financial literacy

Mar

2023

“Rich Dad, Poor Dad” and Your Money Mindset

Reading Time: 5 minutes

Have you read the book Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money — That the Poor and Middle Class Do Not! written by Robert T. Kiyosaki? This should definitely be on your list of books to read and learn from to improve your money mindset.

This book shows us a solution to getting out of the Rat Race, which Kiyosaki defines as a situation where people “work for the owners of their company, for the government paying taxes, and for the bank paying off mortgage and credit cards.” This scenario sums up most of our parents’ and our lifestyle in our 9-5 jobs. Kiyosaki proposes that we learn and practice investing as a solution to get out of this trap, retire early and live wealthier lives.

The book is full of great advise and real-life examples from the author’s own experience on how to go about investing. I will not be providing a summary of the lessons here. I think you should read the book yourself to get the full learning experience.

However, I will share some of the concepts in the book that had a great effect on me as it challenged a lot of my ideas about money and how to get rich. This book will definitely help you in transforming your money mindset into a wealth mindset.

Assets First, Luxuries Last

Most of us think that our homes are our greatest assets. Kiyosaki points out that this is the wrong way to think about assets. Assets are the things that generate income for you. If it doesn’t generate income for you, then it is a liability.

Assets include a business that generates income, an apartment that you have for rental or a car that you also lease out.

When you acquire a house or a car, unless you have them rented, these do not generate income for you. Instead, you spend more on them because you have to pay the mortgage and taxes that come with your purchase of the house or car. Thus, both of these items can be considered luxuries and you should only acquire luxuries when you have generated enough income from your assets to cover the expense of owning these items.

Pay Yourself First

Kiyosaki also stresses the concept of paying yourself first. This is an important aspects of having a good money mindset. You should have a budget for Financial Freedom and Savings. These are the portions of your budget that you should prioritize. Of course you should aim to be able to pay all your bills on time, but if money is short, you should prioritize paying yourself first.

He states that you are your greatest asset, especially your brain and body. So you should take care of your health and continue to educate yourself in order to maximize your knowledge and skills to pursue your goals. I could not agree more.

Most of us focus on working hard to gain wealth forgetting to take care of our health. In the end, we may succeed in acquiring wealth but we end up spending that on hospital bills to recover from our health issues instead of being able to enjoy our wealth for our goals such as buying a house, travel, running our own business, etc.

Always Look for Opportunities and Act on Them

Kiyosaki also advises that even when things look bad, you should always look for opportunities to turn around the situation. The way to do this is to use your creativity to think of solutions on the best way to handle the situation. This is how someone with a good money mindset will approach a seemingly negative financial situation.

A classic example is, if you feel you are not earning enough and you want to have your own business. You shouldn’t wait until you have saved enough to quit your job and start your business. Instead, keep your job, keep saving for your business and start it on the side while you are earning from your day job. This can be done more easily now with the rise of online platforms to start your online business.

The goal is to look for opportunities to earn more income without incurring major risks. If you quit your job to start your business, you will not have another source of income if the business venture fails or if it needs to be funded with more money. Most of us would commonly try to get a loan to fund a business but Kiyosaki discourages this.

Start Early, Learn Along the Way

One of the best advise in the book which I wished I had learned when I was young was to start early. Most of us already know that we should start saving for our retirement early. But we often do not think of investing early. Instead, what most of us do is start acquiring credit card debt or loans early on in our careers.

By starting early, he suggests not only learning to save early but investing in yourself early as well by taking classes that may not be useful in your main profession but will be useful to you when you start investing and start your own business.

By learning, he doesn’t only mean thru books but also seminars, classes as well as actually taking jobs and from mentors that would help you learn business skills such as in sales or marketing or how to work with and manage other people. These are all skills that you will need in order to work smarter, not harder and they will be useful when you finally start your own business.

Don’t Forget to Give

Kiyosaki encourages us to be greedy in our pursuit of building wealth but he does not mean doing so without taking into consideration our relationships with people in the process. That’s why he encourages that employers should get the best people to help them run their business and pay them what they deserve instead of focusing on how to cut costs. He shares that when his staff get a big paycheck, he feels happy because it means that his business is going to get big profits too.

He also encourages giving without the thought of getting something back. That’s why so many rich people make it a habit to contribute to their favorite charities or have created charitable institutions of their own. Being able to help others is a big part of having a good money mindset.

A simple form of this is to share your knowledge with other people. It is a great feeling when someone you shared your knowledge with comes back to you and tells you how it improved their life. In the process, you also gain new friends and expand your network for future opportunities.

