As a millennial who's in the financial services industry, I constantly learn new things and gain a lot of useful new information. Learning too much wasn't always good; it got to a point where things got a bit confusing -- information overload as we call it, and that wasn't at all helpful. I realized that we can't just let the winds dictate where we're supposed to go -- that's why boats have sails.
I had to learn how to filter. After years of constant learning, unlearning, and re-learning, I'm now able to differentiate the noise from the truth, what's relevant and what isn't. Among the many things which I consider important about investing, I must say these are the top three most important information that a millennial has to keep in mind.
#1 YOU ARE NEVER TOO YOUNG TO INVEST
You've probably heard this before and you just couldn't care less, but really, the biggest asset when it comes to investing is TIME. The earlier you start, the more money you can accumulate. How is this possible? It's called compounding interest. You probably didn't understand how powerful this concept was when you were still taking up basic accounting but believe me, Albert Einstein wouldn't say “Compound interest is the eighth wonder of the world” for no reason, right?
Now, let me illustrate the magic of compounding interest, let's say you invest P 1,000.00 every month over 10 years, without investing you will be able to accumulate P 120,000, but let's see how much your money can grow if you invest it.
Remember, you only invested P 120,000 for 10 years but that amount has grown to P 214, 578 -- that's the power of Compound Interest. The earlier and longer you invest, the more time you give it to work its magic. You can see from the visual above the huge opportunity that you miss if you just leave your money in your wallet or in your savings account. Apart from the fact that it won't grow as much as what you've seen, you'll also just probably end up spending it.
If you want to know more about compound interest, I suggest that you read this article posted by CNN: The 1 thing Millennials need to know about investing
Bottomline: Start investing as soon as you start earning, or as soon as you can even when you're only getting an allowance. Just like my sister who started investing even while she was still in college. There's magic when you start early. Believe me. You won't just build your wealth, you will also be able to build good money habits, and of course, the earlier you start the faster you'll be able to achieve your financial goals.
#2 YOU ONLY NEED 20% OF YOUR INCOME TO START AND KEEP THE BALL ROLLING
We've established that it's important to start early. The next question is, how much should you invest and where should you allocate this part of your money? Let's answer the first and most fundamental part of investing first. How much should we set aside for our investments? I personally follow the principle that Bo Sanchez teaches, the 10-20-70 Rule which says: 10% should be allocated on tithes, 20% on your investments, and 70% goes to your expenses. CNBC gives emphasis to this principle in their article 11 Signs You Will Be A Millionaire: "On average, millionaires invest 20 percent of their household income each year. Their wealth isn't measured by the amount they make each year, but by how they've saved and invested over time."
"Where do I put this amount?". To keep it simple, let's focus on growth and protection.
Protection - for your life & health
For protection, there are a whole lot of options available in the market right now. You just have to be very wise in picking the best one for you. Just make sure that it will give enough coverage for your:
1. Long-term Healthcare needs (for your medical expenses when you're old), and
2. Income Replacement (in case of death or accident).
Growth - for your #goals
For growth, I would suggest that you go for Stock Market Investments or Mutual Funds. By doing so you could maximize the earning potential of your money. Guess what? Contrary to popular beliefs, you don't have to be filthy rich for you to be able to participate in the stock market since you only need P5,000 to open an account. Woohoo! You have two options to get started with this: there are direct platforms like COL Financial where you can manage your money yourself, or you can invest through Mutual Fund Companies where an expert will do the investing for you. Either way, if you consistently invest for the long-term you can earn an average compounded interest of 12% annually.
I won't dig deeper into the details for now, but you can definitely message me for your inquiries.
Bottomline: Financial Freedom can only be achieved if we allocate the right amount in the right investment vehicles. Learn how to choose the right investment vehicles where you can maximize the growth of your money without compromising your protection.
#3 YOU NEED NOT TO BE AN EXPERT BEFORE YOU CAN START INVESTING
As millennials, sometimes we have the tendency to delay something especially when we think it's too complicated or nakakatamad intindihin. Believe me, I know how that feels. Sure, you could read countless articles online -- that's a good start. You have to put your learnings into action though, and that's where people like me are helpful. You don't have to have it all figured out. Financial Coaches/Advisers are here to guide you and help you assess what's best for you. We can even help you create a clearer vision and sustainable goals and action steps that will really secure your future. You just need to take a leap of faith and find that person that you think you can trust.
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Let's just have a quick recap:
1. You're not getting any younger ergo the best time to start is now.
2. You can start just by simply setting aside 20% of your income.
3. To get started find yourself a financial mentor/coach/adviser.
Now that you know all these things, it's time to put your learnings into action! Feel free to connect with me via my email I would love to journey with you.
Go for your goals!
P.S. I hope that you find this article helpful and relevant and if you do please hit the like button below and share this to your friends.
P.P.S. If you wanna learn more attend our FREE Basics of Investing Class by clicking the register button below.
"ANG KWENTO NI PETRA THE PROCRASTINATOR"
Gusto kong gawing part ng New Year's Resolution ko yung mag save and invest.
