3 Big Personal Money Lessons I Experienced in My Life

1.) In financial management, what you don't know will hurt you.

I was in Cebu 5 years ago working as a Software Developer in a Japanese company. Back then I have to say that I was financially illiterate that's why it was easy for insurance agent to persuade me to buy an insurance policy from them with a very low return. I found out after I consulted credible people.

It was a costly mistake for me and I regret what I did. I feel sorry and mad at myself for letting that happen. Because of lack of financial knowledge, I was not able to properly analyze what I was getting into. That made me realize that I have to do something. It was my wake up call. I cannot be financially illiterate or else other people will just take advantage of me.

After that incident, I became keen in attending financial management seminars. I was introduced to AXA, one of the famous insurance companies globally. That's where I got my first investment which is a life insurance. After that I also became a member of IMG (Internation Marketing Group) which is where I learned how to invest in mutual funds.

A year after I had the chance to work in Singapore and I also became a member of Asensadong Pinoy, an organization with a campaign to educate OFWs about investments from paper assets to real estate. Regular meetings and seminars are held to continuously foster the wholistic growth of individual investors.

I have come a long way and I will not stop from learning. Everyday is a learning process. I would never forget that incident 5 years ago. If it wasn't because of that incident I would not have my wake up call and most likely I'm still financially ignorant by now.

2.) In order to achieve something, find a mentor or person who has been there and emulate him

This might be common sense but people tend to forget this sort of "life hack" if you will. After attending several seminars and meeting successful and wealthy people I noticed this common denominator. Successful people always have models or mentors that they try to emulate or follow. Why reinvent the wheel if it has already been done by somebody else? That's the reason I have my mentor on real estate investing, on mutual fund investing, on working out, on personal development, on meditation and even with my hobbies such as salsa or bachata dancing or playing guitar. When you find a mentor, just remember to be a good student and make sure you show that you're willing to do what it takes to achieve the results you want. Life is so short especially when you hit your 30's. ;) 

Life is just really fast and finding models to emulate in order to achieve your goals in life is one of the best ways to maximize your time in fulfilling your life goals.

3.) Don't be afraid to fail

I joined 2 networking companies for the past 2 years. The first networking venture I had, I did not get any income and I kept paying for the membership so I cancelled it after a year. Several months after that I joined another networking company which is popular among filipinos I should say. AIM Global is the name of the company. I'm no longer active with it but there's a chance I would get back to it in the future as I can see my right leg is increasing every month. But still, I would consider it as a failed venture as I did not earn any income.

I spent a lot of money and time to earn some passive income and yet I was not able to earn any.

Was I regretful? Was I bitter?

Probably a little. :) But still I know those failures don't define who I am as a person. There's a saying "It's not the number of times you fall but how you pick yourself up each time you fall." I know I learned a lot from those failures so I just treat them as valuable reference experiences instead. Besides, what doesn't kill you makes you stronger. :) And I always remember that winners are not afraid to lose. I quote Michael Jordan when he said "I can accept failure but I can't accept not trying."

Why you are still financially unhappy right now?

Whether you are trying to make ends meet living life from paycheck to paycheck or living life like you're attached to a time bomb of debts, you're definitely making wrong financial decisions which need to change A.S.A.P.

Below are some tips on how to reverse your fortunes when it comes to money making you happy in life instead of getting stressed always with your financial problems.

1.) Get rid of credit cards.

2.) Calculate monthly expenses and get rid of unnecessary expenses. Make sure there is an excess.

3.) Get rid of liabilities or avoid them. If you're a couple and just got married and you don't have any savings, you might want to postpone making a baby. Having a baby in this case will be an added financial responsibility. It's better if you can put yourselves in financial stability before adding another financial responsibility.

4.) Invest on insurance. A lot of filipinos doesn't know how important an insurance is in building ones financial portfolio. Many of us have heard stories of properties, cars getting sold because our family member got hospitalized.

5.) Educate yourself financially. This is very important. We would often say "if I only knew that my life would have been better" but we never ask ourselves if we really tried our best to search for ways to better our financial situation in life. Enough of those "bahala na si batman" attitude.

6.) Stop procrastinating and take action.

The Story of the Father and Son and their Carabao

One day a man who lived in the outskirts of the Cebu province was going to market with his son and his carabao. They met a couple on the way.

“Why walk when you have a carabao to ride?” called out the husband, “seat the boy on the carabao.”

“I would like that,” said the boy, “help me up, father.” And the father did that willingly.

Soon they met another couple in the sari-sari store. “How shameful of you!” cried the woman to the boy, “Let your father ride; won’t he be tired?”

So, the boy got down and the father rode the carabao. Again they marched on.

“Poor boy,” said the next person they met, “why should the sluggish father ride while his son is walking?”

So, the boy got onto the carabao, too. As they went on, they met some foreign travellers. “How cruel of them! They are up to kill the poor carabao,” cried one of the travellers.

Hearing this, the father and the son got down. Now they decided to carry the carabao on their shoulders. As they did so, the travellers broke into laughter.

The laughter frightened the carabao. It broke free and ran away.

Moral of the Story: You cannot please everyone.

(Source: http://www.philstar.com:8080/cebu-lifestyle/2014/06/01/1329764/man-and-his-carabao)
(Original: http://www.kidsgen.com/moral_stories/you_cannot_please_everyone.htm) 

Sharing my thoughts:

Everyone will have their own opinions about what they see in you. 

