money management

Oct

2020

Lessons from My Maid Invests in the Stock Market and Why You Should, Too!

Reading Time: 6 minutes

Have you ever thought of why you should invest in the stock market? Maybe you have heard of stories from people getting rich from investing in stocks. There are also horror stories of people going broke from risking too much in stock investments. We all have financial anxieties and investing in stocks is one way to ease our financial burdens. Most of us only lack the knowledge on how to do it.

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Common Financial Situation

The chart of expenses below compares the expenses of the regular employee to that of their house helpers. This may seem like a funny comparison but the situation also tugs at reality in a major way.

ITEMS	MS. OFFICE WORKER	MS. HOUSE MAID
Salary	12,000 / month	5,500 / month
Tax	1,000	None
Food	3,000 / month	FREE, from groceries bought by Ms. Employee
Transportation	100 / day or 3,000 / month	FREE ride w/ Ms. Employee
Mobile Phone	1,000 / month	500 / month
Freedom of Time	Need to complete 8 hours of work	Can relax when all household chores are done
Personal Care (e.g., shampoo, soap, toothpaste, etc.)	500 / month	FREE, bought by Ms. Employee
Bills	3,000 / month (Rent + Utilities)	FREE
TOTAL EXPENSES	11,500 / month	500 / month
SAVINGS	500 / month	5,000 / month
	Need to save up some more before she can send financial aid to her family in the province.	Has enough savings to send monthly financial aid to her family in the province.

Financial Situation of Ms. Employee vs. Ms. House Maid | Original Source: Flickr

“Ms. Employee” represents all of us who struggle to make ends meet with our monthly salaries. “Ms. House Maid” represents the household helper that we employ to help us manage our households. Not many of our household helpers may be able to save this much of their actual salaries. Most of us are also unable to maximize our savings because we have to take care of our expenses first. That’s why our first lesson is actually to prioritize our investment fund.

In his book My Maid Invests in the Stock Market and Why You Should, Too!, Bo Sanchez shows us that his household helpers do invest in the stock market and they can look forward to a brighter financial future by doing so. Here are some of the lessons Bo Sanchez teaches his maids which we can use so we can start investing too.

Take Charge of Your Finances

In the first part of his book, he encourages us to take charge of our financial future. Most regular employees including household helpers and OFWs do not have this initiative. We are all preoccupied with addressing our family’s present financial needs. We often forget that we should also prepare for our own future.

This is an all too common scenario outlined in his book that often happens to employees.

“They send most of their salaries back home. They send it to their parents, siblings, nephews, nieces, aunties, uncles, cousins, including their pet carabao. Sometimes, I feel my helpers are supporting entire civilizations. Without their monthly stipend back home, the economy of an entire barrio will cease to exist. People will loiter on the road aimlessly. Children will die of starvation. And the world will come to an end.”

We are all burdened by the financial needs of our families. This puts a lot of pressure on us to send them all that we can. We even end up giving them all that we have. Then, we shelve the thought of our own futures for pondering on another day.

Bo says that everyone ought to be rich but not everyone knows how to do it. This is why we should learn to invest in the stock market — to start building our wealth. In his book, he shows us the basic strategies he teaches his maids for planning their budget and what each fund is for.

Budget Your Income

If you have an income, you need to make a budget. Be sure to include investments in your budget. For his helpers, Bo suggests this simple budgeting system. The first fund for him is the tithe fund.

You’ll grow in abundance thinking, when you give beyond your family’s needs. This will make you think rich and feel rich. And when you change your thinking, you change your living. Soon, you’ll become very rich and you’ll have more to share.

Tithe Fund – Having this fund helps you grow in abundance thinking. He recommends allocating 10% of your budget for this fund.
Expenses Fund – This fund is where you will get all your spending for your daily needs.
Support Fund – What you regularly send for your family’s needs.
Emergency Fund – A savings fund that you use for when emergencies come up.
Retirement Fund – Your real savings.

Because you don’t have a business, the best way for you to grow your money is to invest in the stock market.”

