9 Genius Personal Finance Terms I Learned From Last Year
It was the year I took risks, I diversified, and I got serious in building my assets.
Although I lost my job, I gained a new one and it is closer to what I am passionate about.
It has been a remarkable year for all of my passion projects as well especially, blog. I finally received my first Google AdSense payout ever. I grew my Facebook Page and Facebook Group from 100 to 3000++ respectively, in just a couple of months.
And launched my own resource library where you can still join to get unlimited access to my freebies.
I will sometimes pinch myself in disbelief on how most of my goals came true last year.
But more importantly, I learned a lot of valuable lessons that made me excited for 2018.
So today on the blog I will share you to the 9 Genius Personal Finance Terms I Learned From Last Year and the impact each term made for my finances.
It was only late last year when I got serious with tithing.
All along giving 10% of my income was such a burden for me. I have plenty of reservations in this biblical mandate and thought I could get past by simply attending church service and living a good life.
But there’s more to TITHING than the monetary gifts.
God doesn’t really need the money we give. He wants our hearts. He wants to know how much we trust Him and His provisions to our life.
Tithing is an act of obedience. It’s putting God above our finances and above whatever selfish desire we have.
I’d like to quote again the post of Sir Marvin Germo, an international speaker and author of Stock Smarts Guide to Investing book series, about Tithes.
It’s you setting aside 10% of what you gained and not putting it in stocks, bonds, or using it for your daily expenses. It doesn’t make sense when you think about it.
However when you look deeper, it is you saying that God, I trust my 90% will stretch far better than 100% with me just trying to do it on my own. Tithing is never about money.But it’s more about how well and deep do we know that we have a Father who loves us so much that He will provide for our needs not because of how good we are but because of how good He is.
Tithing is us responding in love. Saying God, you have Blessed me with so much. Here’s 10%. Thank you for Blessing me with 100%. We don’t tithe to get Blessed. We tithe because we know because of Jesus we are already Blessed.
What I realized since the day I entrust my finances to God?
- I became better when it comes to budgeting my money.
- I am slowly letting go of my fear of losing my money.
- I became more aware of the important things around me that doesn’t cost any money like taking dinner at home with my parents to talk with them about my day or spending the weekends watching movie or having karaoke at home.
- I became more humble when it comes to my finances.
- I make less impromptu decision when it comes to money.
- I feel sufficient enough for day, for the week, for the month and more importantly for the month.
- I stopped worrying about money and ultimately put my trust to God’s provision instead.
- I started saying God, you have blessed me with so much. Here’s 10%. Thank you for Blessing me with 100%.
Truly one of the best personal finance terms I’ve learned from last year.
In April last year I started tracking my net worth by the numbers.
Using the formula Total Assets – Total Liabilities = Net Worth, I manage to come up with my current value.
This helped me make sound goals and decisions in life. It’s good to see where I am at financially versus where I’ve come from. How much my money have grown and where it went.
If there’s one activity I want you to do as soon as possible, it will be to calculate your net worth.
Why you should calculate your net worth?
According to this post by Investor Junkie there are six reasons why you should bother calculating for your current net worth.
Reason #1. Net worth is the most accurate measure of wealth.
Do you want to know how rich you are? Calculating your net worth is not just the easiest but also the most accurate way you could measure your wealth.
Reason #2. It’s a way to track your financial progress
Net-worth gives you an idea how you’ve been doing financially. Are there debts you need to focus more? Are your savings enough for retirement?
Reason #3. Moving the financial focus beyond your income
At the end of the day you’ll realize it’s really not about how much money you earn but what you do with what you earn that matters.
Reason #4. Avoids the over-emphasis on asset value alone
When it comes to net worth, you are measuring not just the total asset you have but also the liabilities. This give you an understanding how credit card debts, personal loans and other liabilities can have negative impact on your overall wealth.
