I’m currently preparing my talk for ‘Finance for Newlyweds’ for the Shangri-La BridalFair. My preparation made me remember a lot of financial mistakes we did in our 20+ years of marriage and it is only the grace of God that we survived those trials.

I thought about a lot of marriage breaking up and it seems that annulments have been increasing in the Philippines and has actually been more socially accepted. So why do marriages end? How can a couple who are really in love with each other end up hating each other? How did “till death do us part” become such a cliché?

I have heard many speakers, counselors and even Preachers say that money is the number one cause of separation by a factor of 4:1. While money is definitely a primary concern of many break-ups, there is very little factual data to support such a claim. However, many studies would put money as one of the leading cause along with communication, infidelity, wrong expectation, intimacy and commitment; although not necessarily the number one and by no means a factor of 4:1. Sorry to burst the bubble of some speakers, counselors and Preachers – I would urge them to double-check their facts.

Despite money not being the leading cause, it is definitely a concern for many marriages and can lead to the breaking up of marriages. I am not an expert in marriages and I have no qualms about telling people that I can be clueless as to keeping a ‘perfect’ marriage, just ask my wife! However, after two decades of being together, my wife and I managed to survive the many challenges in our marriage and most of those challenges are financial in nature. By God’s grace, I think our union will survive in the next 20 or so years.

Here are some suggestion married couples can consider with regards to finances in their marriage:

1) Communicate & be transparent – I find it disturbing that many couples are unaware of each others finances. Even the law acknowledges that a marriage brings union, including their finances and made provisions for conjugal properties. Bereft of any pre-nuptial agreement, a marriage solidifies the finances and everything as now co-owned. Statement of income should likewise be transparent; many problems erupt from false assumption. A wife might be yearning for better family lifestyle thinking that the husband’s income can sustain, only to be dismayed that it can’t. By being transparent and communicating properly, expectations can be managed.

2) Plan, plan, plan. Preparing a budget and sticking to one is definitely a conjugal exercise. I highly recommend that a couple sit down and discuss their budgets, how to disperse income and what to prioritize with their limited resources. A couple must agree on the budget and once a budget is set, they must respect each other by be faithful to the budget. Of course, some flexibility should be exercised as well.

3) Practice family financial planning.  Set up an emergency fund. Think long term — save & invest for the future. Buy life insurance (this really brings peace of mind). Prepare for retirement. Avoid getting in debt and if you need to take a loan like home loan, talk about it and get counsel first.

4) Practice stewardship. Many issues arise if couples don’t practice stewardship. They need to be responsible and accountable to each other and most especially, to the Lord.

5) Learn from other couples. This is not just about money management, but about marriage in general. Have mentors for your marriage and please chose those with a good track record for obvious reasons. You don’t need to learn by experience because it is way too risky to experiment with your marriage.

And here’s my most cherished tip for married couples, keep the Lord in the center of the marriage and everything will turn out great. “If they obey and serve him, they will spend the rest of their days in prosperity and their years in contentment.” – Job 26:11, NIV

Here’s one of the most fundamental objectives one should prioritize – setting up an emergency fund.

It is foolish to think that we will never undergo an emergency in life and most of the time emergencies cost a lot of money. In my seminar Steps to Financial Peace, I talked about setting up an emergency fund as the 3^rd step to achieving financial security.

Before starting on emergency fund, it is best if you know how much you actually spend in a month. Many people I know are clueless as to how much they spend monthly. During a financial planning session, I asked someone how much he spends monthly. He told me that he wasn’t sure as to the exact figure so he said he will just give me a ballpark figure. The figure he gave me was P40,000 to P80,000. If the discrepancy was about P5,000 to P10,000, it would have been understandable but P40,000? I politely asked the person to really think about all his expenses, examine his bills, record his spending and get back to me.

If you already have a monthly figure, you are now ready to start building your emergency fund. The rule of thumb for emergency allocation is somewhere between 3 to 6 months of your monthly expenses. 3 months is good, 4 months is better, 5 months will be great and 6 months is excellent. Emergency funds come in handy for a variety of reasons: medical emergencies, loss of employment and so forth. You should also be sensible in determining what an emergency is and what it is not. A 42” flat LED TV that is on Sale is definitely not an emergency.

Why should you set up an emergency fund? Here are 3 good reasons why you should:

1) Emergencies do happen:  It is foolish to think that emergencies will not happen to you. As time goes on, you realize that things do come up that you have not planned for; and you’re going to have to provide for them.  Things do happen, and they won’t happen at a convenient time.

