This post is simple. My goal is to give myself and the readers of Frugal Pinoy the chance to be completely honest with ourselves about our money. While I’m generally doing ok, there are some aspects of my financial life that still need improvement.

Let’s take the time to review this questionnaire. You don’t have to write your answers in the comments. In fact, I just recommend that you print it out and answer it in your private journal or a piece of paper. As for me, I’ll do my best to disclose what I can below, without sacrificing my privacy too much.

Without further ado, let’s get honest, shall we:

Finances

1. How much monthly income do you have minus taxes? Apart from your salary, include other side income streams such as businesses, allowance, etc. [FP's note: My income is ok, but I want to earn more.]

2. What is the exact amount of money you spent last month? Including utilities, debt repayment – everything. [FP's note: All my expenses are in a spreadsheet, so I only have to open it to answer this question.]

3. When you subtract your answer to question #2 from your answer to question #1, do you get a positive or a negative number? If it’s a negative number, you are obviously living beyond your means.  [FP's note: Positive! But if I include savings, obviously the answer is zero, since I "spend" every centavo.]

4. If you don’t have an answer to #2, how come you don’t know how much you spend? Too busy? Not sure how to track your money? Overwhelmed at the thought?

5. How much debt do you have? Credit card debt, loans, borrowed money from friends and family. [FP's note: No debt.]

6. If you suddenly lost your job and other sources of income, how long would you survive without resorting to debt or receiving money from relatives/friends? This points to your emergency fund, if you have one. [FP's note: Personally, my family and I could go on for over 6 months, even longer if I tap into my savings outside of my emergency fund.]

7. What’s your definition of being wealthy/rich? It could be a specific amount, a feeling, a lifestyle, etc. Usually, though the answer doesn’t lie in a specific amount, because it’s not the money per se that we want, it’s the experiences and things it can buy.

8. Do you think you have what it takes to be rich? Why or why not?

9. If you want to be rich, what steps have you taken to reach that goal? What additional steps do you need to take?

10. What large expenses will you have within the next 10 years? For those in their 20s and 30s, it could be a wedding, kids, travel, a new home, starting a business, etc. [FP's note: For me it's a house, travel, and kids.]

11. Are you financially prepared to handle your listed expenses from #9? True, you can take out loans to pay for many of these large expenses, but consider this question with the thought that you shouldn’t incur additional debt. [FP's note: Yes, I'm on track with my saving goals.]

12. Do you have any investments? Not just limited to stocks. May include businesses, sources of passive income, bonds, real estate (intended for rental or selling), etc. [FP's note: I have a few investments, but would like to be more aggressive.]

13. How do you make financial decisions? Do you do your own research? Rely on advice from experts? Or do you just go with your heart? [FP's note: A little bit of all three. But the most important factor for me is to gain as much informational advantage as I can.]

14. Do you tithe regularly? Apart from contributing to causes you care about, volunteering your time and giving donations gives you a feeling of abundance. [FP's note: I donate to causes, but want to do more volunteer work.]

15. Are you part of the 10% of Filipinos who save up for retirement, or are you part of the other 90% who don’t? [FP's note: I'm part of the 10%.]

Work and Employment

16. Why are you working at your current job? Apart from the paycheck, what is your motivation for getting up each day and going to the office? [FP's note: I love it, that's why.]

17. If you really like/love your job, are there ways you can become more productive at work? Frugality with your time is equally important. [FP's note: Working on this every single day. It's an ongoing battle. Some days I win.]

18. If you really dislike your job, what is forcing you to stay? I feel sad when I see highly educated, competent employees rant on and on about how much they hate their job.

19. If your job is your only source of income, have you ever thought of creating more income streams? This may include businesses, side raket as a freelancer, garage sales, investments that pay dividends, etc. If you’ve considered these streams of income, have you taken steps to get more involved in them? [FP's note: I've got multiple income streams, but not as many as I'd like.]

20. Have you ever asked for a raise? For some reason, most corporate workers I know are too shy to ask for a raise. I suppose that given the current economy, it might seem like an inappropriate time. Still, you have to consider it if you have a good track record. Have you brought new clients to your company? Did you save them any money? [FP's note: I raised my rates in the past year or two.]

21. Are you aware of all the benefits offered by your employer and do you take full advantage of them? Even your dependents might be eligible to use your benefits. [FP's note: No employers, so no benefits. I have to take care of this myself.]

Family Life

22. Do you and your family have clear “rules” about money? This is especially important if you’re married or if you plan to get married. Will your money and assets be combined or will you keep them separate? Do you talk about saving and spending? [FP's note: My partner and I are completely open to each other about money.]

23. Have you prepared a will? Who gets your assets when you die? Do you have the paperwork to support this? What is the chance of your will being contested? [FP's note: Working on this. I want it done with a professional so it will be hard to contest.]

