Starting early

source: http://economictimes.indiatimes.com

Remember our generation?

For my friends out there who is within my age group do you remember when our parents ask you to save some of our allowance and deposit it in a bank? That was our generation, the saving generation. I remember my dad opening an account for me and my siblings and deposited 50 pesos(yeah back then that amount still has a value but now its just plain 50 pesos).

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But why did our parents did such. To tell you the truth I don't really remember what happen to that account. The very first bank account which I really open for my own was with BPI when I was in college to handle the money my parents sent me for my education in Manila. For most of us our parents are from the provinces and the common notion to gain financial freedom is through savings which was still good at that time. When you are in a rural area savings are good emergency funds that you can pull out in case of emergency. But times has already changed.

Remember my post about how I allocated my salary to six funds?(click here to read that post) Yup these times ask for such action. It is not enough for us to save but we should as well set aside money for emergency, for investments, and other bunch of funds or baskets or envelopes if that is how you do your budget to ensure that when such is needed we can really pull out something.

That is why it is wise to start while young. 

Is it too late for us? I wouldn't say that it is too late but rather let us not waste time while we are at it. At the same time if you are a parent as well it would be nice if you can start your kids not only savings but also investing.  This morning I was cleaning some parts of our apartment's backyard where short grasses have grown. Some are easy to pull out  but some required my 100% strength to pull out. As I was doing manual labor I realize that the longer or deep the roots are the harder it is to pull. 

Why don't we make sure that the next generation, that is our kids, will have deep roots in savings and investing. Now most kids are more prone to materialistic lifestyle which they actually acquired from us. 

Why do you expect a child to save when you yourselves can't. Just like the old TV commercial that says "anuman ang ginagawa ng matatanda; ginagaya ng mga bata" (whatever adults do kids follow)something like that. 

It is a sad truth. We complain why kids today are so unruly, spends a lot, and into such profanity at an early age but in reality what we see is a reflection of ourselves. What you and I see is what we are in compressed form. 

So how are we going to correct this?

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Start early. There is still time. If you have a credit card debt, cut your credit card and stop buying unnecessary things. Little by little pay your debt and simplify your lifestyle. If you want your kid to stop bugging you buying the latest PSP or XBox you yourselves should stop buying new cellular phone every other two weeks. If you want your kids to save up only go once a month to your favorite resto which you usually go to for dinner every other day.

Start small, think big. Start early.

It doesn't have to be a sudden and major change because when you do that you will experience withdrawal syndrome. Cut your spending little by little.

I remember a story of a former alcoholic who nearly  lost his family. One day it just came to a point where he was so drunk that he didn't recognize his wife and kids when he went home. He hurt them. After the effects of the alcohol subsided he realize what he had done and wanted to change. He seek a friend's help who is also priest. His friend told him to spend a week with him. After talking to his wife and kids he bade farewell and spend the week with his friend.

First day was a shocker. When he opened his friend's refrigerator it was full of beer from the freezer to the vegetable drawer. Imagine how he was surprised(probably his friend is also alcoholic). But then his friend told him to grab as much as he can. He was hesitant at first but he got one. After that he accompanied his friend on his priestly work. 

source: http://www.myspaceantics.com

In the evening after dinner he ask his friend about the refrigerator full of beer. His friend told him drink as much as you can today but tomorrow and there after you take out one bottle until you finish all. With that he said okay and did so.

After a few days he started to noticed something. Since he has taken out one bottle every other day his craving for alcohol seems to dwindle down until he can manage to live a day with just one bottle. That is the time he realize his friend's point. Human nature dictates that it holds on to what is already established. That is why he has to take out that thinking or psychology little by little until he it is taken out of one's system.

Sorry for the long story but lets apply this to our saving and investing. Most of the people I meet who have known about my investing venture would ask "how much have you earn now?" expecting me to tell them I earn half a million pesos in six months. It could be possible if I am trading and speculating and if I have a chunk of capital to do so. But I opted to invest and trade a small portion rather than trade and speculate. Because when I trade and when the stock market is down surely I will get a heart attack.

That is why start early so that you can start at small amounts. When you add all this small savings and invest them in a long period this small amounts multiply. They don't grow linear but rather exponential because of compounding which according to Albert Einstein is Ninth Wonder of the World.

source: http://mariosingh.com

Start early; if you are at my age it is not too late but you have to start right away. If you are a parent teach your kids savings and investment. Teach them that when they own a stock they are part owner of the company or if they put their money in a mutual fund a portion of that fund's earnings goes to their investments.

Again I say, START EARLY!!! 

