In my last post, I wrote about how a CHANGE IN MINDSET greatly affected my attitude towards money. I said that I now believe that it is in God’s will for me to be rich and earn large sums of money to be used for good. I also mentioned that I am now a more positive and optimistic person believing that I indeed have the capacity to generate huge sums of money so that I can reach my goals.
I also said that my goals could be summed up into one thing – become FINANCIALLY FREE!
In this post, I will outline the steps to do just that. But before that, let me tell you a story.
When I was a kid, I was already taught to save. From the P10 baon I receive every day, I set aside about P2 to go to my piggy bank. After some time, I realized I already had P500 saved! I was excited. Later on, my parents got me and my siblings Kiddie Savers Account. That time, they were working as canteen concessionaires for a government office. They gave us P100 per day to deposit to our accounts. We were really excited to go to the bank and make our deposits. Take note, I was just 10 years old at that time. At the end of the year, we had enough to pay for our next school year’s tuition fees.
You see, I was brought up to be a natural saver. But as I got older, I seem to forget those values and often find myself having more expenses than I could actually afford. Hence, as I started to earn more, I spent more and none was left for savings. Finally, after four years of earning an income, I was fed up with not having any decent savings and made the decision to prioritize saving up for my future. After all, I am not getting any younger and soon I will have a family to raise and support. Even though I’m a girl, I still intend to help my husband fund our family’s financial needs.
But how do I save when I have so many expenses to pay for? The answer to this will be outlined in the succeeding post. At least for now, you know the gist of my story.
So, here I am – wanting to be financially free. How do I start?
STEP 1: INCREASE MY CASH FLOW
How can I really pay for all my basic expenses if my cash flow is so little? Yes, I can reduce my expenses but I can only do it in such a way that I do not live in utter poverty. I can make sure I only spend what I make but if all that I earn is just enough to pay the bills and I am unable to even afford some of my needs and wants, then will I even be able to think about saving?
To be able to effectively save, especially that I now have a goal to reach, I need to increase my cash flow.
There are many ways to do so which we will discuss in the post dedicated to this.
STEP 2: MANAGE DEBT
There are good debts and bad debts. Good debts are debts made to acquire items that would allow you to generate additional income. Bad debts are debts acquired to finance items that give you more expenses. Managing debt means you have less or possibly zero bad debts.
Here, we see that increasing cash flow is really necessary. Because if I have limited cash flow, the tendency would be to loan more. But how can I make a loan when already I am tied up to paying other loans. It’s a vicious cycle. Loaning by itself is not bad. It can even be a source of financial leverage. But the key to this is proper debt management.
Another separate post will dwell deeper on this.
STEP 3: CREATE AN EMERGENCY FUND
Emergency funds, from the name itself, are for emergencies. This is the part where I actually start setting aside money for savings. This is what people call saving for the rainy days. But this fund must not be touched unless there really is an emergency like when I lose a job or when I need cash for repairs or sickness. It is not intended for when I need a new gadget or saw a sale for an item in the mall.
I will discuss emergency funds in detail in a separate post.
STEP 4: PROVIDE PROPER PROTECTION
Most Filipinos fail to insure their lives against untimely death or even against living too long. Most only have the mentality that the present is all that matters and we must spend all we can in the present. But what happens when we suddenly meet an accident. You may accuse me of being negative on this but it is just the simple reality. Accidents do happen and we can never predict them.
Now when it happens to us, are we sure that our loved ones can cope with our loss especially if we are the breadwinner? Single people would say that they would delay getting insurance – after all they don’t have a beneficiary. But they fail to realize that if they insure themselves now, once they do get beneficiaries, they don’t need to insure themselves again.
We will dwell more on this in a separate post.
STEP 5: ASSET ACCUMULATION
This is now the part where I start to make money grow. I have earned it, now I’ll make it grow. Many people make the mistake of simply placing their money in the bank. The bank exist to safe keep your money, but they won’t make it grow. Put your money there today, when you wake up tomorrow, it’s still the same amount. So what? Well, you are actually losing! Your money remains the same in amount but in value it decreases. Why? There is inflation.
More on this on a separate post. If you notice, I am keeping you hanging because there are just so many things to discuss about each step that this post will be very long to contain them all.
STEP 6: ESTATE PRESERVATION
Are you aware that before your heirs could actually claim your wealth a.k.a. estate they would need to pay 20% estate tax? Once you die, your assets freeze and the only way for the legal heirs to claim them is if they pay the tax. Many rich people are unaware of this and this leaves them in a very vulnerable situation. If their children cannot produce the estate tax, then the government essentially inherits all their hard earned wealth.
How do you preserve your estate? I will discuss this in another post. J
And finally, the last step.
STEP 7: GIVE, GIVE, AND GIVE
The reason many people are blessed is they continue to be a blessing to others. By sharing their resources – time and money – they open themselves to receiving more blessings. Money is not meant to be kept to ourselves alone. It is meant to circulate. We are blessed to become a blessing. We earn a lot so we can give a lot. The more we give, the more we receive.
Many make the mistake that once they start earning a lot, they keep it to themselves. If they learn to let go of those earnings, they would realize that they would continue to receive more. If they simply kept it to themselves, then they risk stopping at that threshold where they can no longer earn more.
This post will be expounded in the succeeding posts. There is just too much knowledge to absorb and share that I risk making this blog post very long and tedious to read. So watch out for the next posts as I expound on each step more and share what I’m doing to actually fulfill each.
Thank you for reading and have a great day!
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