Month: January 2017

Over the years of coaching a lot of would be entrepreneurs, I realized one thing that I think is the #1 reason why people don’t become rich. Most people think that to become rich all you have to do is earn more income. But only a couple of months after getting a promotion, or getting a bonus, however, most people still end up living day to day. They are no better off than before they got promoted.

Here is the brutal truth. More money won’t make you rich, if your problem is you don’t know how to handle your money.

The scary part of having more money is that it reveals how good or bad you are in managing your money. Money has a way of magnifying things. If you are having problem handing little money, more money will only compound your problem.

Have you read stories of people who were once broke and then suddenly won the lottery? After a few years, they end up more broke and more in debt than before they won the lottery. Strange isn’t it?

If you have plans of starting your own business, the #1 skill you need to learn is how to manage your money. I won’t recommend you do investing when you are heavily in debt. If you are in that situation, the first thing you need to do is to get yourself out of debt. After that, you have to be able to set aside money for emergency situations. After which, you can then move on to setting aside money for increasing your investment portfolio.

Earlier this month, I have had the privilege of learning from one of the Philippines’ sought-after financial coach, a registered financial planner and author of the book ‘No Non-sense Personal Finance’, Randell Tiongson as part of our team’s 3-day retreat.

Over the years, I have had the chance to share the same principles in my team through my financial literacy talks. I feel strongly that more people should learn these things so that they are better equipped in handling their own money. I know how it feels to be in debt. I know how it feels to not being able to save up for emergencies. I know how it is to get confused in the myriad of advise on investments. That’s why, it has become my mission to guide people starting in their business how to manage their money well so they won’t fall deeper into debts, hoping that one day, they will reap the harvest of their hard work just like what happened to me and the leaders in my organization.

Basics of Financial Literacy

Depending on where you are currently in your finances, here are some things you can use as your guide in your own financial journey.

1. Get out of debt. This is a huge topic all-together. Some people use credit card as if the bank gave them a bonus.  They act as as if the credit limit given is money they actually own. Worse, some use this as their “emergency fund.” Always remember that the rule of the game in the world of money is, “who is indebted to whom?”. As the saying goes, “the debtor is the slave of the lender.” When you really think about it, this description is quite accurate. Have you observed how people who have debts behave on social situations? Their self-esteem takes a hit. They feel ashamed not being able to pay off their debts. Something deep inside them starts to feel inferior. It is more than the money that is eating away inside of them. It is their soul. It is their confidence and self-worth. With this, it is imperative then that you get out of debt as soon as you can. This is specially true for retail debts like credit cards or personal loans. If you own several credit cards, your goal is to pay-off one card at a time and only pay the minimum on the others. The sooner you can pay-off one credit card, the sooner it will be for you to gain back your confidence and momentum. That’s what people call “snow-ball” effect, that after paying off one card, soon the habit you formed will allow you to carry it on in paying the next card, and so on, and so forth. You can apply the same technique in paying off personal loans from other people.
2. Save for emergencies. Most people have only one source of income, their job or their business. In the event that this stream of income suddenly stops, they get into financial trouble. One must be able to prepare for this event. Financial experts recommend having at least 6 months worth of expenses. The reason for this is because it normally takes around 6 months to be able to replace your stream of income, either by finding another job or setting up another business. Have you tried saving for emergencies, only to experience an “emergency” a few months after and at the end of the year you are still no better of than when you started? Still no emergency fund saved. The trick that I discovered in saving off for emergency fund, is to make it very convenient and hassle-free to deposit money into your fund, and very inconvenient to withdraw money from it. In my days as an employee, we had this savings and loans association where they automatically deduct a percentage of your salary into your savings account. I never saw the money. In fact, it never reaches my ATM account. To withdraw, I would have to fill out several papers and I only have a 30-minute window on specific days to be able to do it. The extra hassle is enough for me to just leave the money out there. I’ve applied the same thing in my business. Once money comes in, I automatically transfer them to my different accounts including the one for emergencies. My mentor described the emergency fund as “peace of mind” fund, because it’s supposed to give you peace of mind.
3. Grow your money. Once you are able to save for emergencies, that’s when you will have the confidence to venture out and explore other options to grow your money even more. We all know that you will not earn a lot when you leave your money in the bank. In fact, you are actually losing money if you take into account inflation. Inflation is when the price of goods rises every year. This is around 3% to 4% on the average. Savings accounts on the other hands rarely give more than 1% interest. You are on the losing end. The only reason you leave your money in the bank is for liquidity reasons. Because you can withdraw them anytime because of emergencies. If you want to grow your money, you are better of putting your money in investments. There are several ways you can invest. Personally, I have tried investing in real-estate, retail treasury bonds, stocks, insurance, and business. Each one is not better than the other, it depends on your particular goal at the moment. Obviously, if you ask a real-estate agent, he will say investing in real-estate is the best. If you ask a stock broker, he will say you should invest in stocks. If you ask a businessman, he will say you should invest in a business. For an ordinary employee like me before, it is quite confusing to receive different advice from different people, but one thing that has helped guide me in my journey, whether to listen to a particular advice or not is this, “every time you buy into someone else’s opinion, you are also buying into his lifestyle.” Ask if the person giving out the advice is personally investing on his or her own recommendation. If not, better to turn around and ask someone else. If yes, then get to know the person’s values and character, as well as the lifestyle that he has. Is he living the lifestyle that you dream about in the future? If yes, then listen to him. If not, you might be better of doing business with someone else, you share the same values with, and someone living the lifestyle that you want to be in the future.

