15 May 2012

{Parenting & Money} 3 Must-Haves in Saving and Investing

Previous Posts
{Parenting & Money} Basic Principles of Saving & Investing
{Parenting & Money} The Inevitable Link

In my previous posts on {Parenting and Money}, I shared my realization about how a child can dramatically change the landscape of our finances.  After the milk and diaper, Don and I will worry about tuition fee and increasing household expenses.  Before we know it, we will be worrying about our retirement.

As some may already know, Don and I waited seven years before we were blessed with a daughter.  At that time, our objective for saving was to have enough money for our fertility work ups.  My only regret was that we did not save up for the "after-birth".  Compute this:  If Don and I were able to set aside P2,500.00 each every month for seven years, then adjusting our spending and budget will not be as difficult now.  If we saved an additional P2,500.00 each every month for our retirement, can you imagine how much that would be by the time we are 60 years old?

So, I asked Mr. Hector De Leon, EVP of First Metro Asset Management, Inc.:  What do I need to have in order to save and invest successfully?  The absence of any of the three essentials below will result to non achievement of goals and frustration.

KNOW HOW
This is probably the easiest to address especially with the rapid developments in technology.  One simply needs to make a decision to want to learn about investing principles and all the answers are available at the click of a mouse.  However, you might actually get an overload of information and end up more confused than when you started.

Getting advice from experts that you can trust might be the best way to start.  Fortunately, the number of legitimate financial planners in the Philippines is growing at a very fast rate.  These experts can help you in your personal wealth management activities and at the same time guide you in the essentials that you need to learn to ensure your investment success.
Savings
CAPITAL
It is very common to hear people saying that they believe in the importance of saving money and that they want to invest BUT they simply have NOTHING to save.  These are the same people who can actually afford to pay amortizations on loans for non-essential items.  The simple truth is, for as long as you are generating income from your work or business, then you will have something to save.

This is all a matter of perspective.  If you pay yourself first before you start spending your income, then you will surely be able to set aside even the smallest amount as savings.

Follow this equation:
EXPENSES = INCOME - SAVINGS
DISCIPLINE
The most difficult to correct is the lack of discipline and yet this is the most critical.  Having higher income or getting higher returns on your investment will not necessarily translate to wealth unless you have the discipline.  Higher income, more often will result to higher standards of living.  Higher returns on the other hand, only works if you are actually able to set aside some funds that enables you to take advantage of these returns.  For many people, the formula Expenses = Income - Savings is easier said than done.  Setting aside that small amount for savings could be so difficult especially with all the marketing activities going around for luxury items that all of us want but do not really need.

One way to discipline yourself is to join investment programs that allow you to save money through salary deduction.  These programs are available in some companies, cooperatives and associations.  This way you are able to save amounts, that are easy on the pocket, on a regular basis.  If you do not have access to salary deduction facilities or if you are self-employed, then you can also enroll in your bank's auto debit facility.  In this case, you simply need to instruct your bank to deduct a certain amount every month and invest the proceeds on whatever instrument you want to invest in.  You bank's e-banking facility may also work in the same manner.

Next Week:  {Parenting and Money}  Short Term Goal:  How to Manage Daily Household Expenses

18th Floor PS Bank Center, 777 Paseo De Roxas, Makati City891-2860 / www.fami.com.ph

Disclaimer:  Cruisin' Mommyhood did not receive any form of compensation from First Metro Asset Management, Inc. for this post. 

Photo credits: Know-How photo from nokhoog_buchachon; Savings photo from Flickr; Locked Piggy Bank photo from vichie81
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