It’s Never Too Late

This being said, it is not too late to start learning and investing and looking for opportunities to build your wealth. Kiyosaki provides several examples of people who started building their success after they have retired or after losing much of what assets they previously had.

As long as you have an open-mind, are willing to keep learning and are bold enough to go after opportunities as they come, then you will always spot opportunities to build your wealth. In the process you will keep honing your money mindset until you acquire a wealth mindset. The key word here is to build gradually instead of indulging in get-rich-overnight schemes. It may happen to a lucky few but it may not happen to you, so its better to do it slowly but surely as long as you keep on doing it.

Learn, earn, learn some more, earn some more. That’s how Kiyosaki did it since his younger years. He was lucky to have a rich dad and a poor dad who showed him contrasting beliefs and attitudes about money and wealth and he was able to learn from them. Now, we are lucky that he has provided us the chance to learn what he has learned and it is a great opportunity that we should not pass up.

Go and get the book yourself and start reading. I will be reading it again to see what nuggets I can learn that I missed before.

Updated. First published on Pinoy Smart Living as “Thoughts After Reading Rich Dad, Poor Dad” on 2018.07.31.

Feature Image: Original Photo by Joshua Mayo on Unsplash.

Jul

2022

4 More Tips to Improve Your Financial Wellness

Reading Time: 2 minutes

We have provided common sense money advice before. Here are 4 more tips to help you improve your financial wellness. These additional tips should be a big boost to transforming your financial wellness for the better.

1. Pay in Cash

To help you stick to your budget; you need to remove the temptation to swipe your credit card. So it is better to carry cash with you. This way, you can allocate different amounts to different expenses instead of taking out your credit card. You can use envelopes or your wallet dividers to visually distribute your money. With this method, you also get to see how much money you have left. This means that you will be able to say “No” to some expenses or money leaks that is not allocated for in your current budget. Paying for your purchases in cash is one way to help you get closer to your goal of being debt-free.

2. Build Savings

Before you start investing; make sure that you already have your emergency savings in place. Your savings account should be equal to 6 months of your income. This allows you to be able to pay for your basic necessities and regular expenses in case you lose your job. It will also ensure that you have money to support you in case of emergency situations such as needing to repair your house due to natural calamities or needing to buy a new laptop for work, etc. This is different from an allocated savings account for planned expenses. For example, if you want a new sofa; then you can save up for that amount aside from your emergency savings.

3. Financial Health Check

As you are tracking your expenses and trying to stick to your budget; it is important to do a regular health check of your finances. This allows you to see where you can improve things and create a better budget that suits your current needs and goals. If you are paying-off credit card debt, then talk to personnel from your bank to review where you are in your goal. If you are already investing, then review your losses and gains and any potential areas for further growth. More importantly, check the status of your savings; have you maintained it and/or is it growing as your income has grown? What other things can you do to generate more income?

4. Maximize Employee Benefits

One more thing that you can do to improve your financial wellness is to check if your employer provides financial wellness programs. This could be in the form of monthly contributions (thru government agencies) or other programs offered by the company itself with other 3rd party partners. For example, your company might have partnered with a bank to provide employees with special rates for maintaining a time deposit or savings account. Ask your colleagues or inquire from designated personnel in your office if these options are available.

If you are just starting out on your financial wellness journey; make sure that you do your financial wellness assessment first. This way, you know which areas you can improve on and which areas you are good at currently. Don’t forget to keep improving your financial literacy as well. Remember that there is no one budget or investment strategy that fits everyone and works all the time. You always need to be aware about where your money goes so you can adjust your financial strategies accordingly.

Feature Image: Original Photo by Towfiqu barbhuiya on Unsplash.

Oct

2021

5 Ways to Improve Your Financial Literacy

Reading Time: 5 minutes

There are many ways to improve your financial literacy. Money is involved in almost everything we do in our daily lives. We work at our 9-to-5 jobs to earn money because we have so many things to spend it on. Most of us barely get by on our monthly income, making it seem like we are working for money instead of making money work for us.

This is why financial literacy is important. Learning about money and understanding how you can make it work for you, instead of the other way around, will help you reach your financial goals quicker.

Learning about your finances can only start with the right mindset. Most people are afraid to tackle money issues because it is a sensitive subject that is tied up with their personal habits. If you want to save money, you need to accept the fact that you have to sacrifice some personal conveniences and luxuries to start saving.

Instead of treating your finances as a boring subject or a scary one, try to look at it with an attitude of curiosity. This is the only way you can start learning. Don’t be judgmental; just be curious about yourself, your money habits, and the possible ways you can make your money work for you.

