6:56 PM
Frugal Mom
What ever we do, what ever we say, there is always a reason behind it. I created this blog for the purpose of documenting my journey out of the rat race. I want to retire at the age of 45 and to be financially free. But first things first, how can I achieve those things. Theoretically, it is achievable. Just make the correct computations and assumptions, everything will be possible. But in practice, money doesnt grows on trees. Money earned hard are money well spent. I have given the following points in which serves as my guide in achieving my target.
1. How much money do you want in your pocket when you retire?
- Basically Php 1 today will not be the same 10 or 20 years after because of inflation. According to Wikepedia, "Inflation is a rise in the general level of prices of goods and services in an economy over a period of time. For me, I want to have 5M in my bank account before I retire. That is a lot of money, right? Wrong! Im 32 now and it will just take me 13years more to hit my target of retiring at the age of 45. To achieve that amount, I need to generate income not just from my salary but also coming from other source of income that I invested on the side. And that 5M now, will not be as much as 5M after 13 years.
2. Determine your net worth.
- To understand this fully or what you call Lay Man's Term, I will show a simple formula to determine your net worth.
Assets less Liabilities = Net Worth
So now, let us define what are the terms mentioned above. Assets are everything you own. There are many classifications of Assets, these are Real Assets (Land, House,etc) which are cannot be transferred physically. There are also Paper Assets, these are assets in form of Stocks, Bonds (Receivable from a company), and Money deposited in bank. So you will ask if the appliances and gadgets you own are considered as assets. The answer is yes. Based on the meaning above, Assets are everything you own. Whether it is just a simple stove in the kitchen or a simple rug in the living room. But there is a big "But" as time goes by, those assets will depreciate and lose its value. So include the cost of the depreciation deduct it to the cost of the said asset, then you will get the book value of the said asset.
Liabilities are everything you owe. Means, all your credit, whether from Credit Card, Mortgage, or from other people. List it down according to how much interest is being added up in the principal amount. I know most of us have a very long list particularly for this one. But have no fear, I know you will never stumble upon this blog if you really dont want to make a start to be financially free.
Net Worth is the excess of Assets over Liabilities. There are times that you wonder upon making the computations above, Liabilities exceeds over Assets. It just means that you are not living within your means. You already consume what you suppose to earn in the future which should not be the case. Because there are no such thing as future inheritance.
3. Determine your sources of Income
- For me, currently I am just spending to cover my expenses from my salary. Meaning, I am living paycheck to paycheck. I am just starting and I have some savings that I invested and the interest I got from it is being kept so that in the future I can reinvest it again. If you have talents use it. Do you know how to sew or some crafts? Do you have eyes for photography or the confidence to talk in the crowd. These can be used as sidelines. God gave us talents to nourish not to keep it to ourselves. Who knows after developing those talents, it might be another source of income for us.
4. Study, apply and ride your vehicles to wealth
- Dont be afraid to invest in knowledge particularly money matters and be thankful for those mentors around you. Read, attend seminars, surf the net. Your options are infinite. Seek also mentors who are willing to share their knowledge and experience for being financially free. For me, I really admire Bro. Bo Sanchez and I really follow every cent that he say. He is indeed a mentor to look upon to.
5. Tithe
- Lately, I just realize that if you will not be able to give 10% of your income to God's glory. how come you will expect that He will give abundance to you. The more you give, the more you will receive. As much as possible, I set aside 10% of my gross income and used it for tithing.
6. Save
- Whatever your purpose is, set aside 20% of your income regularly. If you dont have bad debts like Credit Cards and other loans, lucky for you. You can save all the 20% solely for your future. But if you have debts like I mentioned above, set aside a portion of that 20% to your "Freedom Fund". I will set myself as an example. Out of the 20% I set aside from my income, I divide it into 4 categories. (1) Long Term eg. Retirement (2) Short Term eg. Travel Abroad, Additional Investment (3) Emergency - self explanatory (4) Freedom Fund - very important!
7. Set timetable and dont PROCRASTINATE
- Most of us is just contented on what happening to our lives right now. But if we will make some pushing, all things are achievable and we will just realize it that it is worth it. I myself, I want to retire at the age of 45. By then I will have Php 5M in my bank account. Do the math and I will definitely be able to achieve those dreams.
7. Pray and Believe
- Make it a point to dedicate what ever you are doing for the Glory of God. Because nothing in Him is impossible. So always believe that those dreams will come true. I am sure it will.
