Monday, 19 December 2016

Steps to Filipino Financial Freedom

As I travel this morning to work, I'm reading book of Chinkee Tan, Till Debt Do Us Part, I want to share with you his Six Sequential Investment Strategies to Financial Independence but I will call it, Six Steps to Financial Freedom and share my opinion on those steps;

First, Get Out of Debt. It starts with clearing your debts. Face it, many Filipinos are buried with debts due to spending habits whether small or big amount "PAY IT". "It is in our willingness to pay".

Second, Set Aside Budget for 1 to 2 Months Emergency Funds. If you are earning 15000, then you should have 30000 in your savings account. This is called restricted funds and should be use for emergency ONLY. Start building your emergency funds.

Third, Set Aside Another Budget for 3 to 6 months Long Term Savings.  From example above then you should have 90 000 long term savings in a time deposit or bonds that can earn a higher interest compared to savings account. The importance of 2nd and 3rd steps are for future storms that in case you lose your job, you will have at least 8 - 9  months worth of living expenses and within that period you can find a new job or start a business. There is no panicking and stress.

Fourth, Make Major Purchases. This is the time you are allowed to make major purchases after establishing steps 1 to 3, you can buy your car, vacation, gadgets, or down payment for house. In this fourth step you will have enough cash in your pocket. Don't skip steps 1 to 3, which most Pinoys are doing.

Fifth, Make Long Term Investments. It includes educational funds, pension funds, retirement funds, real estate property etc. etc. This step is for future protection and brighter future of your family especially if you are the bread winner.

Sixth, Invest on Speculative Stocks and High Risk Investments. You arrived at the sixth steps because you have enough knowledge and extra funds to invest on high risk investments and this is not for everyone.  Rules of Investments:

Rule No. 1 Never invest in Something that you do not understand no Matter How Profitable It Might Be.

Rule No. 2 The Higher The Interest, The higher the Risk.

From my real life experience, I invest on Poultry farming and trust the person in charge but without proper research and knowledge, the business went buzz and now trying to recuperate the capital invested. I was attracted with high interest returns on the proposal but without knowing the high risks attached I made a mistake. Learn from my experience.

Start your first step to Filipino Financial Freedom.

Sincerely yours,

Jonathan I. Ruiz, CPA, MIB

P.S. Credit to my Mentor Chinkee Tan Book , Till Debt Do Us Part.

Friday, 16 December 2016

Pay back your Utang!!!

Utang or debt is a very important lesson that you need to understand to achieve financial freedom. To have a financial freedom, you should have a debt free life. Don't bury yourself with credit card debts or personal loans.

Reasons Why you cannot get out of debt:

First, "You are Spending more than what you are Earning", it means you are living above your means as the popular advice of financial advisors "Live below your means" but many are not following this advice. The attractive promos of credit card companies with 10 - 20% cash back every time you spend, it makes you blind on interest rates, service charges, and penalties for late payments.

Second,  "Hindi ka IN kung wala kang Latest Gadgets", there is a long queu line on Apple stores every time they released a new version of iPhone, I lost my count on the versions of iPhone. The peer pressure and media advertisements  (special offers, no down payment, zero interest rates) push you to spend and take a monthly installment plans for gadgets, cars, appliances,  etc. etc.

Third, "Pahiram naman , bayaran ko agad may Emergency lang".  "Gasgas na phrase ito". We keep using it every time we don't have enough money and continuously borrow from our families and friends until we cannot keep up with the promise date of payments. "Dagdag ka lang ng dagdag ng utang at hindi ka naman nagbabayad."

Three Practical Tips on How to handle utang:

First,  Pay back your Utang, Pay first the highest interest rates  among your debts and it should be prioritize or negotiate with the banks or institutions to restructure or buy back the loans at a lower interest rates.

Second, Build your emergency funds, "Marami ang nababaon sa utang dahil sa mga emergencies at ang unang tatakbuhan ay 5, 6 or bombay". You should build emergency funds for unexpected events or storms in life, it can be your protection for financial problems. Start building your emergency funds.

Third, Utang only for Good Debts, "I said avoid only bad debts", there are investments that you will encounter along the way and there are possibilities you don't have extra cash, this is the time you can "Utang for Good Debts" . For example: Rental properties, borrow from the banks to buy property that you can rent out, use the power of leverage.

I'm looking forward for you to get out of debt.

Sincerely yours,

Jonathan I. Ruiz, CPA, MIB

How to Ensure you Have a Long Lasting Retirement?

#RetirementGoals. Everyone needs to plan for retirement because there will come a time that you will stop working. Sometimes, it can also b...