Grow Your Money and Enjoy Financial Freedom

(For the Neophytes and Yuppies)

Saving and investing your earnings may not be your top priority now. You may also be clueless on what to do or where to start to reach your goal of a secure future.Nevertheless, saving for the future to ensure that your retirement years will be worry-free and happy is one of the best gifts you can give to yourself and your family.The future may seem distant now but the earlier you become aware that your job and earnings may not be here forever, then the easier it may become for you to seriously start saving, make your money grow and enjoy financial freedom.Hence this book aims to provide you with a simple guide towards realizing your financial goals.

“Where should you start?”• Ideally, the setting of financial goals should start as soon as you start earning.• Achieving the target would be much easier if goals are set early on because aside from keeping you focused, it can also motivate you to persevere and excel in your new life and career overseas.• However, all is not lost for those who are already working but are yet to set a goal. It is never too late to start. Here are some matters to consider when setting financial goals.

Make your goals realistic.Think of a list of things that you wish to accomplish by the end of your career. Write down your list of goals where you can always see it so you will always be reminded of it.Examples of goals you may want to set are the following: the exact amount of money you wish to save, properties you wish to acquire, and capital for a business you want to start, etc. Make sure your goals are realistic by taking into consideration your salary, the cost of living, and other obligations.

Let your family know about your financial goal.Achieving your financial goals may be a breeze if you have the support and encouragement of your family and loved ones. This can only happen if you make them a part of your financial goal by informing them about it. Ask their opinions about the goals you have set and tell them that you will need their help in accomplishing it.You can also discuss with them the household budget so you will know how much to expect from you. Remind them to spend the money wisely because you will work hard for it. Encourage them to also save money and avoid overspending.

Financial Goal TemplateYour PriorityYour GoalsTarget Date to Reach your GoalAmount Needed to Reach Goal1.2.3.4.5.Download Template

Save Money and Make It a HabitCan I Save Money?A person who finds it hard to save money is likely to cite their meager salary as the reason. “I am earning so little, there won’t be anything left after allotting money for bills and daily expenses.”If you accept this reason, then does it follow that people who earn more such as the OFWs would have an easier time saving? The ironic truth is that many

people who receive higher salary also tend to spend more, leaving no money for savings.This means that the ability to save should not be based on one’s salary. Keep in mind that everybody can save, regardless of their salary. One just needs to put their mind to it and commits to spending less. Putting aside money for savings gives you protection against life uncertainties and unexpected expenses.

Money Management TipsEverybody knows the importance of saving but actually doing it is still a very difficult task for most people. To make the task of saving easier, here are some money-saving tips that you may want to consider.

Spend Less: The key to saving money is minimizing spending. Allot a monthly budget and strictly follow it. Spending less doesn’t mean that you need to forego basic necessities or totally deny yourself of luxuries. It mostly means that you recognize the wants from the needs and living within or better, below your means.

Pay Yourself First. Set aside an amount of money for savings every payday and do this right after receiving your salary. The idea is to save at least 10% of your monthly income. You can use this savings in the future for business or other types of investment. Increase your savings in time by watching your spending habits and living below your means.

Make Saving a Habit. When you start setting aside money for savings right after receiving your salary, make sure that you do not make it a one-time thing.Do it regularly without fail so the habit of allotting money for the future becomes a routine. Once it becomes a habit, saving would become automatic.

Avoid vices. Starting a vice such as drinking, smoking and gambling is not only addictive and expensive; it can also ruin your physical and mental health. Avoid self destruction and achieve you life goals faster by leading a clean lifestyle.

Set a budget and stick to it. Setting a budget is the first and easy step. The real challenge would be to religiously follow the amount you set per need or want. Make sure you create a workable monthly budget by taking into consideration the following:

• Determine your net income- the actual income you receive minus the taxes and deductions. You should also include your income from other sources if applicable.• List down all your fixed expenses – The regular monthly bills that you need to take care of such as rent, utility bills, credit card bills, etc. goes here.• List down your variable expenses. The amount that goes to food, clothes, transportation, and leisure are the variable expenses. The amount may change monthly.• Add up your fixed and variable expenses and minus it to your total income. Your income should be higher than your expenses and the difference will go to savings.• Adjust your expenses if needed. If your calculations reveal that you are spending more than you are earning, then you need to make adjustments in your variable expenses.

