2019 Financial Goals

Image from  InspireCast. 


Not gonna lie: 2018 was an annus horribilis for me. 

Recognized that things were bad and spent early 2018 asking for help, and the rest of the year trying to get better. Partly explains why I’ve been AWOL from blogging for the latter quarter of 2018. It’s been a very busy couple of months at work. I went away for a vacation in mid- to late- December. New work schedule started. Everyone’s complaining that they haven’t even finished work from the last term and yet here we are. 

On money matters: I usually list my expenses down. I even made a Google Sheets Template dedicated to this. When I opened it to tally how much I have spent for 2018, that’s when I realized that I have stopped updating the sheet in August. August! Yikes! That actually coincides with when I upped my medication. (Still haven’t posted about this. It’s an ordeal but I’m getting better. But also, health care is expensive and my meds are ~200 a pop per day. No joke). I think I got disheartened with the amount and subconsciously stopped updating my list. 

My investment portfolio briefly touched 7 digits. Then I didn't sell anything and it got wiped out by nearly 40%. Remember kids: Never leave money on the table. That's a hard lesson learned. But also: don't panic. The stock market is bound to go back up, you just have to be really patient. 

I'm still going to be on medication for ~5-6 more months. It takes a whole chunk of change that should be going on a retirement or investment account, but if smaller savings means that I'll get better, I'll take it. 

I don’t really want to do resolutions this year, mostly because I sucked at it. My goal this year mostly the same as last year’s: save for retirement and get a clear picture of expenses/where my money goes. 

I did not invest in PERA last year, despite my January 2018 resolution. Most of what would have been my savings went to doctor fees and meds. Would love to remedy this soon, what with PERA investing via BDO is now apparently easier as an online banking option. 

Started updating my excel list of expenses as well. Will probably try to tally 1H2018 and approximate for the latter half given my half-assed list. 

The only new addition is probably this: be consistent. Not just with the money stuff but with all other kinds of behavior. I was talking with a friend who said she read somewhere that forming new habits take 21 to 28 days. It’s now January 20 and I have so far listed my day to day expenses. I know where I’m at—expenses are bigger than pay, boo! But that is due to a parent going on a trip and I had to fund the expenses. But I do plan to discuss it and ease up on other spending categories. Plus, it’s not all lost as I have some still uncashed paychecks coming my way. 

Perhaps an additional finance goal: Get busy with a side hustle opportunity that came my way last year. I haven’t maximized it yet and will hopefully get to do that this year. 

When you think about it, it wasn't really all *that* bad. Sure there were times I felt I was at an an all time low. But I spent most of 2018 trying to climb out of it. There were some successes: My strategy was to keep pitching things out into the universe. I managed to do a few things. Applied for and did not get in some other things. That's still a bummer but there will be other opportunities out there. 

That’s it. Hopefully will be more consistent with the blog posting this year. How was your financial 2018? 

Preparing for retirement with PERA

In a previous post, I looked at how the TRAIN would affect my take home pay. 

TRAIN promises to cut the withholding tax. From my previous effective rate of 32%, it will go down to ~9.2%. That savings will go a long way to fund my retirement. So while it might be tempting to use that "free" money to live the best life now, I'm opting to invest it for my best life in the future. 

Although I contribute to the SSS--it is mandatory, after all--I'm giving it the side eye. For one, there's the talk that the SSS assets would be depleted in 28 years if crucial reforms are not implemented. Which means the SSS is possibly not  around by the time I'm retiring. So I thought I should prepare for that bleak future scenario. At any rate, no one should be counting on just the government pension. I mean, the minimum pension right now is pegged at Php1,200. Who could live with just that money? 

Anyway, I was still working in government when the PERA law was approved in 2008, but implementation is another matter. There was buzz in 2016 that it would go live, and it did in December 2016. But the only two approved entities--BDO and BPI--only had mentions of it but no actual product yet. 

Even before the approval of the TRAIN, I was already thinking of seriously saving for retirement. In the international (mostly American) finance blog circles, it's all about ETFs or index funds. So I was looking at index funds. And then I thought of PERA to at least get a 5% tax credit for saving.  

