Early Birds Catch Cash-Rich Worms

Early Birds Catch
Cash-Rich Worms

How to Make a Financial Plan

The most exciting thing for young people who have just graduated from college is earning their own money. After applying and going through interviews and tests, the prospect of receiving their first pay is something they all look forward to.

Whether you’re a fresh graduate or someone who has been working for a few years, there is something you should aim for: building your personal wealth. Don’t live from paycheck to paycheck for the rest of your life. With wise money management, you’ll be able to live well and prepare for your future adequately.

Tips to get you started
Below are some surefire tips to help you get on the right track:

  • Identify your financial goals. Maybe you’d like to buy a car in two years, or move to your own place in a year’s time. You may also want to think long-term and decide to buy a house at age 35 and retire at age 50. Whatever your goals are, write them down. Having goals will motivate you to have a plan to build your wealth wisely.
  • Make a budget. You already know how much take home pay you’re receiving. Do you know how much of it you’re spending and saving? Maybe your mobile phone bills have hit the roof. List down all your expenses and set a ceiling amount per expense item and stick to it starting next month.
  • Make saving a regular habit. If you start saving now, there’s a great chance you’ll be able to meet your financial goals on time or even earlier. Money experts advise that you pay yourself first — that means when you get your net pay, take out a certain portion as savings before you spend the rest of it according to your budget. Build up a fund that will be for emergencies — it’s for those times when you suddenly lose your job or get sick.
  • Get insurance. Most companies offer health insurance as employee benefit. If yours does not, get health insurance on your own. It is very costly to be ill and it may cause disability. Look into getting accident insurance too, and life insurance. At your age, the premiums are cheap.
  • Be careful with credit card debt. Credit cards are exciting as they enable you to purchase things you’ve long wanted to, and you are given the leeway to pay at a later date, or even make deferred payments. But if you’re not careful, you may charge and charge beyond your ability to pay. If you can’t pay, know that your credit history will be tainted so use your credit cards wisely.
  • Start getting into simple investments. Look for a regular savings plan wherein you put in contributions monthly. These monthly contributions may then be invested in time deposits and funds or to buy insurance.

Some things to keep in mind

When you suddenly find yourself with a cash windfall, such as a sizable performance bonus or an inheritance, lock this away for many years in an investment that may earn you the highest yield possible.

"Invest early – and wisely."

The earlier you start investing, the more you can take advantage of compound interest (which is interest on the interest you have already earned), which will make your money grow faster. Let’s say you started investing P1,000 monthly into a fund that yields a rate of return of 8%.

That means you put in P12,000 a year. With compound interest, it will take only nine years for this amount to double. And if you keep that amount untouched for a long time, this sum will keep on earning and earning due to compound interest. So start early. As they say, the early bird catches the worm.

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