Let money work for us in this challenging future! As our country continues to develop, most Filipinos might continue to struggle financially.
EMPLOYMENT
If you are thinking that there will be more jobs when our country becomes totally developed like the advanced countries as the United States, you might be right to someone but you might be opposite to some also.
When a country becomes developed, it replaces some of the skills that an actual person can do. What am I talking about? Due to development, some manual skills of humans can already be performed by some robots. As a result, people who have the skills which can be performed by robots will not be already in demand in the labor market.
Also, once a country has been developed, its labor cost will also increase. In this case, the country will manufacture its product in a low-cost labor country. Apple Company has its main office in the US. But due to expensive labor cost, the company manufactures its product in China.
DEBT IS HIGHER THAN SAVINGS
It’s hard to admit that most Filipinos who reached their retirement age are only happy for some sort of years. The years that they are still happy are those where they still have funds to maintain their lifestyle. But once the fund is run out, they’ll wake up to reality. They need to work even they are in their senior age.
Whether like it or not, they have no choice because the pension that they receive from the government is not enough fortheir monthly expenses which include their medication.
Why would a retirement stage end this way? The only way to answer this question is to go back during youraccumulation years. This is the time where you were consistently earning a lot. Your money behavior during your accumulation years has an impact on your retirement age.
What behaviors am I talking about? Some of theseare your debt higher than your savings. The other reason might be you really have low savings because you just start saving when you are just near your retirement age.
EXPENSIVE EDUCATION
The school fees seem to increase faster than your income. If you are not financially prepared during your family stage, you will drag down your suffering to your children. Due to financial concerns, your child might not be able to choose the degree that he wants to enroll. The worst is the child might not even have the chance to step in college.
INCREASING COST OF LIVING
If your family were able to live at P20,000.00 a month, don’t expect that this would be the same after 10 years. Theannual inflation rate of our country ranges up to 5% which is definitely higher than your salary increase.
As the cost of living increases, challenges approach. Saving for the future will become a big challenge on your part. So, you might not have some savings. In this case, if crises strike (emergencies) the only option you will have is to borrow money.
CONTROL YOUR FUTURE
The problem why most Filipinos suffer during their retirement age is we let our employers or the government be the one to plan for our retirement. Knowing the fact that the government nor your employer can provide all the necessary thingsyou need in your retirement age.
Be the one to plan your future while you are still on your accumulation stage. Be the one to dictate your future. Accumulate. Pay yourself by saving some amount of your income before spending. Let your money work for you. Then, protect your accumulatedwealth.
BUILD YOUR SOLID FINANCIAL FOUNDATION
Having a happy retirement means having a solid financial foundation. Like a house, if it has a good foundation it can last for several years. The same with your retirement. If you have a good financial foundation, you will be financially worried freebecause you are financially prepared.
Proper Protection on Life, Health and Disability
If you are a breadwinner once you stop working due to health, disability and death reasons, your family could go hungry.
But there’s a way on how to protect yourself and your family if some of those mentioned situations might happen. While you are working, maybe you’ve encountered different agents offering different kinds of Health Care, Life Insurance, and Non-Life Insurance. But should you have among these three?
There are two kinds of Health Insurance. This can either be a short-term or long-term. An example of short-term is your PhilHealth. It is called short-term because once you stop your payment, your coverage also stops. Besides this, short-term health care usually lasts only until the senior age.
This makes the difference from long-term health care. As it is only payable for just a certain period of years but the coverage runs even after you reach your senior age. An example of long- term health care is the Ultimate Kaiser HealthBuilder.
If you are still single who doesn’t have any qualified dependents, grab a Long-term Health Care. In this stage, you don’t need to have a Life Insurance. Long-term Health Care is what you need because this is what will protect your income. Ifyou have some health concerns that lead you to
stop working to have your medication, your expenses wouldn’t all come from your pocket since your health insurancewill cover it.
How about Life Insurance? When do you need to have this? Life Insurance is needed the moment you will have a dependent or the moment when you are already married. The main purpose of Life Insurance is to secure you from sudden financial downfall. If you become disabled or unfortunately you lost your life, Life Insurance will provide a financial support (depending on your premium) to your dependents which they can use for their expenses while trying toestablish themselves from your incapability to provide.
The problem is only a few of us are convinced to avail a Life Insurance because of its expensive cost. However, there is a way to avail a Life Insurance at a lower cost. This is to have a Term Insurance.
