InvestaDaily

We have been there, staring at our credit card bill and being overwhelmed by the sums of debt we have accumulated, the interest that comes along with it, and the credit terms pressuring you to pay by a specific date as if you have not enough deadlines in your life.

The worst part about debt is that it keeps us from reaching our goals, the more of it that we have, the farther away we are from our dreams and our financial freedom. D2ealing with debt is exhausting and stressful, but it does not have to take forever to pay off. 

CONTENT:

• What is debt 
• How debt keeps you from reaching your goals 
• Stigma of debt 
• Debt as a prison 

TL;DR

• Mind the gap (fix budget) 

○ Increasing Revenues 

○ Decreasing Expenses 

• Avoid Credit Card spending 

○ Deleting Cards from Online Stores 

• Reward yourself (with cash you have!) 

Methods 

• Avalanche Method 
• Snowball Method 

Conclusion 

• What method do we recommend? 
• Recap on the tips 

The first thing we have to do to pay off our debt is to mind the gap. This is the gap between your monthly income to your monthly spending. Having a tighter gap leaves you less room for financial flexibility, that is why there must always be a significant gap between your income and expenses. There are two ways to increase the gap, either you increase your income or you decrease your expenses. Managing to do both would be the best thing you can do.

By making the gap bigger, you can make enough room to pay for your debt in a shorter period. Try to think of anything that can help increase your gap, brew your coffee at home, prepare your own meals, eat out less, or maybe sell those old guitars you do not use anymore, anything would make a big impact. 

Next, we have to avoid credit card spending at all costs. It would not help acquiring more debt if you cannot pay off your current ones. Delete your credit card information from your favorite online stores, remove it from your internet browser, delete Shopee and Lazada from your phone, or even go as far as cutting your credit card.

It may seem like a punishment to you, but being free from debt is better than being stuck in a loop of acquiring debt and draining yourself to pay them off. Once we have established your gap and preventing further debts, we can now move on to strategies that we can use to be finally free of debt. 

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The Avalanche approach is the quickest and cheapest way of paying off your debt. You simply have to list down your debts from the greatest amount to the least, and pay the biggest debt first. This makes it so that you minimize the interest you have to pay by eliminating the biggest amount as quickly as possible, and after paying off the greatest amount, you can use the additional cash flow from paying off that debt to easily pay off the following amount, and so on. As simple as it may sound, the Avalanche approach is easier said than done.

This method makes it hard to start since you are dealing with the greatest amount first. Moreover, it is usually demotivating for you since you do not see results immediately. As humans, we love to see results quickly and not being able to get the results we want can be overwhelming. That is why in the next approach, we will be using human psychology to our advantage! 

The Snowball approach is perhaps the more effective method of paying off your debt. It is the opposite of the Avalanche approach, wherein we pay off the smallest amount first. This makes sure that we feel motivated everytime we scratch debt off our credit card bill. Even though this is not the cheapest method of paying off that debt, allowing the bank to squeeze a little extra interest from us, this method is more likely to keep you in track to your debt free life which, after all, is our goal.

In sum, we recommend that you start off small and pay the smallest debt using the snowball approach. Always remember to mind your gap, the greater the gap, the faster you’ll be able to be debt free. Avoid acquiring additional debt from the ones that you already have and finally, make sure that you are always on track. Do not forget to reward yourself every now and then, you deserve it. Paying off debt is not an easy thing to do.

If you are reading this article chances are you think you are too young to invest. You also probably think that you do not have enough money and that you lack the necessary business skills needed for investing. The truth is, most people need investing as a way to safeguard their future.

For those of who are still on the fence, it is important to remember that your investing journey does not start with your first deposit, it starts with your first initiative to learn about investing. But why exactly do we need to invest and if ever, how can we start?

 

First Reason to Invest: Compounding Interest

There are two main reasons to invest at a young age. The first one is compounding interest. The earlier you start investing the more your funds accumulate. Investing is all about making your money work for you and the sooner your money works, the sooner it multiplies to create more money which will in turn create money thereby creating an endless cycle of wealth creation.

For example, If we assume a starting capital of PHP 10,000 and a compounding  interest rate of 4% per annum and let’s assume that you start at age 25, by age 70 your investment will be worth PHP 58,412 amount. However if you keep the interest rate and the starting capital constant but instead start at age 15 your investment will be worth PHP 86,464 once you reach 70. Of course this is an oversimplification and you probably won’t have the same funds when you are 15 and when you are 25 years old but try it out for yourself with values that you think are realistic. 

Second Reason to Invest: Risk

The second reason is your ability to take risks. Adults typically don’t have the appetite for risky investments the same way young people do because adults have responsibilities to their family. Therefore, by the time someone starts a family, a person’s investment philosophy should be about safeguarding the future and capital protection as opposed to significantly multiplying their net worth.

On the other hand, you being young, can take on more opportunities with your desired amount of risk with minimal downside. With this, you are more likely to learn from your mistakes earlier and start being profitable earlier.

How to Start Investing

So how exactly can you start investing? You don’t have to go to Business School, you don’t even need to go to college to invest. In the digital age all it takes is 20 seconds. All it takes is 20 seconds to follow people in the finance world on Facebook, Twitter and on YouTube. This seems like a small thing but when you see finance on your timeline, it encourages you to learn more about finance and investing. In a way, you’re planting these small ideas into your mind which will eventually turn into your drive; into your passion for investing.

But let’s say you want something more actionable, what can you do? One of the most practical things that someone can do is to allot a certain amount of time to learn about investing. This can be done an hour per week or an hour per day; it depends on your schedule and how quickly you want to learn about investing. All you need to do is to look up basic terms like “interest rates”, “investing”, “capital”, and “compounding interest” and eventually, you will never run out of things to look up.