This is a good budget plan to start you off on allocating your money. If you want a more sophisticated budget plan, you can also try out the money jars budgeting system. Of course, if you have loans and debts, such as credit card debts, then you need to pay off those first.

Have a Powerful Vision

Bo encouraged his helpers to follow the budget plan monthly by showing them the best and worst case scenarios that they could find themselves in if they don’t take care of their financial futures.

We should all have a clear vision of what we want to achieve when we have improved our financial situations. This will keep us motivated to stick to our monthly budget goals and help keep us disciplined to spend our money wisely.

Create a powerful vision for yourself in the future. This is where the discipline of delayed gratification can be used to your advantage. Disciplining yourself to live within the limits of your current budget will enable you to enjoy the comforts you want in life in the future, when you are not working anymore and you have all the time and the money to do what you want.

To help you stay motivated, you need to learn the basics about money and increase your financial literacy. You can also read up more on how the rich think about and manage their money.

Invest in the Stock Market

If you don’t own a business, then concentrate on doing great at your job. Then, use the money you earn to invest in the stock market. This is another reason why you should invest in the stock market.

Many people fear the stock market but Bo states that “trading” is the riskier side of the stock market and there is a difference between trading and investing.

Trading is speculation.

In trading or speculating, you don’t look at how strong the company is. Any company is a game–even what they call “penny” stocks. These are companies whose stocks are worth centavos. Because they’re considered very risky. So leave the trading to full-time traders–the people who do this full-time, studying about it 8 hours a day.

Truly Rich Club: Helping Good People Become Rich

Investing is where the investor “invests only on the great companies. Because we’re in for the long haul. Through your business or job, you create the money necessary to invest in the stock market.”

Money Cost Averaging

The best strategy to invest in the stock market is money cost averaging where you buy stocks of great companies, little by little each month. The important thing is to do it regularly. When you adapt this strategy, “you’ll be buying stocks without much thought to the bouncing of the market prices.”

He follows Warren Buffet’s strategy: “Be fearful when others are greedy, be greedy when others are fearful.” This is a simple strategy that anybody can use. This is also another reason why you should start investing in the stock market.

You Can Start Investing Online

Bo recommends that you invest online through Citiseconline, now COLFinancial using their Easy Investment Program (EIP). He states that he is not sponsored by the company but he recommends it because it allows people with smaller budgets to invest since only Php5,000 is required as the initial investment amount.

Each month, or every 3 months thereafter, you can deposit your investment fund to the different branches of these banks: BDO, BPI, Security Bank and HSBC.

These are just some of the lessons from the book My Maid Invests in the Stock Market and also the reasons on why you should invest in the stock market too! Remember though that before you start investing, you should try to eliminate all your current debts first. You should also start learning about the different investment types.

Bo Sanchez’s book definitely gave me a new perspective on how to manage my finances. The budget plan he recommends is a good plan to follow if you are just starting out earning your own money especially if you have no current loans to keep your budget tied up.

There are many resources that you can get your hands on online to help you get started on investing. In the meantime, start growing your investment fund so you can make your initial investment as soon as possible.

Here’s to a brighter financial future for all of us!

If you want to discover the Seven Success Principles from the Ancient Book of Proverbs for your money, work and life; click here to get a free copy of the Ebook from Bo Sanchez entitled Nothing Much Has Changed.

Updated. First published on Pinoy Smart Living on 04.16.2019.
Feature Image: Original Photo by Austin Distel on Unsplash.

Sep

2020

How to Get Out of Credit Card Debt

Reading Time: 4 minutes

Credit cards can be a blessing and a curse. They allow you to spend for something even without cash on hand. However, if you don’t monitor your expenses well, you end up paying more than what you originally spent. If you don’t monitor your swiping sprees wisely, you could end up in credit card debt. I had seen this happen to several friends but I never thought it would happen to me. You then find yourself wondering how to get out of credit card debt.

Credit card debt is scary but it can be avoided and overcome.

