How can you invest, if you do not have enough money to invest? Ipon muna!
Aside from acquiring knowledge, knowing how to save and budget wisely is one of the keys to smart investing. Failure to do this simple step properly might prevent you from investing regularly.
We have mentioned in our previous blogs that investing is a journey. (Read our top blogs here) If your chosen investment is the vehicle to get to your destination, saving and budgeting is the fuel that will keep it going.
The Saving Habit of Filipinos:
RECEIVE salary – SPEND salary = SAVE the leftover
“I will start investing once I have extra money.” Sounds familiar? This is a common scenario once the salary is received. But after spending, more often than not, there won’t be any leftover and investing is put off until next month.
This was also Pong’s excuse as to why he started investing really late. (Read Pong’s story again here: the Social Cost of Investing). As we always teach everyone, the earlier you start investing, the more time your money can grow. But what makes it very difficult to start is because of the misguided saving habit we Filipinos got used to.
Unless you make saving a priority, it would be really difficult to start investing.
The Ideal Saving Habit:
RECEIVE salary – SAVE & INVEST = SPEND the leftover
No matter how small, learn how to save a portion of your salary for the purpose of investing. You may have heard about the 10-20-70 principle before. To help you accomplish the ideal saving habit, we recommend that you do the same thing.
Upon receiving your salary, divide it accordingly: 10%, 20%, and 70%.
Take the 10% which you can save for your emergency fund, or for paying off debt. Or if you are religiously inclined, you can give it to where you receive your spiritual nourishment. This is what they call tithing.
Next, set aside the 20% for your savings and/or investments. Separate it immediately and deposit to a different bank account or into your investment.
No matter how small, keep on saving until you have enough to start investing. Did you know that you can start investing in the stock market for as little as P5000? (Click here to read our 5 easy steps)
Ideally, only 70% should go to expenses. The key to do this successfully is to prioritize your important expenses first like bills, utilities, grocery, and food items.
This might be very difficult to practice at first, since you got used to spending all your salary. It may mean adjusting your current lifestyle to accommodate your new investing habit. Do you really need to buy that Starbucks coffee or DVD?
If the 70% will not be enough to cover everything you need, you can be flexible in doing this just as long as you set aside even a small portion for your investment.
Remember, saving and investing for your future requires discipline. It is not easy, but this small act can make all the difference.