Investing for your future should be the FINAL part of your quest for financial freedom. This is very crucial because the amount that you will put in your investment will be earmarked for the time that you will be retired from work. That’s the time when nobody will take care of you!
Although there might be an amount that will be received from your social security during your retirement age, but most likely, that amount will not be enough to cover for the lifestyle that you would like to live. And don’t think that your children will be your retirement fund. If you did not do well with your life when you were strong, don’t expect that they will do better. Who else will they learn about managing the finances to but you as their parent?
Of course the very first thing you will do is to learn how to earn money. And the good news is that there are so many ways to earn money. You can earn money by working on a job, providing a service, starting an online marketing business, starting a small business, and other things.
Pay your self first
Now that you have money from your different income sources, it is a wise philosophy to invest on yourself. You are your best asset, so you have to take care of you first before others.
One way is to increase more knowledge with what you are doing to earn money. I always believe that what you earn is in proportion to what value you can provide.
Another way to pay yourself first is to save a portion of the money you receive. Your job or business is not for life. Something might happen that is not in favor for you. So set aside a portion of money so that you have something to invest to make that little amount of money to grow over time.
Clean up your liabilities
Being in debt is a bondage, you have to go out quickly from it. The interest you pay to a loan is always greater than any investment vehicle. You have too pay as quickly as possible. Free yourself from the bondage of debt. Be free!
Insurance and healthcare
Protecting yourself by having an insurance coverage (healthcare and life) is a good idea. This may not be for you, but to protect the people you leave behind if something untoward happens to you. You can get a Variable Universal Life (VUL) Insurance so that your healthcare, insurance and investment will be pack together. But don’t use the VUL as your main investment vehicle, this should be primarily to cover you with your medicals and life insurance coverage. The investment side will be the icing of the cake, as they say. They may say the VUL is expensive, but your healthcare expenses is more expensive.
Just like health care and life insurance, emergency fund is very important. Before putting money in your investment, you should make sure that you have saved on the side an amount for your emergency fund. This will protect the investment that you are going to build. This should be at least six months to ten months of of your salary.
Emergency fund should only be used for emergency expenses.
Your investment vehicle
Once your desired amount of emergency was reached, it is then time to save every month to invest. You can now start building your investment for the long term. You will be using the compounding effect of investing money for long term.
If you are following the 10-10-10-70 formula with your budget, the 10% you save for investment from your earnings, you can gradually build up an amount of money that will take care of you during your retirement age.
The investment instrument that I would be looking for is investing in stocks. Investing in stocks is the best way to invest, period. And the best way to do that is by owning the market. I mean you can buy stock portfolio that are already diversified and managed by a fund manager. These are Mutual Funds (MFs) and Unit Investment Trust Fund (UITFs). Although bonds and money market are less volatile, they can only earn a very low returns that is almost the same as a bank savings account.
If you are already on your 50s like me, don’t worry, it’s never too late to start. If you are younger, you are in great advantage. Starting early in investing is a key to big wealth. Time is the best element in investing. Saving even a small amount every month and investing that money in your UITF or MF account, you are building your money machine that will take care of you when you will not be able to work to find money.
You need help? I can share you some ideas that can help you get started. Read here how I saved and invest my first million peso. I believe you can do it, too.
You can join also my Facebook group where I mentor others to Become Pinoy Millionaire.
Here’s to your success!