Be aware! Be Financially Educated

Be aware! Be financially educated.

It’s a sad reality that majority of Filipinos don’t plan ahead and think for the future. Be financially secured! Be prepared for any exigency.

The first steps to financial independence and freedom start with asking yourself these questions:

1. Do you have enough income sources for your needs?

Without a source of income, it will be difficult to achieve financial freedom. Employment and business are the two most common and reliable sources of income you can have. Depending on your situation, strive to find a good job or start a business that can answer for your financial needs. Remittances may be a source of cash flow, but if this money comes from someone else.

2. Do you live below your means?

You may be earning a lot compared to your peers, but if you spend outrageous sums on things that are way beyond your budget, then you are not going to achieve financial independence anytime soon. If you make P30,000 a month but spend P15,000 on entertainment, you’re spending too much. Staying within or below your means allows you to save up for the proverbial rainy day. It also lets you put your money in investment vehicles or assets that can appreciate in value over time. By living modestly today, you will be able to give yourself much-needed financial elbow room in the future.

3. Do you save regularly?

Gaining financial freedom doesn’t happen all at once–it happens one step at a time, which is exactly what happens each time you save any amount, each time you earn something. Ideally, you should be saving at least 20 percent of your income. It will also be a good practice to set aside money for savings, instead of spending what’s left of your money. To ensure that you do not touch your savings, keep a separate account purposely for it. When it reaches a certain amount, you may invest it in a higher yielding fund.

4. Do you invest your money?

Financial freedom can come easier if you also make your money work for you. Long-term investing is particularly important especially if you want to achieve financial freedom in your retirement years, which is when a lot of people lose financial independence. Find ways to cultivate your passive income sources–these refer to assets that can earn money for you. Examples of passive income sources are mutual funds, equities, and real estate, to name a few. The easier you start investing your money, the more you can earn from it, en route to financial freedom.

5. Do you pay your debt on time?

Debt can crush you, and there may be times when you feel like running away from it. Unfortunately, not paying your debt on time, or worse, running away completely from your debtors and similar obligations, will ruin your chances of attaining financial freedom. Not paying on time means additional interest payments and penalties that can set you back financially. Running away from debtors can destroy your credit standing and reputation or worse, land you in jail. Make a sound plan to pay off your debt, even if it takes considerable sacrifices. Only then will you be able to achieve financial freedom.

6. Do you have adequate protection?

Financial freedom means being adequately prepared for life’s exigencies such as medical problems, disabilities, or death. To ensure that these do not bring you to the debt hole, purchase insurance. There are different insurance plans to match your needs. This is one investment that you will certainly not regret.

7. Do you have a financial plan?

Achieving financial independence does not come with luck. It calls for a sound plan, which you can develop after carefully looking at your needs, your financial status, and your goals. Consult your personal financial planner or adviser to help you in coming up with a financial plan. Also make it a point to regularly check out your plan to adjust to your personal circumstances.

Ideally, you should have said yes to all seven questions. But if not, turn the question around into statements: I will have enough income, I will live below my means, I will save regularly, and take these as your mantras as you march towards your financial independence.

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