I’ve been receiving a lot of messages asking me to write how to invest in the stock market (in my case Philippine Stock Exchange), how to start, and what are the procedures.
But without proper mindset and guidance, investing will be a gamble for someone who doesn’t have the proper mindset on why we do it. Thus, before I write something about it, I will tell you first, how to save money.
Saving money is important for someone who wants to become an investor. I remember a former colleague who was so eager to invest. He admitted that he doesn’t have savings as he spends it on buying new gadgets. He knows how to save money, and then he spends it. When he became an investor, he put all his money in the stock market, and then after having a profit on it, he will spend it again to purchase a more expensive gadget.
“Ilang taon na akong nag-tatrabaho pero wala pa rin akong ipon.” (I’ve been working for years, and yet I don’t have savings) I remember as he rants.
I know some of us have been complaining about it. That after years of working so hard, we wonder why we don’t have savings at all. Saving money is difficult until we learned why we do it.
Why saving money is important and why should I?
Saving money is important just in case you will need the money. “Well, Dhenn I don’t think I need money. I have a credit card for that.”
Having a credit card is good as it gives you the power to purchase when you don’t have the money. When I received my first credit card, it was January 2014, and since I cannot afford a DSLR Camera, I purchased a Canon 1100D using my credit card. I asked then the saleslady if I can ask for a discount. She said that if I will pay it in cash, I will only pay 16,000 pesos (original SRP was 19,999.00)
That’s a whopping 20% discount that I could never get in the bank.
I learned a lesson that year; do not use your credit card to purchase something expensive. If you can’t pay it in cash, it means you cannot afford it.
Saving is not just important in case you need the money. You can save because you need an emergency fund for emergency situations. You save for retirement, a down payment for a house or car, for your future wedding, or education. There are also a lot of benefits of saving your money in which I will mention below:
Benefits of Saving Money
When I saved money with proper mindset and guidance, it brought a lot of benefits in my life. I no longer save just to spend, but rather I save money to invest it later.
For me the benefits are the following:
1. Increase in income, for a money not spent is money earned.
2. Stress-free life.
According to a survey made in Australia, 80% of the working population experiencing stress over money.
Why? Even though our employers pushed us to have a work-life balance, if we have a lot of financial responsibilities, we will work and get the promotion instead.
Knowing that you have saved money, creates a healthy lifestyle as you need not worry about it.
3. Spend without guilt.
Have you tried buying an item with your credit card? You swipe and sign, there’s no emotion and a lot of thinking involved. After that, you wonder why your bills are that high.
Unlike paying in cash, you will think twice whether you need it. And every time you make large purchases, it’s painful, but worth it because you work hard for it.
Now you know why you should save and the benefits of it, I know you will ask how much should you save.
How much should I save?
My answer is; it depends. There are a lot of formulas out there that you can Google it out. Formulas may not work for everyone else as we have different lifestyles and different backgrounds.
As for the formula that works for me is this:
Expenses = Income — Savings
In this simplified formula, you will minus your savings from the income and the rest will be for your expenses.
Then how can I determine how much will I save? This percentage works for me as well:
10% = Tithes
20% = Savings
70% = Expenses
Now the last question is, where should I save?
There’s a lot of medium you can use to save money and these are:
1. Piggy bank. But this is not wise these days because your money could be at risk.
2. Banks. Thru savings account or time deposits. the safest, but has the low-interest rate.
3. UITFs or Mutual Funds with low risk. Don’t put your savings to a high-risk medium.
4. Cooperatives. Safe and most profitable of them all but also with risk. Research about the cooperative first. Some part of my savings is in AFPSLAI and some on my company’s cooperative.
The returns are not that much high, but I earned 4,000 to 5,000 per year, and that is not bad rather than putting it in the bank.
Now at least you know how to save. Share this if it helps you. See you in the next series.