Ways to be debt free: Allocating your salary or earnings

source: http://blog.mdsuburbanhomes.com

One way to be able to get out of debt and start investing is allocating your salary or earnings. 

Wait what did I say "allocating your salary?" Yup you can save and allocate your salary even if your salary is small. If you haven't read my post about starting investing even with a small salary click here.

The problem with most of us is cash management. Sometimes when we get our paycheck we pay it all to our debts leaving us cashless until the next paycheck thus forcing us to borrow so that we can pay for our daily living. Others save some but eventually touch that set aside money because some "sale" is so attractive(click here). Others put all their money in time deposit thus they are unable to get it out when they encounter emergencies thereby forcing you to borrow again. 

See my point.

That is why you and I have to allocate our resources or to put it direct our limited cash so that we have something to pull out without affecting other things that need cash. So how do you allocate your limited cash so that you wont be trapped and end up borrowing?

It is so surprising that the Holy Bible has something to say about allocating your money:

Ecclesiastes 11:2 

Give portions to seven, yes to eight, for you do not know what disaster may come upon the land.

It does not necessarily mean that you have to divide your salary or earnings to seven or more upon receipt but it is a good practice to do so. As for me I have initially divided it into six parts I called funds. You can make it into 4 or 8 but that entirely depends on you but as for me I am sticking to six and probably add another in the future when the need arises. Also it does not mean that each category should be equal because we have different needs base on our lifestyle, our age, and other factors. 

The concept here is to allocate a portion to each category or "funds" so that we have something ready for anything that may come up or befall us. As the quote in the movie "Mechanic" says "Amat Victoria Curam" which means "Victory Loves Preparation"

Let me share to you why I divided it to six:

One: Retirement Fund

This fund is for my retirement in the future. The value of your money now will be decreased as time progresses due to what we call inflation. In order to fight inflation we have to make money increase so that we can cope up with inflation. This fund could be set aside form time to time and when a certain amount is reached will be invested in stock, mutual fund, or a time deposit that gives a return above inflation.

Two: Investment Fund

You might wonder why do I have an Investment fund when I already have a Retirement Fund. Well why only save for retirement when we can increase more our current finances by investing it to other financial  vehicles like small business, stock investment, debt investment, or short term placement of cash that gives a fair return. This way you can have extra for the current time and at the same time add more to your already existing Retirement fund any extra you may make from this fund.

Three: Savings Fund

Again it may seem like this is already a duplication but hey savings fund are monies you set aside also which you can pull out for an opportunity that may give you a nice return. Also you can use this fund if you are saving for something that you have been dreaming to buy or take like a vacation in Bali or a 21 inch flat screen TV or maybe the latest laptop or an Ipad. This is the fund where you can put it and wait 

until it reaches the amount you need to purchase your wish list things.

Four: Emergency Fund

Yup this one is for those things that just pop up right in times you are not expecting like sudden hospitalization, disaster, and other "beyond control" events in our lives.

Five: Expense Fund

This one is self explanatory. You live thus it is logical that you spend money for some expenses that you do in order to live day by day. This might be the one with the biggest percentage of your salary or earnings.

Six: Tithes or Donations Fund

Hey you got to share your blessings. Most of the time you pass the opportunity to bless others because you don't have anything left for it so to make sure you bless others with your wealth you allocate some for this.

As for the additional fund I am thinking of creating a fund for insurance. This one might be another duplication with Emergency fund but this one is for something that we can setup so that besides the money save in the Emergency Fund we have more funds to cover such unexpected expenses. I am still in the exploratory stage for this. My beloved has introduce me to insurance and we are looking at the best options available out there. There are so many types of insurance thus a careful study must be done. Though I remember that my first investment has an attached insurance up to 60,000.00 pesos that wont be enough to cover me up as I aged.

Again save, allocate, and make these funds grow to outdo inflation. 

"Amat Victoria Curam"

The New Philippine Bills

I really haven't seen these new bills yet I hope when I go on vacation in the Philippines I will have the chance to get a hold of each new Philippine Piso bill.

Ways to be debt free: Keeping your goals

 source: http://creditrepairtipsandadvice.com

I guess this is the last step in achieving debt-free status(or should I say this is the unending step) that you and I has to do. Let us recap the steps:

1. Accepting that you  are buried in debt

2. Make an inventory of what you have

3. Discipline

4. Setting Goals

If you think the rich has no problem keeping their goals because they have a lot of money your wrong. People who are truly rich(as differentiated who are just rich) struggle the same way simple person like you and me  in keeping one's goal. 

But there is a difference.