Reason #5. Puts your debt level in proper perspective
Sometimes we forget how much debt we have. This hinders us to really work on our way of being debt-free. We need to have a clear number on how much we owe. This is the first step to getting free of debt for life.
Reason #6. Important in applying for a loan
If you’re getting a loan whether for a new house or a new car, your net worth will be most often than not get asked. Knowing your net worth not only helps with the application but it also serve as a guide on up to how much loan can you really afford.
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What I learned from religiously tracking my net worth every month?
- I’m able to celebrate my progress unlike before.
- It’s way easier for me to set financial goals because I have a working basis.
- I’m not ashamed anymore of how much my net worth is.
3. Stock Market
My first six months went with so much lessons learned. There were regrets and satisfaction. It was a real roller coaster ride.
It’s a one of the personal finance terms that made my year filled with ups and downs (literally!)
But I still treat investing in the Philippine stock market in the early years of my career as an advantage. I can’t wait for my money to grow through compound interest.
What I learned so far now that I’m investing in the stock market for almost a year already?
- If a stock is down, treat it as an opportunity to buy. I had one of the biggest regret of my investor’s life when I didn’t buy Wilcon during its off months. It got as low as Php 8 before and I didn’t add. Now Wilcon is valued at Php 11 per share. What an increase, right?
- Try to find stocks for easy trade. Those you can buy low and sell high for profit. Golden Haven Philippines was such an amazing stock to buy last January. It started with Php 70 per share and now it’s Php 320 per share already!!! Golden Haven is in the business of memorial lots and under the Villar Group. I have no idea how this stock is performing is such volatility but if I can bring back time I would have bought at least 100 shares and sell them all now. Nasa huli talaga ang pagsisisi.
- Always be firm with your decision. Do not let emotion take control of your judgement. That’s why investing in the stock market is not really for the faint-hearted.
And later, led me to invest as well.
To recap, crowdfunding is a practice of funding a project or venture by raising small amounts of money from the large number of people.
In the Philippines we have Cropital, PhilCrowd and FarmOn as top crowdfunding platforms. All three are focused in helping farmers especially Cropital and FarmOn.
Currently, I have Php 17,000 capital invested in FarmOn. I bought a plot of rice in Isabela and about six plots of squash growers. My plan is to reinvest the money as soon as I the return comes in.
But if a new cycle opens and I can get a chance to invest in poultry products like pig and chicken, I am more than okay to invest another Php 5000.
What is it about crowdfunding that I became a fan of?
- The opportunity to support real local farmers.
- I’ve always wanted to own a farm but I don’t have the resources to do so. I find investing in crowdfunding such as FarmOn is a cheap and practical alternative.
Related Post: How to Invest in FarmOn: A Step by Step Guide for Pinoys
There are two ways to make money in the Philippine stock market:
First, Capital appreciation.
Capital Appreciation is an increase in the value of your investments due to increase in the potential value and demand of shares in the company you invested.
Let’s say in 2013 you bought 100 shares of Jollibee (JFC) at 107pesos/share. The total value of your investment is Php10700.
At present 2017 Jollibee stocks is at whooping Php189/share. Meaning you make Php18900 out the 100 shares you own.
That is Php8200 earned within 4 years of passive investing. Without you actively participating or working for it.
Dividends is one of the genius personal finance terms I learned from last year. Dividends are payout issued by some profitable companies to its shareholders/investors that reflects the company’s respective earning.
This can be by additional cash to the shareholder’s account and/or additional stock shares.
Given the example above let’s say Jollibee also gave a 1peso/share dividends to its shareholders every three months from 2013 to 2017.
This means above from the Php8200 you earned from the capital appreciation of the money you invested, you also gained a dividend of Php1600.
And because I’ve been investing directly in the Philippine stock market, I am now able to take advantage of dividends.
Now, not every stock you invest with will pay you dividends. Some companies will choose to reinvest in the company whatever earnings they have into further growth.
