. A 20% deep hole is just enough depth for easy redemption. One of the most popular saying on this is, “when you’re in a deep hole, stop digging.” – because when you continue taking out debts after over 20% the harder it will be to come out of it.
ON HOME RENT OR MORTGAGE: 30% of the monthly take home pay is the maximum practical amount you should be spending for home rent or mortgage. More than this would not be practical anymore.
ON SAVINGS: Savings should be set on at least 10% of your monthly take-home pay each month. One of the best ways of doing it is for us to condition ourselves that the savings that we are doing is like the fixed expenses that we spend monthly. Meaning, in our budget we should allocate the 10% savings portion even before spending anything.
If it is very possible to save more than 10% by all means you should do it.
(For questions, comments, suggestions and reactions email @ jvvillamor@insular.com.ph)
