What to do with Savings? Establishing My Emergency Fund the Right Way!!!

I’ve commit a lot of financial mistakes in the past and in my quest for financial freedom this year 2018


 (actually it started year 2016 I had a blog post with a different name containing my quest to financial freedom and it makes me smile remembering it now because I am pleased that I am actually thinking about financial freedom way back before and I am happy that I am still pursuing it till today, the difference now is that I have high hopes in achieving them thru a step by step plan and good decisions this time) I really wanted to make sure that I am making the most sound decision by acquiring a lot of knowledge from different people, mainly from social media or reputable websites.

So, journey to financial freedom is basically making your money work for you.

To start making it happen, you have to have enough savings. I am following the most common formula on social media, which says, emergency fund, travel/leisure fund, investment fund, retirement fund. Some say you need to have life insurance but it’s not in my goal actually, anyway luckily I will have one once I start with my new company. I also see some people put emphasis or importance on having health card and I totally agree with that because you can easily find comfort at times when you get sick without actually worrying of how much you should be paying if you want to get a room etc,.

You Might be Interested in

Applying my Own Advice about Career on my “Downtime”

Inspire Me to Save - How I Save with a Little Over Minimum Wage

Inspire me to Save || Evaluating my Finances 

So let us move on to the topic, what to do with my savings?

After being inspired by Peso Sense I did try to save as much as I could in 2017. Where do this savings go?

• I invest in FarmOn (told you I look up to Saving’s Pinay so I tried one of the investment platform she have as well).

• I put money in our Local Coop the San Jose Koop

• I have little amount in Pagibig MP2 (this one is a little bit embarrassing because I am not consistent on contributing to Pagibig MP2 so I only have a tiny bit of money here, I don’t even want to mention it because trust me it is too embarrassing LOL)

Did you notice something?

Yes, you got it right; I did not follow the formula.

Emergency Fund › Travel/Leisure Fund › Investment Fund › Retirement Fund

With little money for Emergency Fund I skip immediately to Investment Fund which is FarmOn and MP2 (regardless if it’s long term or short term). I will tackle more about my money in Koop, please keep on reading.

Yes I did save, but I don’t have enough emergency fund (I have little extra but it is not enough to cover my more than 3 idle months when I resigned from work).

Some people suggest having at least 3- 6 months worth of salary as emergency fund.

Upon making this mistake I thought of, just recently, get insight from the Peso Sense Group and ask where I should keep my emergency fund.

Note: Now I have a clear goal in mind to establish emergency fund first as I learned that;

Clearly Emergency Fund should not be in Pagibig MP2 which has 5 year maturity date or FarmOn which has 1 year maturity date (by the way I think 1 year maturity date in FarmOn is not that bad but you will have different needs from time to time so in my opinion it is safe to follow establishing funds as suggested by many just to have at least withstanding financial capacity for a certain period of time)

All comments in that thread is very much appreciated by the way, I genuinely needed all of those, yet indeed one comment stand out the most.

Quote

“It is important the emergency fund is liquid, meaning it is easy to use in the form of cash. That is why it is important to put it in savings account so that in case you need to use it, you can get the whole amount.

Don’t put it on investments like mutual funds, stock markets or business because it is not “liquid”… Plus,  if the market is down you will lose money. If your business falls short you will lose money too.”

Unquote

I didn’t put his/her name for privacy reasons but by any chance you are a member of Peso Sense Group, please refer to this link and you will immediately see the comment.

Now, let me discuss about my share capital in San Jose Koop.

Following the response of my fellow Ka-Peso sense, emergency fund should be liquid. That means I can able to use the money in the form of cash anytime without consequenses or restriction in times that I need it.

I kind of use my money in San Jose Koop as an emergency fund when I resigned from my previous work but there is a tiny problem with that. In able to get my share capital form San Jose Koop, I have to borrow my own money with 5% interest. It is actually not that bad but I am obliged to pay monthly and on time or else I will increase my expenditures by paying penalty.

This situation is totally the opposite of the advice I get from Peso Sense Group.

Money in Koop apparently cannot be an emergency fund because it has its own consequenses, just imagine if I still don't have work for the next more months, it means I don't have the ability to pay my loan will of course incure penalty and obviously I will lose more money in that way (by the way once you have share capital in koop you have the option of opening regular savings account with 500 peso maintaining balance so this is where you can save your emergency fund if you like or you can save it on well known commercial banks like BDO, BPI and so on).

Lesson?

Clearly I have more to learn on managing my money. The mistake is so simple but it can greatly affect you on challenging times (like when I resigned from work).

Thanks God everything is now clear to me. Hope that you get something out of this simple mistake I made.

Thank you for reading all the way.

Please share if you find it useful.

Follow my Instagram and Facebook account