Check Out this Monthly Budget TemplateFixed ExpensesVariable ExpensesTotal Monthly IncomeTotal Monthly ExpensesDifference1.2.3.4.5.

List all your expenses in a notebook/journal. Some people who run out of money would reason that they do not really know where the money went. If you are one of the people who find yourself constantly going broke days before the payday, then you may want to list down all your expenses in a journal to understand your spending behaviour.Doing this will let you discover where the large bulk of your money goes and may give you ideas on how you can save money. For example, if you discover that you have been spending too much on your lunch then you can consider bringing packed lunch to work.

Spend wisely. People who are money-wise can buy lots of stuff but still save money. They do this by choosing high quality items with a slightly higher price than low-quality items with lower price. Items that are more expensive allow you to save money because it may be more durable. Buying an item of low quality would actually make you spend more in the long run because you may need to buy a new one soon.

Use credit cards wisely.Make your credit card work to your advantage by availing rewards you can get by being a member. However avoid unnecessary purchases and think twice before saying yes to promos and special offers because there is no such thing as zero (0) percent interest.Refrain from buying anything that you can’t afford to pay in cash and always pay your credit cards bill on time and in full.

Don’t expect things to be easy. Remember the saying, "No Pain, No Gain". It is always easier to spend without worrying about tomorrow so one should not expect the goal of saving money to be a walk in the park.

Issues on Saving MoneyHow can I save money when I am full of debts?Being in a worse financial state should strengthen rather than weaken your resolve to save money. First accept the reality that saving is not possible at the moment because you need to pay your debts. It is better to forego saving for a while than suffer from charges. Give yourself time to settle and eliminate your financial debts. Start building your savings when you are finally debt –free.

I can’t save money, because my family keeps on asking for more money from me.The family may ask more than you can give. They may also state reasons that would make it hard for you to say no to. Remember that it is always a good thing to help but giving more than you actually can may hurt both of you in the long run. Giving them everything you have will teach them to be overly dependent on you. Meanwhile, letting them know your true financial situation can motivate them to manage on their own. So learn to say no by prioritizing your own needs too.

How can I save if so many people keep on asking me for loans?Once you start earning your family or friends may assume that you always have extra money to spare. Again, only help if you truly can. Some say that lending money to families and friends is risky because aside from the possibility of not getting your money back, it may also damage your good relationship with them.

I plan to save money, but I think it is still too early for me to think about retirement.Retirement years may be the farthest thing from the mind of many Filipinos.

However, the earlier you start thinking of its impending reality, the easier and faster it will be for you to achieve financial freedom. In case you are wondering when the right time to think about your future- is the answer is NOW!

Quick TipWants vs. Needs PrincipleBefore buying something, askyourself first: Do I need this orDo I just want this? If youreally need it, then you shouldbuy it. But if you simply wantit, then you might want to waitfor a few more days beforebuying to see if you still wantthe item.

To further motivate you to start saving as early as possible, take a look at this simple chart that shows the time value of money:Time Value of Money ChartStart End Annual Contribution Annual Interest Final Value25 65 24000 0.05Php1,920,000.0026 65 24000 0.05Php1,825,200.0027 65 24000 0.05Php1,732,800.0028 65 24000 0.05Php1,642,800.0029 65 24000 0.05Php1,555,200.0030 65 24000 0.05Php1,470,000.0031 65 24000 0.05Php1,387,200.0032 65 24000 0.05Php1,306,800.0033 65 24000 0.05Php1,228,800.0034 65 24000 0.05Php1,153,200.0035 65 24000 0.05Php1,080,000.0036 65 24000 0.05Php1,009,200.0037 65 24000 0.05Php940,800.0038 65 24000 0.05Php874,800.0039 65 24000 0.05Php811,200.0040 65 24000 0.05 Php750,000.00

This chart effectively shows the advantage of starting to save at a young age. A 25-year old that starts to save Php2000 a month and earns 5% per annum would already have Php 1,920,000 by the time he is 65. However, one who starts to save the same amount that earns the same interest at 40 years old would only have Php 750,000 by the time he is 65. For the 40-year old to earn Php 1,920,000, he needs to save for a longer period of time.So if you want to have an easier time saving and for a shorter period, save money as early as possible.