There are two reasons why companies choose to issue dividends. According to Investopedia,
- Many investors like the steady income associated with dividends, so they will be more likely to buy that company’s stock.
- Investors also see a dividend payment as a sign of a company’s strength and a sign that management has positive expectations for future earnings, which again makes the stock more attractive. A greater demand for a company’s stock will increase its price.
In May last year, Entrepreneur.com.ph published an article on the 5 High-Dividend Paying Stocks. The list includes Leisure and Resorts World (LRP), San Miguel Corporation (SMC2B), First Gen Corporation (FGENF), Phoenix Petroleum Philippines (PNX3A) and Megawide Construction (MWP).
Do you have any of the stocks in your portfolio?
6. Financial Independence and Early Retirement (FIRE)
Financial Independence and Retire Early or simply known as FIRE, is one of the personal finance terms that’s been going around the money blogsphere for awhile.
There are two concepts involved in getting FIREd. First is Financial Independence and second is Retire Early or Early Retirement.
Financial Independence is having enough wealth to live without working.
Retire Early means retiring outside or earlier than the normal retirement age of 60. It’s all about retiring young in your 20s, 30s or 40s.
FIRE is the combination of the two which is having the best of both worlds in personal finance. It means you have enough passive income (money coming in even when you are asleep) to survive even if you quit your job today.
Once you achieve FIRE, you are actually at the peak already of financial success. You don’t longer worry about your finances and start living the life you want to live.
Upon learning how important FIRE is I got obsessed with the idea. It literally became my new life goal. I started implementing steps that could help me reach financial independence. And I identified my own retirement age.
What are the steps I’m doing to get FIREd for real?
- I track my net-worth. Doing this on a monthly basis gave me a good idea on how much money I have and gave me a way to monitor my financial progress. Download the FREE Net-worth Tracker Now!
- I increase my saving percentage. Currently, I am saving and investing 30% of my income. This is a big increase from 10% I used to do. I am also implementing the 1% rule wherein I save an additional 1% of my income every month.
- I continue being invested. There’s just no stopping for me in this area. I know I have to make money work for me if FIRE is my ultimate goal. I need to invest more so that in time I reach my retirement age, all the money I have is earning enough passive income for me through compound interest and dividends.
- I find more ways to earn extra income while working full-time. Hustling is something I’ve learned to do since I was young and continue to do even now. Aside from blogging I also own a YouTube channel, do freelance writing and hosting. I even started to sell Human Heart Nature products, my all-time fave natural face, bath and body brand. You can check my online shop HERE.
7. Retirement Accounts or Retirement Funds
Learning about FIRE led me to another genius financial term called retirement accounts.
Retirement accounts are basically money dedicated to finance your retirement years. And you’re not just saving this money but investing it on a dedicated vehicle.
Although you have the option to save for retirement using a regular savings account, investing in a retirement account or fund speeds up everything.
Because your money is being invested, you are taking advantage of the power of compound interest.
Thus, to retire with Php 4 million pesos with a monthly income of Php 25,000 becomes more possible with investing. This, my friend, is already proven and tested.
Last month, I created a comprehensive guide on three of the best investment for retirement in the Philippines.
Exchange Traded Fund or ETF works like a typical mutual fund wherein you invest in a bucket of stocks but, it can be bought and sold like a common stock in the Philippine stock market.
Index Fund is a type of investment wherein your money is passively managed and run by a program to match the performance of a given index. Unlike ETF, Index Fund can’t be traded in the stock market.
Personal Equity Retirement Account or PERA is a personal and voluntary retirement savings plan where you can contribute as long as you have a TIN Number.
This is the Philippine’s version of Individual Retirement Accounts (IRA) in the US.
If there is an important lesson I learned upon knowing retirement accounts it’s really to make the best investment for retirement you could ever make as early as today.
Whether you choose to invest in ETF, Index Fund, PERA or any other investment vehicle, the most important thing to do is get started.
