71014_MoneyHappiness_vl-verticalWho doesn’t want to have a million bucks? I do and with the rate I’m going right now, I’m not exactly sure when will I reach my first million. It got me thinking, where does all my money go? Would I ever have one million at least in my life?

A month or two ago, Inquirer’s Finance Blog “Money Smarts” featured an article about “What does it take to be a millionaire?” It listed down 7 tips to help this goal and let’s see what have I been doing to achieve this goal.

1. Treat money as something to save and invest. The minute you receive your paycheck or a windfall (example, an inheritance or a bonus), think of how much you can put away as savings. Then look for venues where you can invest your money. If you think this way, you won’t be tempted to splurge money.

Some people splurge their retirement pay on BMWs or Mercedes Benzes. But when they get really sick, they find themselves with not enough cash to pay the hospital. So save more, rather than spend more.

–> Save more rather than spend more. Hmm.. I save but I don’t save a lot. Is that a crime? On another article they mentioned how you segregate your savings.

  • Emergency fund (at least 6 months of living expenses) = roughly Php 450k
  • No touch savings (starting at 10% of your income)
  • Investment/Retirement Fund.

Of the three, my emergency fund at present is only 10% of what I’m supposed of my goal. No touch savings, I’m starting to do it this year again as last year no touch savings went to investment. I have life insurance with endowment, which one of them I’ve halfway paid and added another to it. By the time, I retire, I have the endowment to add on my fund.

2. Assume some risk when investing. When you play safe in investing, you’ll get safe (but low) returns as well. Millionaires have gone out on a limb putting up businesses which they hoped would earn — nothing is guaranteed. But it is in taking calculated risks that they are rewarded.

When investing, look at higher-yielding investments. Sure, they may be more risky than regular ones (such as savings and time deposits), but you may earn more in the long run. Just be wary of get-rich-quick investment schemes. Remember the adage: If it is too good to be true, it is.

–> As mentioned above I invested 75k Php with Sunlife Balance Fund early this year out of my savings last year. Small but it’s a start. I’m planning to put the 13th month pay that I will receive January next year into another fund. It’s better to diversify. My No-touch savings will go to TD. I’m not much of a risk taker.

3. Live simply. If you keep your cost of living low, you will have more cash to save and invest. Some millionaires have lived in the same homes they have had for the past 30-40 years. Or they live in the homes they inherited.

You can also take a cue from the way millionaires live: not all party every night, nor do they buy every new car model that’s released. Instead, you’ll find these millionaires working at their desks at 8 a.m. and having just two cars in the garage.

–> Hmm.. I have to start this. I mean I don’t go out every night and party but my weakness is travelling. I have a separate travel fund which is bigger than my emergency fund Angel

4. Have a goal. Don’t just dream; set financial goals for yourself. By being specific, you will be more motivated to reach your goal. For instance, make it your goal to have your own home by the time you are 35 or 40. It may be a studio condo unit or a three-bedroom home in a subdivision—it will depend on your income and how you save over the years. Having a goal will help you focus your efforts well.

–> Ok.. I’ll set a goal. To have my first million pesos by the time I’m 35 and my own home by 40.

5. Choose good debt over bad debt. Take out a loan only when the loan proceeds will be used to earn you more money. For instance, apply for a bank loan to expand a business that’s feasible. But to take out a loan to buy assets that depreciate quickly (examples: sports cars, yachts, etc.) may not be wise as these assets will not earn you enough to pay off the loan. If you really want to buy such assets, pay in cash so you don’t have to pay the cost of borrowing.

–> I don’t have debts!! Smile I hate having debts. If I use my credit card, I see to it to pay everything on time. I sometimes advance pay the items I just used.

6. Share your blessings. There seems to be a unique mathematical formula at work: The more you give, the more you are blessed back in return. Help those who are in financial need, and you may find yourself blessed all the more. If you’re an employer, share profits with your employees; they’ll be more motivated to work for you, leading the way to increased productivity.

–> I do, through church. I also plan to buy some school supplies to distribute to the local school in my dad’s hometown.

7. Train children to handle money well. It would be sad if money you earned will just be spent unwisely by the next generation. Teach children the basics of money management, and caution them against vices such as gambling, drugs, and the like. Being responsible about wealth will be rewarded in the long run.

–> No kids but I’m teaching my sis to save as well.

So.. let’s see.. I want to be a millionaire by 35. In order to do that I need to save at least 200k a year. Also, I need to beef up my emergency fund to 450k and I want to have my own home by 40. I’ll keep you posted on how I’m doing. Do give me some tips on how to reach that goal.

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