For that, the complete formula I am aspiring to follow is: Abundance = Income – 10% Tithe – 20% Savings –70% Expenses. If you are living on purely 110% expenses, then some re-evaluation needs to take place.
Lesson # 3: Don’t put your long-term savings in the bank. Put it where the banks invest it.
Banks are convenient places to store our short-term and emergency funds, but a BIG No No to park our long-term savings.
Consider this, the rate of inflation in the Philippines averaged at around 3% last year. (Inflation rate is the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.) So if you have P1,000 now, its purchasing power will decrease by about P30 next year. By the tenth year, it will just be able to buy around P737 amount of goods.
Year
|
Amount before Inflation
|
Amount eaten by Inflation (3%)
|
Amount after Inflation
|
1
|
1000
|
30
|
970
|
2
|
970
|
29.1
|
940.9
|
3
|
940.9
|
28.227
|
912.673
|
4
|
912.673
|
27.38019
|
885.2928
|
5
|
885.2928
|
26.55878
|
858.734
|
6
|
858.734
|
25.76202
|
832.972
|
7
|
832.972
|
24.98916
|
807.9828
|
8
|
807.9828
|
24.23949
|
783.7434
|
9
|
783.7434
|
23.5123
|
760.2311
|
10
|
760.2311
|
22.80693
|
737.4241
|
The thing is, the average interest rates in banks nowadays is only less than 1% annually. If inflation behaves at only 3%, your money will still decrease in value by about 2% every year (3 % inflation rate - 1 % interest rates).
Sad, right?
The good thing is that there are other places where you can save your money and gain much higher interest rates.
Here is the deal breaker: they are also the places where our banks will put them after we give our money to them. They don’t lock the cash in vaults; they invest it and gain 5 to 20% annual interest while we earn that crummy 1% or less.
I have nothing against banks, but when I learned about that, I was at shocked how much my financial stupidity is making me lose money.
So what exactly are these investment vehicles?
Some of you by now may have heard of the stock market, mutual funds, equity fund, bond funds, and balanced funds, etc.
Let me guess, your reaction can range from 1) nosebleed because I'm speaking Latin in 2) you scoff because they sound like another scam 3) you are aware of them and you invest in one or two of them (Kudos!)
I will be writing what I know so far about them in another article, but for now, I will just share some of the good resources I have come across in Lesson # 4.
But if you’re a beginner or a non-believer, here is my key takeaway: they may seem daunting to learn at first, but if you read the right books and approach the right people, you will find out they are not that complicated and many are legitimate and legal.
Here is what I have learned: Don't save my long-term savings in banks, but put it where the banks invest the money. That way, I will be able to beat the inflation rate and grow my money some more too.
At the same time, I learned that I need to increase my financial IQ along the way, for me to avoid being burned by get-rich-quick schemes.
Lesson # 4: Be a lifelong learner. Surround yourself with mentors, books, events, and positive people.
For those who do not know where to begin or those who want to know more, I will share a brief overview of my experiences, and hopefully, you will be able to pick something from them.
When I started looking for ways to earn more money so I can save more for my dreams, I really do not have an inkling where to begin. Should I work part-time as a freelance writer, start a small business, do network marketing (the legit kind, of course), or what?
Then I remembered something I have always been curious about as a child – the stock market. I Googled a lot about it, only to be frustrated because I can’t find the information I need. The articles are too technical, or not suited to the Philippine setting, while some were obviously just after some quick bucks.
Fortunately, I came across a free copy of Bo Sanchez’ My Maid Invests in the Stock Market, a short and easy to read book on how to start investing in the Philippine Stock Market.
Coincidentally (or maybe not), a friend also gave me a copy of another Bo Sanchez book, the 8 Secrets of the Truly Rich. In a twist of fate (or perhaps divine intervention), my initial interest with stock investing led me to the path of financial literacy.
I have read some of Robert Kiyosaki’s books and even the classic The Richest Man in Babylon, but one of the things I really appreciate about Bo’s books is they reflect the local scene and they were written with a spiritual perspective. I also trust him because his mentors include some of the titans in Philippine business industry.
(Speaking of local books, one of my favorites too is Kasusuweldo Mo Pa Lang, Ubos Na by Vic and Avelyn Garcia.)
To cut the story short, after doing more research, I opened a COL Financial account, the online stockbrocker mentioned in My Maid Invests. To further guide me, I also subscribed to Bo’s Truly Rich Club, an online group whose mission is to “make good people rich” by providing stock investing guides and updates, business newsletters, power talks, and a whole lot more. (I have been on COL and TRC since 2012.)
But as they say, when you want to grow, you don't stop learning.
I was already half a year into my stock market investing when someone from the company I am working on invited me to attend a free seminar by International Marketing Group (IMG), a company dedicated to spreading financial literacy among Filipinos. Because I was still busy grasping the concepts of stock market investing (and admittedly, a little smug because I foolishly thought I already many things back then), I declined but made a mental note of it.
The right time did come, because when a friend and I were learning about mutual funds, our research led us to IMG. With nothing to lose (since it's free anyways), we registered and attended the first series in the IMG Wealth Academy about Basic Financial Foundation and Investment Strategies. At that point too, I was craving an environment where I can meet other people who also want to grow financially, since admittedly, the outside world is not that encouraging.
I gave myself two weeks to read more and weigh my options, and then I decided to become a member of IMG. For a year, I attended their regular training and seminars on mutual fund investing, real estate, debt management, insurance, estate management, among others. I'm no longer active in IMG and didn't renew my long-term health insurance I bought through them after one year; still, I learned many things from my brief stint there.
My experiences may not be applicable to your current situation, and the path I took different from yours. But here is one thing I discovered after all those books and seminars – the financial concepts are actually universal, but the strategies we use to apply them might be different for each one of us.
At first, it can be confusing and many of the things you learn may seem to contradict each other, but what is important is you do your research, compare your options and do not just rely on one book or one person (yeah, even me) or one seminar for advice. What worked for others may not be the best option for you. Get what really suits your needs and your circumstances.
Here is what I have learned: Don’t be smug with my limited knowledge. Always strive to learn continuously and to surround myself with many good mentors, books, and activities. Not only because I will be more inspired and encouraged to grow, but also because I will be able to screen out which option best fits me. And yet (very important too), I should set timelines for my goals, else I will just be stuck at all research and no application.
Lesson # 5: The purpose of wealth is to love others
Money is not the most important thing in the world, but it affects all the important things in our life.
But if we have enough of it already, would it be greedy and materialistic to ask more of it?
Should we just be contented with what we have and no longer aspire to earn more?
No, there is nothing wrong with asking for more if your purpose in accumulating all those wealth is so that you will be able to help more people.
True, corruption scandals have uncovered people who will do anything because of their selfish desire for money. At the same time, Bill Gates and Warren Buffet are proofs that many wealthy people are actually generous and selfless.
Here is what I have learned: Truly rich people view their money as this: They earn money so that they could give more to God and His poor.
Money is not the root of all evil, but it is the love of money which corrupts one’s character. If your heart is in the right place, then your wealth will also be in the right hands.
I learned then to desire to be someone who earns as much as I can so I can give as much as I can. But since I cannot give what I do not have, and cannot apply what I do not know, it all starts by increasing my financial IQ first.
I hope with this series, I have also encouraged you to do the same.
My other financial literacy-related articles:
