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Today is the first day of the "BER" months and 2019 is just around the corner. The question is, "How are we so far with regards to our 2018 goals?"
When I was still employed, this is the time when I am filled with so much excitement because bonuses begin pouring in almost every month! This may also apply to you. Admittedly, Christmas season is the most wonderful time of the year -- and the Philippines have the longest celebration!
But please don't let another year pass without you being any step closer to your financial goals. If you haven't begun building a financial plan, this is the time for you to do so.
Starting with a clean slate? PERFECT! As the title of the blog post says, "First Things First."
The Financial Planning Pyramid
It is very important to plan for your financial future, and the financial planning pyramid will be your guide in doing that.
This widely accepted and simple tool can help you in creating a financial plan that is based on solid foundation. The pyramid above clearly shows you which financial matter you should address first. And as you move up the pyramid, your income protection needs are replaced by your need to accumulate more wealth.
Your trusted Financial Planner will work with you in doing this.
During my Registered Financial Planning (RFP) class, I met one of my mentors Mr. Melvin Esteban. Below is a video of one of his ANC Shoptalk episodes on the Basics of Financial Planning. Watch the video and learn from the expert.
During my Registered Financial Planning (RFP) class, I met one of my mentors Mr. Melvin Esteban. Below is a video of one of his ANC Shoptalk episodes on the Basics of Financial Planning. Watch the video and learn from the expert.
Insurance or Investment First?
Obviously, insurance should be your top priority. This is the solid foundation from which you will build your financial wealth.
But in my five years of learning about money, reality is that people I have talked with are more interested in investing than getting a life insurance coverage.
This is the norm that we have to begin deviating from.
Investment Takes Time to Build, Insurance Doesn't
If you will think about it, as long as you are still insurable, insurance money is technically "instant money."
If the insured is diagnosed with critical illness, he/she gets a lump sum from the insurance company for his/her medical treatments.
If the insured becomes disabled due to accident, he/she gets a weekly fund as income replacement.
If the insured dies, either by accident or natural death, his/her family gets the insured amount, which may be NET of tax, to pay for his/her final expenses, death taxes, housing and auto loans. It also ensures that his/her young kids will finish college and that his/her family will not live a worse lifestyle that what they have now, with or without the insured.
If you are having a hard time understanding the logic behind life insurance, just think why you are getting an insurance for your car or for your home. Consider also why your bank requires you to pay for mortgage redemption insurance (MRI) when getting a home loan.
With investments, it takes time to build -- and the length of time depends on the rate of potential return of your chosen tool. You should also take note that the higher the potential return, the higher the risk. You should also have the size (read: large sum of money to begin investing with) and expertise to grow your money in your preferred investment.
As one of the richest people in the world, Elon Musk, said, "It is okay to have your eggs in one basket, as long as you control what happens to that basket." This applies if you want direct investing.
The Role of a VUL in the Financial Planning Pyramid
As I have mentioned above, almost all of the people who I have talked with wanted to learn about investing first, but didn't move into action simply because they do not have the time and expertise to do so.
But there were also those who initially wanted to learn about investing, but after I explained to them the importance of getting a life insurance, the security and peace of mind that it can provide you with, they decide on getting a life insurance policy while growing their money through investing indirectly, both at the same time. This is conveniently done through a Variable Unit Linked (VUL) policy issued by insurance companies.
If you will learn how a VUL actually works, it can address ALL levels of the Financial Planning Pyramid from Protection, to Savings and Wealth Accumulation, to Growth and Diversification -- all at your own CONVENIENCE.
In 2017, I wrote a blog post about our first VUL and the lessons it taught me as a policyholder. I encourage you to read the post, click Not All VULs are Created Equal. May you learn from that experience as well.
Final Word
Do not rush into things. Everything that is worth it takes time.
Personally, thinking about how my 2018 has been so far made me write this post.
I have checked 4 out of my 5 set goals for the year. These are:
1. Being able to retire from mandatory work at age 35.
2. Being able to make my passion and my purpose now my full time profession.
3. Being able to spend more time with my family.
4. Being able to have my own car.
But all of these did not happen overnight, nor eight months in particular. This took five years of learning, planning, and risk taking -- which I still do up to this day.
While I was busy with my day job back then, I worked on my dream job, writing blog posts at 5am or 11pm, meeting with clients on weekends, and used my vacation leaves to attend financial seminars.
Every time money would come in, I made sure that a part of it goes to my VULs (I have six policies as of this writing) and I lived on minimum.
It was never easy, but as I experience the fruits of the risk - return trade - off that I took, I can say that it was all worth it.
Whatever your financial situation may be right now, believe that you have full control over it. Be the master, not the slave, of money.
P.S. I hope you find this post helpful. Kindly click the SHARE button.
P.S.2 Considering getting a VUL? Send me an email at financialplanningforpinoys@gmail.com or you may visit our website at http://www.synergiainsurance.com.
