Here is a guest post by my good friend and wonder boy Dodge Ronquillo. Awesome read!

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Rethink Expenses and Spend Happily

Expenses are things we spend money on, sometimes wastefully. That’s why all successful businessmen and all respected finance gurus advocate living disciplined lives and reducing expenses–to set aside money for savings, investments, and emergencies.

However some of us may think that to have a wealthy life, we should scrimp out on everything else until we amass a big amount of money. I think that living that way is missing the point. Save up a good chunk of your money and place it in places where it can grow and spend the rest–but stay within budget and don’t get in debt. Expenses are and always will be a part of our lives (unless we live in self-sufficient farms with a water supply and a source of renewable energy).

Ironically, that means we are free to spend. The question is, how do we spend the money that we work for? This is not a blog post on how to save more. This is a post on how to spend more happily.

Two Kinds of Expenses

I believe that there are two types of expenses. The first kind is what we normally pay for. Let’s call these requirements. In other words, our cellphone bills, utilities, association dues, transportation costs. We need these to live.

The other kind of expense is the kind we splurge on. Let’s call these happy switches. Our movie tickets, dinners out, gadgets, books, clothes. We want these to reward ourselves.

Now, do you feel better spending Php 1,200 on your cellphone bill or on a few new tops or new Mac accessory? I hope you see what I’m getting at. If we aren’t happy with how much we earn, then we should probably rethink how we spend. Don’t reduce spending; rethink it. How much of your money goes to paying bills instead of going out with friends?

So yes, the trick to being happier is reducing our expenses, but just one kind–the requirements. I suggest cutting down on requirements and spending more on happy switches. I don’t think I know anyone who prefers paying bills over going out to dinner with friends.

Two Things You Must Understand

1) This assumes you follow a rule for saving up. I like I like a ratio shared by a friend of mine (According to him it’s T. Harv Eker’s ratio): 10% Savings, 20% Investments, 10% Charity, 10% Education/Self-improvement, 50% Expenses. Spend happily but don’t go beyond 50%.

2) This is a way to feel rewarded no matter what our income level is. It’s a realistic and short-term way of enjoying what we work hard for. This allows us to feel rewarded while still saving up money for the future. I’m sure I’d prefer to watch movies and go out for dinner rather than give that money to the bank for my credit card bill.

Apparently, there is a way to be happy now and in the future. Go ahead and spend happily!

Dodge Ronquillo’s contacts:

Posting a column I wrote for Moneysense Magazine.

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Beyond a mission, a cause

As I write this column, 2010 is about to end. 2010 is an eventful year indeed: a new President that ushered a new hope for the country’s future; a stronger and more stable Peso; a fantastic upswing in the Stock Market , accelerating in a rate we have not seen in a long time; and many more – both good and bad.

On a personal note, I am about to end a full 2 years since I have gone independent and not be affiliated with any financial services institution in my 22 years of professional life. My affiliations today have been limited to the Registered Financial Planner Institute Philippines (RFP) – an organization dedicated to the education of financial planners; and my church – Victory. Both affiliations have been largely influential in my professional, personal, and spiritual growth.

In 2010, I found myself doing more advocacies – speaking and teaching in small and large crowds from North Luzon down to Southern Mindanao and even out of the country. Venues has likewise been diverse, from corporate offices, to convention centers, hotel function rooms, university classrooms, churches and even in tables in fast food restaurants. Programs were varied: financial planning, investing, and entrepreneurship, among others. I also found myself working with the youth teaching them personal finance through a program called Blue Chip which we organized last summer and I was invited to volunteer to handle a class on entrepreneurship for a group of hybrid home school students. This year also gave me amazing opportunities collaborating with wonderful individuals that really inspire me like Cito Beltran, Francis Kong, Chinkee Tan, Paulo Tibig, Carlo Ople, Miriam Quiambao, Donita Rose and Eric Villarama, among others.

All these because I believe in a cause: the financial education of the Pinoys.  We all know that the biggest problem of the country is poverty. I used to think that the reason poverty is such a problem in the country was economic in nature; we lacked capital, poor distribution of wealth, undesirable macroeconomic foundations and the like. Then as I got a little older, I thought that our problems were political in nature; poor governance, dynasties, poor delivery of basic services and hostile environment for business. While the two factors I mentioned contribute substantially to the mess we are in, I began to see and accept that our problems are also social in nature. When I saw the way many handle their finances (myself included) and the way the nation saves (one of the lowest in Asia) one will see the root cause of our poverty issue. To make things worse, so many Filipinos are stricken by a poverty mindset that keeps them in bondage.

Such a herculean task should be made a cause by many. While there have been more and more advocates of financial education, we are drowned by the sheer numbers coupled by our limited exposure. The solution? We need to look at this as more than a vision and beyond a mission. We should embrace this as a cause. The Bible is full of encouragement and holds many answers to our questions, and yes – even our financial questions. We must be encouraged that even if this cause is a near impossible one, we just need to build on it, one advocate at a time.

Then he said to his disciples, “The harvest is plentiful but the workers are few. – Matthew 9:37, NIV.

… con’t.

Getting into an investment program that will give you growth which is way below inflation rates (even at its lowest levels) over a long period of time was bereft of any sound reasoning. I was curious as to why he often proposed such a strategy and I was baffled by his response. He said the US dollar has historically performed well against the peso and showed me a chart that the average depreciation of the peso was about 8 percent per year. He then said  the 2-percent growth added to the 8-percent depreciation of the peso will result to an effective annual return of 10 percent over a period of 15 years.

Arguably, the explanation of the adviser will seem to be a compelling one to many. His mathematics being a bit off tangent notwithstanding, I politely queried about the possibility of the pesos depreciating slower than 8 percent and even a probability that the peso may actually appreciate against the mighty US dollar in a span of 15 years. He confidently replied that such a scenario will never happen, citing history and an obvious over-confidence on the US and a discontent for the Philippines.

With a bruised nationalistic pride, I could have carried on the discussion pointing at a closer review of historical data (a longer span of the parity rates will result to a lower depreciation rate), macroeconomic factors, geo-political considerations and fundamental analysis and so on; but it was not my place to argue my position. I just gave the adviser a personal advice to consider diversification in his recommendations and to think about other factors prior to making a pitch to his potential clients. Even at the time of the said discussion (The US dollar was still soaring), the argument of the advisor was full of folly, the most dominant of which is the consideration of risk factors.

Today, those who listened to the said adviser are now trying to accept the bad decision they have made. Clearly, they have lost a significant amount in the value of their hard-earned monies. Whilst I do understand that one can’t predict the future, economic or otherwise, sound financial principles such as diversification and asset allocation would minimize substantial erosion of one’s savings and investment. A good adviser would have considered many things prior to making recommendations and he must always stick to prudence before anything else.

Be careful before listening to any advice. It is not too difficult to discern competence if we listen intently.

“Whoever strays from the path of prudence comes to rest in the company of the dead.”­ —Proverbs 21:16, NIV