Obviously if you want to be a writer, literacy is a must; but how is your financial literacy? When it comes to life decisions, being a freelancer can be very rewarding – but also very risky.
Putting yourself first above all also entails preparing for your financial future. Are you stable enough financially that you can create without major worries? Are you making your hard earned, possibly fluctuating income work as hard for you as it can?
Since neither of us are in a great position to offer financial advice (read: the opposite), we chatted with friend and financial officer Tina Cruz to figure out how empowered financial decisions can make us better creators. Take it away, Tina!
Can you tell us briefly about what you do for work? How long have you been in the banking industry?
Hi, I’m Tina and I’m a Business Development Officer at Banco De Oro under Trust and Investments Group. I’ve been in the banking industry for 7 years and have experience in the retail banking and wealth management for high net worth individuals.
My role is to generate volume and revenue for the bank through marketing and selling of investment products such as Unit Investment Trust Funds, Fixed Income etc. to existing and prospective clients. I also do financial advisory, investment briefing for internal and external clients.
Investing 101
How do you explain investing for people who have absolutely minimal knowledge about investing? What are some key facts that people should know?
Investing is making your money work harder. The main goal of is to beat the rise of price in goods and services (aka inflation), to earn more, reach a certain goal and retain the lifestyle that you enjoy now.
Just like in love, investing has risks. We always say that without risks, there are no returns. Therefore, it’s a life-decision, too, as part of your hard-earned money will be set aside in something that has no guarantee in hopes of getting a higher potential return. If you check banks or read the papers or watch the news, nowadays, regular savings and time deposits don’t yield more than 1% per annum.
One thing I want to point out is that savings and time deposits are not investments. These are deposit products. If you put your money in those outlets, you’re actually not investing because the current inflation rate is at 4.5%. Inflation depreciates your purchasing power. What your Php 100 can buy before may not be as much now and the sad thing about it is that we can’t control it. We can beat it by putting our investible funds, money we won’t need for certain period of time, in an investment that can potentially givea return of 4.5% or higher.
There are still a lot of Filipinos who don’t invest, probably because it’s not a practice that the majority is accustomed to. Most save their money in banks and they keep it liquid (withdrawable anytime) in case of emergencies. The most common accouunt that people avail are time deposits because they’re safe, guaranteed and give a fixed interest.
Whenever I talk to newbies, the common misconception they have about investing is that it requires a huge amount of money and that it’s all about stocks. There are some banks who allow investments for as low as Php 10,000 and there are various products where you can invest too. There are government bonds, corporate bonds to name a few.
However, it’s also important to know yourself as an investor since there are risks involved. Best to assess yourself the Client Suitability Assessment which all financial have to know your risk profile and what investment products are suitable for you.
Why should people invest? More specifically, why should writers and artists invest?
We work to make a living, sustain a certain lifestyle and reach our goals like buying a home, travel abroad, prepare for retirement or saving for your child’s education. I’m also sure that you will all agree with me when I say that we want our money to grow. With the inevitable rise of prices in goods and services, the value of our money or purchasing power depreciates. Saving or accumulating money is good, but wouldn’t it be better to make your money work harder for you? Investing your money is your road to financial freedom.
Investing for Freelancers
Do you work with a lot of self-employed people? If so, how does the process with them differ from people with salaried incomes, if at all? Do they approach the bank, or does your bank have targeted programs and services?
Yes, the majority of my clients are businessmen or those who were really born wealthy. However, the process of how we do business with our clients is standard as we are regulated by Banko Sentral. Clients have to go to the bank to inquire about our products as we need to conduct a face-to-face interview or Know Your Client (KYC) to prove identity and validate source of funds. We conduct events and talks to attract new clients too.
There are a lot of women who want to pursue freelance writing as a fulltime career. Often time, perhaps because of shows like Sex & the City, the idea is often extremely romanticized. I was wondering if you could give us your personal insights on what the actual financial implications of this romanticization could be.
I think Sex and the City highlighted the idea that you can actually do what you love and earn from it. Case in point, Carrie Bradshaw as a columnist/writer. The show portrayed her character in glamorous way that those who would want to follow her lead might get the idea that you can actually live a lavish lifestyle with the income you get from writing. Of course, she’s been in the industry for so long and has made a name for herself so I would assume that she’s really earning a lot to afford her designer clothes and shoes. However, it’s a different case for beginners. The series lacked to show the struggles of being a freelancer.
Being a freelancer would mean: 1.) Not having a fixed income. I’m pretty sure you won’t be getting the same fee for every project, at least in the beginning. 2.) Irregular stream of income. You may have completed your projects but it’s possible that you won’t be getting your pay that quickly. 3.) there are times when you won’t have a project so that means you have to live with what you have for a while.
Those are just some of the trade offs of being on your own. Your life and financial stability is in your own hands. If you don’t know how to manage your funds enough then it won’t be too long when you don’t have anything to spend.
A lot of people go into freelancing careers knowing that their income can fluctuate over time. Are there any measures that potential freelancers can take to protect themselves against instability, either before or during their freelance career?
- Build an emergency fund – as I mentioned earlier, you should have at least six times of your monthly expenses in your bank account to make sure that you have something to spend in cases of unforeseen circumstances such as hospitalization, job loss, etc.
- Set aside an amount regularly – forced saving will not only instill discipline, but it will also ensure that you have money for a rainy day.
- Educate yourself in investing – you want your money to work for you while you sleep.
- Invest early and regularly – investing early and consistently will translate to better return on investment.
- Avoid debt.
These days more people – especially new grads and 20-somethings – are encouraged to “do what you love.” However, doing what you love doesn’t always translate into a lucrative career. Do you think you would you give the same advice of “doing what you love” or offer different advice? What are some ways that people can follow their passion while still looking out for their future?