Term Insurance is cheaper because it is a pure insurance. It doesn’t include savings nor investments.
Manage Debt/Reduce Liability
It’s easy to incur debts. But it’s difficult to move away from it. It’s difficult because you are treating the result withouttreating the cause.
How would you treat the cause? Try answering this simple question. How did you incur your debt? Why can’t you pay it?
To answer the first question, know the cause of your debt. While for the second, take a look on your lifestyle. Take a look on how do you spend your money. If you are still living beyond your means and yet you incur some debt, expect that thisbrings different kinds of headache for you.
By reducing your liabilities or expenses, you can pay your debt. Liabilities are anything that you buy that won’t help you toincrease your cash flow. If you keep on taking Starbucks why not stop it, then go for water or 3 in 1 coffees.
Have an Emergency Fund
Once an emergency occurs whether that is medical or non-medical related, almost all of us are shocked (financially) since it’s another form of expense and we are not prepared for it. In the situation where you are really incapable, the only option you have to settle the emergency is to go for debt.
To avoid this kind of situation, build an emergency fund. This is the 6 months total of your monthly expenses. If your monthly expenses are P10,000.00 a month, your emergency fund should be P60,000.00.
Emergency Fund is important because it minimizes the chances of you going for debt during emergencies. The moment you lost your job, you can still survive for 6 more months while looking for another source of income.
Build Up Your Savings/Investments
While you are still in the accumulation period, it’s a must to build your savings and investments. However, there is ascientific process in doing this.
Do you know some of the stories of the people who came from rags before becoming rich, but in the end, they resulted going back to where they came from? This kind of story isn’t new already, especially to celebrities.
If you’re into sports you must probably know this names, Allen Iverson, Scottie Pippen and Mike Tyson. But have you also known them on their financial side after they retired from their careers?
These three sports celebrities were earning millions every year during their playing and fighting career. However, the lifestyle they had when they were at their peak of their career is far from what they currently have.
The three of them went bankrupt. If you are going to ask the cause why they were dragged down from richness to rags, they would have similarities and differences. But the bottom line is what causes them to be in their current situation istheir lack of financial literacy.
A ladder that must be followed. Building up your savings and your investments is the last part in building your financial foundation. If you don’t have a long-term health care or life insurance, you are not able to clear your debt and you don’t have an emergency fund, you’re investment will collapse.
If there are some crises in your life, then these occur when you are running out of money. You only have two choices left. Either you go for debt or you redeem your investment. Once you’ve chosen to go for a debt, it’s unlikely to find someone who will lend you money without an interest. If you decided to redeem your investment, what if the market is not performing well? If it’s in the good condition, definitely it’s a good luck for you. But if it’s the opposite, you lose fromyour investment.
Having a long-term health care or life insurance, eliminating your debt and having an emergency fund protects you fromredeeming your investment in the short-run.
BUILD YOUR OWN MONEY MANAGER
Understand How Money Works
During your economics class, you’ve encountered several types of graphs or curves. But none of these curves teaches you aboutmoney.
The X-Curve Concept
In financial literacy, there is what we call as X-Curve Concept. What’s with this X-Curve Concept?
If you want to become financially worried free, you must have the X-Curve Concept in your finances.
The Law of Decreasing Responsibility (Red Curve)
When you are young, you have a lot of responsibilities. Basically, you are a man at work. What you spend for your expenses comes from your active income. At the end of the curve, it says “No/Less Responsibility”. It means that by thetime you reach your retirement age, you should
not already be a man at work. Instead, you are enjoying your retirement age and letting your money work for you.
The Law of Building Wealth (Blue Curve)
During your younger years, you don’t have any savings. But the moment you reach the accumulation stage, you should already be starting to build your savings and your investments so that by the time you are in your retirement age you arealready financially free.
Upon reaching your retirement age you must be financially worried free if you follow this X- curve.
The Power of Compounding Interest and the Rule of 72
When is the best time to start your investment? The answer is simple. It’s now. Not later nor someday. If you start earlier, you can stop earlier but your money will continuously grow. How can this possibly happen? It is because of the power of compounding interest. The interest of another interest. This gives the difference of investing early than later.
As an investor, you must also be aware of the Rule of 72. By dividing 72 by the interest rate of your investment, you can determine how long will it take for your money to double.
Let’s say you invested your money at 4% interest, 72/4 = 18. It will take you 18 years for your money before it doubles. If you invested your money in a higher interest, it takes shorter time before your investment will double. Example, you invested your money at 12%, 72/12 = 6. It takes 6 years for your money to double.