Here are 5 ways you can start learning to improve your financial literacy.

1. Learn and Talk About Your Money

The first thing you need to do to learn about money is to become aware of how you spend your own money. Track your daily expenses in a notebook, a spreadsheet, your mobile phone; whichever way is convenient for you. Do this for a whole month and before the month ends, you will already see a pattern on what you spend your money on. These are your spending habits. Based on these habits, you can start learning ways on how you can better spend your money.

Tracking your spending also helps you identify your attitude towards money. Do you have a poverty mindset or do you have a wealthy mindset like rich people? Most people have a poverty mindset. Learning about your finances and having a plan of action will help you develop a wealth mindset.

Another habit you can develop is to be comfortable talking about money. Talk to other people about how they spend their money. Do they follow a budget? Has their budget worked for them so far? You might even find a buddy who you can learn from or who can help you stick to your money goals.

2. Make A Budget and Follow It

Once you’ve identified your spending habits, it’s time to make an evaluation. Look at the items you are spending money on and categorize them. Identify which are your major expenses. From there, identify which are the most important ones; the ones you need and can’t live without and which ones you can do without. Those items you can do without are your “money leaks”. You are spending money on these items unconsciously and these may be bigger items than just your cup of coffee from your favorite cafe each morning.

Based on this general category of your needs and your money leaks, create a budget. Your budget should help you plan out how much money you must allot for the important items on your list and how much you can spend on your money leaks (if there is extra money for them in your current monthly income). This way, you don’t feel deprived but you can control how much you can indulge in your favorite luxuries – not every day but maybe once or twice a week will allow you to save money.

Try to follow your budget for at least 3 months and adjust it accordingly until you create a budget that works just right for you. Then follow it each month while keeping track of your spending and your savings. This will help you discipline yourself so you can manage your money better. A budget will be a big help to improve your financial literacy.

3. Create Long-Term Money Goals

After learning and adjusting your spending habits, it’s time to create long-term financial goals. How do you plan to spend your money a year, 3 years from now? Having extra money tucked away in our savings account often inspires us to take up our buried dreams that we’ve kept in the back burner because we needed to earn thru a day job. This is the starting point of how you can make money work for you.

Write down how you want to spend your money in the next 3 years and even 5 years. Are you going on a travel adventure? Do you plan to put up your own business? Do you want to buy your own apartment? Are you thinking of studying again? Do you want take up that course you really wanted to take in college but had to give up to follow your parents’ advise?

Write down your dreams and do your research to figure out how much money you will actually need to make that dream a reality. Once you have the figures, then you can start learning new ways to not only save more money but to make your money grow.

If one of your major goals is to get out of credit card debt, write it down and see how you can adjust your spending to pay it off as quickly as possible.

4. Learn and Start Investing

Now that you have a clear idea of how much money you have, how much you are spending and saving and how much money you need for your financial goals; it’s time to start learning about investing. Unfortunately, money lessons are in most school curriculums so most people have to learn it on their own.

Investing is not only saving more money, it means creating wealth. One of the most convenient way to start growing your money is to enroll in your bank’s investment program. Be sure to ask your bank about it and learn how your money can earn from their program.

You can also consult a professional financial adviser who can help you decide on the best investment tool suited to your current situation and financial goals. This way, you are already growing your money while you are looking for other ways to earn more. In the meantime, stick your budget and keep saving. The desire to learn is your first step to further improve your financial literacy.

5. Keep Learning On How to Make Money Work For You

There are tons of resources about investing online and there are many books that you can read too. We have compiled some of the basics for you in these articles:

You can get more financial wisdom from these articles but be sure to read books too:

There are many resources that you can easily access to improve your financial literacy. As you learn more and enhance your personal money management skills, you will eventually get the opportunity to learn about financial instruments that you can use to increase your wealth.

You can read books, watch online videos and listen to podcasts about financial management or about investing tools that you are interested in. You can also take courses to help you learn about finances. Just keep on learning as much as you can so you have a better understanding of what works for you.

Updated. First published on Pinoy Smart Living on 2019.09.20.
Feature Image: Original Photo by Mathieu Stern on Unsplash.

