Opened A FB Group
Pinoy Money Guides
http://www.facebook.com/groups/233607556677025/(I've uploaded some informative videos here, w/c you
can't do in a forum)
READ My article on page 4,
about how to make HUGE increases in your
wealth in the coming year.
Don't miss this.
UPDATED Aug 2: Completed (almost) quick guides and budget.
Reading through the forums (lurking) for a few years,
I've seen some good things about the posts, but still
I still feel there's something lacking.
Rather than create(or reply) posts on each specific
topic, I've decided (if the mods will allow) to create
an "all-in-one" post where you can be clueless with
money, or know something, or even be a little advanced,
yet by the end of this post, you will be equipped with
the knowledge that will give you a clear path to
financial success, depending on your preference.
(this is not complete yet, but I will be editing this
since as of the moment, writing this so far has cost
me a bit of energy)
Anyway, let's get started:
Step 1. Choose A Target Goal.Go for a worthwhile target goal. It depends on you.
If you haven't reached your 1st million yet, I would
suggest you shoot for this. Although in my opinion,
1 million is too small. It can't buy a decent house,
it can buy a car, but as we grow older, we get sick,
or an older family member might, and hospitals cost
huge money.
And IMHO, you should be ready for anything. I remember
when my mom got hospitalized, it was a 200k bill for
9 days stay. Didn't have philhealth (it's stupid of
me yep), sayang 200k, but at least di naman masyado
affected.
Anyway, if you haven't read anything by Robert Kiyosaki,
I suggest you do as a start, he makes things simple to
understand. Particularly these two books: Rich Dad
Poor Dad, and Cashflow Quadrant.
So I'll tell you the meat, which is an intro to step 2.
Step 2. Choose A Path To WealthIncome comes from basically the 4 sources shown here
in this (text) figure (called Cashflow Quadrant):
E | B
-----
S | I
E stands for employment. S stands for self-employed
or small business. B stands for big business, I for
investments.
According to Kiyosaki, it is easier to get rich with
the right side of the quadrant than it is for the
left side of the quadrant. B & I is easier (in my
opinion, faster) than E & S.
So you we supposed to do this?
You choose from these recommended paths:
Choice 1:
E -> S -> B + I
(You start from a job, then put up a small business,
turn it into a big business, and pool your income
to investments.)
Choice 2:
E + I
(As you're employed, put some on investments)
Choice 3:
E + S + I
(As you're employed, put up a small business [maybe
consulting and such] and pool your income to investments)
If you notice, all these paths lead to investments.
I'll explain why: Invesments (& big businesses, explained
later again) form leveraged income, as opposed to
earned income from E or S.
Leveraged income is income where you don't put time in,
by using any or all of OPM, OPT, and OPS (other peoples'
Money, other peoples' Time, and other peoples' Skills)
Leveraged income becomes a huge force once it's what
I call 'mature'.
Those who have done this are earning unbelievable amounts.
Say you have an investment that earns just 10%/year.
According to the rule of 72, 10%/year doubles in 7.2 years.
And it multiplies by 8 in 22 years.
(Rule of 72 estimates the number of iterations, in this
case years, it takes to double an investment by dividing 72
by the interest.)
The good news is there are investments that earn 20, 30 and
even 50%. (shown later)
If it earns 20%, it doubles in 3.6 years, and multiplies by
6 in 10 years. A 100k investment becomes 1M in 13 years.
(If you chose the E + I path, I can show you (later again)
how to get to 5.8M in that same 13 years)
--> What's the difference of a small and a big business?
Despite its name, its not the size that determines Kiyosakis'
definition of big and small businesses (S & B).
S is a business where you are crucial or integral to the
existence of that business.
B is one where you can take yourself out of the business,
yet it still earns and can still grow.
Step 3: Setting up the proper budget.Depending on your choice, you should budget accordingly.
If you are going for choices 1 or 3, then money is not
your only budget. But you should also budget your time.
Budget is really very simple, but not easy.
First you start by computing:
a. How much you want to be putting away for savings
b. How much you want to be putting away for investments/business capital
c. How much your fixed costs are
d. How much you allocate for luxury
It is important to differentiate what your fixed costs
really are, and what your luxury items are.
Many of the things we feel are important are simply
doodads, things that add 'visual' value, i.e. "pangporma",
but don't add monetary value.
I personally am not against buying any of these,
as we all have our personal whims (I have an
abnormal crave for buying and collecting La coste
shoes)... but we should be limiting these while we
haven't reached our financial goals.
Anyway, a famous mutual fund advisor of the 80's
once said, you should consider investments as
tithing to yourself, rain or shine you should put
away 10% of your income to an account.
This is effective actually since when you start having
the discipline of saving, it will become easier and
easier after a while.
Just this last note, if you are budgeting your time
and money, plan it. Allocate the proper amount
and stick to it.
Say you are putting up a part time business, set
a schedule just like having a subject in school, or
having a real part time job.