Sisimulan ko na talaga. Bayaran ko lang lahat ng mga natirang utang
from December tapos mag simula na ako.
Pasensya na di ako nakasimula last month.
Try ko this month kaso siguro after Valentine's Day.
I'm sorry, di parin ako nakakasimula. Graduation season.
Nag promise kasi ako sa kapatid ko na bibigyan ko siya ng regalo.
Next month, push na!
Sorry, may out of town trip kasi next month.
After that I'll start investing na talaga.
Naparami yung gastos sa out of town trip last month e. T_T
Wala ng matitira sa akin if invest ko pa. Maybe by June, I can start.
Nakalimutan ko, meron nga pala kaming mid year event sa company.
May mga kailangan bayaran. Hindi parin ako makakapag save.
It's the start of the rainy season! Kailangan ko muna mag tabi for emergencies.
Maybe by next month, I'll start saving.
I heard it's ghost month so it's probably not a good time to invest?
Hala! It's my dad's birthday. We're planning to surprise him
with a simple birthday celebration. Hmm, maybe by October. Bonus na!
Friend, sorry. Alam ko matatapos na yung taon.
Pero gusto ko kasi sana muna bayaran yung mga utang ko pa.
Baka by November mas makaluwag na konti.
Kailangan ko sana yunng pera pang bili ng mga regalo e.
After Christmas na siguro.
UHMM, December na. Alam mo namang maraming gastos.
By January na lang siguro ako mag start
In one of the financial books that I've read, the author mentioned "Procrastination is the worst enemy of investing." (Isa-al, 2016) I couldn't agree more with what she said. It has become a norm for people to put off different life goals, and more so, their financial goals. The funny thing is, I am pretty sure we all have this nagging little voice that reminds us of the important tasks we’ve been postponing but no matter how loud that voice gets, we just shut it off completely. To be fair, I’m sure most of us are eager to improve our financial situation but the problem is our lack of action -- we just end up doing nothing about it.
Friends, don’t let your excuses be bigger than your desire to achieve your financial goals.
Let’s have a quick reality check: How many 13th month pays, bonuses, incentives, 15th and 30th's, or maybe even weekly commissions have already passed through your fingers, and still you haven't done anything about your plan to invest? How long has it been like that? Have you tried computing the total amount of money that has come and gone in your bank account?
Let me shake you a little more: your capacity to save and invest does not depend on the amount of income that you receive each month (if you think it's not enough), nor on the ‘right time’ (it isn't like Mr. or Ms. Right). It does not depend on your hopes of receiving a windfall or some sort of instant money. More importantly, it does not depend on your 'extra' or tira-tira. Saving and investing must be intentional. It's a choice that you make and an action that you take.
Whenever I conduct financial literacy classes I always remind people of this:
"Financial independence is not a dream but a priority."
If you want something to happen in your life, you must decide to work on it on a daily basis. By making something a priority that means you’re deciding to put more effort, time, and value into that particular thing that you'd call your 'priority'. In essence, if financial independence is your priority, you’d let all your excuses take the back seat and work your butt off towards achieving your financial goals. You won't let any temporary pleasures get in the way of your permanent security.
I don't really plan to make this article long - my message for you is simple: if you think your financial independence is important to you, I urge you to make saving and investing a part of your plan. Easier said than done, sure. It requires discipline - absolutely. But much like becoming physically fit and healthy, financial fitness is a daily decision. You can only get there if and when you work hard for it - every single day.
Now, when’s the best time to invest? I say NOW. We’re all running out of time, and today is the youngest you’ll ever be. You can get more money but you can never get more time. The question is: how will you best use it?
P.S. Clueless on where or how to start? Financial Independence starts with proper financial education. Make time for it! Feel free to attend our regular Financial Literacy Classes. :)
Isa-al, G. (2016). Home At Last: How Migrant Workers Can Retire Rich and Worry Free. Black Card Books: Ontario.
It has been so typical for us to include being physically fit on our new year's resolutions, but aside from resolving to be physically fit, maybe this is the year for you to become financially fit as well.
Here are 7 simple and very doable resolutions that can help you become financially fit this year:
1. "I resolve to review my finances"
The first thing you should do is lay out all the necessary details about your finances. How much is your net income? What are your fixed expenses? Do you have an emergency fund? Do you have debts and loans and are you aware of their interest rates? What investments do you have?
These are just some of the important questions that you need to ask in order for you to have a clear picture of your current financial situation. This will give you an idea as to how you can improve your finances.
If you've never done this before, make this the year you finally do! I suggest that you look for a financial adviser or mentor who can help you on this.
2. "I resolve to create and stick to a budget"
Knowing how much you earn, spend, save, and invest are the key ingredients to being financially fit. Know where your money goes. One of the simplest formulas that you can use for budgeting is the Abundance Formula: Income (100%) - Tithes (10%) - Savings (20%) = Expenses (70%). Try it out for the next few months! New Year’s Resolution-making is the perfect time to start new habits. Make budgeting one of them.
