Personal Financial Planning (Cash Flow, Debt, Education, Housing)
What the domain tests
Personal financial planning tests cash-flow control, debt management, emergency reserves, education funding, and housing decisions.
Core rules
- Emergency fund: 3-6 months of essential expenses in liquid, low-risk accounts.
- Debt: keep total monthly debt payments below 36-40% of gross income; pay high-interest debt first.
- Education: estimate future cost with inflation; use time-segmented investments.
- Housing: compare rent versus buy; budget for down payment, amortization, MRI, fire insurance, taxes, and maintenance.
- Pag-IBIG and bank loans have different rates and terms; compare total cost, not just monthly payment.
Worked example
A P1,000,000 housing loan at 6% annual interest over 20 years. Monthly rate = 0.06 / 12 = 0.005; n = 240. Amortization = P × r × (1+r)^n / ((1+r)^n − 1) = P1,000,000 × 0.005 × 3.3102 / 2.3102 ≈ P7,164 per month. Reasoning: the formula converts the loan into equal monthly payments; add MRI and fire insurance to get the true housing cost.
Traps
Buying a house with no emergency fund; using credit card cash advances for a down payment; ignoring education cost inflation; comparing only the first-year loan rate; forgetting closing costs.