If you can remember in school, how hard the subjects
seem (well if you are like me, they are actually not,
but I am talking of most people), but you manage
to pass them anyway.
It is because the learning is systematized, and you
have a schedule to follow.
Business is the same thing. You have to learn the ropes.
And you have to devote some time.
Same thing with your cash to put away, plan, and
set the proper amount.
And stick to it.Most people say they don't have enough time, or
don't have enough money. This isn't true. It's just
that they haven't learned the discipline yet.
Whatever the amount of time and/or money, the
first you do it, doesn't really matter how much.
Doesn't really matter. What matters is you learn
the discipline.
Step 4: Getting Your Hands Dirty: Business(If you chose option 2, E + I, you can skip this part,
but there are very important golden nuggets here
than you can apply to your money management as well)
If you ask me, I don't see any other way of earning
huge amounts of money other than getting into business.
Now some people will say, isn't acting or becoming
a model/actor/actress profitable?
Well yes, I know since my sister is a commercial model,
and has a few acting stints here and there.
And it may indeed be profitable, but here's the thing,
there's no way to turn that profession into a leveraged
deal, where you don't have to work, yet still earn.
Compare that to say putting up a restaurant. If you
create systems (turning the business from an S to a B),
you can create multiple branches for that restaurant.
In effect you can double, triple, quadruple your income.
You can do multiple gigs with acting (I'm using acting,
but you can apply this to other similar work), but eventually
you will hit a certain limit.
So here are my quick and dirty guides to getting into
business (these are not hard and fast rules, but it's
good to always have these in mind, IMHO):
Step 4.1 The old Chinese business saying still holds true
most of the time in our day and age, as it did centuries
ago, and that is:
"Sell when everyone else is buying, Buy when everyone
else is selling."
Seems simple, but if you are thinking of skipping this,
I caution you, since hardly anyone is following this rule.
Let me explain by examples:
First in the stock market arena, Warren Buffett (the
part owner of Coke, Dairy Queen, Gillette, G.E., The
Washington Post, Geico insurance, & a whole lot more,
and is one of the richest people in the world) has
been following this advice as seen through how he
acquired shares of the companies mentioned above.
He has revealed his method of stock investments, and
has followers who themselves earn a lot, yet still,
most stock investors, brokerages, and the like, use
this seemingly harmless, but really deadly advise:
"Buy low, sell high"
So what is wrong with buying low and selling high?
Well for one, it doesn't tell you when it's low
and high. When stock prices go down, a lot of reasons
may be behind it, and a number of people will sell
their stocks because they feel that they have to
sell while the prices are "high".
In another case, when stock prices are going
up, everyone seems to be buying these stocks, despite
being overpriced. "Buy while its low, since it's going
up up and up".
Buffett has always been observed to be almost not
buying or selling, most of the time. But when everyone
is selling when a stocks price is going down, like
a giant who's in slumber for a long time, he becomes
awake and buys wholesale the stock that really dipped.
That's the right time to apply, buy low sell high.
But most people don't get it.
Why? Most peoples' decisions are largely, if not purely,
affected by their emotions.
Another example: "Fad" businesses. A news of one type
of business which is doing great at a present time will
certainly get the greed glands of people going.
A lechon manok business gets copied by others and in
a few months time or a year or so, a number of these
will be gone.
And then when the dust settles, a few businesses remain.
What's happened here?
Everyone (of course 'everyone' is a metaphor here
) was
"buying" into the concept of this new "fad" business.
And then astute businessmen will either sell their own
business for a high price to others, or use marketing
tactics and/or use their advantage of economies of scale
to weather this onslaught of the entry of a heavy influx
of new competitors.
And then these competitors business ineptness gets the
better of them: they don't have the proper attitudes of
business, get affected easily by emotions, don't know how
to manage their cashflow, don't know how to manage their
inventory, don't know how to handle explosive growth,
don't know how to systematize their business, etc etc.
And its only a matter of time.
Then they sell their business, to whom? Some of the buyers
I see are the originators.
Step 4.2 Learn to handle this, and you'll be ready for any situation.
And that is, your emotions.
There's a rule: high emotions, low IQ. We tend to do
stupid things when we're high in emotions. No one is
an exception.
NOTE: I realized this section alone would be too bulky for this
post, so I'm just gonna give some tips in bullet form. If you
have questions just post them, and if I can answer then I can
share my thoughts.
Step 4.1 abridged Buy when everyone is selling, sell when everyone is buying..
Don't just blindly buy low sell high, doing so will get yourself
killed (in business/finances, I mean)
Step 4.2 abridged Master your emotions. Everyone is human. But stay calm in
every situation. If you are gonna do something when you are too
angry, too sad, too happy... too emotional, STOP, RELAX, sleep
on it. Then continue making your decision when you are more
rational.
Step 4.3 abridged Concentrate on learning marketing. Marketing is not selling
by the way. Marketing makes sales easy. Sales is just part of
marketing. Why concentrate on marketing? If there are sales,
everything becomes easier. It is easier to think of budget,
workforce, salaries, rent, improvement of your office/shop,
if you have the sales.
