ABC's to Financial Independence

It’s funny how a lot of people will excitingly raise their hands to the question of.. 

“Who wants to be a millionaire?” 

..but only a few (and some will even hesitate) wants to pursue the necessary work to achieve financial independence. 

What then is financial independence? 

A lot wants it but only a few clearly defines what financial independence is for them. That is why, most people end up quite unfulfilled in their (specifically) financial goals. 

Now, let’s define financial independence in this simplest form. Let’s imagine that we are shopping in a department store. Look here, look there...and voila! There it is, the item that you really want. Pick it up! Disregard looking at the price tag. Hurry! Go to the counter! Pay! 

How do you feel? 

For some, it will be horror. Why? What if they don’t have enough cash on hand or it’s another expense on top of the piled up loans and debts they have?

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Understanding the SSS Contribution Table and why you should not depend only on SSS for your retirement

Just recently I saw a Facebook update from Philippine Social Security System on the pension (or retirement) benefits one can avail for a certain amount of SSS contribution. 

The amount shocked me that it lead me to investigate further the math (or computation) behind the said values. 

As part of our Global Campaign for Financial Literacy, it is very important to understand what benefits we are getting for what our money is paying for. Thus, today, let us dissect and understand the SSS contribution table (as of 2017) and learn why we should not depend only on SSS for our retirement. 

We should not only depend on our SSS for our retirement

This is the image uploaded by the Philippine Social Security System (SSS) in their official Facebook Account: 

SSS Contribution and Benefits (source: SSS Facebook Page)

Now looking into the values:

Juan contributed every month 110.

Every year that's 1,320.

Thus, for the next 20 years of contribution that would be 26,400. 

While Pedro contributed every month 1,760. 

Every year that's 21,120.

Thus, for the next 20 years of contribution that would be 422,400.

Thus, Pedro contributed 16x more than Juan. 

Now, before we proceed with the shocking part, let's us understand first the SSS contribution table (data as of 2017).

SSS Contribution Table 2017 (source: www.sss.gov.ph)

For a Range of Compensation (monthly salary) there is an equivalent fixed Monthly Salary Credit. 

The current SSS contribution rate is 11% of the monthly salary credit not exceeding P16,000 and this is being shared by the employer (7.37%) and the employee (3.63%).

Self-employed and voluntary members pay the 11% of the monthly salary credit (MSC) based on the monthly earnings declared at the time of registration.

For OFWs, the minimum monthly salary credit is pegged at P5,000.

For the non-working spouse, the contribution will be based on 50% of the working spouse's last posted monthly salary credit but in no case shall it be lower than P1,000.

Source: www.sss.gov.ph

Now, going back to the above image, after 20 years of contribution, both Pedro and Juan applied for retirement and will be receiving the following pension benefits:

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Step-by-step guide: How to open an account in BDO

In building a solid financial foundation, it is important to build from ground up. We start first in protecting ourselves through healthcare and life insurance. We must make sure to eliminate our debt. Then we need to build an emergency funds before investing. 

In building an emergency fund, the best way to do it is opening a bank savings account. If you noticed, the interest rates of the banks are very minimal because, the bank knows that anytime you can withdraw money (as in the case of ATM card and/or checking accounts).

Thus, having a bank account is perfect for building an emergency fund. Today, let me share to you a step-by-step guide how to open an account in BDO. 

Bank accounts are perfect for emergency funds

Banco de Oro (BDO) is one of the major banks in the Philippines. A pretty stable company and a part of the SM group of companies (Henry Sy's companies - the richest man in the Philippines). 

I personally am a client of BDO and I love their online banking facility especially their funds transfer and bills payment.  

Thus opening a bank account in BDO for emergency funds is a perfect choice. Below is the requirements and the step-by-step guide in opening a savings account in BDO. 

BDO Savings Account Requirements:

1. Two Valid IDs - Examples: Police Clearance, Passport, Barangay Clearance, Voter’s ID, NBI Clearance, Senior Citizen Card, PRC, Postal ID, Philhealth, Driver’s License, and etc.

2. Proof of Billing - This will be used to verify your address. Examples: Phone bills, electric bill, water bill, credit card bill, etc. 

3. Two copies of latest photo - you might want to bring a 1x1 and/or 2x2 photo. 

4. Initial deposit requirement - bring cash. Different account types have different initial deposit. Might as well bring a substantial amount of cash. 

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