A Real Life Budgeting Exercise: How to Know You Are Ready to Invest

So H had a brilliant idea this morning to invest in SunLife through me. To be honest, I wasn’t pushing her to get a policy since she already has a VUL and whenever she asks me what to do with her finances, I just encourage her to compute her budget first. Haha.

But then she came across the current promo for SunLifeFlexiLink1, a single premium VUL that is currently offered at a lower rate of Php125,000.00 instead of the standard minimum of Php250,000.00. H always bragged about having money sleeping in her bank but was she really ready to put it all in investments? We’ll find out.

  • Assess your current funds

Since H did have some money already, we began with knowing how much it really is and how we can re-allocate it properly. This is similar to doing a net worth too but we focused on her cash that is not currently tied up. We also had some trouble actually measuring her net worth given that she owns a car and a condominium but has loans for it, so we just assumed that the net value of those are zero.

From checking all of her accounts, we determined that H currently has:

Cash in banks         214,318.73
Credit card liability           27,769.47
  • Determine your monthly expenses

We then checked how much H spends in a month with the end goal of knowing her required emergency fund. We need to set this up first before even thinking about investing and need to separate it so she can’t accidentally use it for random stuff.

Monthly Expenses Amount
Condo Amortization           20,000.00
Car Amortization           11,700.00
Gas              6,000.00
Toll              1,000.00
Parking              1,800.00
Car Insurance              1,400.00
Rent              2,500.00
Food              3,000.00
Groceries              1,500.00
Condo dues                 700.00
Real Property Tax                 333.33
Condo Insurance                 566.67
Shopping / Clothes              1,000.00
Subtotal           51,500.00
less: Amortizations           31,700.00
Total           19,800.00

H currently needs Php51,500.00 every month to cover her living expenses as well as her fixed obligations. Emergency funds are supposed to be 3 to 6 months worth of your expenses but since she’s currently not ready to set aside that much money, we decided to stick to her minimum living expenses of Php19,800.00 assuming that if she can’t pay for her amortizations by a couple of months, there’s no really immediate risk she’ll be facing. I honestly haven’t read about how to deal with this situation too so if you know of something, please share!

Multiplying Php19,800.00 by 3, we now get this new picture:

Fund Allocation Amount
Cash on hand         214,318.73
Credit card liability         (27,769.47)
Emergency fund         (59,400.00)
Net         127,149.26

We have determined that from her cash in bank, H has to set aside Php27,769.47 for her current credit card bill, and Php59,400.00 to start her emergency fund. I’m encouraging her to open a new bank account with a different bank to easily get this out of the way of being spent.

She has a net amount of Php127,149.26 which is enough for her to avail of SunFlexiLink1! Haha. What a coincidence! LOL. The promo is only up to the end of the year and now is really a good time to invest in the Philippine Stock Market since it is down and shares are cheap. I really wish I had spare money now. Huhu.

Anyway, I guess I have done my part and H eventually did got me to do her finances despite me trying to impose to do it on her own so she could be more familiar with it. I leave it up to her to know if she’s really decided to invest her money or would need some more time and confidence to think about it.

We also did her full year budget and I’ll try to elaborate that one on my next blog post so stay tuned!




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