May

2021

Common Sense Money Advice That People Don’t Follow

Reading Time: 3 minutes

Money has always been a top source of stress for most people. If not addressed, too much worrying about money can lead to serious physical and emotional problems. It can even result in a breakdown in relationships. How to solve money problems then? There are tons of financial advice that people probably already heard or read about. In fact, most of these advices are simply common sense yet one the greatest mysteries about life is that no one really follows them. It sounds so easy to do but for most people, it is very difficult to follow. Here are some of the common sense money advice that people don’t follow:

1. Spend Less Than You Earn

This rule is so simple. Just live within your means. Obviously, if you spend more than you earn, that will only spell debt. Even a grade schooler knows that if you subtract more than you add, you will end up with a negative number. You need to have financial discipline; otherwise, it will be very hard to create wealth. Avoid keeping up with the Joneses.

There are many ways to reduce your monthly expenses. It helps to have a budget. The money jar budgeting system is a good money management technique because it not only helps keep your spending in place, it also helps slowly build your wealth. If spending less is really not an option, then you need to look for ways to earn more money.

2. Understand How Credit Cards Function

How many people are buried in consumer debt simply because they do not understand how credit cards function?

Credit cards are very useful. With credit cards, you don’t always need to have cash. You can purchase anything without having to worry of paying them immediately. However, if you don’t have a basic understanding of how it works, credit cards can turn into your worst nightmare. Always remember that you are not using your own money when you purchase items using your credit card but rather you are borrowing the bank’s money.

Credit card companies use the power of compound interest to their advantage. Compound interest is a very powerful mathematical concept that you can use to increase your wealth. Unfortunately, it is a two-edged sword. If used against you, it is a sure way to financial bankruptcy. That is why understanding how credit card functions is a necessity if you have a credit card.

Unless you know how to manage your credit cards, it is better for you to refrain from using your credit card altogether. Use credit cards only in emergencies. Buying because it is on sale even though you don’t really need it is not a valid definition of an emergency.

3. Automate your Savings

One of the lessons of this pandemic is the importance of having a savings account. Life is unpredictable. Saving money can ensure financial stability in case of emergency.

Pay-yourself-first has always been the initial advice that wealth managers will tell you as the first step towards building your wealth. Unfortunately, most people would rather spend or pay everyone else first before themselves. Savings always comes last. Usually, people save using whatever it is that is left (if there is any).

The best strategy to avoid this scenario is to automate your savings. By regularly setting aside a fix amount through automatic savings, you will soon be able to build up your emergency fund. One of the wealth rules of the richest man from Babylon is to always save 10% of income.

4. Seek Help from Qualified Persons

If your financial woes are already big enough for you to handle on your own, then it is time to seek help from other people. If your problems are about money, ask a professional in financial planning to help you. If you cannot afford your own financial planner, then ask a friend who is an expert in handling money.Don’t just ask any friend.

The problem with most people is that they normally seek advice from friends or relatives who are close to them. However, they fail to consider if these people are also having financial problems of their own too.

Think of it this way, if you are in school and you are having problems with your Math subject, obviously, you will not ask your Filipino or Science teacher to help you. Instead, you will seek the help of your Math teacher or a fellow student who is good in Math because they are the ones who can help you.

Remember to always ask the correct persons for advice.

So, If you want to have a better financial life, it is best to follow the common sense money advice that people don’t follow.

First published in Pinoy Smart Living on 03.26.2019.

Photo by Monstera from Pexels

Apr

2021

3 Types of Expenses You Need to Manage

Reading Time: 2 minutes

There are 3 types of expenses you need to manage in order to be successful in your financial goals. These can be applied to any items you have on your monthly budget. Identifying these kinds of expenses helps you schedule your expenses. In this way, you don’t fall victim to little money leaks that can ruin your budget.

1. Fixed Expenses

Fixed expenses are the types of expenses that you incur in predictable amounts and in consistent intervals. These usually happen monthly such as utilities, rentals, loans, insurance, subscriptions and credit card payments. These can also include your tithes, savings and investment funds if you add to them monthly.

Since these expenses occur on a regular basis, you can schedule them automatically. This one of the 3 types of expenses that is the easiest to manage in your budget.

With a fixed amount and schedule, it is easier for you to decide which expenses to reduce or remove. This allows you to maximize other items in your budget. For example, you can downgrade your mobile plan subscription. Then, you can add more to your savings or investment fund.

2. Periodic Expenses

Periodic expenses are similar to fixed expenses but they occur less frequently. These kinds of expenses can also be scheduled quarterly (every 3 months), bi-annually (every 6 months) or annually (every year).

The dilemma with periodic expenses is that they are usually necessary. That’s why it is hard to remove them from your budget. These expenses usually include maintenance costs. Examples include oil change for your car, car registration fees, annual membership fees and annual tax fees for a business.

