Five healthy personal finance habits

MONDAY, 19 SEPTEMBER 2011 18:56 RIENZIE P. BIOLENA / PERSONAL FINANCE

I RECENTLY read an article in an online magazine focusing on the top habits of elite athletes. They were excruciatingly simple, but the simplicity belies their profoundness: These are the habits that make them excel and stand out. Think Muhammad Ali, Rafael Nadal, Michael Jordan and Manny Pacquiao. These people were not champions in their field for nothing: What they are is an achievement prepared long before the fight, and discipline followed each step of the way. Reading the habits made an impact on me: An “a-ha” moment that these are the same principles in personal finance and they, too, can be applied with the same results.

Let me share with you some of these habits that I read and how they can help your financial life:

1. Envision success. Start with the ending. You do not want the ending to be one of failure, but one of success. To start living the life of your dreams means you having that dream first, establishing it, and knowing that you can achieve it. Envision your dream house, your dream car, your dream retirement life, your dream lifestyle, your dream education for your children, your dream in helping out people.

Having that vision makes you work harder and smarter. It gives you purpose, persistence, courage, hope and giving you that gana to do your best no matter what. So far as my experience in personal finance goes, much of the challenge for a person is psychological and behavioral, rather than technical. It is not really a question about the know-how—information is now available virtually anywhere, anytime—as to the resolution to discipline oneself and learning more on how to become financially healthy.

Envisioning success also gives you confidence that you can actually do something with your life, whatever the circumstances. I was once a savings- account type of person, but I really wanted to try out investments and experience the higher returns that it always boasts of. The minimum to invest then was P100,000 so I set aside almost half of my monthly salary and all of my bonuses just to lift myself over that high a hurdle. I sacrificed enjoying my salary—buying gadgets, traveling, partying—for the end of investing. I did, and it was a success.

2. Identify with successes. Who doesn’t get inspired with the lives of Henry Sy, Socorro Ramos and a host of other entrepreneurs with their rags-to-riches story? These are not Disney princesses or telenovela fiction, but true stories of determination against all odds. Having a model for success enables you to learn from their experiences— mistakes, achievements and all. I think that’s why “GoNegosyo” is such a genius and a hit: It brings hopeful and new entrepreneurs to touch base with established ones to learn from them the secrets of having a business and managing one’s resources.

Identifying with success also means identifying with our own personal successes and learning from our own mistakes. You might have been burned big time in the past with your investments when you pulled out your money—on a down market after which, you saw the market rise and recover again. Lesson learned: Invest for the long term and do not realize losses on when the market is six feet under.

I have one mistake (among a host of others) in handling money: not diversifying. High with the returns of the stock market during the bull season of 2006-07, I put in all—as in all—of my savings into a stock fund. Come 2008 when I needed money—and luckily, my money has also lost its market value—I was forced to pull out some with not just losses realized, but lessons as well.

3. Follow individualized programs. No two persons are the same, and no two families are the same. Why should they have the same financial setup? Each has their own needs and aspirations. So, too, with personal finance. There is no cookie-cutter approach to this. Each individual is treated differently. Different lifestyle, different aspirations, different needs and requirements equal different approaches. Those who are starting out in their careers can afford to invest a modest chunk of their money in the stock market and try out variable unit life for protection; but a retiree, for that matter, may have more of her portfolio in fixed income, with a minor allocation in stocks, if at all.

When I was single, I can afford to allocate half of my salary to savings and investments, cutting off expenses here and there. But now that I am married and have a kid, the needs of cash requirements have changed, so does my expense structure.

4. Set goals. Setting goals is essential. Really. I think this is one of the most talked-of yet unacted part of financial planning. Without goals, you end up nowhere. Set goals that are achievable and realistic, that way, you are not biting off more than you can chew or be frustrated at the end because you have achieved too high a goal. It makes you set out a road map and action targets that you will work on. Think of the vision as the buffet course, and the goals, the individual menus.

5. Have a coach. Imagine if Manny Pacquiao doesn’t have Freddie Roach, or if Ateneo doesn’t have Norman Black.

Athletes have different kinds of coaches—strength coach, nutrition coach, sports coach. Each with his own set of areas in the athlete’s life to contribute to the overall performance. It’s the same thing with our lives.

We have doctors for our health, architects for our homes, lawyers for our legal needs. Luckily, there are people who are solely dedicated to providing the same level of expertise and experience when it comes to one’s financial health—financial planners. But anyone can claim or print the title of “financial planner” in their own calling cards. What you would want are professionals that underwent rigorous training who are trusted, knowledgeable and experts on the field. People like the Registered Financial Planners, a designation that is respected and known not just locally but internationally, with international set standards in knowledge and ethics.

Rienzie P Biolena, RFP is one of the pioneering Registered Financial Planners in the Philippines, having taken up the first RFP Program in 2005. He is a senior financial adviser in Philam Asset Management Inc. To know more about the RFP program, please e-mail  info@rfp.ph or visit www.rfp.ph.