Want to achieve Financial Success? Do not start with saving.
On an individual level, the Philippines is one of the countries with the lowest rate of financial literacy.
Even if we don’t base it on statistics, using our own eyes we can see that there are a lot of people who aren’t managing their finances effectively. If we zoom in on the problem much closer, we are sure that all of us know that our nation is suffering from poverty as well. Learning about financial literacy and proper handling of your personal finance may not solve the concern regarding poverty in our country, but it’s a great first step towards financial success.
MINDSET HELPS YOU ACHIEVE FINANCIAL SUCCESS
So now what do we do first? Should we learn how much of our income should we set aside, learn how to lessen our expenses, or begin investing for the future? Well, none of those are actually the first step. The first step is to believe with your mind, heart, and soul that proper handling of your personal finance is a PRIORITY. You should also set in stone that achieving FINANCIAL SUCCESS and FINANCIAL INDEPENDENCE is a must!
A lot of people try to begin on their journey towards financial freedom but meet unnecessary challenges too early. The main reason for this is a lack of self-discipline, and that lack of discipline comes from not having clear and set out goals or objectives. However, once you make it a priority to manage your finances the best way possible, those little bumps along the way that many others experience will likely disappear. Always remember, you find ways to achieve the things that are a PRIORITY to you.
PLANNING FOR FINANCIAL SUCCESS
The next thing you will need is a set of clear and decisive goals. As with anything we would like to accomplish, we will need something to motivate us. When you set out goals it need not be purely long term; make goals for the short, medium, and long term. By doing so, you can reward yourself with every short and medium-term goal achieved to keep you motivated to reach that long term goal. Write these goals down on a whiteboard or write it on a piece of paper then stick it up on your wall to see every day.
Once you’ve done the two essential things mentioned above, then you can do these nitty-gritty things that will help you achieve financial freedom.
SAVE
We’re sure this didn’t shock you, but it is essential on your way towards financial freedom. The problem is many of us fail to save in an OBJECTIVE manner. We think that as long as there’s a little bit of money left in our bank accounts that means we’re saving enough money. The first thing we will need to do is allocate a percentage of our income to savings, this is the #1 priority!
You don’t have to save 80% of your income, even saving as little as 10% to 20% of your income on a consistent basis over the long term is already enough to get you started. It’s definitely better than blindly just spending all of your income without properly allocating any money for your savings.
Most importantly, the proper equation is not income – expenses = savings. The proper thing to do is INCOME – SAVINGS = EXPENSES. By following the proper equation there should be no reason why you won’t be able to save a specific amount per month.
LOWER EXPENSES
Let us get things clear from the get-go, we’re not saying that you shouldn’t enjoy life or buy things you want. However, if you really want to achieve financial freedom then you will need to make some sacrifices and focus on the things you NEED.
Here’s one great way to think about how you can lower your expenses significantly. Let’s say you’re someone who’s an avid buyer at Starbucks, but you want to lower down your expenses. Ask yourself, “Do I really need this cup of coffee worth 160 pesos?” We all know the answer, you can probably live without having to buy a cup of coffee from Starbucks every day. Or if you really need coffee to jumpstart your day, can’t 3 in 1 coffee or a cup of coffee from 7/11 do the trick?
When you think about lowering your expenses focus on areas where you can be more practical. Find ways to look for cheaper alternatives to the things you’re already doing. Most importantly, if you don’t really need it, then find the strength not to impulsively spend on things and just add it to your savings.
CREATE AN EMERGENCY FUND
This is not something you need to begin doing immediately, you can do this after six to eight months of consistently saving a portion of your income. Now, remember, your emergency fund is SEPARATE from your savings. So if you keep your savings in a bank, you should open a separate bank account solely for the placement of your emergency fund. Why? It’s because this fund, as the name suggests, is for EMERGENCIES ONLY! We need to take out all forms of temptation to use our emergency funds unless it is really needed.
So what’s the best way to build up an emergency fund? If you’re saving 20% of your income, you can begin to allocate 5% of that to the emergency fund. So you will be saving 15% of your income then the remaining 5% will go to the emergency fund. By not buying the things you don’t actually need yet, you can also place that excess cash in the fund.
So now, how big should your emergency fund be? A good emergency fund is one that is equal to the amount of six to twelve months worth of salaries. Given that, it won’t be easy growing your emergency fund. However, by putting a portion of your income to your emergency fund consistently, you should be able to accomplish this in 18 to 24 months.
INVEST
Let’s say you’ve found a way to lower your expenses significantly, you’ve saved a good amount of money, and your emergency fund is stacked and ready. What’s the next thing you can do? The next thing you can do is to INVEST your money. So, what is investing? This is basically making your money work for you. There are many things you can invest in, there’s stocks, bonds, currencies, treasury bills, mutual funds, UITFs, and the like.
So what’s the advantage of investing your hard-earned money rather than just placing it all in the bank? If all you do is put your savings in a savings account, the value of your money is actually depreciating due to INFLATION. This is when the prices of goods go higher, and due to the low-interest rates of savings accounts your money is actually losing value relative to inflation.
By investing your money in places like the stock market, you can potentially make a bigger return on your savings which should be enough to combat factors like inflation. Now the question is, how do the above-mentioned investment options work? Know more about the investment that fits your needs and learn about effective investment strategies so you can build your wealth. Join Investa Online Summit this June 27!
For more information, visit www.investagrams.com/investasummit
