Every time I talk to my friends about investments, this is what they usually say:
- "My safest bet is to have the kind of investment and insurance products that you have."
- "I want to invest the way you do."
- "How do you invest? Then I will do just that."
Yesterday, an acquaintance on Facebook wrote a comment on one of my posts asking me to mentor him. He sent me a message saying, "I know hindi lahat natututunan sa books at training. Dapat may taong magaling para matuto." And yes, his last sentence was actually referring to me. That was definitely one WOW moment for me. Sir, if you are reading this, THANK YOU. It is such a privilege for me.
Truth is, I am overwhelmed -- for people to trust me with their financial decisions. And I continue reading, learning, seeking mentors, and EXPERIENCING money matters first hand, so that I can share them with you.
Learning Develops Over Time
One of the books I've read by Robert Kiyosaki from the Rich Dad fame said, "Do not waste a good mistake. Learn from it."
Over the years, since I began my investment journey in the stock market in 2013, it never failed to teach me lessons year after year -- valuable lessons that I learned the hard way causing me time and money. But I have no regrets. Sometimes, you need to experience these mistakes first hand so that you will avoid making them again. And I will be sharing these mistakes -- and lessons learned -- in this blog post.
An unknown quote says, "Smart men learn from their mistakes, but wise men learn from the mistakes of others."
Personally, I like committing mistakes myself. They're more painful. And the more painful these mistakes are, the more I learn, and the more I avoid doing them again.
Read these mistakes, and I hope you learn from them.
Lesson #1 Build an Emergency Fund First
As I began getting a financial overhaul in 2013, learning to shift from being a spender to investor, I was so excited to build my retirement fund. Every time money would come in, I would automatically set aside my tithes and investment money. I skipped being a "saver" and did not give priority in building my emergency fund.
And then it hit me.
One night, my mother who is in her mid 50s then, was sent to the hospital. From the ambulance that picked her up from our home, to various laboratory tests, ICU stay, her doctors' professional fees, and with her three days stay in the hospital, our bill went up to Php45,000 net.
Because I had no money for emergency and zero savings, I sold my shares in the stock market at a loss so I can help with the hospital bill.
Because of this mistake, this is what I tell my friends when they ask me about investing. BUILD AN EMERGENCY FUND FIRST. If you are just starting, you can put aside 10% of your income to build an emergency fund, and 10% for your retirement fund. When you have saved 6 months of your average expenses for emergency, you can put 20% for retirement.
Never put your "pamalengke" money in the stock market. If you do that, you may end up selling at a loss when you need it.
Just this week, we had an unexpected expense. And because I have an emergency fund that I can depend on, I was able to immediately give my share to that expense.
Remember to put your emergency fund where it is easily accessible. This is mainly what banks are for.
Lesson #2 The Stock Market is for the Long Term
In 2014, as I expose myself to different authors and mentors about investing in the stock market, I encountered Robert Kiyosaki for the first time. I read his book Retire Young, Retire Rich. His book made so much sense to me then. After reading his book, I was convinced that it is possible to retire young and retire rich.
And there was this one line from his book that struck me. He said, "Investing in mutual funds is like investing at the end of the food chain." You get to take home your profit after everyone else had "eaten up" their share.
That line made me think of trading in the stock market as the way of getting into the fast lane. And that is exactly what I did.
I was in front of my laptop for hours, waiting for prices to go up, sold shares even with a little increase, used the money to buy again, and the cycle went on -- but only for a couple of days.
Why?
Because I got tired of "chasing" prices. Worse, I only incurred losses on average due to the charges for every buying and selling that I did.
This is what I often tell my friends: Short term, the stock market may go upward, downward, or sideways; but one thing is for sure -- If you start planning for your retirement today, YOU WILL RETIRE RICH because we make the profits in the long term.
As Charlie Munger said, Warren Buffett's partner, "The big money is not in the buying and the selling... But in the waiting." We wait for our favorite blue chip companies to reach our target prices, and sometimes, this may take a while.
Lesson #3 Choose Your Mentors for a Specific Field
When I finished reading Kiyosaki's book, this is what I realized. He is NOT a fan of the stock market. He made his money through real estate and network marketing. For those fields of interest, choose him as your mentor.
If you want to grow your money through the stock market, follow the investing principles of Warren Buffett. The book "The Tao of Warren Buffett" is by far one of my most favorites. (Yes, I have favorite books, and most favorite books.)
Choose who you get advice from. I get advice from people who are already where I want to be.
Choose who you get advice from. I get advice from people who are already where I want to be.
Do not confuse yourself through mixing and matching mentors.
Moving Forward...
Today, after all the mistakes and learnings, I keep everything simple.
I have my emergency fund in the bank to pay for unexpected expenses.
And I have my Insular Life Wealth Assure VUL for everything else.
By everything else I would mean that if gives me two things:
1. PROTECTION against risk that can severely impact my financial condition like accident, disability, and dreaded disease. And in case of my untimely death (knock on wood!), I have enough life insurance coverage to help my husband pay the bills, send our kids through college, and pay for our existing housing and car loans. It will also enable me to continuously support my parents even after I am gone.
I heard a husband once said to his wife, "Bakit mo iniisip na mamatay ka?" (Why does it cross your mind that you are going to die?) The wife is working, while the husband takes care of the kids. He was against the wife getting a life insurance. I do not see his logic, but this is the reason why financial literacy is a MUST.
Personally, it's not about thinking that I am going to die, but working as a medical representative requires me to spend hours on the road driving from one doctor to another -- in two provinces, Tarlac and Pangasinan! Even if I drive as safely as I possibly could, I may come across a drunk driver of some sort. We can never tell when an accident will happen. That is reality.
My VUL protects me and my income from all kinds of risk. It may be death, disability, accident, dreaded disease, and even redundancy.
2. INVESTMENT towards my life's most meaningful goals. My original plan was to be able to quit my day job to have more time for my family, to live out my passion and my purpose by age 40. This is the reason why I began investing as early as I learned about it in back in 2013. But with the look of things, I think this goal will be realized earlier than planned, and I am very excited about it!
Another very important goal is to be able to retire wealthy. Statistics showed that only 1% in the country are able to do this. It's time that we increase these stats! Using the Time Value of Money, I computed for my target retirement fund wherein I will have the same kind of comfortable yet modest lifestyle that I have now. This is where I based my monthly premium. Review your existing policies with your Financial Advisor, do the computation with them if you haven't and make sure that you are on track.
Don't just invest your spare money because the more money you begin investing with, the more it grows exponentially over time. I don't want you regretting by retirement saying that you should've invested more. Remember that time is money's best friend. Make sure that your VUL will serve its purpose. With proper planning, retirement will always be something to look forward to and not be fearful of.
Final Word
Learn from my mistakes. Save time, energy, and money, that you don't have to commit these mistakes yourself. As Bo Sanchez said, "Getting a mentor is the shortcut to success." Through your mentor's knowledge and experience, he/she will show you the way in achieving success.
Be very blessed!
P.S. Are you now considering insuring yourself and investing for retirement. Email me at financialplanningforpinoys@gmail.com. I would love to do the planning with you.
P.S.2 I hope you find this post helpful, and kindly click the SHARE buttons below. Thank you very much.
P.S.2 I hope you find this post helpful, and kindly click the SHARE buttons below. Thank you very much.