The Rule of 72 proves that any investment vehicles that state that it can double your money in few months may be considered asscam.
The 10/20 Rule
This rule is simple. If you want to protect your family properly, you must have at least 10 times of your annual income.
If your income is P120,000.00 a year, you need to have at least P1,200,000.00 to protect your family.
For you also to have an enough retirement fund, you must have at least 20 times of your income in order for you tomaintain your lifestyle for the next 20 years.
But what if you live longer than that? This is the time your investment comes in. But if you live the opposite way? This is the timelife insurance comes in.
Make Your Money Work for You
To be able for you to allow your money work for you, it must be placed in an investment vehicle like investing in the StockMarket or in the Mutual Funds.
Mutual Funds vs. Stock Market Investing
Where should you invest your money? The answer depends on your situation. If time is an issue for you, it’s recommended for you to invest in Mutual Funds. As there is a Fund Manager who will manage your portfolio. In short, your only duty is to invest regularly. Fund Managers are trained professionals in managing different kinds of investments.
Investing in the mutual funds is investing in the stock market in an indirect way. But how do mutual funds work? In mutual funds, the money of investors is being pooled and it will be invested as one in the giant companies which are also called as Blue Chips. With the small amount of your investment, you can diversify your portfolio.
If you decide to invest in the stock market, you must have a high-risk tolerance since the market is unpredictable. As compared to mutual funds, diversifying your investment in the stock market needs a higher source of fund. As there is a board lot that the company assigned for their investors to comply. This is the minimum number of shares that you mustbuy in a company.
Mutual Fund is tax-free. This is one of its huge differences in investing in the stock market. If you want to invest in the stock market, it’s better for you to start in mutual funds while learning the fundamentals of stock investing.
Build Your Passive Income
Build your passive income by investing either in the mutual funds or in the stock market. Having a passive income helps you in the future to prevent your family members from arguing who should take the responsibility to finance your retirement needs.
BE AN ASSOCIATE MEMBER OF IMG
What you read in this eBook is just a tip of an ice berg. You can still have more opportunity to learn more about on managing yourfinances once you become a member of International Marketing Group (IMG).
What is IMG?
International Marketing Group (IMG) is an organization that aims to provide Financial Literacy to every Filipinos, regardless of their economic status. This is one of the biggest distributors of financial products and services in the US, Canada, Hong Kong, Philippines and some other parts of the world.
This organization is like a coin. It has two sides which are business and investment. Both of these sides can be taken at same time. People who are looking for a source of income can get some help through the business side while people who focus on other fields can benefit from the investment side.
Membership Benefits
If you become an associate member of IMG, you can avail the following benefits:
Lifetime Access to Financial Education Workshops Lifetime Free Financial Check-Up
Access to Mutual Funds at Zero Load Entry Fee Access to Affordable Life Insurance Product and Services
Access to Short-Term and Long-Term Healthcare Discounts on Non-Life Insurances
Discounts from Real Estate Companies Access to Estate Preservation Program
Build a Business in the Financial Industry – Professional Career and Entrepreneurship Benefit
Opportunity to Travel the World for Free
An Option to Become a Member of Fidelity Life (A Mutual Benefit Association) 24/7 Free Concierge Service with EverestMemorial Services
Access to Ozone Therapy at Discounted Price
Free Short-Term Healthcare for SMDs (with Qualification) World-Class Recognition for Achievers
Exclusive Discounts on All Medicine Purchases Vision Care Benefit
Great Savings in Car Purchase
It’s a fact that financial literacy is not being taught in the school. This is the reason why even professionals became a victim of different scams. Being not able to finish your studies doesn’t also mean that you will become poor for the restof your life.
Financial struggles don’t choose anybody; either you are a professional or a person who was not able to finish his studies.
In other words, there is no guarantee that you can become the financial worry-free base on your educational attainment since what makes you free from financial worries is financial literacy and action.
Your present financial actions determine what will be your life if you reach the retirement stage. If you are not goingbuild a good financial foundation while you are in the stage of accumulation, it’s unlikely that you can do it when you are in your retirement age. As your expenses will also increase because your risk keeps on increasing.
Don’t rely on everything in the government or in your employers. Be the one to manage your finances and take charge of your future.
The only key to move out from poverty is to get rid of your poverty and poor mindset by becoming financially literate.
Author: The Pinoy Engineer
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