Savings Tips

Are you ready to take on #Adulting? Let our Savings Tips guide you! It’s Insular Life’s official blog dedicated to share articles and tips to the public on how to save, invest, budget, plan your finances, protect your wealth, among others.


Of the many types of pricing, two come to mind that can help demonstrate this mantra of financial planners of “paying yourself first.” These are cost plus pricing and target costing.

Cost plus pricing works for a company if it has no competition. All it has to do is compute what its cost of production is and add to that the profit it desires to earn. When applied to individuals, cost plus pricing refers to asking for a salary equal to their basic living expenses plus the excess with which they want to enjoy life. And as with companies with no competition, individuals can only practice cost plus pricing if they are so unique and talented.

I am reminded of a fresh college graduate who probably earned all of the awards one could earn for his course. When the recruiters came calling, he invited two to one place and, when both were already seated in front of him, told them to bid for him.

Under target costing, a company operates in a highly competitive environment wherein it has very little pricing power. Such companies know that they are earning their desired profits if they are operating at their target cost. For individuals who need to follow the salary grades of companies, they will achieve their savings if they operate at their target cost of living. For individuals, if they live frugally, they will be able to save from their non-negotiable salaries.

Under target costing, income minus target expenses equals savings. In financial planning, the formula was inverted to reflect income minus target savings equals expenses. But here is where many people fall short.

The amount of savings must have a basis. Just following a rough rule of thumb on the percentage of income to save will not cut it. The amount of savings will be determined by the goals that need to be funded compared to any existing investible funds and balanced by the saver’s risk appetite. In addition, part of the savings should include the amount needed to protect the plan in case of the premature death of the saver and potential damage to or loss of his property. This protection comes in the form of premiums for the appropriate insurance policies.

So, while paying yourself first means budgeting savings first before expenses, such savings must have a solid basis. Otherwise, savings may very well fall short.

Do you want to find out if your savings are sufficient to cover the goal that need to be funded? … Or you don’t have a goal yet?  Check out Insular Life financial calculators and we may just be able to help you out.  Visit:  You can find a policy that can address your needs here, too!

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