Bonds and how to use them wisely

Bonds might be unknown to many or boring to others. Nevertheless, they are very useful to balance risk in your investments.

The stock winning strategy

Despite what people think, investing in stocks is not difficult. I believe that the financial sector is doing its best to make it appear unreachable to common people but the truth is that it’s not.

Nevertheless, you MUST follow some rules in order to successfully invest in stocks. Failing to follow these rules and you are not an investor anymore, you would become a gambler.

The one and only certainty about stocks

Now that you know what are stocks, you might still be thinking that stocks are risky and you shouldn't put money in there.

You are right and wrong at the same time.

In order to answer your doubts, I must differentiate between short term and long term.

Short term:

Short term for me is 10 years or less. Indeed, there is a chance that the valuation of your stock portfolio will show low return or negative return. For example, you invest all your money in stocks and just after you did, there's a market correction. Meaning that all the stock prices went down. Of course, you'll feel bad because what your shares worth is less than what you paid for.

BUT

Long term:

In the long term, meaning 10 years or more. The valuation of your stocks will always be more than what you bought them for.

Let's see the following graph that shows the performance of the Philippine stocks since 1986:

Let's talk about stocks!

Some people are either afraid or excited about stocks for different reasons. Some think stocks are evil and will help you lose all your money. Some others think it's like playing in casinos and you have a chance to win big time...

Those people who see stocks as a huge gambling machine cannot be more wrong.

I'll tell you what a stock is and it's very simple to understand: a stock is a share of a company.

Investments! The long awaited final step of our program

After I explained you why you should start a financial program and what are 3 first steps, we can discuss  investments.

Actually, there are so many ways to invest your money, that I'll cover them one by one on the following posts.

The possible investments are the following:

- Stocks

- Bonds

- Derivatives

- Real Estate

- Gold

- Collectibles

- etc...

I'll detail them one by one and how to get started. Each one of them has its own advantages and also its own disadvantage.

The best strategy will be to diversify your savings  in order tocreate a portfolio of investments.

Stay tuned for my next post on stocks.

Start building your emergency fund! Step 3 will prepare you for unplanned events

We've all experienced this and it usually comes at the wrong time: the time you'll need to cash out a big amount of money for unforeseen events.

Have the following scenarios happened to you in the past or are susceptible to come any time?

- your car breaks down or needs a body repair because a careless bus driver hit you.

- your family is about to get bigger. It's a happy news :-) but do you have the means to pay for the hospital bill?

- you suffer from sickness that won't allow you to work for some time. Can you still pay the hospital bill and can you feed yourself and your family while recovering?

- a family member is sick and needs your help.

- you lost your job. Is it going to be fast to find an other one?

- and many more possibilities...

Get rid of your debts! The 2nd Step to Building Wealth

By definition, debt is something, usually money, that is owed or due.

Before I throw my two cents on debts, I want to emphasize why it should be the second step of our wealth program, just after protection.

Let's take the example of a normal family that live in a nice house and drive a nice car. Those two have been bought with a loan from a bank. If something unfortunate strikes the bread winner, the rest of the family will have to shoulder the remaining balance of the house and car. That's where the "protect your income" step comes to help. Since your income was protected in case of a mishap, the family can use that money to pay the amortizations of any debt the family owns.

Now there are two type of debts. Robert Kiyosaki, best-selling author of the book Rich Dad Poor Dad, mentioned that there are good and bad debts. I won't explain that further but I'll make my own type of debts: the one that is avoidable and the one that is hard to avoid.In the hard to avoid category, we have house and car loans. Those are hard to avoid because if you don't take a loan to cover them, it will take you too long to save in order to acquire the house or the car.In the avoidable category, it's mostly credit card debt. It is debt that originates from you buying stuff that you couldn't afford at the time you bought it.

Getting out of debt should be your first priority so that you can focus your money into your investment (for your retirement mainly).

In order to get rid of your "hard to avoid debt", the solution is quite simple: accelerate your payments. Instead of paying the normal amount for your amortization, just increase it as much as you can so that it will be paid off as soon as possible.

