3 excuses 20-somethings say to delay preparing for their financial futureBy Randell Tiongson on May 6th, 2014
Proudly featuring the blog of my friend Lianne Laroya, a fellow personal-finance advocate!
3 excuses 20-somethings say to delay preparing for their financial future
by LIANNE MARTHA LAROYA
You can either spend the first few years of your working life giving your hard-earned money to the restaurant owners and the boutique proprietors who will take it and not return it to you.
Or, you can start preparing for your financial future by giving your hard-earned money to the investment and insurance companies and the fund managers who will take it and return it to you with a significant interest added, after a few years.
How do you start?
Let’s focus on improving your outlook on preparing for your financial freedom – let’s address these common excuses first:
1. “Chill…I’m still young!”
Think about it:
When you’re still in your 20s, you have fewer responsibilities and fewer expenses. You just got your first job so your salary isn’t that big yet – but you’re just starting out in life so your financial obligations aren’t that extreme compared to someone who’s already pamilyado.
Which would you choose: to save and invest while you still have extra money as you’re still young today, or to save and invest while you’re already struggling to make ends meet tomorrow?
The key here is to start now while you’re still young. You can’t possibly start in the future when you’ll have more responsibilities and more expenses, now, can you?
Only 2% of the surveyed 100 Filipino retirees are financially independent.
Many of the retired Filipinos depend on their relatives, or still go to work after retirement just so they’ll have money for their daily expenses.
Those who don’t depend and who don’t work simply make do with their SSS/GSIS pensions which average around P8,000 monthly. (Honestly, this amount isn’t enough for you to live comfortably at all. Retirement is about enjoyment – why should you deprive yourself of life’s pleasures? You deserve to enjoy after working for so long, after all.)
Figure out at what age you want to stop working for money.
Talk to a financial advisor and ask help to compute for your retirement fund’s target number. The number will be big, but if you prepare now and start putting in small amounts monthly, it can be reached – in time.
2. “But I’m still starting out in life. What if the capital’s too big?”
Think about it:
Most of my 20-something friends tell this to me: “P5,000 is the initial investment? So expensive naman to save up for that, Lianne.”
After they tell this to me, they go to Rockwell, to Greenbelt, or to SM Aura, and spend roughly P2,000 every weekend because they’d watch a movie (3D!), eat at a restaurant (Yakimix!), get coffee (Starbucks!) or buy clothes (Forever 21!)
How do I know these? I’m guilty of doing these, too!
“Of course,” they’d say, “I worked hard during the weekdays. So I deserve to enjoy the weekends!”
True. Your young and tired self deserves some relaxation.
But don’t you think your old and tired self in the future deserves some relaxation, too?
You can only achieve this if you start to invest now. You won’t magically win the lotto or receive a million-peso inheritance.
What happens to you in the future is a result of what you’re doing today in the present!
Most mutual fund companies offer an initial investment amount of only P5,000.
If you want to add more to it, the minimum additional investment amount is only P1,000.
My friend, banks ask for P10,000 initial deposit for your passbook account. That P10,000 will only earn a potential interest rate of 0.50% annually.
(I say potential, because bank’s interest rates are subject to change.)
On the other hand, that P5,000 that mutual fund companies require will be invested to gain higher potential interest rates than bank deposits!
Save up P5,000 so that you can open a mutual fund account right away.
If you want to get a life insurance product with an investment component, try a variable unit-linked product – if you’re in your 20s, P1,500 monthly can already get you started.
3. “My salary’s not enough. I’ll just wait when I earn more.”
Think about it:
Waiting for the time to invest when you have more money is like exercising when you’re already healthy and fit – it’s a load of baloney!
Don’t wait for the right conditions to get started. If you do it this way, you’ll always modify the condition until it’s already too late.
You’re 20-30 years old: “I’ll wait when I earn more money.”
You’re 30-35 years old: “I’ll wait when my kid finishes elementary.” Or “I’ll wait when I finish paying for this car/condo/house and lot.”
You’re 50-60 years old: “I’ll wait when my kid finishes high school/college.” Or “I’ll wait when my retired parents stop asking me for money.”
After a while, time will run out and you’ll already be in your late 60s! Yikes.
Your money in the bank is losing its purchasing power over time.
Hey, if you can open a bank account, you can definitely open a mutual fund account or a variable unit-linked financial product for your financial freedom in the future.
Identify at least three financial goals that you have in your life right now. How much do you think would you need to reach them? In how many years do you want to achieve those goals?
How much money can you realistically set aside for that? Ask a financial advisor to help you open an investment account.
The sooner you get started, the more money your money can earn for you.
Lianne Martha Laroya is a financial advisor. She’s also the founder of The Wise Living, a website dedicated to educate you on money management and early investing without boring you to tears. Get your FREE copy of her basic personal finance book for 20-somethings. Connect with her on Twitter,@MsLianneLaroya“