PRINCIPLE OF ECONOMICS, LAND REFORM
ECON103 (TIME: 10:00 – 11:00 A.M.)
PERSONAL MONEY MANAGEMENT
Mr. Nico Del Valle
The idea of management implies that you have a goal or a set of goals in mind. Therefore, the first and most important part of money management is to clarify your own goals, commit to them and write them down. Why do you need money? What will you use your money for? How much do you need? For what? For When? Be specific and realistic. Different people have different needs and different wants. Prioritize your needs. Some wants and needs will have a higher priority than others. Make your priorities clear and allocate sufficient funds to each according to the importance you give it. Avoid inconsistencies. IE: If retirement is more important to you than owning a house, then more savings should be diverted to retirement than to housing. And, if funds are scarce, then you should fund your retirement savings before funding your housing savings. Unfortunately, there will be times when you simply cannot fund all of your wants and needs. Having a priority list will help you decide where to allocate your limited resources. Your priority list should be time-sensitive. For instance, college tuition may come before retirement in chronological order. So, you have to have completely funded the tuition before you have completely funded the retirement. II.RRL - Review of Related Literature
Here are some case situations and the amounts of money needed to fund them:
| [pi|Goals (Wants and needs) [pic] |Total required [pic] |Monthly savings required* [pic] |Time to target amount [pic] | |c] | | | | | |1 |House |200,000 php |900 php |19 years | |2 |Tuition |160,000 php |800 php |17 years | |3 |Retirement |168,000 php |500 php |28 years | |4 |Car |120,000 php |400 php |25 years | |5 |Travel |150,000 php |200 php |63 years | | |Total |798,000 php |2,800 php | |
• You can calculate this by dividing the Total required by the Time to Target (in months). ie: 200,000/(19*12)= 877 php/month In this case, every month in order to fully fund their wants and needs, they must save 2,800 php. If the money is not there, they will have to sacrifice their wants and needs or delay them. This scenario assumes a number of things.
The House cost is the amount of money you need to accumulate before actually buying a house in cash or getting a mortgage, in which case, the mortgage would become an expense rather than a savings item. The Car costs include repairs, insurance, and a new 20,000 php car purchase every 7 years until age 60. Retirement savings are in addition to government pension programs and will, hopefully, yield 400,000 php after 20 years. This is assuming that half of the money is placed in stocks at a 10% annual rate of return and that the other half is in CDs at a 3% rate. Firstly, the amount of savings required to reach your goal may be overstated because you may switch from renting to a mortgage faster than expected. This would seriously reduce the amount of money you need to save for your house. You will still need to repair it and to pay property taxes, but that shouldn't come to the total value of the house. The time frame doesn't take...