2) Relieves stress:  Having an emergency fund has an added bonus — Peace of mind! You will feel relieved because you no longer have to worry about most small emergencies.  Once you get your larger emergency fund saved, you won’t have to worry about paying for most large ones either.

3) Risk reduction:  When you have established a emergency fund (along with other important things like life insurance, non-life insurance and health insurance), you have a lot less risk of unfortunate things happening.  You will also be less like to go into debt.  In other words you’re making sound decisions to plan for problems, before they actually happen.

I know that starting an emergency fund is not easy for others but this is definitely something we should prioritize. Dave Ramsey suggests we do it by ‘baby steps’. Set aside little money regularly into an emergency fund. Do it in stages like 1 week worth of expenses first, and then move to 2 weeks, to 3 weeks and so forth. Keep a piggy bank or an envelope for you to put your cash into it. My wife and I have this big transparent piggy bank where we put bills into. Once the amount reaches P3,000 to P5,000, we transfer it to our savings account that is dedicated for emergency funds. We also take baby steps too.

Here are some tips:

1) Keep your emergency fund in cash or near cash placements like savings, current, time deposits or Special Deposit Accounts (SDA). Do not invest your emergency funds yet as those are intended to be a buffer or a margin for your finances. Make sure that the deposits can be withdrawn quickly and without huge penalties.

2) Keep some of those funds in an ATM account, say 2 weeks’ worth. Emergencies do not necessarily occur during banking hours.

3) Once you have achieved an ideal 6 months emergency buffer, start investing in better yielding instruments like marked to market funds (UITF, Mutual Funds) because said instruments should perform better in the long run. If you keep all your money in low yielding deposits, its value will ultimately erode because of inflation.

Gear up for an emergency because it is the wise thing to do.

“A prudent person foresees danger and takes precautions. The simpleton goes blindly on and suffers the consequences.” – Proverbs 27:12, NLT.

Here is an interesting thought: Would Jesus have an emergency fund? Read this LINK.

It seems that every Filipino’s dream is to have his own car – maybe even earlier than owning his own residence. Never mind the unbelievable traffic, the long hours of driving and the worry of depreciation and maintenance cost, many of us would focus on the merits and benefits of driving our own car. A vehicle is one of the earliest investments we long for, aspire for and work hard for. Anyone who has experience riding the MRT during rush hour, stranded in a bus stop or refused by a taxi cab driver would yearn to be able to afford what seems to be an elusive convenience. Having a vehicle of your own is a worthy goal. A car, after all, can be a very productive tool for the individual.

What hinders us from achieving our dream of driving our own car? Cash. Cars are not necessarily cheap and the prohibitive cost of acquiring a vehicle makes this goal so elusive. The good news is, you can still have your own car, enjoy the enormous benefits and pleasure it brings even if you don’t have the full amount to pay for it. The answer? Get a car loan. Car financing has made owning a car a realistic dream for the average Filipino. When Henry Ford built cars, he envisioned that every American family should have a car – today, that same goal now hold true in our country as well.

Having your own car provides a lot of value. Your mode of transportation is more efficient, you can get to more places in a more convenient fashion and it ultimately improves an individual’s productivity. Further, a car brings a lot of joy to the family; a family car helps foster better relationships for the family members as many memories are born from many trips using the family vehicle.  A car can really help one achieve a better life.

Nearly all banks offer attractive car loan programs and today’s low interest scenario makes acquiring cars relatively cheaper. Here are some tips for those who are thinking of financing their car purchase:

1)      Shop for good rates. Check out different banks that offer financing and you can actually ask for lower interest and you might be surprised that some of them are willing to lower their rates.

2)      Go directly to the lenders and not course the loan through the dealers. Banks gives commissions to dealers so if you go straight to the banks, chances are you can get lower rates. The same also works for car insurances.

3)      The higher your down payment, the better. Interests are charged as an add on rate and not on diminishing balances which means the effective rate is actually higher for car loans. A good way of reducing interest expense is having a higher equity portion, say 40 to 50%. Many programs entice us with low down payments because that will mean we will pay more interest. Nothing wrong with that, that’s how financial institutions earn but we must always be prudent at how we spend our hard earned money.

4)      Consider pre-owned cars. Contrary to popular notion, pre-owned cars can be financed. Cars depreciate fast in the first 2 years. A 3 year old car would still be relatively ‘new’ and have depreciated a lot, which means lower purchase cost and interest for you. In the book Millionaire Next Door, the author cites that many millionaires in the US buy 2 to 3 year old cars.

Owning a car is a reasonable aspiration and it can bring us a lot of joys. However, when owning a car will restrict your budget to a point of drastically reducing your quality of living, better think twice and wait further.