“It’s not how much you make, but how much you keep.”
This is one of my most favorite quotes, which although apparently famous, the naive me first heard it from my cousin while talking to him about living in Singapore.
When he said that, it was light a lightbulb moment for me. THAT IS SO, SO TRUE, I thought.
I started looking back at all the money I earned when I was still working for show business. How I wish I can turn back time and used it differently, but then again, it’s already gone – although it would have been best if I invested them then, the good news is…even if I don’t have as much now, I know more…so I invest what I can.
I am writing this post because I received a message earlier. A former client in our Travel Agency was asking me about my post on Financial Planning. She was wondering if there’s a minimum salary you should be making to somehow be a part of it. “It’s intimidating.”, she said. It seemed like it’s something only for the rich according to her.
Financial planning is definitely not only for the rich, though I must say, many have earned or kept their riches because they’ve planned financially.
At its core, Financial Planning is very simple – it’s basically planning out your finances (ex: day-to-day cost versus day-to-day earnings, saving for emergency, saving for luxury, writing down goals and plans for oneself and one’s family, etc). It’s knowing where you are, knowing where you are going, and making steps to get to your destination. You may start by doing this three-step process: TRACK, ANALYZE, PRIORITIZE.
Do you need a Financial Advisor to create your plans? Not necessarily, but a good advisor can help you especially when some things get tricky. Talking with a good Financial Advisor can help you assess what you need, what you want, and how to start with what you have.
My husband is a Financial Advisor from AXA Philippines. AXA is a French Insurance and Investments company and #25 on the Fortune Global 500 List (as of 2017)! In fact, it is the only Life Insurance and Investments company that made it that high on the list. Helping Filipinos achieve their financial goals one step at a time is what he does for a living, but you know what I am most proud of my husband? It’s that he puts his clients’ interest above all else. That means recommending products that won’t earn him much if that is what’s best for the client, AND recommending other forms of investment even if it means he won’t earn at all. I hope and pray you find that kind of advisor, because your advisor is everything. She or he can make or break your plans.
So now, we go to the main part of this post: little things I’ve learned by listening to my husband. Haha. Seriously. You know how I became his client? It’s not because I’m his wife, true story! One time, my friend was asking him about investments, and I joined them. This friend of mine knows a lot about financial stuff, so he kept asking my husband different things. My husband patiently and confidently answered each one of them, that when we got to the car, I told him: “Wait! I am investing, too!”.
I am not a Financial expert AT ALL (which is why I would rather trust companies like AXA for my finances), but here are a few things I’ve learned from my husband that I wish I knew way back then.
1) COMPOUND INTEREST IS POWERFUL. This is really true! I really wish I knew then just how powerful compound interest is (see a very simple and easy-to-understand video HERE). Albert Einstein supposedly said: “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” Ouch. That would be me, Mr. Einstein. I hate to say it, but it is so on point. Of course, the earlier you start, the better – because then you’d have more time to make your money mature. Also, time makes all the difference in the overall outcome. To see what you mean, you might find THIS READ interesting. Imagine the possibilities if you have a child! Lucky child, haha!
2) SAVING IS NOT ENOUGH. Growing up, we were all taught that saving is good. We were given piggy banks and taught to put some money aside. I’ve learned that well, it is, in the sense that it’s better than nothing. But if you only save without investing (say putting all your money in your closet/piggybank/safe which I actually did years ago, lol), inflation rate might just kill all that hard-earned money. Inflation rate devaluates your money because your money remains the same (no growth – which means a missed opportunity to earn from compound interest), while generally, the prices of things around you consistently go up. A simple infographic on inflation rate HERE.
3) WHEN THE MARKET IS DOWN, REJOICE AND BUY MORE. When investing, all of us are scared of what the future brings. Investing can be tricky and can give you nervous breakdowns, but once you understand how it works in general, you will find that for long-term investments, when the market is down, it’s not all negative – in fact, opportunity awaits! Think of it like your favorite store going ON SALE. For this learning though, I have to stress the importance of reviewing the performance of the company you choose to invest in. With AXA for example, before my husband became a part of it, he studied it, and he told me to do the same. Let’s use AXA as an example, you can view the performance of their funds on their website. Even without a lot of financial knowledge, I encourage you to take a look at it (click HERE, choose a fund, and click on the historical price), and look at the graph from the time of inception. You will see dips for sure, as the market is naturally volatile, but if you study it closely, you will see that historically, the funds just keep going up. So, if there’s a dip and you have more money to spare, there really is an opportunity to invest more at a better price.