However it is important to have savings before applying your learnings on investing. Being young does not give you an excuse to be reckless. You still have to employ risk management strategies as well as to have a “cushion” just in case your investment doesn’t go as planned.

if you still don’t know where to start you can head on to InvestaUniversity, a free stock market program filled with activities, a welcoming community, and instructional videos all geared towards helping you make that first investment and eventually, financial freedom. 

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Maybe you are one the beginners who wants to know the best investment to make. Will I be choosing between insurances? Real estates? Stocks or mutual funds? Or should I just hire a private fund manager for my own investment? It’s up to you on what to invest.

But the best among all is investing in yourself! Investing in yourself makes a great difference before even deciding to invest on stocks, mutual funds, insurances, or real estates! Starting early in investing in yourself can give a great impact on your finances. Why is that? Because you can create a healthy and positive learning environment for you to grow!

Investing in yourself is not all about money but increasing your financial education as well. Even before pandemic, there are lots and countless of instruments that can be used for learning. Here are 5 tips on how you can create a better investment for yourself!

Tip #1: Learn from investing and financial lessons from books and eBooks!

The most common way to learn is to read! Reading dismisses a new and fresh perception. It’s not just a sole requirement in your college classes, but it will also help you learn great, substantial and significant concepts. Both books and eBooks are a springboard for learning. Here are some books you can check!

• A beginner’s guide to the stock market by Matthew Kratter
• Investing All-in-One for Dummies by Eric Tyson et al.
• One Up on Wall Street by Peter Lynch
• The Genius Habit by Laura Garnett
• The Power of Habit by Charles Duhigg

Tip #2: Take online courses and write down your notes!

Yes, that’s right! Take online courses and get some supplementary notes that will help you learn! There are some that offers free online courses with free certificates. You can read a wide array of book selection, from science help books to finance. Here are some sites that you can check and start enrolling for free sessions!

• Alison
• Asian Development Banks
• Accenture
• Google Analytics

Tip #3: Virtual Trading

One of the fun ways to learn is through games! And that’s right you can learn from virtual trading without actually using a real money. Virtual trading is more than just a game. It serves as a learning platform for you to apply and experience a simulation with the market. You can also check our very own platform for this! You can try and have a solo play or even challenge your friends or another peer from a community!

Tip #4: Attend webinars, events, forums, live discussion, and symposiums!

Get to be engaged in a community and attend webinars and other events of the like! Some offers a free session and you may want to take advantage of that! You can also check on our very own live discussions and our online talks! Attending events like this would also help you interact with the community. You can also ask questions and have them answered. It’s a two-way learning!

Tip #5: Watch some videos & motivational speeches about the stock market!

YouTube is one of the biggest platforms in social media. The great thing about this is you can learn from influencers, professors, and experts absolutely free! All you need is a device to watch. At the same time, you can learn from our site and check on the lessons and videos! 

Teach yourself to invest and have a fun financial journey ahead! 

”20% niririsk ko per trade, kaya ko pa ba? Thrice na nawipeout yung account ko, should I prioritize my stoploss kaysa sa target profit?”

Understanding your risk and financial management is more than handling your emotions, but also being grounded with the right education and knowledge on the stock market principles. A 5000 pesos gain can turn into 20 pesos in no time if you do not know how to properly handle your account.

Here are some of the quotes or saying that may possible bring a change and a paradigm shift on your financial management

Quote #1:

You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets – Peter Lynch

Peter Lynch is one of the known investors and mutual fund manager in the world of stock market. He is also one of the many successful investors of all time! Being great in the market does not only mean successes and understanding the market structure. It also takes one to recognize that the stock market declines and fall, and that it the reality of the stock market.

If you are not able to accept this fact, your 100k capital investment can be wiped out anytime! Why? Because you are too confident with the market and your own assumptions and decisions. To be able to beat the market is to be able to accept that even the stock market fails. Learn and re-learn your mistakes on why you are losing. Get back on the track and use your losses as opportunities

Quote #2:

The stock market is a device for transferring money from the impatient to the patient – Warren Buffet

Even the greatest Warren Buffet explains that emotions are dangerous creatures! Being impatient is a mark of losing in the stock market. Once impatience takes over your mind and soul, your decisions gets grounded on fallacious, biased, and unclear foundations.

After that, you create poor results and executed actions. One day, you just sold out all your 2000 shares! But the next day, the market went up. Do you see the part where you lose? It was the part where you have lost your patience. Be patient with the market and be guided with accurate, reliable, and unbiased factors on your decision making.

Quote #3:

Rule #1: Don’t lose money. Rule #2: Don’t forget Rule #1 – Warren Buffet

One thing to always keep in mind is to not lose money. How can you do that? Rather than prioritizing your target profit or reward, set your stop loss! It’s just like a child, who can’t swim with a height of 3 feet, who would be diving into an unknown 5 feet pool. Does he know that the pool is 5 feet tall? Will he be able to swim? Why would he dive into that pool?

The risk of diving is similar to your indicators in trading. You must first analyze what you are about to get into, and the reason why you are going to be diving. Just because a same kid of 3 feet have dived doesn’t mean you are safe; it is also similar to your historical prices. Everyone has their own tolerance and set of skills. You must accept that too!

Conclusion

The quotes above are just some of the ways you can change your mindset and attitude towards the market. This will also help you avoid or prevent yourself from creating errors or experiencing another the same mistake. May you continue to have the burning desire to learn more about the stock market!

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