It's another year! It's time for reviewing the previous year's activities to get useful insights for the current year or to simply reminisce. Here's to the annual lists of books read, artworks published, music discovered, and all sorts of memory train. Although 2020 has not really been the best year, it's nice to celebrate the things we did. Even the mere surviving that year is a great achievement.
For me, the habit of recording financial activities started in college when I entered Accountancy. However, it has always been inconsistent for some reasons I can't point out. The previous year (2020) is probably the first time I was able to account for a whole year. That's an achievement! *yey noises*
While closing my 2020 books and preparing my 2021 budget, various points accumulated in my mind. I just thought, I might as well share some of the insights, in case you guys also are interested in or are in the process of making your own 2021. Just take note that I'm also protecting my financial information. Anyway, may these points be useful to you, just as much as I hope they will be useful to me.
Note that this is a blog of financial insights and personal reflections combined.
Always on thin ice
Because of the pandemic, my 2020 budget did not materialize, just as much as everyone else's plans. In summary, I didn't get the target income I initially forecasted. That's understandable—even big companies' cash flows were heavily impacted.
This experience has emphasized that I only have one stream of income, which is my employment income. I'm fortunate that there were no layoffs or salary cuts in our company despite the adverse economic conditions. However, this doesn't change the fact that I'm always standing on thin ice with just one revenue stream. It's hard to steer the wheel to the future I want to go to with just one sail—I'm too small to fight the winds of life. I have to minimize the possibilities of being financially limped.
I recently started exploring the stock and fund market while the market was down. It's so recent that I don't really have any lessons to share. The gains I realized are still too little they barely afford a few meals. I have also come to peace that I'm actually risk-averse. I prefer placements I don't necessarily have to watch out every day or every alert, so I prefer holding rather than trading. Nevertheless, both are great areas to explore. This year, I'll try learning more about the investment market, little by little. Just also take note that this is not an invitation for financial advisory or literacy seminars—I would like to learn at my own pace and research.
In addition to the above points, I'm further reminded how mediocre I am. I only have my profession to utilize. I wish I have other marketable talents which produces revenue. Or, I wish I have a lot of time to cultivate a skill or two while I'm still young.
The majority of my expenses in 2020 are composed of family support (24%), food (23%), rent and utilities (17%), and insurance (14%).
Being the breadwinner is very difficult
I am a breadwinner. It sucks to be a breadwinner. It's a toxic culture to push the family responsibilities to the children once they start working. But what can I do—we're poor to begin with. I was able to finish education through the liberality of a lot of benefactors. My parents didn't have jobs for a long time. My parents fight about money all the time—yes, "fight", a habitual present tense, in the two and a half decades I have been alive. I don't even have inheritance to look forward to. We have nothing, and I have the burden now. Also, the shame of being a licensed breadwinner working in the national capital who can't even buy a car or contribute to family gatherings. Society standards suck.
What's worse is that my immediate and extended family members think I'm rich just because I have a professional license. In reality, my batchmates in high school and college earn higher, even those whose jobs do not require licenses. They don't directly say it—but even jokes insult (hellyeah). It's like there's an undeserved pressure to pay debt of gratitude to everyone. I won't detail this anymore to avoid getting hurt even further.
Getting too emotional, back to the financial review.
If there was no pandemic, this 24% would have been even higher. Because of the lockdowns, my college brother went back to the province since classes went online. I was able to save the money, and provided just for the family's basic expenses. Still, note that the family support expenses are greater than my personal food expenses.
This year, there's no forecast yet what will happen. I am surrounded by uncertainty. Being a breadwinner is difficult.
Courtesy: KC Green
The cost of living is costly
Recap: 23% of my expenses were for food (of all sorts), and 17% were for rent and utilities.
The food expenses were reasonable. Regarding food deliveries, yes, we had a lot of delivered restaurant food or fast food due to the convenience. After all, we're still busy (and depressed) employees working from home all year round. But if these are relevant costs, I can't really say. If 2020 was a normal year, I believe we would have still spent on them, especially during the audit season of January to April. The absolute amount in peso could have been even double (can't vouch the possible percentage though). My point is, food deliveries are not worth blaming. But, we were able to save a lot by cooking at home, which are is a lot cheaper and more enjoyable.
I don't have a lot of insight on food since this is a basic cost of living anyway. I personally think that 23% is even reasonable. In 2021, I would like to re-evaluate my food choices, though.
