10 Tips for Financial Freedom

Why is it that Filipinos, particularly Overseas Filipino Workers (OFWs), work so hard to earn money and yet do not work as hard to keep it? After many years of hardship, they end up with just the same, or even less than what they had when they first left.

Pay attention on the following tips, organize your financial plans and you need to review them regularly.

1. Pay Yourself first. How much will I save? Ideally you can save as much as 20%-40% of your monthly income.

2. Define your financial target at each phase. Set your financial goal must be based on whatever phase in life you are in financially.

3. Stop spending on things that decline in value. Before you buy ask yourself if you really need it or whether or not you can really afford it. Determine what your needs and wants.

4. Protect your greatest income generating asset yourself. Your family depends on your ability to generate income. They will suffer a serious financial loss if you are no longer able to generate income for them. It is important to cover yourself with insurance.

5. Grow with the economy and beat the inflation. You also have to consider where you are putting your money. Your savings and investments should always generate an income that is higher than the inflation rate.

6. Trust the power of compound interest. Using compound interest can make you earn four times more for the same amount of savings over the same period of time.

7. Assess risk and options, "The higher the risk, the higher the return". There are risk in every transaction. Understand the details of every transaction and identify what kind of financial risks are applicable.

8. Make money work for you, the power of leverage. Leverage is borrowing money for a good purpose provided the money receives from the loan is able to generate income to pay the loan.

9. Invest and diversify. You should spread the risks. You must never place all your eggs in just one basket.

10. Use the power of one. Look into the option of banding together into cooperatives and the like.


Reference:
Colayco, F. J. Wealth within your reach, Pera mo palaguin mo!. Manila. 2004