It has been almost 5 months since my last post. The last post was about setting Financial targets for 2015. We are now on the fifth month of the year so a performance review on the goals I had set is necessary.

MORTGAGE – PASS – We have saved enough and will be able to put in 10% pre-payment for our mortgage. I am still trying to figure out if it would be better to pay the last pre-payment or to invest the money in higher-yielding investments. I have about 4 months to figure this out and decide.

SAVINGS – PASS – We are likely to exceed the $17,000 I had set for this year. Thanks to the bonus, promotion and banked overtimes that I have encashed in Q1. Most of these go directly to savings and celebration dinners with the family as well.

HOUSE RENOVATION – WITHIN TARGET – We still have time to plan and execute the carpet removal and installation of hardwood floors this summer. Though I do not know yet how much this will cost us, we have enough house renovation budget to cover this.

PERSONAL DEVELOPMENT – PASS – I have already exceeded the required 60 hours PDU for the current period. I actually already have about 15 hours that I can carry-over to the next period.

With a few more days before the new year, I would like to start listing our family’s financial targets for 2015.

MORTGAGE – We continue to save for a 10% pre-payment for our mortgage which will bring down the amortization period and will also save us on interest. We have been doing this for the first 4 years of our mortgage and will plan on doing the same on the fifth year before we renew our mortgage. This is our initial plan but I am still working on the math and scenarios (what-ifs) if I invest the mortgage pre-payment to mutual funds that earns at least 5% rather than paying a 2.1% mortgage.

SAVINGS – Maximize savings with a target savings of $17,000 next year.

TRAVEL – We did not have a chance to travel this year so we will make it a point to travel, even if it’s local, next year.

HOUSE RENOVATION – We have been thinking of removing our old carpet and replaced it with wood flooring. We have not yet researched how much this will cost but it’s not a big deal if we have to defer to 2016 in case of budget issues. We also plan on doing it ourselves (after watching Youtube videos and consulting with those who have done it).

PERSONAL DEVELOPMENT – I am a Project Management Professional (PMP) so I need to complete the required 60 PDUs (in a 3-year period). I need to continue to read on Project Management to keep myself marketable and of course to bring value to my team.

By early next year, I hope to have a more realistic and measurable targets.

If you would like to get an idea on what I am up to, all you need to do is to see what kind of books I am reading. I was attending art classes late last year so I usually borrowed art books from the library. But my collection of borrowed books made a sudden shift this year.

Here are some of the books I have been reading the past few months:

• The Wealthy Barber by David Chilton
• The RESP Book – The Complete Guide to Registered Education Savings Plan for Canadians by Mike Holman
• The RRSP Secret – Defend and Build Your Wealth With This Powerful Investment Strategy by Greg Habstritt
• The Naked Investor – Why Almost Everybody but you gets rich on your RSP by John Lawrence Reynolds
• The Pension Puzzle – Your Complete Guide to Government Benefits by Bruce Cohen
• You Can’t Take It With You by Sandra Foster
• The Ultimate TFSA Guide by Gordon Pape
• Multiple Streams of Income by Robert Allen
• Rich Dad’s Success Stories by Robert Kiyosaki
• 101 Ways to Cut Your Expenses
• Suze Orman DVDs on Personal Finance Management

Yes, I’m into Personal Finance right now. I take joy in planning and what better thing to plan that my family’s financial present and future.

I am not an expert on personal finance but I hope that this blog would help or even be an eye opener to you. Or at least read this so you’ll be up-to-date on what I’m up to these days since you may not have heard anything about me for at least a year.

I wanted to call a family meeting right after the New Year celebration to discuss the year that was (2011), the present (2012) and the future. I had my print-outs of 2011 expenses complete with bar and pie charts but my 2 young kids didn’t really care. I reminded them of the meeting a week before but they must have forgotten or got distracted by playing games and other more fun stuff than what was on my meeting agenda.

So I took it as a personal burden/crusade to go ahead and plan for 2012 and the years ahead. As of last week, my wife made a decision to join the crusade and is now on-board and up-to-speed on the plan. Actually, she is running the show now so I better find myself another art class to keep me busy.

Here’s a high-level overview of how we made our family’s financial plan.