I used my first credit card for a new cellphone and for the cellphone purchases of my 3 friends too. In the same month, we had lost our jobs (as we worked in the same company). I had no savings to back me up for the next months. I had to spend my last pay check to look for another job. In the meantime, my credit card debt was getting larger. My friends didn’t have the capacity to help with the payments at the time. What was I to do?

Are you are in the same situation? Are you trying to pay off more than one credit card? Here are some tips to keep you focused on overcoming your credit card debt.

Avoid creating more debt.

Needless to say, this is the first step you should take. Look at your current spending and find out where you can reduce your expenses. Avoid using your credit card for necessary expenses (e.g., food, utilities, etc.), use cash as much as possible.

Leave your credit card at home. This way, you don’t succumb to the temptation of whipping it out every time you are strapped for cash. If you just can’t help yourself, resort to some extreme measures. Some people actually freeze their credit cards, in the refrigerator, so they don’t have the convenience of taking it out.

Make sure to pay your credit cards on or before the due date. This is to avoid getting additional late payment fees added to your outstanding balance.

Be a smart and focused payer.

Educate yourself about your credit cards and pay your credit cards strategically. Talk to your credit card companies. Find out which credit card has the highest interest rate and total outstanding balance.

In general, you should pay off the credit card with the biggest balance or the biggest interest rate first. Aim to pay that credit card first as soon as possible. At the same time, you should still continue to pay for the other credit cards that you have. As soon as you’re finished with the first credit card, tackle the second one next. Repeat with the other credit cards remaining.

Some people choose to pay the credit card with the highest interest rate first. Others start with the credit card with the biggest outstanding balance first. Still others start with the credit card with the smallest outstanding balance. Choose the payment method that you are most comfortable with in your current financial situation.

Find out which credit card companies you can request payment arrangements with. Credit card companies offer payment plans too. You can pay a fixed amount every month until you pay off the full amount. This means that you don’t incur more debt from the monthly interest rate on top of your actual balance. The end goal of this payment arrangement is to eventually close your credit card account once you are fully paid. That’s one less credit card to worry about.

Close the gap with each payment.

As you pay for any of your credit cards, try to pay more than the minimum monthly amount required. Paying more than the required monthly minimum will help you reach your payment goals much faster.

If you are really on a tight budget, you don’t need to do this with each payment. Each time you have some extra cash on hand, pay off more than the minimum amount for your credit card. This means that you also avoid spending the money on something else. That’s hitting 2 birds with one stone.

Don’t close a credit card account that is not yet fully paid. If you are already thinking of doing this, stop immediately. Closing a credit card account that you have not fully paid will have harmful effects to you and your future.

Expect to be hounded with calls, letters and emails with threats of a court case. You might be able to endure it but your unpaid credit card debt may haunt your loan applications too.

Your unpaid credit card debt will reflect badly on your credit history. When you apply for a personal loan from a bank, they will take a look at your payment history. With your unpaid credit card, that’s definitely a red flag on your record. You may not be able to get a personal loan from any bank because of your unpaid credit card.

Also, when looking for employment, some companies do check their applicant’s background including their credit card history. Your shady credit card history may be standing in the way of your dream job.

Endure and learn your lessons.

One of the obvious ways for you to pay off your credit card debt faster is to create more income. You can use your talents to help other people and earn.

List down the things that you are good at. Write down the things that you love to do or would love to do. Be honest with yourself on this or seek the help of friends. Doing this can help you explore hidden talents. You may rediscover a passion that you have been putting on the back burner for a while.

Can you play an instrument or are you good at drawing? Offer to teach for a fee! Do you like to teach children? Be a tutor! Have you always wanted to share your passion for gardening with others? Now is your time to start sharing your knowledge and start earning!

There are many other ways to create income or additional income. You just need to have a clear focus on your goals. Be open-minded to new ideas and be brave enough to grab the opportunity.

Finally, don’t fret about the amount of your debt. By educating yourself and keeping your focus on your goal, you will eventually overcome it. Just don’t forget the lessons you learned along the journey so you can be a wiser spender in the future.