3. "I resolve to reduce/eliminate my debts"
Some say, "Getting rid of debt is like losing weight - it results from discipline." So this year, if you want to become financially fit prioritize paying off your debts. When you have too much debt it will surely weigh on you and hinder you from achieving or doing the things that you want to pursue - such as traveling, enrolling for a short course, moving to a job that you're passionate about, helping out a charitable organization, etc.
So what should you do? How do you start? The very first thing that you can do is to consolidate your debts. Create a list. In terms of eliminating them, there could be many different ways. Here are some tips to get rid of your debts:
If in case you won't be able to become completely debt free this year, what you can do is to set a debt repayment goal. Identify which debts do you want to pay off within the year and make sure you commit to that. Be mindful of the things that you spend on. Make sure that you don't get yourself into a debt-trap.
4. "I resolve to save and invest more"
#FinancialGoals. Set a specific goal and exceed it! Excite yourself by identifying how much money you want to save and invest by the end of the year or within the next 5, 10 or 15 years. Let's say, you wanna get married in 5 years, or you want to buy a house in 10 years time, or go for a European Tour with your future family 15 years from now, as early as today, start saving and investing for those goals, while making sure that you also have savings and investments that will secure your long-term goals such as retirement, your child's education, etc.
To keep things simple, what you can do to make sure that you're able to set aside a specific amount every month is to use the Abundance Formula (10-20-70). Let's say your Monthly Income is P20,000, 20% of P20,000 = P4000.
What does this mean? If you're earning P20,000 monthly, you should be able to save and invest at least P4,000 every month. In a year, your P4000 monthly savings will amount to P48,000, and in 5 years, that's P240K. Take note, this is assuming that you're only saving and not yet investing. I'd like to emphasize on the term invest. According to dictionary.com, a simple definition of investing is to put money to use, by purchase or expenditure, in something that would offer potential profitable returns, interest, income, or appreciation in value. So, let's say you put your P4000 on an investment vehicle that earns 10%/annum., at an average, in the next 5 years instead of just having P240K you can have as much as P370,000. Again, you can only get that if you invest.
So what are your possible options? Investments like stocks, mutual funds and other paper assets, healthcare plans and insurances are all good investments. They're all essential in securing both your short-term, mid-term, and long-term goals. Through these investments you can take advantage of the power of compounding interest, beat inflation, and make money work for you.
I would love to discuss more about investing on a separate blog. Needless to say, make this the year you begin investing! Stop wasting your time, money, and opportunities. (You may read about the cost of our waste of time, money, and investment opportunities here.) Learn more about investing through financial literacy seminars, books, videos, etc.
5. "I resolve to create my emergency fund"
Sometimes things don’t always go the way you planned. Although slim, there’s a chance that you could lose your job if the company you work for goes bankrupt, or if the management decides to trim the workforce. Even worse, (and I personally pray this doesn’t happen to you) you or one of your family members runs into a medical emergency, or is affected by a natural calamity. What happens then?
That’s what the emergency fund is for. It prepares you for those unwanted, unexpected, uncertainties of life. Think of it as your buffer – something that softens the impact of those situations, without having to get into debt, borrowing from your relatives, or touching your investments. Ideally, your emergency fund is 3 to 6 times the amount of your monthly income.
6. "I resolve to earn more...so I can give more"
A lot of financial blogs give emphasis on reducing one's expenditures and there's nothing wrong with that – but instead of cutting your expenses, why not just earn more? It's equally important to give emphasis on increasing one's cash flow. One of the secrets of the truly rich is that they have many income streams. Why? Here's the truth, they believe that there’s no limit to how much one can earn. Want to be truly rich? The first step is you have to believe the same thing.
If you've been postponing your dream business or that passion project for many years now, make this the year that you finally bring them to life! Do a freelance job, sell baked goods, put up an online shop, or be a virtual assistant to somebody! Getting into a side business has never been as easy as it is nowadays. Having more income streams isn’t impossible.
And hey, earning more not only enables you to achieve your personal goals faster, it also increases your capacity to give – and giving is always a good thing.
7. "I resolve to have an abundance mindset"
"Wealth is created in the mind. Money problems are mind problems. Unless you change your self-portrait, you won't change your life. You get what you subconsciously want. If you want to be rich, it's up to you." -Bo Sanchez
Let me be completely straightforward about this, if you want to be financially fit this year, start by having a change in your mindset. Until we change what's on the inside, we cannot change what's on the outside. No matter how practical all these resolutions are, if at the end of the day you don't believe that you were meant to live in abundance, all the other resolutions will be pointless. Put it in your mind that you deserve to be wealthy, and that you will be wealthy!
Let this be the banner year for your finances!
Have a blessed 2017!
P.S. If you wanna learn more about financial literacy feel free to attend our
FREE Financial Literacy Class. To know more about it, click the button below.
About the Author
Chai Santiago is a graduate of Manufacturing Engineering and Management from De La Salle University who later on found her passion and purpose in the Financial Education industry. She is a Certified Financial Educator® (CFEd®) under Heartland Institute of Financial Education (HIFE) and a Financial Coach at International Marketing Group (IMG).