Don’t let another month or year pass by without you working towards your future.
Part of my 2018 Goal is to invest in an index fund and treat it as my retirement account. The maximum money I can contribute to both my mutual fund and stock market is Php 100,000 each. After that I’ll build my retirement account like crazy.
8. Opportunity Fund
It has been a classic financial concept to build an emergency fund. You save 3 to 6 times worth of your monthly salary and reserve it for “emergencies”.
Your emergency fund gives you a buffer money for the next 3 to 6 months in case you lose your job today, met an accident or unexpected death in the family happens.
But sometimes life opens opportunities to us that can cost money. Opportunity like a seat sale to your dream destination, a presale house and lot within your budget, a new stock on its IPO stage or an even a new business idea.
Enter Opportunity Fund.
According to Get Rich Slowly, opportunity funds are money on hand to take advantage of unexpected opportunities. Joe of Retireby40, one of my favorite personal finance bloggers to read, says once in a while you’ll come across a good opportunity and you need money to take advantage of it.
That’s Opportunity Fund in a nutshell.
For years I’ve struggled in saying yes to travel because I’m afraid of losing money. Then, I decided to make my extra income fund my working opportunity fund.
I used it to buy my ticket to Palawan on my birth month during the Red Hot Seat Sale. It will also provide enough money to cover my expenses during my first out of the country this year and the trip to Samar I’m doing with my family in in March.
Enrolling in a short course or attending a seminar are also real-life examples of where opportunity fund can be of use.
There’s no really minimum or maximum amount to have in your opportunity fund.
As your finances improve, you can increase your opportunity fund as well. Opening more opportunities for you in return.
During the early days of my journey to financial freedom I’ve learned the value of emergency fund. Then last year, I learned it’s smart to set aside money for opportunities too.
Here’s a confession:
I’ve been spending thirty minutes of my day shopping for life insurance.
From Sun Life, Philam Life, Manulife, etc. even institutional banks such as BDO. I will visit each website and read as many online reviews as I can to compare.
Personal finance bloggers in the Philippines agree that life insurance is so important. You want your loved ones to grieve and cope up with the loss peacefully, without worrying about money.
And I agree with the statement too.
Now that I’m accumulating wealth, it’s just fitting to protect my assets and provide money for my family in case something bad happens to me.
I know it will be painful for my family if I die. But the financial pain of not having any money left, and even passing debt to them scares me the most. I want them to cope up with the loss peacefully.
The money they will get from my life insurance is enough to start a business, take a vacation and unwind as well as provide financial support to my younger sister.
Many also agree that life insurance is a good investment in your 20s, the premiums are lower, you are most likely healthier too and you have all your productive years ready to hustle on the side and pay for the policy.
Even if your health degrades later on, it’s nice to have that assurance of life insurance with you.
Life Insurance, as defined from Investopedia is a protection against financial loss that would result from the premature death of an insured a.k.a. Policy holder. The main goal of life insurance is to provide a measure of financial security for your family after you die.
I actually won an insurance policy from Sun Life during the SINAG Sun Life’s Financial Literacy Journalism Awards good for one year. Part of my goal this year is to get an actual policy that’s good for life.
With the new Tax Reform for Acceleration and Inclusion (TRAIN) Law this could be a good move to do for everyone.
Final Notes from SavingsPinay
I hope these nine genius personal finance terms I learned from last year make an impact in your financial life too.
What is your favorite among the personal finance terms I mentioned in this post?
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Izza of SavingsPinay helps Filipinos bridge the financial literacy gap one content at a time by providing insights and tips on budgeting, saving, investing, side hustle and growing your net worth. Aside from this blog she also writes at www.izzaglinofull.com, a beauty and lifestyle blog for frugal Pinays and manages, www.izzagevents.com, a wedding and event business since 2011. For inquiries, topic suggestions or future collaborations email her at firstname.lastname@example.org