We live in a society where behavior is mostly dictated by the media. We try to conform on what we see on TV or what we see in social media (e.g. facebook) without realizing whether our actions are aligned to our values and principles in life.

No matter what you do or how you do it, people will have something to say about it. Some are bad and some will be good. But the bottom line is people will always have things to say. It's up to you if you let it affect you or not. You cannot please everybody however you can please yourself.

So get out and enjoy life to the fullest. Live each day like it's your last day but make sure that you do things you want to do in life and not from the expectations of other people and be smart with your decisions.  What's important is you're happy and you don't step on someone else's toes in whatever you do. 

We can associate this to investing and peer pressure in a way that even we know how important investing is to better our financial standing in life and yet not even the majority does it. 

Majority of our friends and families wouldn't understand us if we take action and invest for our future. But as long as we know that what we are doing is right and we don't harm other people in what we do, then that's all that matters. We don't have to be bothered with what other people would say about us. 

We don't please anyone. We only please ourselves.

Poor Mindset VS Rich Mindset

The big difference between the poor and the rich is actually their mindset.

Even if you are poor but you have a rich mindset you will prosper in life. That's what my mentor would always say. And I truly believe in it. Are people born with this mindset? I don't think so. It can be learned but the trick is you have to want it. This desire to learn will open up opportunities for you. You grab those opportunities. You open your mind to learning and you'll see yourself attending seminars and learn from people you want to emulate. You surround yourself with positive wealthy people or people that are in the same journey like yours. And next thing you know is that you become like them. This is how I cultivate my own rich mindset. It doesn't happen overnight. I had to attend tons of seminars year after year. I was open to new learnings. Slowly I was becoming like them.

Let me share with you behaviors I observed from people that have poor and rich mindset.

Poor Minded People

1.) They are financially illiterate.

2.) They are comfortable where they are in life. They just continue to do the same mundane things over and over again expecting a different result.

3.) They see money as a means to reward their selves or to make them happy.

4.) They have bad debt or they're having a hard time to eliminate their bad debt.

5.) They love to practice instant gratification. They upgrade with the latest gadgets, cars and go for travel even though they don't have any emergency fund or life insurance or debt is not yet fully paid. They upgrade their lifestyle every time their salary increased.

Rich Minded People

1.) They understand financial management is vital in one person's life because they know that finances properly handled also positively affects other areas of your life and responsibility is also lessened when you know how to handle your finances.

2.) They have that burning desire to prosper in life may it be to achieve financial freedom, tremendous wealth or anything like that. This desire keeps them open minded for learning new things and to the opportunities that come their way. This desire pushes them out of their comfort zone to try new things that will lead them to achieve their goals.

3.) They see money as the storage of their time value. Our employers buys our time through the form of a paycheck or salary. A rich mindset understands that if we spend all our time value (paycheck) we will never get it back because time lost is irreplaceable. This is the reason the rich mindset saves and invests.

4.) They have zero bad debt.

5.) They delay instant gratification knowing that greater things will come for those who wait.

There you go! Be sure not to follow what poor minded people do. A poor minded person will never get out of the rat race cycle. Turn yourself into a rich minded person and soon you will become one.  

How to find your passion in life

Having passion in life gives us direction. 

It gives us motivation each day as we wake up in the morning ready to face the challenges ahead of us. On the contrary, having no passion in life makes us live like zombies where we just tend to follow what other people are doing, observing what is the trend and following it. 

I remember reading an article which talks about the things dying people regret the most in life. One of which is not doing the things that really mattered to them. Instead they do things which is what other people would want from them. The result is its like you lived a life that is not truly yours, a fake one I may say. Sad but true.

Successful people have one way or another identified their passion in life and used it to achieve greater things. Take the case of Warren Buffet who is regarded as the world's greatest investor. He always had that passion for investing ever since he was young. Another example is Steve Jobs and his passion for making a difference. His innovations made our lives better. 

For those who haven't found or are not yet sure what there passion is, let me tell you one technique to identify your passion in life. This was shared by my business mentor when I attended one of his seminars. One should imagine that in this world all jobs will have the same salary and there will be only one currency. Let's say the currency will be in US dollars and let's say the monthly salary for everyone would be 1,000 dollars regardless of the job you have. What job would you want to do? 

This scenario would force you to choose the job that you truly love. And since you enjoy doing it that you don't even consider it as a job. That's where success comes after.

I hope this post helped you in a way to find your passion in life.

What is a big net worth if you don't have passive income?

I was in the office and searching some quotable quotes about financial management when there was this quote that struck me. It says "What is a big net worth if you don't have passive income?"

It struck me since I was this person. My net worth though is not that big but I know that I still don't have passive income. Yes my mutual funds have earned but those earnings are just in paper. Unless I liquidate it it's nothing but a number. That's why I got more convinced that what I'm doing now is right at least based on one of the goals I want to achieve in life. I'm putting most of my hard earned money on real estate with the goal of turning these properties into cash cows. Rental income from my properties will give me passive income in the future which will set me free financially. That is what I'm looking forward.

I withdrew some of my money in mutual funds and invested it in real estate. I remember listening to Robert Kiyosaki's teachings in youtube. He was telling that money working as currencies which tend to fluctuate in value everyday should be immediately invested in a real asset like real estate. Money working as currency will lose its value the longer you don't do anything with it. It made sense.

