As we begin another year, I am sure many of you have included financial improvement as one of your goals for this year. My prayer is that you become consistently aggressive (in a positive way) towards achieving this goal, among others. May 2015 be the year that you would finally save and invest.
Exactly a year ago, we have read and heard about the 52-week money saving challenge. For the "Pinoy version," you start saving Php50 on the first week, Php100 on the second week, Php150 on the third week, until you reach Php2600 on the fifty-second week through increments of Php50 per week. At the end of 2013, you are supposed to have saved Php68,900, as shown in the table below.
At first glance it looks easy. It seems like anyone can do it. I have a friend who tried it, but by October, she had nothing to put inside the piggy bank anymore. Sadly, it was an epic fail.
I believe many have failed in the 52-week money saving challenge that is why I have recently read about the REVERSED 52-week money saving challenge, wherein you begin with the biggest amount at the start of the year. I am not sure about this, but for those who will be trying to do it, I wish you the best of luck.
What is the Real Challenge in Saving and Investing?
All of us want to save -- to be looking at a growing amount in our bank book payday after payday. Unfortunately, we lack the discipline to do this. We often tell ourselves that since we worked hard for that salary, we can spend it in whatever way we can. And that is where the REAL CHALLENGE comes in.
Putting Php50 in one week is easy. If you are paid well, even the Php2,600 for the last week would still be easy. But what if you are a rank and file employee, working for so many years and thought to yourself, "Where did my hard-earned money go?"
Sounds familiar? In my case, yes, most definitely. Two years ago, I experienced my financial rock bottom moment when I became stressed paying off bills month after month. I just felt exhausted working for money. Then I told myself, "I will never be broke again."
The application of this Basket System was the first step I took that helped me achieve my financial goals.
Most people have probably heard or are currently using the 30/70 Baskets System. Whenever you receive new money, you divide the money into three baskets: Tithes (10 percent) and Investments (20 percent), and live on the rest (70 percent).
But through the Truly Rich Club I have learned the 5W Baskets System, which works better for me.
Everytime money comes in, whether it be my salary, allowance (since I work in the field), incentive and bonuses, income from my small businesses, and commission from another side line, I divide my income according to this basket system.
The 5W Baskets System
First, 10 percent is your Worship Fund (Tithe).
Second, 20 percent is your Wealth Fund (Long-term Investments).
Third, 10 percent is your Want Fund (Yes, Splurge!).
Fourth, 10 percent is your Wellness Fund (Short-Term Savings).
Last, 50 percent is your Wallet Fund (Regular Expenses).
10 Percent For Your Worship Fund
This, for me, is the best investment. Where can you find an investment that will give you rewards and dividends up to eternity?
When we faithfully tithe, we are not only giving an offering to God, but an offering to our fellowmen as well.
God is using us as a channel of His blessings. God lent us His money for a purpose, and that is to serve and bless many.
Some would often say, "Why will I give this money to the poor? This is MY money. I worked hard for this -- my sweat, my talent, my time -- to earn this."
Now let me ask you this? Who gave you your sweat? Who gave you your talent? Who gave you your time? Who gave you your life?
Everything we have comes from God.
This is how I look at this. God is our BUSINESS PARTNER. And our business partner gave us EVERYTHING we need -- talent, time and resources. And all that HE is asking is 10% of the profit. Will you still deprive God of that?
Last February 2015, I had an opportunity to bless 16,000 attendees of the Feast PICC by sharing how I was blessed by tithing. This is my testimony that we can never out give God in His generosity. Read the full text of my sharing here >>> Generously Blessed by Tithing.
10 Percent For Your Want Fund
I wanted to reward myself accordingly. I do not want to spend out of control to reward myself, but I do not want to feel deprived either. After all, I live by the rule "Pay Yourself First."
For my Want Fund, I opened a BPI E-Prepaid account, which is a debit card that I can even use for online purchases. With it, I can do guiltless shopping.
10 Percent For Your Wellness Fund
This is for short-term savings for specific projects. This can be savings for a new house, a new car, expenses for your daughter who will soon be going to college. In my case, it is for a pilgrimage to the Holy Land that I am planning to achieve in 5 years (with fingers crossed).
For my Wellness Fund, I joined our company's savings plan where in they deduct a certain amount from my monthly payroll, and place it in all of the employees' savings account. Since the amount is bigger, it yields higher interest compared to your regular savings account. If you are employed, your company may have this same benefit. Or you can open a separate bank account for this.
20 Percent For Your Wealth Fund
For my Wealth Fund, which is my Retirement Fund, I invest directly in the Philippine stock market. I opened an account with COL Financial, the biggest and largest online stockbroker, and put Php5,000 every month, buying shares of blue chip companies for long-term. I learned how to do this through Bo Sanchez' Truly Rich Club.
I also invested in the stock market indirectly through Insular Life Wealth Assure. It provides protection (insurance) while enhancing yields. I pay an annual premium of Php80,000 for 10 years, invested in the stock market, and I have an estimated PHp15 Million retirement fund when I reach 65.
Since time is our greatest ally in investing, you will get higher returns if you start earlier.
By the way, there is also this exhilarating thing called "SHOPPING" in the stock market. As long term investors, we do this when the market is down and it is way better than shopping at our favourite mall.
Why?
Because there is no traffic, no long lines at the cashier and no feeling of regret when you get home for buying on impulse.
It is buying shares of SMPH or AYALA at a discounted price! Buying shares of these companies make you part-owner of that company. And when you see a lot of people going to these malls, you can tell yourself, "OUR business is good."
How cool is that, right?
Take Your Pick and Choose What Works
You can use the 30/70 Baskets System, or the 5W Baskets System. They are fund allocation systems that you can apply whenever your income arrives.
You may always use the 52-week money challenge or its reversed version.
At the end of the day, do what suits you best in achieving your financial goals.
Do You Think Living on 50% Of Your Income Is Insane?
I can already hear complaints. Yes, this is living way below your means. And yes, it is possible. Remember how much your starting salary was years back? And yet you managed to survive? You have done it before, you can do it again. The key is simple living.
You can let another half month of your hard labor just pass in your hands by shopping and paying off debts, or you can choose to save and invest a portion of it for your future. After all, who wants to work all his lifetime just paying off debts, right?
P.S. Do you want to learn how to have multiple income streams and not just depend on your salary? As of this writing, I am earning from five other income streams (stocks, small business, affiliate marketing, networking and as a financial advisor) aside from my salary. I learned how to recognize these opportunities when I joined Bo Sanchez' Truly Rich Club. To register, click HERE.
P.S2 Do you want to learn how to invest in the stock market directly with as little as Php5,000? Click HERE.
P.S3 Do you want to invest in the stock market but do not have the time to learn how? Fill out our financial form HERE.