Unlike fixed expenses, we tend to forget periodic expenses. This results in paying penalty fees which ruins your budget. It is very important to include these types of expense in planning your budget. The advantage is that you have more time to prepare for them.

3. Variable Expenses

The trickiest type of expense to manage are variable expenses. These types of expenses don’t occur regularly but they are still important. Variable expenses can be subcategorized into necessary and discretionary.

An example of a variable but necessary expense is gas for your car. This does not occur regularly but you have to budget for it when it becomes necessary. A discretionary, variable expense includes a new pair of shoes or travel funds. These don’t occur regularly but they are important for your well-being.

Discretionary expenses are usually items that you reward yourself with. Sometimes, they can be impulse buys which you incur because you are feeling down and you want to feel better. Your behavior and priorities will define what variable expenses you cut out or save up for in your budget.

Which type of expense do you usually have trouble managing? If you haven’t started budgeting, then the first step is to track your expenses. Then try out the money jar budgeting system and adjust as you need. This will help you control the flow of your money. It is also helpful to know more about the money lessons you didn’t learn in school. Get more financial inspiration for own financial goals with these books on wealth and success.

Feature Image: Original Photo by Sasun Bughdaryan on Unsplash.

Apr

2021

Get Out of The Rat Race

Reading Time: 4 minutes

Do you want to get out of the rat race? Do you know the reasons why you are stuck in the rat race? People stuck in the rat race don’t even realize it. Most people have accepted this situation as their fate. They have become resigned to living with the situation for the rest of their lives. They are teaching the same belief to their children as well. The bad thing is; they believe that there is no escape. Actually, there is a way out; they just haven’t taken the time to learn about it.

What is the Rat Race?

Have you heard the term “the daily grind”? People use this term to describe the rat race. The rat race is the constant struggle of going to work to pay your bills. Your salary is never enough, you borrow some more, you work harder to pay more. Your hard work makes your company rich. The company doesn’t do anything to help you as you continue to struggle to make ends meet. The struggle only gets more difficult as the days go on. This cycle is similar to a hamster running on his wheel. No matter how fast it runs, it doesn’t go anywhere.

Are You in the Rat Race?

The rat race is where we usually go to after graduation. We start to work and we enjoy working. Earning our own money makes us feel independent. After some time, we see and feel the signs of being stuck in the rat race.

Devaluation – You work hard for a fixed hourly or daily rate. Extra work is minimally compensated or recognized.
Repetition – You do the same thing every day and you derive no satisfaction from it.
Justification – You keep coming up with excuses for staying in your job.
Boredom – You can’t wait to do something else.
Disconnection – You don’t feel that your work contributes to any significant difference in other person’s lives or your own.
Drawing Board Syndrome – Your plans to take a leave from work never pushes thru.
Lifestyle Creep – Any minimal increase in your compensation/salary leads to lifestyle creep. You end up burdened with more debt.

The vicious cycle of the “daily grind” is what it’s like to be in the rat race. If you can figure out why you are stuck; you are in a good place to start transforming your life.

In his popular book Rich Dad, Poor Dad, Robert Kiyosaki describes the rat race as a situation where individuals “work for the owners of their company, for the government paying taxes, and for the bank paying off mortgage and credit cards.”

Why Are You Stuck in The Rat Race?

Most of us have parents who have been stuck in the rat race. This makes it seem almost impossible to get out of it. The rat race is a cycle that provides a false sense of security. Here are some reasons why you feel secure in your current job; and why you can’t seem to get out of your current lifestyle.

Your job offers you a monthly income. This provides you the money to support yourself and your family’s needs.
You want to keep up your government contributions to maximize your retirement pension.
You’re putting your dream job on the shelf. Your reasons include: (a) it doesn’t fit in with your current job, (b) it will take special training which you don’t have the money or the time to spare at the moment, and (c) it is not guaranteed that you will succeed in it.
You want to start a business. You need to do and learn many things. Raising funds is necessary to start.
You want to create extra income and save money to invest. Work prevents you from having extra time or energy for a side job.
Your work and salary doesn’t leave room for you to volunteer or support a charity, a friend or a loved one.
You have plans to get a house and/or a car in the future. You have to take care of tuition fees first, loans and other expenses.

These are just some of the most common excuses we tell ourselves which is causing us to stay in the rat race. These thoughts usually interrupt our plans for change.

Fear is Keeping You Stuck

One common factor in these thoughts or excuses is fear. We all fear failure. No one wants to feel rejected. We don’t want to disappoint the expectations of our family and friends. We all fear that things won’t work out in the end.