For your credit card debts, first of all, you have to stop spending more than what you can afford. Please remember that the credit card interest is really really huge. What you owe the credit card company in interest is so big that it's almost a scam. So you have to stop that right now. With the credit card debt you have, consolidate what you owe into a bank loan that gives you a lower interest and will help you pay it off faster. When you get that new bank loan, use that money to pay off all your credit cards and get rid of your cards so that you won't be tempted to use them anymore. Maybe just keep one for your online payments and in case you often travel abroad.

I hope I helped you realize the importance of getting rid of your debts and why it should come as Step 2 of our program.

If you want to know more about this topic, you can get a free coaching meeting with one of our financial coach. Just email us at pinoyfinancialcoach@gmail.com

 

 

Photo Credit: By Reza luke (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

The FIRST STEP to Building Wealth: Protect your Income!

We never think about it but reality is: people depend on us.

If you are married, of course, your husband/wife and your children depend on your income.

If you're single, it is common that your parents and your siblings depend on you especially if they are going to school.

Have you ever thought what would happen to them if something happen to you right now?

We can guide you through investment strategies that will protect your income if something unfortunate happens to you and that will give you investment profits that can fund your retirement.

In my strategy, I save up 50,000 pesos each year to contribute into my investment.  The investment vehicle that I use insures my income today so that in case something happens to me tomorrow, my family will be protected and receive a substantial amount from the proceeds.

And if I live long enough to retire at say 65 years old, my investment would have multiplied by then, allowing me to withdraw  somewhere between P8-16 Million, tax free!

As you see, it is possible to accomplish the first and the last step of our program by being able to protect your family if something happens to you and that will allow your money to grow with time and will allow you to retire a millionaire!

Contact us if you want to know more about this topic or if you want some advice from our financial coaches. Email us at pinoyfinancialcoach@gmail.com

Free financial coaching session!

Hello, We are a team of financial advisors and investors. We help people to be in charge of their finances in order to retire as Millionaires. We give free coaching to help you attain your financial goals. For more information, you may email us at pinoyfinancialcoach@gmail.com

The foundations to build wealth

Here we go, it's time for me to disclose our secret recipe for wealth building.



Step 1: Protect your income

Step 2: Get out of debt

Step 3: Build your emergency fund

Step 4: Invest

We'll get into each one of those steps in the following posts.

Caring about our future (part 2)

Yesterday, we studied about the financial need to send my son to college.



Today, we will discuss our financial need as future retirees.

I am 33 years old and I plan to retire at age 65. Let's assume that I will live an other 20 years without income and without rental properties. I'll then need to fund my daily expenses with my savings.

How much do I need?

Let's say that me and my wife can live a simple life and we can normally live with 30,000 pesos a month.

In one year, we are going to need 360,000. In the span of 20 years, we will need 7,200,000!

Not only that, we must take inflation into account. Inflation in the Philippines in 2013 is around 3%.

In 32 years, at the age of my retirement, I will need 18 millions and a half to be able to live!

I hope this will make you realize that it is time to start preparing for the challenges that will come in our life.

With our help, you can already take the first steps.

 

Photo Credit: By Dori (Own work) [Public domain], via Wikimedia Commons

Caring about our future (part 1)

Before we get into how to build wealth, we must understand why we need to become financially savvy.

When we use words like wealth, money, millionaire, rich, etc. we usually think about a fancy car, a beautiful big house, all the gadgets we can buy and so forth...

In reality, there are much more important events that need our attention right now before even starting to dream about a big house and a powerful car.

Those pressing needs are:

1. How to send our children to school and university

2. How to fund our retirement

First, let's study the college tuition fees:

Please teach me how to play in the stock market?

This is what I hear when people see me checking my financial account online. It made me realize that most of the middle class families have no clue on what to do with their money.

In this blog, I won't get into stocks right now because it's one of the last steps in your wealth building process.

But I can't stop the urge to say that only fools will play in the stock markets and will lose money. Thewise will invest in the stock market.

What people need to understand is that building wealth is not going to happen instantly. It will take years but if you understand the process, it's gonna work.

Basic knowledge on what to do is the first step in order to improve your finances.

That's where I will help you and I'll make it simple so that you can start getting rich right now.

Stay tuned for my next post where I'll introduce the first step you must take for a successful life.

 

 

Photo credit: By Katrina.Tuliao [CC-BY-2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons