Plan for the Future

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I know of someone who has worked for almost 10 years as an auditor overseas. He has travelled to Europe and America. He bought the latest gadgets. He had expensive suits and shoes. Last year he was made redundant by the auditing firm he was working for in the United States.

He is now back in the Philippines, broke.Friend, I don’t want that to happen to you.

Pay yourself first

There is nothing wrong with travelling and buying things for yourself. You are allowed to indulge once in a while. But make sure you set aside money for yourself and your family in the future.

I love the book The Richest Man in Babylon by George S. Clason. It says, among other things, that you have to pay yourself first no less than one-tenth of what you earn.

Yes, pay yourself first before you pay for your everyday expenses. The only exception to this is when you tithe, which we should be actually doing as well.

10% is a reasonable start. But if you have credit card debts, I suggest you start with a smaller percentage and pay off your credit cards in the meantime.

What to do with the money

The money that you “pay yourself” can be invested. You can probably start by putting it in a time deposit account. If you have gathered enough then you could buy an investment property that you could rent out.

You can also put it in the stock market. Just make sure that you only invest in the big and stable companies. Ensure that you have an investment strategy as well.

I have a friend who set up a small lending business, but only lending to those he trusts and has the capacity to pay.

I would also recommend that you set up an Emergency Fund, which is equal to at least 3 months of your salary. This is for, well, emergency – if you get redundant on your job, for instance, this will give you and your family something to live on while you find another job.

Start early

The book The Richest Man in Babylon (by George S. Clason) also makes this very good analogy:

“Wealth, like a tree, grows from a tiny seed. The first copper you save is the seed from which your tree of wealth shall grow. The sooner you plant that seed the sooner shall the tree grow. And the more faithfully you nourish and water that tree with consistent savings, the sooner may you bask in contentment beneath its shade.”

Your money will definitely grow more if you give it more time and it can benefit from compounding (interest earning interest) as well.

Let’s take the example of two friends, Mario and Luigi.

Mario started setting aside $5,000 a year every year since he was 30 years old earning 10% per year. Now 65 years of age, Mario has $1,355,122 in the bank and he is happy.

His friend Luigi now also 65, lived more simply during his 20s. He also saved $5,000 a year every year at 10% but he started five years earlier than Mario, when he was 25. Luigi now has a total of $2,212,963 from his savings.

Mario saved and invested for 35 years while Luigi did 4o years. The five years between their investment start times was worth $857,841. This is more than half of Mario’s total savings. Wow!

Conclusion

As accountants, we can account for and analyse the money of companies and that of other people but sometimes we struggle to manage our own finances. But it is never too late to apply our knowledge in our personal lives. Seek a mentor if you think you need more guidance.

We also have to commit to pay ourselves every time and it is really best to start as early as you can.

Let us have the discipline to do our saving regularly and to not take away from the pot unnecessarily. And yes, an ipad is not a necessity.

Let us seek to understand how to invest our money well.

Let us plant the seeds in the spring of our lives so we could reap at harvest time.

My prayer is that may the next million that we count be our own.

Now be the best that you can be,

Xiela Marie Dacyon