Blindingly bright sunshine and heat that makes the air shimmer lets us know that summer is most definitely here and for the kids, school is out. Tuition won’t have to be paid for another three months. Hooray for the parents, right?
But the beginning of summer doesn’t mean the end of your expenditures. The heat can and will make you spend for things as minor as a cone of your favorite ice cream flavor or heat-friendly clothes to things as major as a drastically increased electricity bill if you choose to turn on your aircon every night. Not to mention, you and your family might choose to escape the heat by going to the mall to watch the latest blockbusters or even plan a trip out of town. If you’re not careful, you’ll be wondering where to get the money for enrollment, textbooks, and new uniforms before you know it.
You don’t have to completely give up your “cool-down pleasures” to cheat the heat.
Your electric fan will keep you cool only if you position it beside a window so that it sucks in fresh air from the outside. It also helps if you keep your windows open. Also, the fan makes you feel cooler because it helps in the evaporation of your perspiration, perspiration being the body’s mechanism for cooling you down. So don’t leave an electric fan running in a window-less room without anybody. Not only with evaporative cooling not work, the air to be circulated by the fan will be slightly warmer because of the heat of the fan’s motor.
Use other people’s aircon by going to the mall on weekends. But don’t eat other people’s food by buying from mall restaurants. Eat a major day’s meal at home so that you bring your food craving down. And be sure to leave the mall before your cravings for the next major meal of the day crop up.
If you want to travel, check out the websites offering cheap travels. While there are many such sites, they do not exactly have the same offerings. It would therefore be wise to Internet-window shop. Just remember the low price equals low quality. You cannot have it both ways (i.e. low price, high quality).
But the truly the best way to cheat your way to a fun summer is to plan ahead. This way, you do not have to compromise on the quality of your fun. Monitoring your expenses can take the fun away from summer. On the other hand, planning ahead means doing the hard work way before your scheduled summer fun is upon you. This hard work is nothing more than investing your hard-earned savings.
How long should you be investing? It would be safe to prepare five years before your scheduled summer fun. And if you plan to enjoy every summer, you should have investments also on a five-year rolling basis.
Where should you put your money? This will depend on the following:
- Period of investing
- Periodic amount to be invested
- Any starting investment amount
- Future cost of the summer fun
In MS Excel, the factors above translate into the following formula:
=rate(period of investment,negative periodic amount to be invested,starting investment amount,future cost of summer fun)
-rate(nper,-pmt,pv,fv)If periodic investments are to be monthly, the period investment should also be in number of months. Consequently, the resulting rate should be multiplied by 12 to get the annual rate of return.
Finally, on a very rough rule of thumb and based on current market conditions, the following table gives the types of investments per level of required investment returns:
Required Net Compounded Active Source Risk Profile
>20% Business Ultra-aggressive
>10% to <=20% Stocks / Stock Funds Aggressive
>=7% to <=10% Combination stocks & Neutral
>=3% to <=7% Bonds / Bond funds Conservative
<3% Money Market / Money Market Ultra-conservative
If you need to earn high returns but find that you do not have the corresponding risk profile, you could do one or a combination of the following:
- Lower your goals to lower your required return
- Allocate more money to serve as your starting funds
- Delay the schedule for your summer fun to allow you more time to earn at a lower rate
- Add to your periodic contributions to lower your required return
- Level up on the risk that you are willing to take
Remember that summer is best enjoyed when money is of no concern.
(Originally written by Efren Ll. Cruz, RFP at http://www.savingstips.com.ph)