Debt Challenge

I challenge you to eliminate your debt! 

This is a big fundamental in building wealth. By the way, we are talking about bad debt here. In case you don't know, there are two types of debt. There is good debt and bad debt. A good debt is a debt in which somebody is paying that debt for you. An example of this is when you bought a real estate property let's say a condo unit and you had it rented out. In this case, you had the tenant pay your condo unit's monthly amortization. You indeed have a debt through your bank loan however your tenant is the one paying it through the rental income you receive each month making your loan a good debt. Having good debt is a good way of leveraging which is very essential in building wealth.

On the other hand, a bad debt is a debt that you're the one paying. Imagine the same scenario above but for some reason you were not able to get a tenant to rent you condo unit. This debt becomes a bad debt since you'll be obliged to pay the monthly amortization. It takes money away from you pocket. Really good investors don't really pay or at least put out a lot of money in order to acquire assets. They're usually very good in leveraging with banks.

So let's get back to eliminating debt. Whenever I say the word debt here, what I really mean is bad debt. It takes a lot of commitment and discipline in order to get rid of debt. I remember back around 5 years ago when I had a debt of around 100 thousand pesos I accumulated from using my credit card. I know it's not that big of a debt but who knows how big it will get if I did not decide to get rid of it right? I'm the kind of a logical person so I get stressed if I see some issues or problems around me. I know if I don't take care of these issues logically it will hunt me down in the future that's why I intend to resolve these issues... financial issues to be exact.

After attending the IMG seminar and learning that elimination of debt is one of the foundations of building wealth, I had a realization. I thought to myself that if I was able to build this big of a debt (for me it was already big at that time) then I should be able to build this much for savings instead. I twisted it around. So at that time around 2010 I decided to eliminate my debt and instead just build my savings equivalent to the debt I once had which is around 100 thousand pesos. I made the problem a challenge for me to overcome and it went well for me. From that point in time until now, I can honestly and proudly say that I have zero debt. I'm on my way to get some good debt though since I have to get loan to finance my real estate investments.

I have heard countless of debt stories throughout my life. I even had a good friend of mine who accumulated a lot of debt during his 9 years of working abroad. It's so sad to think about it and there's nothing I could do as a friend to help him solve his financial problem. All I know is I learn a lot from this stories and experiences and I take action to things that I can control like debt elimination. I feel good and free knowing that I don't have any bad debt to worry about. I may not have the latest gadget and branded and cool clothes my friends and colleagues have but what I do have though is peace of mind and that for me is priceless. I know for a fact that I will be able to afford it in time if I stay patient, committed and disciplined towards my goals in life.

To end this blog post, I challenge you to eliminate your debt and instead turn it into savings. To illustrate, if you have a debt of 300 thousand pesos, I challenge you to eliminate it for one year or as fast as you can and on the following year is you have to build a savings of 300 thousand pesos and build it from there. I tell you that it's gonna be worth it and it will forever change your life financially.

Be the Chosen One. Be the one to cut the chains of poverty.

Even though the Philippines is considered to be a newly industrialized country (NIC) because of good governance and consistent economic growth we still can't deny the fact that a lot of our fellow filipinos are suffering from poverty. One of the known causes of this is due to rapid population growth. And this can be very scary now that our country is gaining a lot of momentum in terms of economic growth. Sooner or later the gap between poor families and rich families would be too much for the government to handle or manage. No matter how good or bad our government is, it can only do so much in terms of making our lives better.

We should also take responsibility for our lives instead of depending too much on the government because it will never happen. Sadly some of our fellow filipinos think that way. They often would blame the Philippine government for their shortcomings in life. The change should start from ourselves first. There's no other way.

One may find oneself belonging in a family suffering from poverty. It's definitely not your fault if you were born poor. However, it will be your fault if you don't take any action to correct it and later on you still die being poor. That I believe should be the worst case. 

I used to remember my college batch mate. He's mom works as a sewer while he's father works as a construction worker. He has one younger brother. I know they were not doing well financially because I can see that he doesn't have enough money to buy food during our snack break. We were close friends that's why sometimes he would tell stories about their financial situation and it was humbling to listen to his stories.

One thing I will not forget is when he told me the story about telling his parents stopping them in having another baby. The reason he told his parents this is that they are already living a hard life because of their financial situation and adding another member to the family will just put them in deeper hole financially. Nonetheless, he was able to convince his mom to have ligation. 

I do agree with him while I listened intently to his story. If only most of our poor filipino families would think like my friend our country will lessen the negative effects of having lots of poor families. At the same time these families are over-sized so it's even much difficult for them to have a better quality of life. Because of lack of education and lack of money to support their basic needs, some would resort to selling or using drugs for boys or committing crime in order to survive and girls would resort to prostitution. These are just some of the common negative effects of overpopulation and poverty combined.

We need more of our countrymen to be more of a proactive instead of just being reactive. Being proactive means being reactive too but doing it just ahead of time thus controlling the outcome of an incident that is bound to happen. Reactive, on the other hand means you only react after the incident already happened. 

In my example, my college friend already knew the effects of their parents having another baby. He already pictured out what will happen to them and he decided to change this outcome. It's a very rare trait that is worth emulating. Right now this friend of mine is also in the I.T. industry and just got engaged. I'm confident he will have a better life in the future because of how he thinks in a proactive way.