For rent, this is also within my initial 2020 forecast, even if there was no pandemic. In fact, even lower. Our landlady has been graceful enough to not impose additional rent. We also retained our bonds as housemates, so, no increase in share in expenses.
However, for utilities, we all noted increase in water and electricity expenses. Of course, we (mentally) moved our workstations from office to home. We have five people working from home almost all year round, which is a great deal of power consumption. We also cooked food more frequently using induction cooker (LPG not allowed). Consequently, we also used more water. In short, we had more utilities expense as we stayed almost the whole time home.
Insurance is a meaningful expense
I spent on personal insurance exactly as I forecasted, because there was basically no change. It only looks high at 14% because most of the major expenses (food, family support) went down.
I personally am happy that I got this insurance as early as my first year of work. My financial advisor used to emphasize the value of retirement planning, and that insurance is an investment. As time went by, I realized gradually what that meant. Yep, all what your financial consultants and agents are telling you when they offer you products. For my personal take, I would like to add that our generation is generally adventurous. Our first jobs are probably not going to be our jobs for the rest of our lives. Legal-wise, this means that our companies may not vest the minimum retirement benefits for us if we keep exploring careers, because they need five years of tenure to vest. As to government benefits, well, you know what's happening in the national economy in general. Most of all, there is a heavier impact when we make our retirement fund on our own, from our own conscious actions of allotting the money payment due date.
Nevertheless, the most important reason I got that insurance is to impose on myself a restriction of cash outflows for a meaningful cause. It might sound bad for some, but I feel positive about dedicating a portion of my money to insurance as a fixed expense. My financial consultant used to tell me to treat insurance as an investment rather than an expense. I still think that it's an expense—it's just a meaningful one. If I didn't have this, who knows what sorts of unnecessary expenses my money would have gone.
Oh, another important point. Since I'm paying for the insurance, I was able to fix some broken tendencies, since suicide forfeits the coverage. If you know what I mean. It helped me become more forward-looking, rather than just obsessing over the present sufferings. This might be funny for some, but I'm not joking. That's hella important for me to mention.
During this pandemic, a lot of people went looking at the insurance industry, either as a policyholder or as a consultant. It's hard to get an insurance when the economy is down—health is easily jeopardized and job security is uncertain. Moving forward, I hope that more people understand the value of getting insured. After all, no one gets to live forever.
Others
As for the remaining expenses, these are composed of various categories—
Apparel, toiletries/personal care, personal effects and furniture — 8% — pretty low
Internet/load, transportation, and other expenses directly attributable to work — 6% — we worked from home since March
Blog maintenance, professional costs and membership fees, online learning, app upgrades and subscriptions — 5% — there were a lot of free courses, even for CPD, which is a relief
Others — 3% — special mention to the medicine and healthcare expenses I started to incur later in 2020. I'm probably going to continue them for the rest of my life. Don't forget to prioritize your health, folks!
Summary and Points Carry Forward
My income comes from employment, and only from there. I have to work on diversifying my risks at a comfortable level.
Major expenses include food, rent and utilities (40%), family support (24%), and insurance (14%). Moving forward, I have to constantly adjust my 2021 budget as the year progresses, as there's no telling what will happen to the economy.
Other expenses composed 22% of total expenses. This is expected to increase in 2021, because majority of the fees in that expense group now starts at regular rate (discounted last year). Hahaha.
Expenses account for 81% of total cash inflows. Difference between accrual and cash basis is very trivial.
I was able to put 18% of my income as savings or investments. It took a lot of financial reengineering to restrict cash outflows in this ugly economy. What a relief.
Most of us have a lot of financial dreams, like saving up to get married or to get a house/car. It's a good thing to dream. But most of us are crawling our every day lives, making ends meet. Being poor has forced me become almost financially independent as early as high school. It's a good thing yes. But also no—it's not something to romanticize. I don't recommend being poor. Only if we have a choice. *heavy sigh*
On the bright side, while we are not yet rich, while we are still in progress of building our financial wealth from scratch. I think it's a good practice to be mindful of our financial activities. So, I hope you picked some useful stuff here. I'm closing my 2020 for good, really.
Thank you!
PS: I hope I didn't make any mistake that can make you work the absolute figures back. Hehe, no, you can't. :)
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