These are just basic tips for you to get started in your financial journey. It has been more than a decade since I applied these same principles in my finances, and it has carried me well enough for me to be able to quit my 9-year IT career in 2011 and live the life of my dreams. I can honestly say, yes it is possible. It is not easy, but it is not to0 hard either. There are people willing to help you along the way. All you have to do is to make your own decision to take the leap of faith and follow the small voice within you yearning to have your own freedom. There is greatness within you. Unleash it this 2017. Cheers to your success!

If you are like me, you have already realized by now that relying on your paycheck alone won’t give you the desires of your dreams. Want proof? Let’s say you are a young family with 2 kids. You and your wife both have a stable job with a promising career. You have BIG DREAMS for you and your family.

In the real world, here’s what’s that look like:

1) HOUSE & LOT (P5M) – You want to have a HOUSE & LOT. What do you say is a reasonable amount for a house and lot? P5Million? P10Million? more? Of course some would argue that they can live in a simple house, preferably in the province…or just outside of metro manla. The thing with having a home away from your work place is you would need to increase your spending for transportation.

2) CAR (P1M) – Let’s say, since you want a comfortable ride for the whole family, you want to buy a decent car. That will, be around P1Million, not including parking, toll, gas, maintenance, insurance, and more.

3) TRAVEL (P2M) – You also want to travel and bring your whole family to a beach vacation in Boracay or overseas at least once a year, so let’s say you want to do it for at least 10 years, that will amount to P200,000 x 10 = P2Million pesos.

4) SAVINGS (P5M) – Of course, for any emergencies you want to have the peace of mind of having SAVINGS…say P5Million. If you want more, you can always add more for you. 🙂

Total all of the figures above and you will get the PRICE of your DREAMS. In this example, that is going to be P13Million. That’s only for a decent living with basic expenses. Certainly not at a luxurious level yet.

The #1 reason most people don’t achieve their dreams is because they don’t know how much the price is. If you are still reading up to this moment, you are way ahead than most people because now you know HOW MUCH IS YOUR DREAM.

Now, the next question you will have is HOW WILL YOU CREATE THE P13Million?!!!

Would you let me give you some ideas you can consider?

1) You could become a celebrity. Become an endorser for a commercial in TV. 🙂 We all agree that celebrities earn a lot from endorsements. P13Million will be a piece of cake if you are a sought-after celebrity like Piolo Pascual, Sarah Geronimo or the like. But not everyone is cut out for the intrigues in showbiz. That’s why I didn’t even try. I want a peaceful life. Hehe 🙂

2) You could marry someone rich. For some people that’s their basic strategy in becoming rich in life. Obviously, there’s a lot of pros and cons to that. But, living with someone for the sake of money may not be the best use of your life. You only have one life to live.

3) You could become a famous athlete like Manny Pacquiao or a basketball start like James Yap. Did you know the minimum wage of a basketball player in the professional leagues is around P50,000/month and the maximum is around P425,000/month. Not bad! But we all know the life of an athlete is plagued with a lot of risks. What if you injure yourself, what if you get cut, etc etc. Not to mention that you would need to start at a young age to train just to be able to compete.