Identify Targets and Objectives

Listed below are our family financial objectives for the next 5 years. It is important that all family members have an input and agree on the objectives. Otherwise, your plan will just be a personal rather than a family financial plan. (Note: Your kids can’t have any input on the plan if they didn’t attend the Family Financial Planning Kick-Off Meeting)

Our financial decisions will be based on these objectives. Without any objectives it would be difficult to know where we are going. Objectives give us a sense of purpose, a reason for why we are doing things. The objectives will decide or make it clear whether we are purchasing a “need” or a “want”.

• Continue saving for our kids education
• Slowly build-up retirement funds
• Pay the mortgage as soon as possible
• Get a Personal/Life Insurance
• Create a Will and Testament
• Live withinbelow our means
• Continue enjoy life, travel
• Continue building our wealth in heaven

Develop a Plan

Achieving the objectives we listed above starts from having a grasp of our spending habits as well as a good understanding of our commitments or bills we need to pay.

I had been monitoring our family finances since 2001. But for the purposes of future planning, the 2010 and 2011 historical data are enough to give me enough information to forecast future expenses. I have created a new spreadsheet to keep track and forecast of our financials to the next 8 years.

Our Financial Plan lists all money coming in and all expenses. A monthly view of both income and expenses gives us a better understanding if we are living below our means. I said below our means as opposed to within our means to give room for savings.

Here are the categories I used to group and monitor our expenses.

INCOME

• Salary
• Other source of income such as benefits and bank interests

EXPENSES

• Utilities
  • Water and Sewer
  • Phone, TV and Internet
  • Electricity
  • Gas and Heat
• Insurance
  • Car Insurance
  • House Insurance
  • Life Insurance
  • Medical Insurance
• Transportation
  • Car Payments
  • Car Maintenance
  • Gas
  • Parking and Fare
• House
  • Mortgage
  • Maintenance
  • Property Tax
• Leisure and Entertainment
  • Shopping
  • Leisure Class
  • Movies
  • Eat Out
  • Road trips
• Food
• Other Expenses
• Investments/Savings
  • Education
  • 6-month Emergency Fund
  • Retirement

Savings Formula

I have learned this formula more than a decade ago. Most of us use this formula to manage our money.

SAVINGS = Income – Expenses

Of course, since we don’t run out of expenses, chances are there will be no money left for savings.

The correct formula is: EXPENSES = Income – SAVINGS

That is, based the financial objectives I listed above, our family decides on a target saving each month. The monthly target savings determine our monthly expenses. Of course, there are monthly expenses that are fixed such as mortgage and utility bills. But there are other monthly expenses that if controlled can make room for savings.

You will be in trouble if you are spending more that you are earning.

Balance of Present and Future

Keep in mind that you have to enjoy the present as well. You won’t enjoy the future if you don’t enjoy the present because the present (the now) was the future (like 5 years ago).

Enjoyment may mean different things to different people. You have to know what each one in your family enjoys and spend on that.

Learn The How’s

Either you consult with an expert or be an expert (or at least be informed) yourself.

1. Familiarize yourself with how government benefits work.
2. Familiarize yourself with your company benefits.
3. Familiarize yourself with how taxes work
4. Discuss financial management with your friends and co-workers.
5. Arm yourself with knowledge on personal finance and investment instruments.

Knowledge is power. You are better equipped to execute your plans if you have a sound knowledge on financial management.

Risk Management

You have to prepare for the unexpected or expect the unexpected ahead of time. Risk is an uncertain event, that if occurs , has a positive or negative effect.

Some of the risks that have negative effects that you need to plan for are:

• Losing your job or any of your source of income
• Accident
• House burned
• Family member got sick

Get insurance to handle these risks.

Prepare for Your Future in Heaven

I am currently reading a book on estate planning. I just started with the book but the title already taught me a lot. The book title: “You Can’t Take It With You”.

Regardless of how much I have saved for the future, I can’t take it with me. Sure, my wife and kids will enjoy the family savings but they still can’t take it with them.

What’s my point? Invest in your future in heaven.

Here’s a simple breakdown of how we spend our money. And I suggest you do something similar.

10% for our future in heaven

20% for our future on earth

70% for the present

Let me end this blog with a story.