All these fears had been instilled in us by our parents. Their parents did the same. Fear stems from doubts. Your doubts grow into fears. Fear of what if’s is what paralyses you from doing something to change your situation. The best way to combat doubt is to stop it right at the start by learning.

Get Your Self Unstuck

Most of us adults have lost our curiosity as children. Curiosity is an important component to learning new things. The best way to combat doubt and fear is to educate yourself and your loved ones. Learn what options you have to get yourselves out of the rat race. You don’t always have to stay where the money is. There are other ways to achieve financial freedom.

Start educating yourself by learning from those who have already succeeded. You can start incorporating positive morning habits into your daily routine. Financial literacy is very important to create a better life for yourself and your loved ones. Start managing your finances better. Learn and apply a budgeting system. Tailor your budget to your circumstances. Learn more about how to reboot your finances so you can get out of the rat race.

Updated. First published on Pinoy Smart Living on 2018.08.15.
Feature Image: Original Image by Brian Merrill from Pixabay.

Mar

2021

Money Lessons You Wish You Learned in School Part 2

Reading Time: 4 minutes

How are you doing with your finances? Do you consider yourself financially stable? If you do, then good for you. If not, you are not alone. Most people are having problems with money because only a few are financially literate. Most of us have to learn financial lessons the hard way. Just imagine all the things that you could have done differently if only you know a thing or two on personal finance. Here are some more money lessons you wish you had learned in school Part 2 (click here to read part 1 ):

1. Basic Investing Skills

A lot of people are scared of investing. This is just natural; after all, who would not be scared of losing their hard-earned money. You probably heard stories of people losing all their money through bad investments.

However, savings alone are never enough. You need to invest your money too. This is where your knowledge on Investment Basics will come in handy.

True, investing involves risk but it is also a great way to increase your wealth. You can minimize investment risks through financial literacy. Familiarize yourself with the different investment vehicles available out there. For beginners, you can learn about bonds, funds and stocks. Depending on our risk tolerance, you can try for the more advance type of investing such as cryptocurrencies, foreign exchange and stock options trading. It is only through Investing will you be able to slowly build your passive income.

2. The Power of Compound Interest

Out of all the items listed here, compound interest is one topic that was surely discussed in school. Unfortunately, since a lot of people hate math, compound interest is nothing more than a numerical value calculated from a math problem. You probably forgot the formula on how to compute it by now. Big mistake!

Compound interest is probably the most important concept of personal finance. If used to your advantage, it can give you vast wealth. However, it is a double-edged sword. It can either make you or break you. If it works against you, it can lead to your financial downfall. Do you know of people who are buried in credit card debt? That is a clear example of compound interest working against them.

Compound interest is the eighth wonder of the world. He who understand it, earns it…He who doesn’t pays it.
– Albert Einstein

3. Time Value of Money

The time value of money is one the most important concept for investors. It simply state that the value of your money today is worth more than your money tomorrow. To put it simply, it means it is better to have your money with you now than at a later date.

This concept involves time. Time is literally money. The sooner you earn or have money in your hand, the faster you can have money work for you. If this concept was discussed in school, making decisions in life would have been a lot easier.

For example, a buyer wants to buy your property at the prevailing market price. You declined the offer hoping that somebody else with a bigger offer will approach you later on. There is no assurance when the next buyer will come. What if the next buyer comes after a year or two? Is it still worth the wait?

Another example is let’s say the luxury bag that you have always wanted to have is on sale. You decided to buy it to take advantage of the sale. You use your credit card for the purchase. Unfortunately, you were only able to fully pay the item after a few months. With the interests incurred during those amounts, you ended up paying more for the bag.

The time value of money is also at work in investing. The younger you start investing, the more money you will have in the future. This also applies to other things such as your health. Choosing the right food and exercising today will keep you healthy. This will save you money on medical expenses later in your life. In practical terms, don’t put off what you can do today for tomorrow.

4. Building Good Credit

Do you pay your bills on time? Establishing a good credit is probably one of the most important things that you can do in your life. A good credit history will make your life a lot easier. Whether you are buying a house or a car, applying for a loan or a credit card or even getting a job; a good credit score will come in handy.

A credit report is an explanation of your credit history. It shows if you have an existing loan, if you are applying for one and your balance. It also shows your capacity to pay and whether or not you are paying your bills on time.

This is very important in your financial life. A good credit history will make it easier for you to get a loan. It can also qualify you for a higher credit limit and lower interest rates.