Updated. First published on Pinoy Smart Living on 2018.09.12.
Feature Image: Original Photo by Pixabay from Pexels.

Aug

2020

Track Your Expenses

Reading Time: 2 minutes

Did you know that tracking your daily expenses will help you save a lot of money? Knowing where your money is going is the only way for you to take control of your finances. So to improve your financial life, you need to track your expenses.

You are not buying anything lavish. You don’t eat at upscale restaurants. You don’t have the latest gadgets. You don’t even drive a fancy car. But don’t you ever wonder why your money is still not enough?

Launch Challenge

Get a notebook and write down all the things that you will be spending for the next 30 days. You need to write down all your cash expenses, even small purchases like candies, tips and sticks of cigarettes. There are several apps available online that you can download for free to make your tracking easier.

At the end of 30 days, summarise your expenses under two major categories: Fixed and Discretionary Expenses.

Fixed Expenses – essentials or living expenses such as food, transportation, housing, education, bills and utilities and debt payments.
Discretionary Expenses – non-essentials that vary each month as entertainment, travel, restaurants, vices and other miscellaneous expenses.

Once you are finished categorizing them, you will then have an idea on your spending pattern. You will also have a brief overview on what percentage of your income goes to unnecessary expenses.

Then use this data, to create your monthly budget. If your spending is more than your earning, you need to experiment and see what items you can reduce or cut down totally from your budget. Remember, your monthly income minus expenses should always be greater than or equal to zero. The money jar budgeting system is a good budgeting guide to use.

So, what are you waiting for? Begin to track your expenses now!

Updated Version. First Published in Pinoy Smart Living on 08.21.2018

Feature Image by Michal Jarmoluk from Pixabay Images.

Jul

2020

What Stage Are You In In Your Financial Life?

Reading Time: 3 minutes

Imagine a life where you are free to do whatever you want to do without having to worry about money. Wouldn’t that be wonderful? Yes, that life is possible and it is imperative that you know how to get there. Some people like businessmen, athletes, artists and lottery winners fast tracked their way to wealth. But for most of the people, the road to wealth can only be done one step at a time. There are stages to financial independence. First and foremost, you must figure out what stage are you in in your financial life right now. Knowing where you are will give you an idea on where to go next.

Active vs. Passive Income

Before you can understand the stages, you need to have a clear understanding of two basic financial terms about income.

Active Income – is the money that you earned while working. It means the income comes from your active participation or as a direct result of you performing a service. Active income can be in the form of salary, commission, tip, wage and even income from business.

Passive Income – requires little or no effort at all from your part. It is basically money that you earn from doing almost nothing.Examples of active income include income from rent, investments, dividends, trademarks, copyrights, affiliate marketing and other portfolio incomes.

Stages in Your Financial Life:

Stage 0: Financial Dependence

Financial dependence means someone else is responsible for you in your financial life. That person can be your parents, spouse, grandparents, uncles and aunts or whoever is paying for your monthly living expenses. It is perfectly normal to be financially dependent on someone else when young. If you are still in this stage, yet you are old enough to earn on your own, your main goal should now be to move on to the next stage.

Stage 1: Financial Solvency

Financial Solvency is the first stage towards financial freedom. In this stage, you no longer depend on someone else to pay your financial obligations. You now have the ability to pay for your monthly living expenses. It also means that if you have debt, you are now able to pay for your loans on time. Generally, the first step is to either get a job or start a business.

Stage 2: Financial Stability

Once you are already able to consistently meet your financial obligations on time, the next thing to do is to start saving money. Ideally, you should be able to save at least 6 months worth of monthly expenses in your emergency fund. As the name suggests, emergency funds are a stash of money set aside for life’s emergencies. It can be used for emergencies such as a job loss, health emergency or appliance and car repair. At this stage, you should also begin investing a portion of your income. A budgeting system will help you handle your money properly.

Stage 3: Financial Security

At this stage, the income from your investments should already be enough to cover your basic monthly expenses. You are no longer reliant on your active income alone because you are now earning some passive income. Even if you lose your job or business at this point, you can now afford to live a simple life without having to worry about your basic needs.

