Saturday, January 15, 2011

Saving for Retirement Starting this 2011 for Filipinos.

 For the late 20 year old professionals, retirement is far-off in our minds with the presumption that we can save on the later date. However, on the prime of our youth we should be prepared to save a portion of what we earned till we earn and enjoy the fruits of our labor during old age when we can no longer work or still be in a semi-retirement status with little work minding your own business and ventures by still keeping your mind and body active.

A lot of mid-40s onwards are poor or broke after 5 years after their retirement. It is they made a grave pitfall on money management with wrong advice or decision due to compulsive behavior or such.
Times have changed since we stepped into Information Age back in 1989 but let’s go back to the past and recall the Industrial Age of 1860 to 1988. Companies have sprouted through lots of innovation and invention around that time with America, Britain and other western nations lead the race through prosperity bracing itself to be more progressive economic superpowers through production and manufacturing of goods and services. Asia by then is still in its infancy on its industries. Then, there is a Job security / tenure and Define Benefit Plan (DBP) employed during those period.

What is Define Benefit Plan (DBP)?

According to Investopedia.com, DBP is an employer-sponsored retirement plan where employee benefits are sorted out based on a formula using factors such as salary history and duration of employment. Those times when major players give a lot of compensation to their employees after they retire. The Define Benefit Plan as what most businessmen thought is a mistake they made in giving their retired company or corporate employee benefits until they die an exception to this rules are career government officials and employees who still have the Define Benefit Plan in their pension. I was shocked that most accountants never heard of this term DBP.
Moving on to 1989 – The start of the Information Age, employees of this major companies and business are face with No Job Security or Tenure with the change of compensation given by employers using Define Contribution Plan (DCP) in which 401(K) Plans, GRESA, IRA in United States are an examples of these while in the Philippines, it is the Personal Equity Retirement Account or PERA. 

What is Define Contribution Plan (DCP)?

A retirement plan in which a certain amount or percentage of money is set aside each year by a company for the benefit of the employee as defined in Investopedia.com.
So what now?

Some people lost hope in catching up in building their nest eggs. Well it is not too late for people with ages 40 to 55 years old to reap the fruits of their retirement age coming to a close.
There are several steps you can do in order to meet your requirements of building a stable retirement funds.

Change your mind set 

being frugal is not easy. It requires discipline in meeting and achieving your goals about money and wealth. 
Increase more of your savings

As you move or grow into a higher position, you tend to be given more compensation. Why don’t you save it and keep a little and can be used as a medium to start as a capital for a small enterprise or business. Let’s say from the previous 10% increase to 20% or 30% more. 

Be more realistic with your goals

It’s better to think, write and plan your goals on what you want to achieve in the next few years of time.  It is also fine to make annual review of your goals so that you won’t lose sights of your plans.

Lessen of your debts 

pay off your debts and lessen your purchases of unnecessary that you can live without. Cut your credit card expense if necessary.

Cut the booze and smokes 

By living a healthy lifestyle without these vices would help you achieve your goals and lengthen your years of existence in this world minus the lung and liver cancer, cardiovascular diseases and diabetes. Cost of cigarettes and alcohol beverages are high with taxes imposed on every country or states differs. Just citing an example: a pack of cigarettes cost PhP 30.00 and if ever you consume every week two packs of these at PhP 60.00 multiplied by 52 weeks in a years. It will be PhP 1,650.00 per year consumed on cigarettes. 

Avoid Gambling 

It may be fine if you use a little but is much better to control this is highly addictive habit of unnecessary splurge of money. It will drain your resources immediately when you get hooked. 

Learn, Read and Educate yourself 

There are lots of seminar, books on personal finance that tackles a lot regarding money issues and other matter that affect yourself, your relationship and attitude towards wealth management. Better to invest your time and resources in learning new trends and updating yourself with the latest businesses and others concepts. 

Dabble into investments

Real estate, stocks and business ventures are the way to go. Being an entrepreneur requires creativity, entrepreneurial skill and tough mindset is needed in this. It will take a lot of time, money and effort to achieve but in making your business grow. The benefits you will sown is not a short term but to be used in a longer period of time.


It is not too late start as early as now, let’s get moving in 2011 and beyond.




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