5. How Credit Card and Interest Rates Work

Do you understand how credit card and interest rates work? Do you even know how to read your credit card statement? So many people do not understand how credit card and other consumer loans work. As a result, they end up with an enormous credit card debt.

Credit card can be good or bad depending on how you use them. Credit card is a financial tool that you can use as leverage. However, it is never a good idea to use credit cards to purchase goods that you cannot afford in the first place.

The bottom line is that financial literacy can help us make better monetary decisions in our lives. It will help us achieve financial freedom and avoid bad debts.

Teaching personal finance in school can help our children have a better future.

First published in Pinoy Smart Living on 09.18.2019

Photo by Julia M Cameron from Pexels

Mar

2021

Money Lessons You Wish You Learned in School

Reading Time: 4 minutes

Did you know that the number one cause of stress is money? According to several studies, more people worry about money compared to health, family, work or relationships. This is true regardless of age, citizenship, gender, career, educational attainment and even amount of income. There is only one explanation to all this, most people do not have a deeper understanding on how to handle money. After all, not all parents teach their children how to handle money. In addition, money management is not part of the school curriculum. If only it was taught in school. We would not have to learn the hard way. For this reason, there are some money lessons you wish you learned in school.

The Rat Race

Have you heard of the rat race? In finance, a rat race is the endless pursuit of money. It is called a rat race because it is likened to a mouse who keeps on running around in circles chasing the cheese. People in the rat race will have financial difficulties if they stop working. Unfortunately, most people are in the rat race. Worldwide statistics show that out of 100 persons who will retire, only 3 persons will be comfortable and only one will retire wealthy. Life would have been financially better if only we learned about financial literacy long before we started earning. How about you, what will your retirement look like?

Money Lessons You Wish You Learned in School

1.Money is Just a Tool

Mindset is the single most important thing that makes a person rich or poor. Thus, personal finance lessons should always start with instilling the proper mindset. Our mindset is a product of our environment. It is our belief based on what our parents and teachers taught us. Do you have a millionaire mindset or a poverty mindset?

In order to be wealthy, you got to think like the rich. One of the ways in which rich people think differently is the way they view money. For the rich, money is just a tool.

Have you heard of the saying that “Money is the root of all evil”? Most people believe that money is something bad and that rich people are greedy. This belief came from misconceptions on some bible passages. It is not money per se which is bad; rather, it is the love for money. It is people’s attachment to the trappings of wealth that makes it bad. Money should be viewed as just a tool, not as something negative. If you have money, you will be able to buy things that you need and want. Money can also be used to help other people.

2. Money Buys Choices

Money does not buy happiness, what it does buy are choices. With money, you will have unlimited options. You can choose the job that you want, where you are going to live, what car you want to drive, where do you want to go and how you are going to spend your days without constraints and worries. In short, money gives you freedom to choose.

3. There are Other Streams of Income Aside from a 9-to-5 Job

Since young, we have been programmed to do the following:

Study Hard.
Get Good Grades
Earn a Degree from a Prestigious University
Get hired into one of the Top 500 Companies
Climb the Corporate Ladder
Save Money
Buy your Dream House and Car
Retire and Receive Retirement Money from Company

There is nothing wrong with this formula except that it is NOT the only roadmap to success. There are many other streams of income aside from being an employee. You can earn a living by starting your own business. You can earn from different kinds of investments like stocks or stock options. Nowadays, you can even earn money by becoming a professional blogger, YouTuber or online gamer. There are endless possibilities available out there.

4. You can Make Money Work for you

Schools teach students how to work for money. In school, students learn different knowledge and various skills. Most of them are catered towards the specific field of your choice. Engineering students learn technical and problem-solving skills. Medical students study about the human anatomy and physiology and illnesses. Law students specialize about the laws and legal issues. After school, students are well- equipped with all these technical skills, but how many are really ready for the real world? As a result, many people ended up working for money. Unfortunately, a diploma from a prestigious university is never a guarantee of wealth. But rather, it is all about understanding how you can make money work for you opposed to learning how to work for money.

Out of all the graduates, how many actually learned about money management? How about debit and credit? How about investing? These are crucial finance lessons that one needs to know to be successful in the real world.

Without any formal personal finance instruction in our high school or college curricula, many college seniors who graduate in the red continue to make common financial mistakes that only exacerbate their debt burdens.
– Alexa Von Tobel

5. Saving Money Alone is Never Enough

We were taught the importance of saving money even at a young age. However, did you know that saving money is never enough because of an economic phenomenon called inflation? Inflation is more than just a number. It affects all of us. That is why it is important that you understand what inflation is and how it affects your finances.