Now, if you're from a poor family, challenge yourself to step up and be the one to cut the chains of poverty. Be proactive instead of being reactive. Be the one to cut the chains of poverty in your family and you will forever be remembered for this. Your children and children's children will talk about you and tell stories on how you made there lives better. This is the legacy you will be leaving them.

How about if you're not from a poor family? Then you can still challenge yourself to be better than what your parents have accomplished. After all, what is life if we just live within our comfort zones. It is through getting out of comfort zones that we can improve ourselves. Lastly, ask yourself what legacy you will be leaving when you leave this earth. All of us will die someday, and he who have left a legacy will have a meaningful life.

Financial Management Basics: Assets vs Liabilities

Let's get back to basics this time around.

Without a sound fundamentals in investing it will be hard for us to become financially healthy let alone become financially free. I hereby discuss the difference between assets and liabilities and how you should differentiate the one from the other in order to have sound judgments in making your financial decisions.

First, let's define asset. According Wikipedia, in financial accounting, an asset is an economic resource. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset. Simply stated, assets represent value of ownership that can be converted into cash. On the other hand, a liability is defined as an obligation of an entity arising from past transactions or events, the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future.

Let's tackle more on asset as there is a misconception here about how people tend to use the word assets in their financial life. With the definition of asset above, the following can be considered as assets as they are tangible/ intangible resources that can be converted into cash.

• Car
• House and lot
• Cellphone/ Laptop/ Gadgets
• Designer's bag
• Branded shoes and clothes

However, if you want to become financially sound you have to change your mindset a bit. If you are not familiar with Robert Kiyosaki, author of the book "Rich Dad Poor Dad" then this simple switch of mindset will help you become more financially savvy. 

According to Robert Kiyosaki, assets are anything that puts money in our pocket while liabilities takes money out from our pocket. Very simple huh? Yes, it's simple but it's very powerful. Being able to differentiate whether an item is an asset or a liability using this simple concept will either make you or break you in your journey towards financial freedom. Collect assets while you are young and it will forever give you abundance of time and money when the time comes to reap the seeds you've sowed. On the other hand, collect liabilities and you will never be able to get out of the rat race cycle finding yourself living from pay check to pay check. 

With all these change in mindset about what assets and liabilities truly are, let's differentiate again the items that we enumerated above whether it's an asset or a liability.

• Car - A car is a liability. Spending on gasoline and maintenance takes money out of your pocket. However, if you use your car in your business let's say car for rent business or you use it to deliver products to customers then you car should be considered as an asset.
• House - A house likewise is a liability. You spend money for repair and maintenance of your house. But just like your the car, it can be turned into an asset if somebody is renting it and it becomes a source of income through rental fee.  
• Cellphone - This gadget is also a liability. You spend hundreds of pesos for loading up so you could communicate with your friends and family. But if you use your phone for your business transactions then it should be considered as an asset. 
• Designer's bag - This is a liability. By this time, you should already understand that this can be converted into an asset if you know how to generate income out of it. I'll leave to your imagination on how to turn it into an asset as I don't have much knowledge about bags. 
• Branded shoes and clothes - This is another liability. Scenario is just the same with the designer's bag which can be converted into an asset.

There you go! I hope this post helped to clear out to identify what a real asset is. I would be glad if this would change your mindset on how you see things especially in making financial decisions. Take note to always prioritize assets over liabilities. It's not a good practice to buy liabilities thinking that anyway you can convert it into an asset if you want to. 

Treat assets like seeds. When you collect assets it's like your planting these seeds which would later on grow and will provide enough wealth to live the life you've always wanted. 

Why I started this blog?

Just a bit of a background. I'm an OFW working as a software developer/ programmer in Singapore. I started to become financially aware when I was 25 years old. Quite late huh? I think it's a bit late... I think I should have started when I was 21 when I got my first salary. But anyways, I cannot turn back time. 

The turning point was I was 25 years old and I realized I don't have enough savings after close to 5 years of working. I remember that time I was only able to save around 100 thousand pesos. I thought it's pitiful and I thought if I wanted to have a better future I need to do something about it. 

So I started to attend seminars. I have to be open minded. I will never be able to know the things I wanted to know if I wasn't open minded. That was my mindset. Our company held seminars about life insurance with investment features. I attended it and lo and behold, life insurance was my first investment. 

Until now I'm still paying for my insurance policy that I bought that time. It excites me to think that I have started investing and my money will grow which I can use in the future. In this seminar, I was able to meet like minded colleagues of mine who introduced me to a group that teaches financial literacy for free. Some of you might be familiar about it if you have heard the group IMG (International Marketing Group).

I regularly attended their seminars and it started to open my mind about the world of investing. Terms such as passive and active income, financial freedom, portfolio, stocks, bonds and mutual funds were all new to me. Every time I attended the free seminars, I listened attentively. I was like a sponge trying to understand every new information I was able to acquire. 

The terms that struck me though were passive income and financial freedom. These were the words that I was drawn into. I became interested how to have passive income in order to achieve financial freedom. 