4) RISK MITIGATION IS IMPORTANT. Risk mitigation is simply finding approaches to lessen the risk impact of your actions. As they often say, don’t put all your eggs in one basket. Having money in the bank is good, but the drawback of putting all of it only in your savings account for example, is that it earns very little interest. Plus also, did you know that if a bank closes (usual reason: bankruptcy), your money is only insured up to PHP 500,000 per depositor (not per account, but per person) only? This means that while they are liquidating, the only amount you are sure to get is PHP 500,000 (of course given that this is how much you put – or more). Other forms of investment will more likely yield higher returns (ex: business, real estate, stock market, etc). Diversifying is one risk mitigation strategy, because it means you always have a back-up in case one form of investment is not working as well or as quick as hoped. Also, what I’ve learned is to change my perspective. Back then, I thought investing means shelling out money which means gastos (expense). But actually, if you think about it, who will benefit from that invested money later on? Think of as paying yourself for your future (or your family’s). Many companies ask you to give your money on a monthly basis, for as low as a little over a thousand pesos. If you start thinking about how much you spend when you go to the mall or eat out, you might be more forgiving in your monthly responsibility. Letting experts handle my money is also one risk mitigation strategy for me – because although all investments entail some kind of risk, it can be planned wisely most especially if done by experts in the field (which I am not). Simply put, you won’t start a business on a thing you have absolutely no clue (or very little knowledge on), right?
5) INSURANCE IS A FORM OF INVESTMENT. It’s quite interesting how Life Insurance companies are often seen as dubious companies in this country because of some companies that closed down. But apparently, those companies are not Life Insurance companies, but pre-need companies. Pre-need companies then were very different from Life Insurance Companies, which my husband can explain to you or I can discuss next time, but here’s the even more interesting thing: I have been looking it up and it seems that in the whole history of the Philippines, NO Life Insurance company closed down- EVER. Correct me if I am wrong but from what I understand, when a Life Insurance company is in hot waters, a merger or acquisition would most likely happen courtesy of another Life Insurance company and our Insurance Commission (in short, Life Insurance Company #1 will buy Life Insurance Company #2 and still honor all the policies made by Insurance Company #2). Our Insurance Commission does an amazing work in keeping all Life Insurance companies working for the benefit of the people. Moving on, when someone talks to us about Life Insurance, we tend to automatically think “extra gastos”, or “not worth our time”. So we are quick to turn it down before we even listen to its potential, but really, the products of life insurance companies are worth looking into. You can go for insurance only. When you have a family most especially, knowing that they are somehow taken cared of should anything happen to you is comforting. THAT is your investment. You get your money’s worth when you pass on. But there’s also a more common form of insurance nowadays known as Variable Universal Life (VUL), wherein with the money you put, some will go to life insurance (a guaranteed amount that your beneficiary will get when you pass on), and some will go to investments which you can enjoy while you’re alive (which now vary depending on your chosen funds). You can definitely do the investment part on your own, too, but for me, I would rather let the experts handle my money because I know it takes a lot of research, time and a good amount of knowledge to thrive (or even just survive) in this kind of industry. To be honest, with the work I have to do, readings I have yet to finish, and a 16-month old to take care of, learning about this is not really my priority. So anyway, VUL is another product looking into. Then there is also Health Insurance. We do not often see it instantly, but health insurance is also a form of investment. Why? Think about it, when you get a sick, say a critical illness, and you have no Health Insurance, how will you shoulder the expenses? Most likely, you will have to tap into your savings and expenses just to survive. Having a health insurance saves you that trouble. And the best part is, with AXA’s Health Insurance (Critical Illness) at least, if you don’t ever get to use it for health issues, it becomes a life insurance when you pass on (which means your beneficiary will receive the guaranteed amount for your health that was never used). There are other products, but I feel that these 3 are the most underrated by many people. In case you’re wondering, the setup for these products are usually done on a monthly basis, so you don’t need to have a huge amount of money to start.
So there. To be honest, as cliché as it sounds, the best time to plan and act on your finances was really yesterday, and next best time is now. I know this and understand this with all my heart. I look back and really wonder what happened to my money. But when you know better, you do better. So, I do what is still doable now.
Thankfully, my eyes have been opened to the possibilities and potential of investing, so I am more confident in guiding Pablo. Saving will definitely be part of his life, but just as I’ve mentioned, saving is not enough. So I will make sure to teach him the value of investing as well, and of course, the value of spending some of his saved/invested money to help others who need it more.
Hope this blogpost was helpful for you. If you have questions about Financial Planning, please do leave a comment and we will try to cover it next time. Again, I am not an expert here. I seek guidance from my advisor, who, luckily, happens to be my husband. I am a mom striving to learn enough so I can provide a better future for my son.
If you’re interested in consulting with my husband, you may reach him (Charlie Fernandez) at +63928-5071016, or email him at: AXA.CharlieFernandez@gmail.com.
You may also follow him on THIS INSTAGRAM ACCOUNT for Financial Planning tips!