24. Do you have a living trust? This means that if you ever become incapacitated, there is a designated person who will handle your affairs in the manner you’ve instructed. [FP's note: Working on this.]

25. What are you teaching your kids about money? Children learn more by your actions rather than your words. What financial values are you indirectly teaching them? What values are you directly teaching them?

Spending Habits

26. How do you pay for big purchases? Through cash, debit card, or credit card? [FP's note: Cash.]

27. Do you pay your rent, utilities, and other bills on time every time? [FP's note: I'm on time 98%. Sometimes I forget the phone bill. Sometimes the phone bill doesn't arrive!]

28. How long do you wait until you decide to buy an expensive item you want but don’t really need? Do you buy it as you want it, wait for a month or so, or save up for it and *then* buy it? [FP's note: I plan for it based on my disposable income.]

29. How much research do you do for your purchases worth more than P5,000? Do you look at online reviews and compare prices? [FP's note: I research when I can, but gadgets are my partner's forte so I trust her with those decisions even if the gadget is for me.]

30. Are you making an effort to lessen your cost of living? You don’t have to sacrifice too much or start a diet of lugaw. But it helps to save money where you can, so you can channel it to the things you do care about. [FP's note: Of course I do this. I don't have an expensive vehicle because I don't care about it so much, but I care about the quality of my food. And when I travel I choose cheap accommodations because I prefer to extend my stay for a few days rather than have aircon and a complimentary breakfast.]

Image by gmarcelo from sxc.hu

People say that money can’t buy happiness. Is this the truth or just a meaningless saying? When I think about this more, I realize not having enough money for your needs can be a source of stress. If you just got laid off, for example, how can you be happy if you spend sleepless nights worrying about where to get your kids’ tuition? Isn’t the lack of money a typical reason why some couples fight? Or if you work at a job you hate just for the paycheck, won’t you be more miserable compared to someone who has enough money to invest in a business they are passionate about? True, you can borrow the cash you need from friends and relatives, but that tends to put a strain on your relationships.

I suppose money can buy some amount of happiness in the sense that you won’t have to feel stressed or worried about the basics. Here’s what some psychologists found out about the matter:

People with more money tend to be happier than those with less – but only up to a point. That is the conclusion of psychologists Ed Diener at the University of Illinois at Urbana-Champaign, and Martin Seligman of the University of Pennsylvania, Philadelphia, who have reviewed numerous studies looking at the psychological effects of wealth. They report that money’s impact on happiness suffers from diminishing returns: once you have enough for food and shelter, more cash doesn’t bring much extra joy.
Source: “Why money messes with your mind” NewScientist.com

While money can’t buy happiness, it can give you the security and opportunities you need for pursuing the things, relationships, and experiences that make you happy.

In my experience, this is true because having enough money for your necessities allows you to spend your time and energy on the other things that do make you happy. But once you have enough for food, rent, and the bills, acquiring more money doesn’t necessarily mean you’ll be happier. After you’ve made yourself financially secure, true happiness and joy is something that you have to create for yourself, after all.

So if I were to rewrite the saying for accuracy, it’d be: Money can buy security, but more money can’t buy happiness.

Here’s another interesting fact from the study: if you have some extra money to spend on fun things, paying for experiences rather than material things can bring more pleasure.

The researchers found that people reported “experiential purchases”, such as trips to the theatre or travel, as bringing them more happiness than material purchases such as clothes. A concrete purchase may have cost more and lasted longer but a good experience brought more pleasure.
Source: “Why money messes with your mind” NewScientist.com

I guess this means that if you do end up with some extra money that you can spend for personal rewards, you can maximize the happiness it gives you by spending it on a trip rather than an expensive watch.

What can you say about the study? Do you think it reflects your personal experience with money and happiness?

Image by ctr from sxc.hu

Did you know that whenever you’re receiving advice from an “expert” (real or otherwise), it’s likely that you’ve turned off your own ability to make decisions?

According to a recent study, research participants were asked to choose between receiving a sure amount of money or gambling on a riskier, yet higher paying lottery. Scans showed that the participants were activating the brain circuits that weighed risk vs. reward.

But, when an “expert” (actually a computer program) offered his advice, those brain circuits showed no activity. This means that when faced with seemingly expert opinion, our natural tendency is to stop weighing the decision ourselves.

“Most average people have this tendency to turn off their own capacity for making judgments when an expert comes into the picture,” says Gregory Berns, a neuroeconomist at Emory University in Atlanta.
Source: “Brain quirk could help explain financial crisis”, NewScientist.com

While I don’t think that this is solely to blame for the financial crisis, it explains why some people would make risky decisions without thinking twice about it.

