Financial Planning Nuggets - Insurance, Investments, Financial Planning in the Philippines: success

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Getting Your Financial House in Order

Sometimes, I had the chance to do a financial wellness presentation to companies. Before the presentation, we would have a simple workshop and in most cases, the participants would share their own financial knowledge and experience on how to set aside funds for their future as well as list their issues on not being able to save.

Savings. Credits:
UNHHealth Health Services, University of New Hampshire

The most common statement that came out from the workshop is that no matter how hard one tries, it is hard to save money because of the cost of living, recurring payables and/or immediate needs/wants.

To help answer the issue on not being able to save, some basic laws from Beth Kobliner's "Personal Finance in Your Twenties and Thirties" can help prioritize the checklist on the financial plan.

Get health insurance – A single medical problem could bankrupt you. Therefore, health insurance must become your highest priority. If your employer doesn’t offer it, get one for yourself. This is the first step in financial planning.
Reduce your debt – The best way to start saving is to reduce your high-interest debt. Or better, write off your debt. The interest rates on some loans / credit cards are higher than the return you’d receive from investing the money.
Start saving for retirement – The best time to start saving is when you’re young. Interest rates will really start working for you as you get older and accumulate principal.
Reduce your banking costs – Most Saving accounts, Checking accounts, etc have maintaining balances. If you are not careful and go below the minimum balance, fees can take a big bite out of your bank balance.
Build up a nest egg for emergencies – What would you do if you were suddenly laid off? Save enough to cover your living expenses for at least six months. Some banks have facility to automatically shift funds from your checking account into a savings or mutual fund account.
Become an investor – Join a mutual fund pool to reduce your risk. Invest in mutual funds, which reduce your risk and keep you even with inflation.
Reduce your taxes – Look for ways to lower your annual taxes. Sometimes there are discounts if you pay your taxes early.

Start paying attention to your finances today. Apply the 7 rules and develop the habits that will help you for the rest of your financial life.

Success happens here. Credits: lee.fly

by Mel · 1

Financial Pyramid: In which level are you today?

Maslow's Pyramid of Needs. Credits: Wkipedia

Maslow's hierarchy of needs interprets human's basic needs as the foundation of the pyramid and gradually elevates to the levels that human motivations generally move through -- safety, love/belonging, esteem and self actualization.

"For the most part, physiological needs are obvious – they are the literal requirements for human survival. If these requirements are not met, the human body simply cannot continue to function."

In the same way, Financial Planning also has a Financial Pyramid. It is a strategic approach in managing investment portfolio where the base of the pyramid is made up of low-risk investments, the mid-portion is composed of growth investments and the top is speculative investments.

For the most part, the base of the pyramid forms the requirements and foundation of a solid financial plan as well as for a long term financial freedom goal. Similar to meeting the physiological needs, if the basic financial requirements are not met, the plan for financial freedom simply cannot continue be achieved.

The 4 levels of Financial Pyramid:

Protection
This stage provides you with a cushion in case of unexpected events, such as job loss or health issues. Items you need to have in this stage:
-- Savings, Emergency Fund (6 months of salary)
-- Insurance (Life, Health, Critical Illness, etc)
Savings
This stage helps you to start building your wealth and investments. This is the baby steps in creating your passive income sources. Items you need to have in this stage:
-- Mutual Funds, Bonds
-- Real Estate / Your Home
Wealth Building
This stage helps your wealth and investments achieve maximum growth and income. This may be your long term passive income sources. Items you need to have in this stage:
-- Equity, Stocks
-- Business
Speculation
At this stage, you should have excess funds with zero or low debt, enough retirement and investment fund before investing in a much higher risk portfolio. Some items in speculation would be:
-- Gold

Success. One step at a time. Credits: deZengo

-- Art, Collectibles

The financial pyramid enables us to understand the importance of each stage in order for us to visualize our road to financial freedom. It is also important to note that it is ideal to go one step at a time for each level in your financial plan to achieve success.

Understanding financial pyramid:

Financial Pyramid from Mel Co.

by Mel · 0