Where to Put Your MoneyWhen you become more confident with income management and saving money, you may notice your savings growing and just keeping it in your wallet or in a safe box inside the house is no longer the best option.It is now time to examine the various ways on how one can save money and let it grow both here in the Philippines and abroad. The usual option is to keep the savings in a trusted bank where the money will not only be safe and secured, it will also accrue interest.However aside from a regular savings account, other types of bank accounts may also interest you. Study their benefits and choose the one that best fits you.

Regular Savings Account Pros: For a minimum maintaining balance, you can already have a savings accountthat earns interest. You can also withdraw your money anytime you want. Cons: The interest rate is also low, usually only 1% per annum. Recommended for those who are just starting to grow their savings.

Time Deposit AccountTime Deposits. You agree to put your money in a financial institution for a certain period of time with the condition that you cannot easily withdraw it. Pros: Interest rates are slightly higher, compared to a regular savings account, usually 3-5% per annum. Cons: It will require a higher maintaining balance and your money is locked up for the specified period. You will be charged a certain amount for any withdrawals made before the account matures or without advanced notice.

Recommended for those who knows that they would not need the money for a certain period of time.

Special Retirement SavingsSpecial Retirement Savings. A special type of deposit that offer higher interest rate and allow depositors to save money for retirement. Retirement accounts with varying terms and conditions are offered by Philippine banks.Pros: Allows depositors to earn a higher interest and assure them of money they can count on during their retirement. Some retirement accounts also offer a tax-free income.Cons: Most retirement accounts are long term so withdrawing money in case of emergency may be allowed but would require a penalty charge.Recommended for those who want to be financially secure when the time when they can no longer work comes. Also for those who can conveniently save a larger portion of their income to a savings account that will be locked up for several years.

Make Your Money Truly GrowInvestment OptionsHaving money in a savings account is a good start but it is still not enough. The next step should be to look for investment opportunities that would make your money truly grow.The truth is your money stashed in a savings account does not really grow. Over time, the money earned through savings is beaten by the rising inflation rate.For example, the Php5, 000 in your savings account that earns 1% per annum would give you Ph50 earnings after a year. Though you are now richer by Php50, the true value of your money may have actually decreased than increase. Due to inflation, your Php50 last year can buy a lot more than the Php50 that you now have.On the other hand, the money you put in an investment can really grow. Investments make it possible for your money to grow more and at a faster rate so you are able to beat the inflation.

Put your money in mutual funds.Mutual fund is an investment vehicle that collects money from a number of investors to be able to buy and trade government securities or stocks.Purchasing government securities means you are lending money to the government or government-owned companies. In buying stocks, you get to own a part of the company where you invest your money on.The money in mutual fund is managed by professional and authorized institutions. There are different kinds of mutual funds that are offered in banks and other financial institutions. There are also authorized government security dealers that offer mutual funds.To know more about mutual funds, you can check out www.pifa.com.ph – this website offers basic information about this investment vehicle as well as a list of all valid fund members.You can check valid government securities dealers (GSEDs) in the website of the Bureau of Treasury. You need to carefully examine the different types of mutual funds, its potential and the risk involved to get the most out of your investment. Pros: One can invest in a mutual fund for as low as Php5,000. It is perfect for those who are newbies in investing because the required amount and the risk for failure are both low. Mutual funds also invest money in various companies so the risk for failure is lessened. Cons: Mutual fund investors pay a certain fee for the fund managers that handle the investments. The risk may be low but there are still no guarantees.

Invest in real estateThis type of investment involves the purchase of real estate for profit rather than for residence. One can also purchase apartment buildings that would yield rental income. One can also purchase lands to be developed or lands for farming. Pros: The value of a property increases in time. You can sell it for a higher price or leave it as an inheritance to kin. Cons: Buying a property requires large amount of money. It may also take a long time for the property to start giving your profits. Buying a property may keep your money locked up for a long period without yielding any profit.

Start a Business Pros: You get to become your own boss and would have the opportunity to pursue or specialize in the area you are really interested in. Successful businesses would also let you earn big money. Cons: You may need to invest a large amount of money to make a business run. Aside from that, you also need to exert much time and effort. Starting a business is a great venture that demands much from you. In spite of all this, the possibility for your business to fail is also very high.

