One degree is all you need

Question: December passed. June is just on the horizon. Pandemic or not, people are still getting married. Some are probably doing so at a lower cost with no major celebrations, just a solemn ceremony for the wedding. And for us who are getting married soon, that is one huge burden off our shoulders, don’t you think? Asked at “Ask a Friend, Ask Efren” free service at www.personalfinance.ph, SMS, Viber, Twitter, LinkedIn, WhatsApp, Instagram and Facebook

Answer: Dieter Uchtdorf is an experienced fighter and commercial plane pilot. He teaches that if you were to take off from an airport at the equator, with the goal of circumnavigating the world, but were off course by just one degree, you would be around 800 kilometers off course by the time you got back to the same longitude. That is around the air travel distance between Manila and Cagayan de Oro City!

The same is true for newlyweds.

Going into marriage, husband and wife would have their own ways of handling money. Many of these were learned from parents and friends. Some lie in the subconscious as part of the evolution of man. Here are just some of those rules that may be followed by the couple:

• Instead of renting, just use the rent money as the amortization on a loan that you will take out to buy a home
• Do not save for emergencies as the emergency you are watching out for might just come true
• Windfall income is free to spend any which way your little heart desires
• You do not scrimp when it comes to food

There are a lot more of these rules to be sure. And rules generally are good because they preserve the order and keep us from harm. However, using the rules universally when they are not anymore applicable can lead to financial stress.

While ownership of a house is good, owning it too soon can take a heavy toll on cash flow as owning a house is always more expensive than renting one. The new rule should be to acquire the home when cash flow permits. It is said that total monthly debt amortizations should not amount to more than 36 percent of gross monthly income.

Emergencies do happen in life. Would it not be better to be prepared than to be caught off guard? Windfall income is still one’s income even if he did not work hard for it. He just needs to think that because of this easy money, he will be able to fund some (future) expenses just as easily. And anything in excess is bad, even food. To paraphrase the motto of community pantries, consume what is needed (with a taste of luxury only from time to time).

Couples can definitely end up being way off their long-term goals even with just seemingly minor miscalculations at the start of their marriage. Sometimes, the miscalculations arise from overconfidence if they have sizeable starting funds or high income, both of which can, in turn, lead to overspending and even “over investing.”

The good news is that course rechecking and corrections, if needed, can and should be made periodically. And the foundation of such course corrections should be solid and comprehensive financial plans. The later and more infrequent the course corrections are, the bigger and more costly the corrections will be.

Remember, even being one degree off course, so to speak, can lead to financial havoc many years down the road. INQ

Efren Ll. Cruz is a registered financial planner of RFP Philippines, seasoned investment adviser, bestselling author of personal finance books in the Philippines. Become a YAMAN Coach. For details, email [email protected]. To learn more about personal financial planning, attend the 89th RFP Program this May 2021. To inquire, e-mail [email protected] or text at 0917-6248110

Copyright 2021 Efren Ll. Cruz, RFP. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without the prior written consent of the author.