After a year of being active in IMG, I had an opportunity to go abroad and find a job in Singapore. It was a risk but in God's grace I was able to find a job in Singapore. In Singapore I found another group similar with IMG. I guess it's the law of attraction. I want to be financially free and there will be opportunities that will come your way. I was glad I took that opportunity.

My journey to financial freedom is still ongoing and I know there are lots of people out there who wants to be financially free too. This is the reason why I started this blog, so I could blog my journey towards financial freedom and share it with people who are or want to be in the same journey. 

I also wanted to give value to my fellow filipino people by sharing my thoughts and experiences regarding financial management. I find it worthwhile reading financial bloggers and I thought we are on the same journey but for sure my experiences will never be the same like them. 

I believe we need more financial bloggers that are willing to share their experiences, thoughts and expertise so we could reach and educate more fellow filipinos. God bless us all! 

Why it's important to plan what to do with your money?

Let's get straight to the point. If you don't have any plans what to do with your money, other people will do their best to get it from you. And the bad news is these people I'm talking about are professionals in doing this. After all, they aren't in the position they are now if they weren't that good.

Let me ask you, how many times have you experienced coming out from work and passing by your favorite mall. You see this 50% off sale in one of your favorite shops.

You tell yourself you'll just check what's inside and see if there's any worth buying. You see something you like and you buy it while you rationalize that it's discounted anyways so it's a wise buy. The 1,000 pesos that you have been trying to save for the past week was gone in an instant.

I too was a victim of these professional. They know our weakness as consumers. They just place a big discount placard in front of their shop so they can lure us to spend our money that we have been saving.

The only way to avoid these temptations is if you already have planned out before hand what to do with your money. The basic formula of INCOME minus SAVINGS equals EXPENSES still comes very handy. Setting aside your savings first won't make you feel guilty in spending to buy your wants. However, take note that these savings is better to be out of your reach so as not to be tempted to use this money. If you can setup an auto debit from your bank account to invest a portion of your money to a mutual fund or something similar then that would be great. On the other hand, if you're disciplined enough to do the investing part manually it's also fine. The key here is to force yourself to convert the savings into assets as quickly as possible so you will have not option to spend it.

This is one of my mindset when it comes to budgeting my money and making a plan on how to use it properly. As a consumer it's easy to spend money for the very reason that there are a lot of tempting products out there. Latest gadgets, latest trend in fashion, newly opened restaurant and things like that will always be there. That's why I always think I have to make a plan how I should spend my money or else I will find myself spending all my hard earned money to things I don't really need or things that I can live without.

So plan carefully what to do with your money so you wouldn't feel bad or guilty later on when you realized where your money went. Make it a point to save and invest a portion of your income so you wouldn't be tempted to spend it especially if your savings is still accessible. Always remember if you don't plan for your money, somebody else is planning to get it from you.

Why you should invest in Real Estate?

Real estate is the latest investment vehicle I was getting myself into. Before, I never imagined myself investing in condominiums as I saw it as just showing off. However, this thinking changed when I was able to attend a seminar about real estate. It opened my mind to the world of real estate investing and how powerful it can be if you do it right. No wonder some famous and wealthy people I admire invests in a lot in real estate. There's Donald Trump, Robert Kiyosaki, even Shaquille O'Neal. For the local ones, there's Henry Sy, Manny Villar and Jaime Zobel de Ayala. 

 So what are the benefits in investing in real estate? Let me share with you four of the most important reasons why I find real estate investing worthy to add in your portfolio. 

1.) Using banks as leverage 

In real estate, you can get help from banks to pay your properties. What happens is you pay a down payment for the equity of your property. This amount varies depending on the real estate developer. The remaining balance can be paid through a bank loan. This is the only type of investment where you can use banks as leverage. You cannot do this with stocks or mutual funds. 

 2.) Passive income 

It's very common for OFWs to invest in lots, wait for its market value to appreciate and sell them. However, there's no cash flow during the waiting period. If your wise enough, you can add a property to your lot and have it rented. I invested in real estate with the goal of earning passive income from its rental fees. Real estate properties can be really good cash cows. Imagine if you have ten properties that are rented and earning something between 50 to 100 thousand pesos. You could already live financially free. 

3.) Increase in market value 

If you want to beat inflation, this is one of the ways to do it. You no longer have to worry prices going up every year. Real estate properties increase in market value over time and this can be very useful especially if you know how to liquidate this increase in market value. 

4.) Your property as collateral 

This is one of the main difference between real estate and paper asset investing. In real estate you can have your property as collateral to get loan which is a percentage of the market value of your property. The best thing here is you can do this no matter how many times you want. 

There you go! If you want to build tested and proven cash cows, consider investing in real estate.

Do not reinvent the wheel!

I find this topic interesting and wanted to share my thoughts about it. This has always been one of the factors why I try to seek answers to my questions when I was in my mid twenties on how to become financially free. My parents were both teachers and we were living an average lifestyle. My parents were able to give me and my sister our basic needs however I always wondered why we always stay in that level. Don't get me wrong. I'm not a materialistic person. I would just often think a lot of "what if we were wealthy?" and "how would it be like to live wealthy?". The more I grew older the more I wanted to seek the answers to these questions. I attended seminars which started with seminars that were held in the company I was working with before. One thing led to another and next thing I know I was introduced to a group which advocates financial literacy. This group by the way is called IMG (Internation Marketing Group). They give free seminars about financial management. I was a regular attendee to their seminars. I learned a lot from this organization and until now actually I'm still a member of this organization. I could say a big part of my character in terms of being financially savvy was because of this organization. They taught me a big lesson in life and that is not to reinvent the wheel.