Inflation happens when there is a persistent increase of the prices of goods and services which will ultimately lead to the decline of the purchasing power of your money. This means that every year the value of your money is decreasing. That is why savings alone is not enough. You need to learn to invest your money too. As a rule of thumb, the interest rate of your investments should be greater than the inflation rate.

Click here to read more money lessons you wished you learned in school.

Edited Version. First published in Pinoy Smart Living on 09.17.2019

Photo by Karolina Grabowska from Pexels

Dec

2020

Can Stock Options Trading Make You Rich?

Reading Time: 2 minutes

If you know what you are doing, yes, stock options trading can make you rich.

But if you are thinking that it is some form of a get rich quick scheme, then you are wrong. Sorry to disappoint you but there is no such thing.

Don’t fall for get rich quick schemes. It takes time and effort to build wealth properly.
– Dave Ramsey

Like any other investment vehicles, stock options trading carries its own degree of risk. When you invest in something, you are always exposing yourself to the uncertainty of the situation. There is always a chance that the result will not turn out to be the way you expect them to be. In fact, if you are not careful, you might end up losing a lot of money trading options.

The good news is that there is actually a way to minimize risk. But first, you must get rid of the get rich quick mindset. Success and wealth does not happen overnight. It takes a lot of time and effort. Once you realized this, then you are now ready to make your investment.

However, going into trading without knowledge is akin to gambling. It is no longer investing.

Without wisdom, gold is quickly lost by those who have it, but with wisdom, gold can be secured by those who have it not.
– George S. Clason

Financial literacy is always the first step in achieving your financial goals. Since stock options trading requires technical knowledge, it helps to have mentors that can teach you about stock options, especially for beginners.

Mentors are people who are experts in that particular field. Stock option trading mentors are seasoned traders. They have deep understanding, knowledge, skills and expertise on the trade. They don’t just make predictions. because they have used proven and tested strategies for years. Moreover, they read company profiles and financial statements, analyze data and study chart patterns. They use algorithmic trading programs and fundamental analysis. Then, they come up with sound and efficient strategies using the knowledge and information that they have.

Yes, you can read and study about stock options trading on your own. But having the guidance of mentors can make your journey towards wealth easier and faster.

Good luck!

Interested in knowing more about stock options trading? Register for a free webinar now.

Feature Image from Pixabay Images.

Aug

2020

Assets and Liabilities in Personal Finance

Reading Time: 2 minutes

Do you know what an asset is? How about a liability? Many probably have an idea on what they are but how many actually understand these terms? True, it might sound boring for many. Unfortunately, these terms are part of the basic terms that everyone should know about personal finance. A deeper understanding of these two terms can lead to drastic improvement on the current stage of your financial life. So, what is the importance of assets and liabilities in personal finance?

Assets vs Liabilities

An asset is any resource that has monetary value. In short, in personal finance, an asset is anything that you own that has value. Your car, house, investments, cash and items such as antique furniture, artworks, watches, jewelries and even some luxury things are all considered assets.

On the other hand, liabilities are everything that you owe. They can be in the form of mortgages, loans, debts and any money that you owe others.

Net Worth

Your total assets minus all your liabilities is your net worth. Knowing your net worth will help you understand your current financial situation. If it is positive, then good for you. If it is negative, then it is a warning sign that you are living beyond your means. In addition, your net worth can serve as reference point in your financial goals.

Launch Challenge

Compute your personal net worth now. Knowing your current state of your finances will help you improve your financial life. Your current net worth will be your starting point in your financial journey.

1. Compute all your Assets

Start by making a list of all your assets. Your assets include the following:

Real Estate Properties
Automobiles
Cash deposits
Investments on businesses, bonds, stocks, funds, etc.
Insurance
Watches and Jewelries
Other items such as antiques, art works and luxury items

Then, place a monetary value on each one. Record the estimated current market value not the purchase price.

Add then add them all up. The total value is your assets.

2. Compute all your Liabilities

Real estate mortgages
Auto loans
Credit card balances
Student loans
Other personal loans

Add up all the outstanding balances to get your total liabilities.

3. Calculate Your Net Worth

Now, subtract your total liabilities from your total assets. Then, that’s your net worth.

Do this every month to monitor your progress. Your goal is to slowly increase your net worth.

Now that you know your net worth, it helps to keep this in mind each time you spend your hard earned money. Knowing your net worth will help you make good financial decisions.

Feature Image by Bruno /Germany from Pixabay Images