Let’s say I’m an average rank and file employee who is a father of 3 earning a monthly net salary of P12,000. How would you advise me to grow my savings or make an investment when my earnings are barely enough to sustain my family?
It will take a lot of sacrifice, for sure, but it can be done if they are determined. How many employees do we see smoking, drinking, texting and eating junk food and wasting real food? Some may even say they do this and even resort to drinking alcohol and taking expensive drugs to forget their pain and sorrows. Unfortunately, when they wake up from their stupor, their pain and sorrows will still be there and may even be worse when they realize that they lost an opportunity to improve their future.
For this family, I strongly suggest that they save Php33 a day or Php1,000 a month. As we discussed in the last article, the Php1,000 a month if it earns 10% per year can grow to Php2.1M in 30 years or to Php5.6M in 40 years.
Many who write me think that they will get the extra income now if they invest in mutual funds. This is very wrong. Your income will come only when you sell your shares that you bought in the mutual fund with your Php1,000 monthly at a profit.
If you sell it at the wrong time, you may even suffer a loss. Investing in Mutual Funds is not the suitable for those who want regular cash income. It is for those who want capital appreciation, or increase in value of their assets over a long period of time.
Do not put in money that you will need in a short period of time. You really need to “forget” that you have that money. It should be looked at as money for say, schooling of your children 5 -10 years from now. It is also an excellent investment for your retirement in 30-40 years time.
If you want to use this investment option for the schooling of your children, you will have to have a separate accounting for it. It can be done but you probably will still need at least five years before you can see some really good capital growth from it. You will need to plan this carefully.
What is very important with your kind of income is not to be tempted to use credit cards. Credit cards can become the beginning of the end for you. Maybe you could get them free for a year just to convince you to get a card but you will have to pay a steep annual fee after the first year. If you are not able to pay on time, you will end up with penalties and interest that will really kill your capability to save. As much as possible, live simply using only cash.
---
Francisco J. Colayco is an entrepreneur, a venture developer and financial advisor. He is the founder of Colayco Financial Education and the Kapatiran sa Kasaganaan Service and Multipurpose Cooperative which have developed businesses in Banking and Finance, Real Estate, Food, Agriculture and others. He is the Author of Seven Bestsellers in the Pera Palaguin Series, the latest of which is now available in bookstores: “Wealth Reached. Money Worked. Pera Mo, Pinalago Mo!” Find his works and catch him on TV and radio. Check out: www.colaycofinancialeducation.com, www.franciscocolayco.com, www.kskcoop.com, FaceBook and Instagram.