For me, it’s important that you do what you love because you’ll be doing it for the most part of your life. It’s also better if you realize it earlier because when you’re older and experienced in a particular task/job, it can be difficult to shift careers and start all over again. They say that if you love what you do then it won’t feel like a job and I totally agree with that.
But to be realistic, whether we love what we do or not, we have to remember that we do our jobs to make a living. Maybe for the 20 somethings, they just think of themselves for now. But it won’t be just them when they get older. They will eventually have families of their own to feed. Whether we love what we do or not, we have to do it 100%. With that, we also have to think of the financial side of things.
Income – Savings = Expenses
Filipinos are known to be big spenders even if they don’t have much. But if you want to live comfortably, you have to live within your means. Forced saving is not about how big you set aside, it’s committing to save a specific amount consistently. Most importantly, get out of debt.
What would you consider some of the most important financial considerations any freelancer should undertake? Any “golden rules” of financial responsibility to follow?
- Have a goal in mind – There are some people who accumulate money without having a reason where the money is for. The most common answer I get is that they want to grow their wealth and that’s a correct answer. Why not try having a goal in mind. That way you’ll put more value in what you earn and save. You won’t easily withdraw it on impulse because you’ve committed that pool of money for a goal you want to reach in a few years time. Example, travel to Europe or buying a new car.
- Income – Savings = Expenses – Saving using this formula will help you grow your money in no time.
- Educate yourself on financial matters so that you’ll be more careful on how you spend and invest your hard earned money.
Investment Advice
Now that I’ve started my writing career and things are generally stable, what is the best way to start investing? Which investments I prioritize and look into? How much do you need to start investing? What’s the ideal amount that someone should have?
The best way to start investing is by researching about it. There are different types of investments namely real estate, insurance, stocks, etc. Find the investment that interests you and learn about it. That way, you know a thing or two and you’re least likely to get tricked.
For beginners, however, I would recommend you check out Unit Investment Trust Funds and Mutual Funds. Personally, these products are the best starting point for investing as they’re affordable and available in majority of banks. Most banks require a minimum amount of Php 10,000 to start investing. You can also regularly add to it by enrolling it in Regular Subscription Plan (BPI) or Easy Investment Plant (BDO). You dictate the amount and frequency and the bank will automatically add that to your investment.
What are the most important questions that freelancers/writers/self-employed people should ask an investment advisor? How can one pick not just the right advisor but the right investment?
Always ask them to explain to you the product features and the risks involved. Remember that you’re going to put a portion of your earnings in a particular product for a possible return so you deserve to know everything about it most especially the risks. Research, research, research!
Some of the questions that you can ask:
- How does this investment work?
- Is this capital protected?
- Is the return fixed?
- How do I gain or lose money?
- How can I monitor my investment?
The only way to know the right investment for you is by knowing how much risk you’re willing to take. The Client Suitability Assessment is a great tool in determining your risk appetite and the result of which will help identify the kinds of investments you can participate in. Risk Profiles can be conservative, moderately conservative, balanced/moderately aggressive and aggressive. However, people change over time and so can their investment objective. It’s possible that you may be conservative now, but aggressive later on. So it’s also possible that your investment portfolio will change over time.
How important is the relationship between advisor and client? How often does communication happen? How can clients keep track of their money, essentially?
It’s very important that we build and maintain good relationships with our clients because the banking industry is mainly in line with our clients. Their money and needs are what we’re here for. The level of our customer service is also crucial because it can have reputational impact to the company. So we ensure that we give our 101% all the time.
In terms of communication, we can accommodate meetings or portfolio review as and when requested, but quarterly is a good frequency. In fact, most banks offer online and mobile accesses to investments so you can monitor the progress of your account. Elsewise, you can always visit the bank for an update.
Should writers play it safe or invest in higher-risk funds?
Investing is personalized. What one has may not be suitable to the other. I have a lot of encounters with clients who “copy” their friend’s investments then later on regret they put money in it because they’re losing. It’s very important that you know who you are as an investor. We gauge the risk you’re willing to take and recommend products based on the result of the Client Suitability Assessment, which you can through banks and other financial institutions free of charge.
Personal
Do you have any creative hobbies?
I wish I could say I do, but unfortunately, I’m not gifted in that department. I love to dance, but it’s more for fun so I’m not sure if you could classify that as creative!
You actually run a beauty blog as well. What are some of the main benefits you get from maintaining a blog? Have you ever considered doing it full-time?
I started a blog out of boredom. I surprisingly had a lot of idle time in my previous job and I wanted to fill in my schedule by adding more activities. I also happen to be online most of the time and of course, I love makeup! So that’s when my blog came to life. It’s only been less than 2 years but I’m surprised of where and what I’ve accomplished so far. I’ve met so many wonderful bloggers friends who share the same passion with makeup as I do. I’ve also worked with a few brands and of course, receives free stuff.
I didn’t expect all of this to happen! I never thought people would actually notice my little corner of the web and I was fine with just a few readers. And honestly, doing it full-time had crossed my mind. After meeting top bloggers in the country who make a living out of it, it really is possible to do what you love. However, I learned to love what I do and worked hard to be where I am today. I dream to climb up the corporate ladder so blogging will remain a hobby for now.
Just like healthy eating and working out, financial responsibility is much easier said than done! How hard/easy is it for you to follow your own advice in your personal life?
It’s hard to practice what I preach, to be honest. I’m not always consistent because I also want to enjoy the fruits of my labor. I like to shop, travel and eat out. It’s just that sometimes I go overboard! Haha. If I spent so much this month, I try limit myself the following month. However, there wasn’t a month that went by without me saving a portion of my salary. I always do regardless of the amount and I make sure I put it in my investment so I can’t touch it.
Thank you, Tina!