Persons who are struggling to keep their goals who are buried in debt worry asking themselves where in the world where will they get money to solve their debt problem. 

 source: http://www.learnvest.com

Truly rich people on the other hand worry how are they going to generate money from their money to pay off current spending.

 source: http://mamacanon.blogspot.com

If you have read Robert Kiyosaki or Bob Procter this is what they call "the role of money" in one's life.

For people buried in debt or financially illiterate, they work for money. Day in day out even though they have earned billions or even trillions but they are still buried in debt so they keep working for money thus they become slave of money.

 source: http://i38.tinypic.com

What should we be doing then? We must make money work for ourselves by becoming the master of money. 

You might blurt out the Bible says "Love for money is the root of all evils" and I agree with you so you ask why then you want me to be the master of money?

Here is one truth: Money is neither good nor evil, its the person using it that is good or evil.

So let us make things straight, whether you are rich or buried in debt we face the same struggle in keeping our goals. If you are debt free your goal is to get out of debt. When you do get out of debt and become rich never ever stop keeping your goal to be debt free. Continue that goal and whatever extra you have save it and make it work for you. 

 

When you finally become rich my friend please do me a favor. As the master of money use it wisely. 

There is another truth I have learned and I want to share it to you: The best way to enjoy blessings is to share it. 

When you are at the giving end it feels so good and it creates that "ABUNDANCE MENTALITY" thus you struggle more not to get out of debt(because you are not anymore) but to make money work for you so that you can give more.

How much do you have now?

One question you may ask me "I don't have any money, how can I invest?"

The people today has this mentality problem. People's purchasing power is  reduced to their salary and that they have been practicing what most call "Scarcity Mentality". In simple language people believed they cannot buy or acquire things or afford things because they think they don't have anything and that they look at what they have right now as very small. There is a bad effect of Scarcity Mentality. Whenever there is a sale or there is free item that goes with the item they wanted to buy they jump on to purchase it thinking that they got a good deal. The tendency on this is that one becomes an impulsive buyer. There is nothing wrong in searching or buying specially when it is on sale only that this becomes a habit. One may think that when there is a sale he or she must buy. Wise buying is not always buying because it is on sale; in the end one ends to be broke and from there one may brand themselves as poor and thus your mind programs you that you don't have any money to invest.

Number one rule in investing is investigate. Never ever jump into something that you don't know. Today's world has many means of getting information. We have the internet and print media to learn about where to best put our money. Second is invest only your excess. Many people end up losing all they have because they have invested all they have on stocks then suddenly lost everything due to financial crisis. Always only invest your excess.

So the question still stands, how much do you have right now? Many people think that you need a lot of money to invest in stocks but that is not correct. If you look around and check the newspapers or the investment news channels like CNBC you will notice that stocks are in the range of less than a dollar or peso to hundreds or thousands. With this in mind one can buy stocks base on how that particular market's rules. Some are sold in board lot just like in the Philippine Stock exchange where board lots ranges from 10 - 1000 depending on the trading value. So for example a stock trading at Php 50.00 may have a board lot of 100 making the total required investment to be around Php 5,000.00 only. Off course you have to open an account with a broker which requires a deposit of around Php 25,000.00 and up depending on what acount you are opening.

With that in mind you can see how much you are saving. I know you will say I don't even have left after I pay my bills. The problem with us is that we contend ourselves with whatever is left on our salary, we our satisfy first bills rather than satisfying pocket. I suggest you do the reverse. It seems impossible but when there is a will there is a way. 

In order to do this one must first look at his spending habits. One must segregate what are needs and wants. By doing this one can identify which should be given priority. Do this on a daily basis. Everytime you pull your wallet to make a purchase think if it is a need or want. In the process you will be able to control how you spend on the need or want. Master this until it comes to the point that you will not spend for wants anymore and from there you can start building your savings. Make a note on your savings. Writing your savings entices you to save more. Then after making a considerable savings ask yourself again if how much do you have now. Remember the amounts a I gave you  that is Php 25,000.00 and the stock value ranges of Php 1.00 - 50.00. From here you can visualize how near you are and that you have a money to invest in stocks or any other investment

How much do you have now?

One question you may ask me "I don't have any money, how can I invest?"

The people today has this mentality problem. People's purchasing power is  reduced to their salary and that they have been practicing what most call "Scarcity Mentality". In simple language people believed they cannot buy or acquire things or afford things because they think they don't have anything and that they look at what they have right now as very small. There is a bad effect of Scarcity Mentality. Whenever there is a sale or there is free item that goes with the item they wanted to buy they jump on to purchase it thinking that they got a good deal. The tendency on this is that one becomes an impulsive buyer. There is nothing wrong in searching or buying specially when it is on sale only that this becomes a habit. One may think that when there is a sale he or she must buy. Wise buying is not always buying because it is on sale; in the end one ends to be broke and from there one may brand themselves as poor and thus your mind programs you that you don't have any money to invest.

