Shape your desired future life: Building your financial foundation must consist of proper planning and a step-by-step guide you can follow. Focus your time and energy on Investment that can contribute to building your financial future.
Your desired future life lies upon the effort you’re about to make today.
In building your future, you should start by taking care of your financial health as you take drastic measures in shaping your future life.
Benjamin Franklin once said, “If you fail to plan, you are planning to fail.”
Without proper planning you are heading to financial disaster, that’s why you need to start building your foundation now.
How should you build and shape your financial life?
Start by saving an emergency fund
This would serve as a fall back in case an unfortunate event happens like, a family member rushed in the hospital Emergency Room for a quick treatment.
Preferably, you should save at least 3-6 months worth of your salary. You can keep it in a savings account, that way you can withdraw cash anytime.
How much do you need to save per month to hit your target emergency fund amount?
First, you need to know your target amount to recognize how much you should save per month. Let’s say you are about to save 60,000 pesos, that’s 3 months worth of your salary, your target date is 20 months or 1 year and 8 months.
60,000 pesos/ 20 months = 3,000 pesos
You need to save 3,000 pesos per month and you will hit your goal of saving 60,000 pesos in the next 1 year and 8 months.
Or you can do this instead, know how much money you can keep per month. Let’s say you can save 1,500 pesos per month, your target amount is 60,000 pesos equivalent to 3 months of your salary. The formula will go like this:
60,000 pesos/ 1,500 pesos = 40 months
You need to save 1,500 pesos per month and you will hit your goal of saving 60,000 pesos in the next 3 years and four months.
There you have it. By now, you should know how much money you can keep and how long it will take to finish it.
Perhaps, you feel like 3 years and 4 months are quite long? You are not alone. That’s why you got to speed things out. Your job alone is not enough to build the future of your desires. You got to learn how to make more money. Take a side job for example.
Idea to consider: Talk with your bank provider to find if they could automate the process of transferring fund to your other savings account. In that note, once you receive your salary your savings is already deducted.
Paying off your debt
Debt is like a tiny hole in a big bucket with water, those tiny holes represent your debt, the more holes there are the faster it drains the water inside. The same thing goes in your hard-earned money, If you leave it uncheck your Debt will slowly drain your finances.
Stopping these leaks should be your top priority.
First, identify those debts that you have, list it down from the highest amount to the lowest. It’s should look like this.
Upon looking at all those debts, you might feel overwhelmed from the debts filed up that you’ve got to pay. Rest assured you’ll pay them all in due time. Just be mindful of your spending, stop unnecessary purchases, and add more cash flow in your pocket.
Simple tip in paying off your debt, always pay for the minimum monthly due as you strive to pay more in finishing the lowest account possible. Once you clear the lowest debt, you have to put the excess money to the next lowest debt you have and continue this cycle until you pay-off your debt.
Heck, you can save up for your emergency fund while you are paying off your debt as long as you can make it work.
Insurance is a must-have. In shaping your future you should consider the worst-case scenario that might happen.
What if you die too soon?
What would happen to your family?
Can your spouse shoulder everything?
This letter is for you from…
Now that you understand the importance of life insurance, you can now make a legacy that will carry on.
What kind of insurance is the best fit for you?
You can choose between these two:
• Term Life Insurance
you would only pay for insurance premium, it means lower premium as you are only paying for life insurance, your beneficiary will only get the benefits If you die too soon.
This type of insurance is ideal for breadwinners, when you are starting a family and when your child is still young. During this time, your finances are tight and you should only invest in services or products that will be quite beneficial to you and your family.
Getting term life insurance is good also if your investing strategy is BTID or buy term invest the difference. Buying term insurance and invest the difference is best for those who want to have better control of their finances.
• Variable Life Insurance
commonly known as VUL. For those busy buddies like you this might be a good investment. If you don’t want to study the market or do the work yourself VUL is for you.
In VUL, You are paying for insurance and its investment component which means higher premium cost on your part.
Health insurance and HMO
This product or service is made for you, to take care of your future health care needs. Many failed to secure their health care needs, focusing only on investing their money for possible profit. For instance that an urgent need for medical treatment arises, tendencies are they withdraw their investment at a loss to fund their healthcare needs.