So how do we prevent ourselves from relying too much on experts and making blind financial decisions? We need to do the research. In a previous post, I talked about how I only invest in things I understand well. If I don’t understand something yet I want to invest in it, I do the legwork and conduct research from multiple sources. I try to gain an above-average understanding about it. True, this limits the amount of things I can invest in, but at least I know what I’m doing and I don’t lose my money. Or my head.

With that said, I’d like to remind everyone that although I give advice here at Frugal Pinoy, I’ve always been an advocate of doing your own research. If you go back and read my previous posts, I always phrase my advice this way “…this is a personal choice for me, but do what’s right for you…” or “it depends on the situation”. I do this because I know that we all have different habits, priorities, and needs.

Don’t listen to anyone’s advice blindly – even mine. Because you should be the prime expert of your own finances.

Image by Sophie from sxc.hu

“Live within your means” is one of the first rules of personal finance. If you think about it, this is common sense. Still, most people forget this and spend more than what they earn, getting themselves into financial trouble.

Not sure if you’re living beyond your means? Then read on to find out if you have any of the following 6 symptoms:

You don’t know how much you spend each month. If you can’t answer the question “How much are your monthly expenses?” then now’s the best time to compute it and find out. Guessing isn’t allowed. You need to know the ballpark figure for sure.

Why is this important? So you can compare it with your income and know for sure that you’re spending less than what you earn.

You’re dependent on your credit card. Whenever money’s tight, you find yourself using your credit card and just paying for those expenses after your next paycheck arrives. Usually, your credit card bill is more expensive than you thought, too. Because of that, it’s possible that you’re also afraid of opening your bill each month.

You regularly dip into your savings, if you have savings at all.Your income isn’t enough so you have to pay for some purchases with your savings.

This used to be one of my mistakes. I had “savings” but I didn’t know what they were for, I was just saving up money to be spent later. This means that whenever extra expenses came around, I would spend my savings on them whether they were needs or wants.

Your savings need to have a purpose. Are they for your emergency fund? Retirement? A new house? Without that purpose, you’ll be taking money from your savings indiscriminately.

Speaking of savings, you’re saving up less than 5% of your income on retirement or emergencies. Saving more is especially important if you want to maintain your lifestyle during times when your income is lower, you’ve lost a job, or you’re ready for retirement.

You live from paycheck to paycheck. There was a time when I would eagerly await my next paycheck – because I’d already run out of money before it arrived. This is a very stressful way to live.

You need to be confident enough about your spending habits to know that you can wait a bit longer for that next paycheck. You can only feel this way if you know for sure that you’re spending much less than what you earn.

You use new loans to pay off existing loans. It may be common for people to borrow money to pay off other loans, but it’s a clear symptom of living beyond your means. Think about it for a second – getting into more debt to pay for other debts. Not really a sign of financial health.

Have you ever experienced any of these symptoms? What have you done about them?

Image by Steve Woods

Today I found this great video by Ron Davis, whose personal development blog, Distinctions For Life, contains great advice on living better.

I thought I’d share this video entitled “You Don’t Really Want Money”, mostly because it points out several things I believe in:

•  That when people want money, they don’t really want the money per se, rather, they want what they think the money will bring.
• You don’t necessarily need more money to get what you want.

You can play the video below:

At the end of the video, Ron tells us to ask ourselves the following questions:

• Why do you want money?
• How will you know when you have enough money?
• What picture appears in your head when you think about having enough money?
• Can you have that moment or feeling without money?

Think about them.

I recently landed on The Global Rich List website.  It’s a fascinating site, because you input your annual income and the site tells you how rich you are compared to the rest of the world.

Apparently, I’m in the top13.17% richest in the world:

If the idea of wealth comparison and materialism makes you sick, don’t worry.  The Global Rich List is not about boasting about your wealth.  In fact, the point of the site is to show you how lucky you are compared to the rest of the world.  It makes you feel rich enough to realize that you can give to others.  If you want to try it, just click here to visit the Global Rich List site.

Now, you don’t have to give to the  charity that the Global Rich List supports (Care International UK).  You don’t even have to give your money, you can volunteer your time to a cause or organization your believe in.  A few months ago, I wrote a blog post on giving to charities and causes.  Go ahead and read that post in case you haven’t done so yet.  Frugal Pinoy also has a lengthy page that lists several local charities and NGOs.  You can refer to that list if you’re looking for local organizations to support.

Why am I talking about giving again?  Well, first of all, just because we’re experiencing an economic downturn, it doesn’t mean we should stop supporting the causes we believe in.  In fact, these causes need your support now more than ever.

Also, ‘di ba mag-pa-Pasko na? Don’t forget to add these kinds of donations to your Christmas budget.

What charities and causes do you support?  How has the financial crisis affected your ability to donate?