4) You could become a businessman. Did you know majority of millionaires are entrepreneurs? But we all know the world of business is not for everyone. 9 out of 10 businesses fail in the first 5 years. Of those that survive, only 1 out of 10 make it after 10 years.

5) You could do nothing and stay where you are. In most cases, as an employee you would have to rely on your paycheck to earn the P13Million.

Now let’s take a closer look.  Let’s say for example that you are able to save up at P10,000 a month from your job. In 1 year, you would have saved P120,000..after 10 years, that’s P1.2M, after 20 years, P2.4M…and by the time you reach the retirement age of 60 (after 40 years of working), you would have saved a total of P4.8Million pesos. Let me give you a moment to digest the last figure one more time. P4.8Million after 40 years of working. All your life, you did as you were told. Never made any scene. Stuck to your job and worked…so hard, only to get this in return. P4.8Million in 40 years.

Here are some things that you will soon realize.

1) The P4.8Million you saved is nowhere near the P13Million you need to buy your DREAMS. In fact, it’s not even enough to buy your DREAM HOUSE OF P5Million. Even if let’s say you are able to save the additional P200,000 to reach the P5Million price, do you really think the price of the house is going to still be the same after 40 years? The answer is definitely not. There is such a thing called inflation.

2) Some people would argue that the P10,000 can increase after some time since you can get promoted. At first glance, you would think that makes sense. In real life, it doesn’t happen that way. After a promotion, an upgrade in lifestyle would soon follow. What used to suffice is no longer appealing. Of course, a manager or a doctor would have to look the part of a successful or a newly promoted professional. Buy new clothes, new gadgets, and eat out at new more expensive restaurants that would align with their new image or lifestyle. This is what some people call as keeping up with the Joneses. So even if the salary increases, the expenses increase as well. Nothing is still saved up.

3) Everyone who have been working for at least 5 years already know this. It is NOT ENOUGH. In fact, when you ask an employee, what they will do after retirement, almost all will say they will put up a business. Surprisingly, famous athletes go into business after their playing days are over as well. Even celebrities go into business just the same. Everyone know relying on your paycheck is NOT ENOUGH, and adding income by starting a BUSINESS is one of the most feasible options you can have. Why? Anyone can enter a business. Today, anyone with a mobile phone can do business. With the power of the internet, this has become possible.

Why then are people still not starting a business?

Lack of capital. I don’t have money to start a business.

Lack of knowledge. My father was an employee. My mother was an employee. Everyone I know is an employee. Who will mentor me to start a business?

Lack of resourcefulness. What if I fail? What if I lose money? What if it doesn’t work?

Fear of what other people will say. What will other people think of me? What if everyone will ridicule me? What if I become an embarrassment to my clan?

There are so many reasons why starting a business is not feasible for you. But always remember, you only need one reason why you can make it a success.

So what if you don’t have money? Can you borrow capital from someone who trusts you? It’s not a question of having resources…but of having RESOURCEFULNESS.

So what if you fail? At least you tried. Those that do not fail are not doing anything at all.

So what if you don’t know how? You can always ask. Google. Act. Fail. Succeed. Learn. Repeat.

So what if people will ridicule you? They do not own the DREAMS in YOUR HEART. You alone will look in the mirror at the end of the day and say, you made it.

The journey of a thousand miles begins with a single step. My journey has been like that for the last decade. After realizing I need to make some changes, I simply closed my eyes and got started. I started a business part-time, struggled to get it off the ground. I failed many times. Got rejected. Discouraged. Got up again. Licked my wounded ego. Moved on. Eventually, I was able to quit my 9-year IT career to grow my business full-time. Now it’s been more than 5 years since I quit. Never have I felt more free to DREAM and pursue the things I want in life. The next 5 years is going to be very exciting. The DREAM is still alive. 🙂 I hope you find the courage within you to pursue your dreams as well. There’s help on the other side when you decide to make a change in your life. 🙂 Cheers to your success!!!

 

P.S. In my next article, I will share you the one thing you need to know before you start your own business.  If you don’t learn this, starting a business will get you further in debt instead of earn you additional income.

P.P.S. I’m expanding my business and currently looking for partners. Only 4 slots left. CLICK HERE to learn more.