Let us define this idiom. According to wikipedia, to reinvent the wheel is to duplicate a basic method that has already previously been created or optimized by others. Thus, the key here is if you want to achieve something in life, find a person who has been there and make him your own mentor. Consider it like a shortcut if you want to accelerate your progress in achieving a particular goal in life. If you want to become healthy, you look for a quality gym and survey for a guy you want to emulate may he be a regular customer of that gym or an instructor, befriend this guy and make him your mentor. Same goes when we were in college, let's say you want to be a good doctor or lawyer, you and your parents find a quality university that has excellent teachers or mentors that will bring our the best in you. One way or another, we have already done this in our life. Our parents are also considered as mentors. But in our journey in life, why do we forget this invaluable lesson in life?

That's the reason I usually have mentors in every aspect of my life. May it be in investing, self-development, salsa dancing (yes I dance salsa!), working out and the list goes on. The bottom line is DO NOT REINVENT THE WHEEL!

Why you should invest in Mutual Funds?

This is the second investment vehicle I invested in. The first was life insurance. The sequence doesn't really matter as long as you invest your money in assets.

So what is Mutual Fund? Mutual Fund is an investment programme funded by shareholders that trades in diversified holdings and is professionally managed.

I invested in mutual funds way back in year 2010. That was around 5 years ago but until now I still have more than half of it. Some of it I used to invest in real estate to generate passive income in the future. And the remaining, I think I'd probably have them grow for my retirement fund. 

Mutual Fund is a simple investment vehicle to learn and invest in. Let me share with you reasons why you should invest in Mutual Funds.

1.) Easier to manage

What makes Mutual Fund one of the easier investments for beginners is that it's professionally managed. A fund manager is in charge of this pool of money. He invests different portion of it to stocks, bonds and other securities. The fund manager does all the research on your behalf behalf too. All you have to do is to invest in a fund that matches your risk profile, invest on it and you can sit back and relax and watch your money grow over time. This is not the case with stocks where you have to do all the research and stuff.

2.) Affordability

With Mutual Fund, you can now own shares of top companies even with just a small amount of money. I was investing as low as 3 thousand pesos. Sometimes I invest 5 thousand or 10 thousand pesos depending on how much money I get to save. Once I was able to work abroad, the biggest amount I invested was around 50 thousand pesos. For some it could be a small amount or a big amount but I'm not trying to brag here. I just want to show that Mutual Fund is flexible when it comes to the amount we can afford to invest.

3.) Liquidity

Another good thing about Mutual Fund that I like is that it's liquid compared to let's say real estate. With Mutual Fund, you can easily withdraw your money for around 3 to 5 working days depending on the Mutual Fund company you invested in. Just make sure not to withdraw your money on the first few years as it has some deductions and the percentage and number of years depends on the Mutual Fund company.

4.) Diversification

"Do not put all your eggs in one basket." is a famous quote in the world of wealth management or investing. This is easily achieved with Mutual Fund through the fund manager which invests a portion of the pooled fund in stocks, bonds or other securities. Fund Managers manages a fund for different types of risk profiles. These are generally the risk taker, conservative or balanced type of risk profiles. Funds for risky type profile are more aggressive and has the highest potential returns however it is the most risky also that's why majority of fund is invested in stocks for this type of fund. Conservative fund is the opposite of risky fund. The majority of the fund is invested in government bonds which are low risk but also low returns. And lastly the balanced fund is the combination of risky and conservative fund. 

Now as an investor, it's important to know your risk profile so it's easy for you to choose which fund to invest. Are you a risk taker, conservative or balanced type of investor? Age could also be a factor when choosing risk profiles as you can take more risk while you're young compared to when you're older. This is because of the time which is one of the most important factors in investing.

When I first started, I chose a balanced fund but later on I realized I'm still young and I still have more time for my money to grow so I asked my agent to switch my mutual fund to the riskier type. Later on when I'm nearing my retirement I plan to move or switch my fund to the conservative type.

There you go for my thoughts about why Juan should invest in Mutual Funds. I hope you learned something. Cheers!

Why it's better to bet in Life Insurance than in a lottery ticket?

It's common for us Filipinos to be in Lotto or lottery tickets thinking that one day all the stars will align and we win that jackpot prize. I don't want to sound cocky or offensive but I often see old and poor looking people lining up in a long queue to bet in Lotto. And sadly, I also often hear or see in the news that once they finally win that grand prize they turn back to being poor and broke after several years of mismanaging the huge sum of money they've won. The funny thing here is the percentage of winning a grand prize in Lotto is approximately zero percent. If only they learned some basic financial management strategies they would have been introduced to life insurance. So what about Life Insurance? Basically, it's an insurance that pays out a sum of money either on the death of the insured person or after a set period.

If money is invested in life insurance, the beneficiary will get a considerable amount which they can use to start a business or place in some investment vehicle for it to grow. What's the probability you will get the amount? It's 100 percent since all of will die. The idea of life insurance is to protect your loved ones in case you leave this world earlier than expected. The analogy is like paying a place you're renting for the reason that you can't still afford to buy a home. Same goes to life insurance. You pay it every month so if something happens to you, the basic needs of your family will not be compromised like their lifestyle or the kid's education. But why only few Filipinos invest in it? Probably because people don't know about it or probably they want a quick rich scheme or worst they don't have money to pay for it.