A rich man who owned mansions and real estates died and went to heaven. He was greeted by the angels and was asked to follow them to the house they built for him in heaven. They passed by big houses and mansions. The man is getting more and more excited, he did after all stayed in mansions on earth. To his dismay, the angels led him to his a small nipa hut. The angels said, “God wanted to build you a really nice house, but that’s all the money you are sending Him could buy”.

Build your mansion in heaven!

I have been reading a number of personal finance blogs and I realized that I have a number of things to thank for.

• I did not have any student loans – Unlike other bloggers who started their blogs to document their journey to pay off their student loans, I did not have to get a loan for my education. I was a university scholar. The university paid for both my tuition fees, my dormitory fees and monthly allowance. I do whatever I can to pay this forward.

• I did not have any credit card until I was 27 years old – My first credit card was a corporate credit card. This means I did not have to pay for any annual fees and I mainly used it to charge expenses related to company-sponsored business trips. I was never and still am not a fan of credit. I believe in delaying gratification and does not buy anything unless I have the money to pay for it. I only have one credit card today and I always make sure to pay the entire amount every month.

• I do not have any credit. – I make it a rule not to buy anything unless I have the money for it. I am not really a fan of credit. I use a credit card but I make it a point to pay the full amount every month.

• I grew up not feeling entitled. – I had a happy childhood although we only had enough to survive. I learned the value of living below our means and never really had the need to acquire material things.

• I’m done with consumerism. – During my first 5 years of working, I splurged on branded clothes, CD/DVD collection, action/figures collection, etc. I guess I really just needed to experience that before I get married. I learned that money is a tool to make you happy but not the real source of joy.

• I am financial educated. – No, I do not have a financial-related degree but I keep myself aware of how to manage personal finance. I keep track of our family expenses, identify financial goals, save for the future yet still enjoy the present, maximize available government grants and have the eagerness to continue learning from other people’s experiences.

• I have a spouse who share my principles. – My wife and I track our expenses together. Although we know we have to save for the future, we both agree that the money we’re earning will also be used to enjoy the present. This year, we noticed that we can allocate more money to eat out every weekend. This is one thing we enjoy as a family and we are happy to allocate budget for it.

• I had and have great jobs. – I’m not really into stocks and investments so most of our savings are coming from my salary. Our family is a SIWK (Single Income With Kids) family. Although I have had higher than average salary in my previous work, we did not change our lifestyle (too much).

• We can afford to give to charitable organizations. – I have always believe that inequality exists to give people opportunity to share. I myself was a recipient of charitable organizations.

• I know how much is enough. – I recently worked overseas and away from my family. The money was great but with a lot of sacrifices involve. Knowing how much money is enough is the key to contentment and happiness. I feel rich because I have something that money can’t buy, my family.

Obviously there’s so much more to be thankful for. Health, security, family, friends …. but these are topics for another post.

What about you? What are you thankful for?

I was riding the bus yesterday and the man next to me asked me, ” Will you make it?”. After giving him a confused look, he pointed to the chapter of the book I was reading … “How to Retire at 45”.

I said .. “No”, unless I win the lotto (and unless I buy a ticket).

I was reading Timothy Stobbs’ Free at 45 book. I may not be able to retire at 45 or even 50 but hopefully I can do it before I reach 60.

I need to recompute my Net Worth as most of the personal finance bloggers do not include RESP contributions to their Net Worth. So I guess the title of this blog should be ‘Millionaire by 50s’.

We have recently added another 10% to our mortgage payment. This pre-payment further brought down the number of months remaining in our mortgage by 16 months. I could have invested the money but my wife and I have decided that finishing the mortgage will be our priority.

I still make it a point to read personal finance blogs at least once every 2 days hoping that I would learn from other people’s experience.

I have been reading a number of personal finance blogs recently.

For the past month, I have been reading the following blogs: Saving the Crumbs, Give Me Back My Five Bucks, Canadian Finance Blog and Blonde on a Budget.

It is nice to read about how people triumph over financial challenges, finding ways to save and at the same time enjoy their hard earned money.

Although I have started this blog, I do not really have any expertise to share. All I want to do right now is document my thoughts and my journey to saving for the future.

I have started to talk about financial planning and budgeting with some friends although I received less attention that I expected.

For now, I will continue on documenting my journey using this blog