I made inquiries with BPI already. I knew from other posts that one has to go to the head office to open a PERA account. However, when I checked with the BPI website, this FAQ states that starting January 2017, there should be several branches aside the main office that could facilitate opening a PERA account. I went to my local branch to ask if that policy had changed. The girl at the accounts desk called the head office to confirm and to ask for the requirements as well. 

This is how you open a PERA account with BPI: 

1. Yes, you need to go to BPI's main office in Makati. Go to the 17th floor, Assets Management. 
2. You need to bring your TIN ID. In the event that you don't have an ID, bring your ITR as it would have details they need to open a PERA account. 
3. You must have a BPI savings or checking account. 
4. a valid government ID. 
5. Fill up their form, which gauges your investment risk profile 

BPI offers 4 kinds of PERA accounts, which are very similar to mutual fund or UITF offerings. They have a money market, government bonds, corporate bonds and an equity fund. 

Of course, there are fees: BPI asks for a 1% administrator fee based on the amount contributed. There are also "transactional and annual fees from the Cash Custodian as well as trust fees from the respective PERA UITFs." The Equity Fund lists a 1.5% per annum trust fee. I wonder if this is the same as or probably on top of the 1% admin fee. 

Meanwhile, BDO's PERA Equity Index Fund lists a 1% p.a. "management fee." Again, will need to clarify if this is on top of or the same as the admin fee. But I still need to inquire with BDO.  

If we go by fees alone, I'm partial to whoever is offering a lower fee. Then there's the matter of who offers an index fund. There's also the ease of transacting. BDO is attached to my payroll account, that would make it easier for me to transact. That matter of only having one administrator for your PERA accounts certainly has to be considered. 

All in all, I still need to check with BDO and then weigh which one between the two banks will get my retirement money. But even then, BSP Deputy Governor Espenilla acknowledges that the slow rollout is because there are only ~100 professionals dealing with PERA.  It would certainly give the investing public more breadth of choices if other entities would come in and offer their own PERA funds. Until that day comes, it's a coin toss between these two candidates. 

How to Ride the TRAIN with reservations

The gift that keeps on giving. You do you, Alma. 

The first part of the Tax Reform for Acceleration and Inclusion (TRAIN) was signed into law in December of last year. Its main selling point was that those earning Php250k annually will no longer have to pay the income tax. While a lot of people find this a cause for celebration. 

Like Alma Moreno, I still have my own reservations about this whole exercise. I do recognize that we will have a bigger take home pay, but I also know that we will be taxed in other ways. Like the price of anything that uses oil or sugar will surely go up. Hello, fare hikes and no more unli-softdrinks. (Not that I'm a big fan of soda, anyway.) 

But I want to look at this positively, so I want to focus on how the TRAIN will make our take home pay bigger. Every year around tax time, I just grind my teeth at how much tax the government takes away. I mean, it's fine if you see that social services are efficient or that government officials are competent. Just knowing that your tax money goes to someone else's already deep pockets and yours are butas, that's just a major bummer. 

In the pre-TRAIN tax regime, I get taxed ~25-32% because I am single, have no dependents, and earn from multiple compensation. A part timer is only allowed a maximum of 12 hours a week. So if I work for 4.5 hours a day, I only get 3 hours because the 1.5 is already eaten up by taxes. Your payslip may show that you get a sizeable amount, but the reality of what shows up in your ATM is another matter. A third of your salary is no laughing matter. Because in a year, that amount balloons to more than 6 digits. Monthly, it's enough to pay an amortization for a condo or a house. But in reality, I can't even qualify yet for a housing loan--I'm a part timer, and my salary is under 50k. So yes, a bummer. 

Photo courtesy of ABS-CBN reporter Alvin Elchico. 

In the new TRAIN Revised Withholding Tax Table, my income category falls under the 30k + 25% of the excess over 400k. Which means roughly my annual income tax will now fall under 50k, which is a whopping reduction coming from around 3x that amount. From a condo amortization, pambayad na lang ng parking---kung may kotse ako. Eh wala so nganga. Hahaha. 

But seriously, if the tax computation table is indeed true, that is an additional 7k or so to the monthly take home pay. 

What to do with this "free" TRAIN money? 

Not going to spend it on #travelgoals, that's for sure. Will most likely funnel it into a retirement account, aka the long delayed PERA. 

As for which entity and fund, that will come in another post.