Quick marketing tips:
3.a. Have a "mcdo meal" --> a combination or a set of your
products that are "sulit" to consumers.
3.b. Have an upsell (multiple upsells are better), have
another product/s that blends well with your "mcdo meal"
above that have higher margin.
3.c. It's the customer that's most important. If you have
happy customers, these customers will be worth about 10x
the initial sale (depends on industry). So never force
them into anything, they should never feel any pressure
from your marketing.
3.d. Keep a database of your customers. To have control
of your sales, and therefore cashflow, you must have a
way to follow up on each customer
3.e. EVERY employee that has any connection to a customer,
is marketing. In fact, every employee you have is marketing,
since an employee with a bad experience with your business
can get you bad reputation, especially so with social media.
3.f. Business is not dependent on luck.
3.g. Focus on one target market, rather than a pretty broad
market, especially when you are just starting.
3.h. Have at least one campaign to get referrals from your
customers. Referrals are the cheapest and most effective form
of getting new customers. Never miss your chance to get them.
Step 4.4 abridged Take Action. There's a time for planning. But as most of
my mentors used to say, "A bad plan well executed is a lot
better than a good plan that's never executed". There's a
danger in planning too much, which leads us analysis paralysis.
Most great ideas never turn to fruition just because people
failed to act.
(There's one business I'd like to start, that I know I
can get an easy US$5,000/mo, but procrastination is getting
to me, I need to slap myself to wake up)
Step 4.5 abridged Have enough cash reserves. No matter how well anyone has
planned, sh1t happens, and some cash reserves can boot you
out of trouble should things go wrong. I recommend at least
25% of your initial capital, going to 50% if you can.
Step 4.6 abridged In business, and to almost every success oriented endeavour,
self-esteem weighs in a very heavy determinant. Your level
of success is almost always mirrored by your level of self-
esteem.
The good news is that this can be raised.
6.a. Read success books, business, sports, career, anything
that can boost your soul.
6.b. Pay forward. Help without expecting. People with low
self-esteems almost always don't find the time to extend
a helping hand, but those who do, raise their self-esteems
to astronomical heights.
6.c. Excuse the language, but this is what it is called...
Have yourself a f**k you money: Compute the amount of money
you need to live in one month. Multiply that by 6 months.
Then place it in a bank account that you'll swear you'll
never touch again (other than to update or deposit more)
Don't ask me why or how, but this works like magic in
boosting your self-esteem. (this is aside from your cash
reserves for your business)
Step 4.7 abridged Master the Paretto Principle: 80% of your results come
from 20% of your actions. Identify which actions you do
makes you the most money. Then concentrate on those.
For the rest, outsource it. I find it funny that some
very talented entrepreneurs do their own laundry, wash
their dishes, etc etc, when those can easily be done
by a maid, so they can focus their time elsewhere where
it counts the most.
Step 4.8 abridged Take special care of who you listen to.
Usually friends and family are well meant, but if they've never
been successful in business, their opinions are suspect.
Who do I listen to? Only two types of people: Successful
people, and my customers. None else.
Step 4.9 abridged Similar to a tip above, but it's
too important not to state.
Observe what other people are doing, and go the opposite
way. Businesses close because they look alike. They are
copycats of each other. Observe what they are doing,
and be different, in a way that is pleasing to the customer.
NOTES:
Quick Guides:---> Check
http://www.femalenetwork.com/girltalk/index.php/topic,247038.20.htmlGood investments:Real estate, not the ones you buy that are for sale, since
buying these don't earn you a cent.
Let me explain: You can get real estate from sellers who have
old and unwanted property. Banks sell these, but mostly its
from the owners.
They usually sell them at below market value, because real
estate is very difficult to sell or liquidate. If you can buy
them cheap, and renovate cheaply, you can compute a net gain
if you rent the property out, and the rentals can pay for more
than what it is costing you.
Mutual funds and UITF: if you are the type who don't want to
understand how investments work, I would say these are profitable
with a modest risk. Modest interest rates, modest risk. Some mutual
funds get to 20 or 30%. Just shop around.
<for future edit>
---> TricksIf you have credit cards, it's not true that the less you use
your credit cards for purchases, the better you are financially.
There are several (hundreds if you really dig deep) tricks to using
credit cards. I've read a number of books about this topic.
Here's one:
http://www.alibris.com/search/books/qwork/3031538/used/How%20to%20turn%20plastic%20into%20gold%3B%20a%20revolutionary%20new%20way%20to%20make%20money%20and%20save%20money%20every%20time%20you%20buy%20anything--with%20credit%20cardsIt is not the purpose of this post to explain this in detail, since
to teach it requires a few days or weeks to get everything down, in
my experience of teaching it, but just to give you an idea: banks
earn a whole lot of money from their credit cards. No, not just when
you get delayed and pay for the interest charges, but just by using
your credit card when paying.
And to encourage you to make the banks earn, they share this earnings
to you.