I'm not an insurance agent and I also have nothing against people that bet in lottery tickets. I myself bet in lottery tickets once in a while. The only difference is that I do it for fun and not depending on it for my financial future. I still continuously educate myself financially. I still continue to save every month and invest my money to assets that will generate passive income for my future and my family's future. It's always better to have control on what your future is going to be. At the end of the day we are still held responsible to whatever kind of life we lived and not because we didn't end up winning the lottery or anything like that. In life it's always easy to make excuses. However every time we make an excuse we deprive ourselves of something we deserve.

As a parting message let me quote Bill Gates, a billionaire and founder of Microsoft saying "If you are born poor, it's not your fault. But if you die poor, it's your fault."

When is the right time to invest?

I have read a lot of articles about investing and financial literacy. I also love watching ANC On The Money episodes as I learn a lot from it. And often I hear or read this question a lot.

"When is the right time to invest?"

Of course the answer is a resounding NOW. Why? Let me give you 3 reasons.

1.) Time

Time is the most important factor when it comes to investing. It is always better to start young so your hard earned money will have all the time for it to grow. Take for example a 25 year old yuppie who invests his 100 thousand pesos in a mutual with an annual return of 12% for 35 years. By age 60, he will have grown his 100 thousand pesos to a whopping 5,279,961 pesos. This is a good example of money working hard for you. :) On the other hand, if he started at age 35 (ten years later) and invested the same amount, by age 60 he will have grown his 100 thousand pesos to 1,700,006 pesos. In this scenario, delaying by 10 years will cost you 3,579,955 pesos. This is just a simple example but it clearly shows how important time is when it comes to investing.

2.) Circumstance

Everyone goes through different financial stages in life. The amount I'm able to set aside for investments is bigger now compared 3 years ago. I know that this will not be permanent so I try to maximize this situation. Another factor is that I'm still single and I just support my mom for her medicines as well as for the monthly salary of our helper (nanny) back home. 

I know for a fact that my expenses will become bigger by a wide margin once I get married and have kids so I take advantage of my situation now where I can set aside a big chunk of my salary for investments. What I'm trying to say here is that circumstances in life can also be controlled in your favor if you really want to invest in your future. To do this however, you have to be able to identify whether the decisions you are going to make is gonna negatively affect your finances. For instance, if you're a couple and you had a baby and you were not able to prepare for it financially, for sure it's gonna become a huge financial responsibility. It will be much harder for you to save and invest. Same goes to buying cars and not getting any ROI from it. Same goes to upgrading gadgets every year just to say to your self that you're "IN" when it comes to the latest gadgets. And the list goes on. These are things that we need to properly analyze first before jumping into conclusions whether we need it or not. Remember that usually as we grow older circumstance goes against us. Financial responsibilities gets harder and harder. Make sure you make wise decisions now while you still have time.

3.) Inflation

Let us define inflation first. Inflation is defined as a sustained increase in the general level of prices for goods and services. It is measured as an annual percentage increase. As inflation rises, every dollar you own buys a smaller percentage of a good or service.

I remember my mentor once said, "Take advantage of this situation that you're able to invest in multiple properties as several years from now you won't be able to do it." This is because of inflation. Another common example is often you would hear from your parents or grand parents where they boast about how cheap the price of food or how small their allowance was during their time. The value of money depreciates over time. If you will not invest it, it will either lose its value over time or you will lose it forever (after spending into liabilities). On the other hand, if you invest it, you make inflation your ally. You will no longer get pissed when prices goes up because your investments or assets also appreciates in value.

Reasons why financial freedom is worth achieving

First, let's define what is financial freedom or financial independence. According to Wikipedia, "Financial independence is generally used to describe the state of having sufficient personal wealth to live, without having to work actively for basic necessities. For financially independent people, their assets generate income that is greater than their expenses."

It's one of those things that's very challenging to achieve in life especially for us Filipinos where majority are ignorant when it comes to wealth management. Yes it's a bit offensive by saying the word "ignorant" but that's the truth anyways. I was also ignorant before until I decided to educate myself and take action. And it's been quite a journey. I'm not there yet but I enjoy every process of it. I could not think of myself just being the same person I was before who was not in control of my finances and my future.

I will write different posts about the actions I took as well as the trials and failures I encountered on my ongoing journey to financial freedom. I know that it's gonna be an uphill battle however I'm fully aware that the rewards far more outweigh the sacrifices I will be experiencing. With that said, let me share with you four reasons why financially freedom is worth dreaming and achieving despite the daunting obstacles that awaits you.

1.) Time freedom

If you have the time freedom you would be able to control how you would like to spend your time. Right now as an employee working as a programmer, my time is controlled by my job. Sometimes I also spend time in the office even on weekends as we have to render overtime to catch up with development schedule. I like my job but I don't see myself working like this until I get old and weary.

I remember my mentor would say that wealthy people also have problems. The only difference is the quality of the problem is higher. They would often wonder or think what to do and where to travel and all that because they have the time and money. On the contrary, people that are still in the rat race cycle would often worry how to make time because they just don't have it.

2.) Be able to spend time with loved ones.