Number one rule in investing is investigate. Never ever jump into something that you don't know. Today's world has many means of getting information. We have the internet and print media to learn about where to best put our money. Second is invest only your excess. Many people end up losing all they have because they have invested all they have on stocks then suddenly lost everything due to financial crisis. Always only invest your excess.

So the question still stands, how much do you have right now? Many people think that you need a lot of money to invest in stocks but that is not correct. If you look around and check the newspapers or the investment news channels like CNBC you will notice that stocks are in the range of less than a dollar or peso to hundreds or thousands. With this in mind one can buy stocks base on how that particular market's rules. Some are sold in board lot just like in the Philippine Stock exchange where board lots ranges from 10 - 1000 depending on the trading value. So for example a stock trading at Php 50.00 may have a board lot of 100 making the total required investment to be around Php 5,000.00 only. Off course you have to open an account with a broker which requires a deposit of around Php 25,000.00 and up depending on what acount you are opening.

With that in mind you can see how much you are saving. I know you will say I don't even have left after I pay my bills. The problem with us is that we contend ourselves with whatever is left on our salary, we our satisfy first bills rather than satisfying pocket. I suggest you do the reverse. It seems impossible but when there is a will there is a way. 

In order to do this one must first look at his spending habits. One must segregate what are needs and wants. By doing this one can identify which should be given priority. Do this on a daily basis. Everytime you pull your wallet to make a purchase think if it is a need or want. In the process you will be able to control how you spend on the need or want. Master this until it comes to the point that you will not spend for wants anymore and from there you can start building your savings. Make a note on your savings. Writing your savings entices you to save more. Then after making a considerable savings ask yourself again if how much do you have now. Remember the amounts a I gave you  that is Php 25,000.00 and the stock value ranges of Php 1.00 - 50.00. From here you can visualize how near you are and that you have a money to invest in stocks or any other investment

How much do you have now?

One question you may ask me "I don't have any money, how can I invest?"

The people today has this mentality problem. People's purchasing power is  reduced to their salary and that they have been practicing what most call "Scarcity Mentality". In simple language people believed they cannot buy or acquire things or afford things because they think they don't have anything and that they look at what they have right now as very small. There is a bad effect of Scarcity Mentality. Whenever there is a sale or there is free item that goes with the item they wanted to buy they jump on to purchase it thinking that they got a good deal. The tendency on this is that one becomes an impulsive buyer. There is nothing wrong in searching or buying specially when it is on sale only that this becomes a habit. One may think that when there is a sale he or she must buy. Wise buying is not always buying because it is on sale; in the end one ends to be broke and from there one may brand themselves as poor and thus your mind programs you that you don't have any money to invest.

Number one rule in investing is investigate. Never ever jump into something that you don't know. Today's world has many means of getting information. We have the internet and print media to learn about where to best put our money. Second is invest only your excess. Many people end up losing all they have because they have invested all they have on stocks then suddenly lost everything due to financial crisis. Always only invest your excess.

So the question still stands, how much do you have right now? Many people think that you need a lot of money to invest in stocks but that is not correct. If you look around and check the newspapers or the investment news channels like CNBC you will notice that stocks are in the range of less than a dollar or peso to hundreds or thousands. With this in mind one can buy stocks base on how that particular market's rules. Some are sold in board lot just like in the Philippine Stock exchange where board lots ranges from 10 - 1000 depending on the trading value. So for example a stock trading at Php 50.00 may have a board lot of 100 making the total required investment to be around Php 5,000.00 only. Off course you have to open an account with a broker which requires a deposit of around Php 25,000.00 and up depending on what acount you are opening.

With that in mind you can see how much you are saving. I know you will say I don't even have left after I pay my bills. The problem with us is that we contend ourselves with whatever is left on our salary, we our satisfy first bills rather than satisfying pocket. I suggest you do the reverse. It seems impossible but when there is a will there is a way. 

In order to do this one must first look at his spending habits. One must segregate what are needs and wants. By doing this one can identify which should be given priority. Do this on a daily basis. Everytime you pull your wallet to make a purchase think if it is a need or want. In the process you will be able to control how you spend on the need or want. Master this until it comes to the point that you will not spend for wants anymore and from there you can start building your savings. Make a note on your savings. Writing your savings entices you to save more. Then after making a considerable savings ask yourself again if how much do you have now. Remember the amounts a I gave you  that is Php 25,000.00 and the stock value ranges of Php 1.00 - 50.00. From here you can visualize how near you are and that you have a money to invest in stocks or any other investment