You should plan ahead, especially in this aspect. You will grow old, you would need health Insurance when that time comes, insurance is cheap when you don’t need it and expensive when you need one. Why not, consider it now when you don’t need it and it will take care of you in your old age as you enjoy the fruit of your investments.
If health insurance is for taking care of you when you grow old, HMO is for immediate needs and emergencies. In case of an illness, you can just present your HMO card to any (accredited) hospitals or clinic and you’ll be spared from paying upfront to get the help that you need.
This is the most exciting part, seeing your money grows. Like a tree that keeps growing, your money will keep growing as you continue to sow seeds that grow. Take note, not every seed grows, some are wasted, and please don’t dwell too much in your losses. You should understand what investment you’re getting yourself before you invest, that way you could minimize the risk and maximize the return. Do your due diligence.
What type of investment you should get? It depends on your goals and what investment vehicle you understand.
You can consider investing in these investment vehicles:
• Stock market
If you are not familiar with the stock market, it is a place where the publicly listed companies are gathered, companies like Jolibee, Ayala Land, SM, PLDT, Globe resides here to look for investor who would invest in their business. You can make money in stock market using these 3 Strategies namely: Dividend investing, Capital appreciation, and Active trading. Let’s discuss them one by one.
1.) Dividends investing
this strategy focus on the possible return you can get when you invest in a company through dividend income. Dividend is a token reward paid to the shareholders for their investment in a company’s equity, and it usually originates from the company’s net profits. How much dividend you will get are determined by the company’s board of directors.
2.) Capital appreciation
is a buy and hold strategy in long term duration, buy when the price is low and sell when the price is high. In most cases, it takes months or years to earn serious money.
3.) Active trading
is a buy and hold strategy in short term duration, buy when the price is low and sell when the price is high. Timing the market. This is for those who like gambling, predicting how would the market respond. In most cases, it takes minutes or a snap of finger for you to know if you’re losing or winning in your trading.
• Mutual Funds
Is a financial vehicle made up of a pool of money collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets. Mutual funds are operated by professional money managers, who allocate the fund’s asset to produce capital gains for the investors.
Mutual fund are for you, if you don’t want headache, no impulse buying or selling in your part. You who want to just invest your money and do the things that matter to you.
You build up your mutual fund portfolio by buying on a regular basis when the market is up, keep buying. When the market is down keep buying (mall offer items for sale, so as mutual fund NAVPS) NAVPS stands for net asset value per share or you can call them tag price. If the tag price amount is lower than usual its a bargain. Buy more if you can.
You will be shocked at the time of your retirement, 10 years, 20 or more years to come, your investment grows with the help of compounding, capital, and interest compound overtime.
• Real Estate
Means property, especially inland. This property can appreciate or depreciate depending on the economy and other factors. You can make money in real estate in 2 ways namely: Capital Appreciation, and Rental Income.
1.) Capital Appreciation
you buy a property today and in the near future, you will sell it higher. You can even do make-over in an old home then sell it. basically it’s a buy and hold then sell strategy. This is for you if you like buying, holding, and selling properties for its value.
2.) Rental Income
you buy a property and lease it out for monthly passive income paid by your tenant. Most likely you would need a large chunk of money to start this out.
If you want to make money in real estate, studying and practicing skills related to real estate is a must-have.
• Cooperative investing
Is a business, or other organization that is owned and run jointly by its members, who share the profits or benefits.
Chances are your company might have cooperative that you can join in and earned a sizeable amount in return.
Cooperative gives dividend to its members, how much dividend would you get depends on your cooperative business income.
Basically, crowdfunding is like mutual fund. They pooled all the funds of their investor and lending the pooled funds to businesses that need funding.
You earned dividend income in crowdfunding, say for example you invest 10,000 pesos in a startup business that needs funding of 1,000,000 pesos in return you will have a 5% return of your investment. That would be an easy 500 pesos for doing nothing, your money works for you.
You build assets that work hard for you, you get products and services that will serve their purpose in the right time. You are planning ahead in taking the leap that will shape your desired future life with the right investment vehicles that can assist you.
Yet to start?
Start building your emergency fund now!
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