I'm an OFW (Overseas Foreign Worker) and I couldn't count how many times it crossed my mind thinking what my life would be if my parents were able to build assets. I have noticed this cycle has been happening over and over again with Filipino families. After a member of the family will graduate and starts to work, he will then support his family which is ideal. However this cycle goes on and on which is no longer right. When the student graduates and he builds his own family he also follows what his parents did. He will expect and depend on his children financially later on. It's not hard to notice this as it happens to my friend's families, my relatives, and even to some of my neighbors. How come they already knew that this cycle happens over and over and no one doesn't take action to change their future? It's something that I always wonder when I think about some Filipino families I know or some that I read in the news.

3.) Able to spend more time on things I love to do... living life to the fullest as they say.

Since the day I started this journey to financial freedom, I would often think how it would be like to live a life where you have control over your time, be able to do the things you wanted to do anytime.

Let me ask you what's your ideal day if you had the time? If I had my way I would see myself in the future like sending my kids to school in the morning, doing some recreation stuff or managing some business in the afternoon and cooking for my wife and family in the evening. The list of activities is endless if you're financially free. Try to ask yourself what would you do if money and time is not an issue. The idea of thinking about it should already excite you. How much more if you make it happen?

4.) Less stress

I love my job but I have to say it can be stressful at times. I always say to myself that I cannot be working for the rest of my life. My plan is to retire around 35 to 40 years old. I think it's feasible. I also believe that stress is a silent killer. If you always get stressed it causes different kinds of sickness. Although there's a positive and negative kind of stress but that's out of this topic already.

Imagine yourself on the beach relaxing under a coconut tree sitting on your comfortable beach chair reading your favorite book and sipping your favorite drink. Nice huh? ;) Life is supposed to be fun and worthwhile. Make your life count. I know life is much deeper than that like the legacy you will leave and all but for sure life would not be worthwhile if it's full of stress and problems. And the worst part of it is if you have no control over it.

These are the things that drives me to achieve my ultimate goal which is financial freedom. Are you on the same journey? You can share your thoughts in the comments below or if you have a blog discussing similar topics as mine please feel free to share in the comments too.  

Short Term Loan versus Long Term Loan

A friend of mine messaged me how I was. He's an ex-colleague from a previous company I was working with. After some small chit-chat he was asking about the equity that I'm currently paying. Here goes our conversation which I translated in english. I also just picked the parts of our conversation that are meaningful.

Friend: I have a small question... you have 2 condo units in Philippines right? You're done paying the equity?

Me: Yep... I'm still paying it though...

Friend: What's your plan after paying the equity? Are you gonna take loan in Philippines?

Me: I'm gonna have it rented. Yep, I'll take a loan in the Philippines.

Friend: I checked the interest rates and its quite expensive...

Me: Yeah! It's really like that... how much is the interest rate? I'll give you a good link listing the interest rates of banks in the Philippines...

Friend: I checked BPI (Bank of Philippines Islands). I used their loan calculator. The amount of 2 million pesos for 10 years will become 3.5 millions plus after everything gets fully paid.

Me: I see... Just remember to negotiate with several banks to get the lowest interest rate. Mine... I'm planning to have the tenant pay the remaining balance.

Friend: Hmmm... it's really expensive though if the tenant will pay my monthly amortization... Let's say my estimated monthly amortization would be 25 thousand pesos so it would be too much for the tenant to pay this amount every month...

Me: Most likely you have to divide with the tenant your monthly amortization expenses. My plan though is to have a loan that is around 30 years to pay so that I will have an amortization of around 10K-12K per month which my tenant can shoulder.

Friend: What?! The interest should be quite high if it's a 30 year loan...

Me: Yeah! Interest should be high but the tenant will be the one to pay it anyways... :)

Friend: Hmmm... you're right... you have a point.

Me: In the long run you will also get some passive income since every year your rental fee should increase while your amortization will stay fixed... :)

Friend: Nice... hehehe! But I'll try to take a loan here in SG if they will allow... if not I will try to follow your plan. Is it ok? hehe!

Me: Sure! We can share some info with our friends who also invested in Condominiums back in our country. That would be cool... :)

My friend is planning to get a loan that is payable for 10-15 years to pay his Condo unit. My take on this is that it's better to have a loan which would be payable in 25-30 years. Yes, it will have a high interest rate. But with this strategy you can have the tenant pay the monthly amortization thus making your property self liquidating. Aside from that you will also get some passive income every year as your rental fee goes up. Of course your monthly amortization will stay fixed for 30 years.

Getting a loan for short term let's say payable in around 5-10 years would be ideal if you have some extra cash or extra savings that you can convert into solid asset. This is also an advantage since after fully paying your property you can negotiate with a bank to have your property as a collateral so you can get additional properties or assets. You can do this method infinitely which is the reason why I got interested in real estate investing compared to paper assets.

Short term or long term loan has its own advantages and disadvantages. Just be sure to understand what are the implications or scenarios before choosing which type of loan is appropriate based on you current financial situation.

I hope you learned something from it and hope it will help in your decision what type of loan you'll get in the future. Just be sure that loan we'll be invested in an asset and not a liability. Good debt versus bad debt if you get what I mean.

And lastly here is the link I gave to my friend. It's from one of my favorite sites. It's about investing in foreclosed properties in the Philippines.