Stage 4: Financial Independence

This is the ultimate goal for most people. This is the stage of financial freedom. It is the stage where you have enough savings and investments to finance your desired lifestyle. At this stage, your passive income can now completely take over. Your basic needs as well as some comfort in life can now be sustained by the income that you are receiving from your investments. Even if you are vacationing in an island somewhere, you don’t need to worry because money is still pouring in without you having to lift a finger.

Stage 5: Financial Abundance

Some people will not be contented with merely achieving financial freedom. The next stage is for these people. In this stage, there is abundant wealth. You already have all the money that you ever need to the point that you don’t know where to spend them anymore. People on this stage usually looks into building their legacy. A legacy is basically who you are, how you lived your life and how you want the people to remember you. It is at this point that you consider how you will leave your wealth behind so it can served as a very strong foundation for the next generation.

Now assess your financial life. What stage are you in in your financial life right now? Where will you grow from here? What is your end goal?

Good luck on your financial journey!

Feature Image by Photo by Lukas from Pexels

May

2020

How Financial Literacy Can Change Your Life

Reading Time: 3 minutes

Are you constantly worried about money? How is your financial situation during the lockdown? Are you struggling to make ends meet? Do you have enough savings to go through this pandemic? Are you struggling to meet debt obligations? Are you living from paycheck to paycheck? Do you feel that your salary is not enough to cover your monthly expenses? Are your financial worries so stressful that they are already gravely affecting all aspects of your life including your health and personal relationships? Well, there is a solution to your problem. That is, a basic understanding of finance. Financial literacy can change your life for the better.

What will you do when you have money problems? Most people will look for ways to earn more money by sacrificing their time and health. They will either get a second job or work overtime just to raise the needed money. Other people will resort to borrowing money. However, not all loans are created equal. There are good loans and bad loans. Some loans like credit cards charge high interests and can easily spiral out of control especially if you don’t know how to use them. There are some who will simply rely on government support. While these strategies may help ease your financial burdens in the short term, it is not going to permanently solve your money issues in the long run.

There is only one solution to money problems and that is financial literacy.

The single biggest difference between financial success and financial failure is how well you manage your money. It’s simple: to master money, you must manage money. –
T. Harv Eker

Financial literacy is essential in having a secure financial future. Unfortunately, financial literacy was never thought in school. For most people, the yearning to learn financial literacy only comes when they are already faced with financial crisis.

Academic qualifications are important and so is financial education. They’re both important and schools are forgetting one of them.
Robert Kiyosaki

So, what exactly is financial literacy? Wikipedia defines financial literacy as ” the possession of the set of skills and knowledge that allows an individual to make informed and effective decisions with all of their financial resources”.

In short, financial literacyis simply understanding money and how it works. It is knowing how to budget, how to pay your bills, how to borrow money responsibly, how to save, invest and prepare for retirement. Financial literacy will help you make good financial decisions in your everyday life that will ultimately affect your overall financial situation and change your life for the better.

Working hard is simply not enough. You can be a graduate of a four-year course, have a master’s degree or even a doctorate degree but know nothing about personal finance. Even if you are earning millions, you can still end up poor if you know nothing about how money works. It is not about how much money you make but it is all about what you do with the money that you earn that matters.

It is not about how much money you make. The question is are you educated enough to keep it.
Shaquille O’Neal

More so, have you ever wondered why the rich is becoming richer and the poor becoming poorer? Contrary to popular belief, it is not because the rich are all crooks. Neither it is the government’s fault. If you want to know the answer to this question, invest your time in financial education and soon you will find out that the only thing that is stopping you from being wealthy is you.

Make your first step and start your journey towards financial literacy now.

And remember, financial literacy is a lifelong journey. It will not end by simply reading just one book. It is something that you need to learn throughout your life if you want to achieve complete financial freedom.

Edited version. First published in Pinoy Smart Living 10.19.2018Feature Image by mohamed Hassan from Pixabay Images