These are just some points that I practically apply to myself. I hope it will help you the way it is helping me right now. Good luck in your endeavor and journey. Our journey to financial freedom....
1. How much money do you want in your pocket when you retire?
- Basically Php 1 today will not be the same 10 or 20 years after because of inflation. According to Wikepedia, "Inflation is a rise in the general level of prices of goods and services in an economy over a period of time. For me, I want to have 5M in my bank account before I retire. That is a lot of money, right? Wrong! Im 32 now and it will just take me 13years more to hit my target of retiring at the age of 45. To achieve that amount, I need to generate income not just from my salary but also coming from other source of income that I invested on the side. And that 5M now, will not be as much as 5M after 13 years.
2. Determine your net worth.
- To understand this fully or what you call Lay Man's Term, I will show a simple formula to determine your net worth.
Assets less Liabilities = Net Worth
So now, let us define what are the terms mentioned above. Assets are everything you own. There are many classifications of Assets, these are Real Assets (Land, House,etc) which are cannot be transferred physically. There are also Paper Assets, these are assets in form of Stocks, Bonds (Receivable from a company), and Money deposited in bank. So you will ask if the appliances and gadgets you own are considered as assets. The answer is yes. Based on the meaning above, Assets are everything you own. Whether it is just a simple stove in the kitchen or a simple rug in the living room. But there is a big "But" as time goes by, those assets will depreciate and lose its value. So include the cost of the depreciation deduct it to the cost of the said asset, then you will get the book value of the said asset.
Liabilities are everything you owe. Means, all your credit, whether from Credit Card, Mortgage, or from other people. List it down according to how much interest is being added up in the principal amount. I know most of us have a very long list particularly for this one. But have no fear, I know you will never stumble upon this blog if you really dont want to make a start to be financially free.
Net Worth is the excess of Assets over Liabilities. There are times that you wonder upon making the computations above, Liabilities exceeds over Assets. It just means that you are not living within your means. You already consume what you suppose to earn in the future which should not be the case. Because there are no such thing as future inheritance.
3. Determine your sources of Income
- For me, currently I am just spending to cover my expenses from my salary. Meaning, I am living paycheck to paycheck. I am just starting and I have some savings that I invested and the interest I got from it is being kept so that in the future I can reinvest it again. If you have talents use it. Do you know how to sew or some crafts? Do you have eyes for photography or the confidence to talk in the crowd. These can be used as sidelines. God gave us talents to nourish not to keep it to ourselves. Who knows after developing those talents, it might be another source of income for us.
4. Study, apply and ride your vehicles to wealth
- Dont be afraid to invest in knowledge particularly money matters and be thankful for those mentors around you. Read, attend seminars, surf the net. Your options are infinite. Seek also mentors who are willing to share their knowledge and experience for being financially free. For me, I really admire Bro. Bo Sanchez and I really follow every cent that he say. He is indeed a mentor to look upon to.
5. Tithe
- Lately, I just realize that if you will not be able to give 10% of your income to God's glory. how come you will expect that He will give abundance to you. The more you give, the more you will receive. As much as possible, I set aside 10% of my gross income and used it for tithing.
6. Save
- Whatever your purpose is, set aside 20% of your income regularly. If you dont have bad debts like Credit Cards and other loans, lucky for you. You can save all the 20% solely for your future. But if you have debts like I mentioned above, set aside a portion of that 20% to your "Freedom Fund". I will set myself as an example. Out of the 20% I set aside from my income, I divide it into 4 categories. (1) Long Term eg. Retirement (2) Short Term eg. Travel Abroad, Additional Investment (3) Emergency - self explanatory (4) Freedom Fund - very important!
7. Set timetable and dont PROCRASTINATE
- Most of us is just contented on what happening to our lives right now. But if we will make some pushing, all things are achievable and we will just realize it that it is worth it. I myself, I want to retire at the age of 45. By then I will have Php 5M in my bank account. Do the math and I will definitely be able to achieve those dreams.
7. Pray and Believe
- Make it a point to dedicate what ever you are doing for the Glory of God. Because nothing in Him is impossible. So always believe that those dreams will come true. I am sure it will.
These are just some points that I practically apply to myself. I hope it will help you the way it is helping me right now. Good luck in your endeavor and journey. Our journey to financial freedom....
Posted in: Freedom Ideas