Getting Insurance PoliciesAn insurance policy is a good investment because it protects you from life’s unexpected turn of events. There are also insurance companies that come with a savings and investment option. You need to carefully study your needs and goals to determine the right insurance policy to get.Once you decide to purchase insurance, take time to read the coverage, the cost and the terms and conditions. Younger people can benefit more from insurance because they have to pay lower premiums.Pros: Insurance policy holders can both have savings and protection.Cons: Most insurance agents would only talk about the benefits and leave you clueless of any disadvantages. Insurance is also more expensive for older people and their application may also be disapproved.Quick TipThinking how much of your money shouldyou invest?The amount that you should invest shoulddepend on your risk tolerance for risk profile.One’s risk profile will reveal a person’s currentfinancial situation and how much of thatamount he can afford to put in an investment.It will also help one determine the investmentvehicle he or she would be most comfortable in.To do this, it is highly recommended for aninvestor to undergo an investment riskprofiling. It is a set of questions about one’sfinances and attitudes towards risk. This isusually provided by banks and financialinstitutions that offer investment opportunitiesso you can request this to your financialadvisers. One can also search for investmentrisk tolerance quiz online.

Things to Consider Before InvestingYou are advised to choose the right investment vehicle at the soonest possible time because any delay causes one to lose money. However it should not be misinterpreted with investing hastily.It is probably the reason why many Filipinos are either clueless or scared of the word investment.The result of the Consumer Finance Survey (CFS) conducted by the Bangko Sentral ng Pilipinas (BSP) from November 2009 to January 10 revealed that 7

of 10 Filipinos would rather depend on fixed income than take the risk of investing it.(Source: BSP Website).

Since all investments come with a risk, your goal is to minimize the possibility of losing money by making careful and informed decisions.

Consider your finances and your needs.One investment that may work for others may not be the best for you. The right investment vehicle can be determined by assessing your own financial status and goals. Take a look at your finances and decide how much of it you can comfortably allot for investment.

Consider the risks involved.You invest your money with the hope of earning more but along with that is the possibility of losing. You should be aware of how much you can lose and be ready for the consequences that you may need to face in case the worse happens.

How much can you earn?Obviously the earning potential should be a top concern for all investors. Consider the profits you can gain and if it is higher than the inflation rate.

Beware of investment scamsUnscrupulous individuals take advantage of the desire of many OFWs to grow their money fast so they no longer need to work abroad. To avoid losing your hard earned money, beware of investment offers that have the following elements:• Very high earning potential with low risks. Scammers would often present an investment opportunity with a money-earning potential that is too good to resist.• Money will grow too soon. All investments require time and patience so a promise that your money will double or triple at the soonest possible time is probably a scam.• Pressure to give money right away. A true investment opportunity would give you time to study the pros and cons of your actions. Be suspicious if you are being pressured to give money right away.• Trust your instincts. Do not ignore any doubts that you may have about an investment offer. It may be best to let go of an opportunity to invest if certain terms or conditions leave you feeling uncertain.

Quick TipThe saying, “Don’t put all youreggs in one basket” can beapplied to your investments. Itmeans that it may be best to tryputting your money in several

investment options.Putting all of your money in onlyone investment vehicle is morerisky because you can lose allyour funds at once. On the otherhand, trying different investmentslets you learn and discover thebest investments that work foryour needs.

To be or not to be an EntrepreneurYou may need to have these questions answered before you plunge into the world of entrepreneurship: Is entrepreneurship for me? Do I have what it takes to be asuccessful entrepreneur? What are the viable businesses that anOFW like me can start? How much capital do I need to start asmall business? Where can I get the trainings andskills that will prove beneficial for thebusiness I am planning? Where can I get the funds I need formy business venture? How much can I earn if I invest in abusiness? What can I do if my business fails? What should I do to ensure successand profit?

Disclaimer: The information contained in this book is for information purposes only. The publisher made sure that the information presented is accurate, reliable and up to date.However, the publisher cannot guarantee that all information is up to date and true at all times due to the fact that policies and regulations are never constant. The reader of this book agrees that the publisher cannot be held liable for any direct or indirect losses that may be incurred as a result of the information presented in this document.