March 25, 2014 – Can I Realistically Be Financially Free?

An honest question via my Facebook Group (Faceless Trader) came across that I deem to be so important that I had to make a blog post about it.  You see, most Filipinos work very hard.  I know this.  I am very sad because while many people toil for so many years, I don’t see a nest egg at the end of the rainbow that will help them upon their retirement and at least be “financially” free.  If I can write a single blog post that will help most people to do the right things while they can, I figured I will spend my next two to three hours devoting a post about it.

So here goes: (Suze Orman or Dr. Love – Filipino style – and Money related style)

Can I realistically be financially free, Faceless Trader?  I can only save around $100 a month and I’m a call center agent.  Thanks.

I also have a property in Batangas and I have a buyer but I don’t know if I should sell it, because I have future plans for it. I want to be financially free.  Tell me how.  Is Php 3 million in the bank enough?

*****

There were many terms in the question so let me define my personal definition of “financially free”.

To me, this means you have to at least have a house in the next fifteen years (or by the time you hit 35), and a bank savings account of around one year’s worth of your current monthly expenses (which I will peg at Php30,000 a month or at least Php360,000 a year) as well as some passive investments that will help generate income for further growth of your wealth and your dreams.

Now that means if you are currently 23 years old (2 years working, most Filipinos finish college by the time they are 20-21 and have zero debt, Thanks to their family members – but some have to pay for their own tuition – so they may incur some loans – Filipinos don’t have high student loans versus the Americans.) , I will now compute the PMT (amount you have to save), the interest rate (you must realistically earn) and the number of years you need to do so , in order to reach your financial goal.

*****

Financial Goal: (Faceless Trader’s Definition of Financially Free)

House or Whatever You Want (in 12 years) – let’s peg this at P5,000,000 – (I’m conservative, any house today will cost you between Php5-7M if you’re gunning for a middle class apartment, so I doubt that in the next 12 years that it will still be Php 5M.)

Money in the bank – Petty cash of P360,000 (Running balance every year – this is for your emergencies or whatever)

Savings and Investments – Solve for X.  I have 12 years and 144 months to save and invest my money.

Assumed Return on Investments = Philequity average return is 20% per year, but let’s keep this at 10% in case a bear market comes around.

monthly paymentyear horizon

pmt function

Let me teach you that Mr. Excel has a pretty neat function called PMT to help you on your financial life.  The first is the interest rate assumed.  I assumed you have chosen an excellent mutual fund like Philequity fund (www.philequity.net) and can realistically earn a CAGR of 20% per year or 1.6% interest per month.  That means that your monthly payment (or peso cost averaging deposit every end of the month) of P9,056.76 will result after 144 months of sacrifice or 12 years, into a nest egg of Php5,000,000 lump sum.  Now if a bear market happened, you’d have to place P18,138.43 every month so that even if the CAGR of the Philequity fund for the next 12 years is a paltry 10% every year, you can still reach your “house” goal. 🙂

Now, any call center agent I believe, can somehow save Php10,000 a month ( IF you really put your heart and soul into it.) So, realistically, yes you can do it.  In fact, you can do this for yourself starting today even if tomorrow the market suddenly slid 2% (in the index).

philequity

If you want to start this now, you can just call me up via 689-8005 (after market hours 3:30pm onwards) or call anyone of us via our hotline 689-8000, check our website (www.philequity.net) – and we can help you start by automating this Php10,000 per month deposit to your future financial freedom goal.   If you want us to help your company’s employees and explain Philequity fund, just give us a call.  We’ll do our best to make a visit.  Yes, you can actually be “financially” free as long as you have 12 years and Php10,000

*****

Now the P360,000 regular petty cash and the Savings and Investments will be your passive seeder.  While you have a longterm fund working hard for you, you have to make your salary high enough so that you can have enough cash and enough savings to earn more money to put into your savings and investments.

You mentioned that you’re a call center agent.  I heard they’re paid P30,000 upon first entry.  I would assume that you cannot save anymore with current cost of living expenses so I encourage you to save P10,000 and live on the P20,000.  Now for your petty cash and savings – I will ask you to do a Saturday and Sunday free lance job.  You may consider helping a friend with a skill you know.  Can you play music?  How about teaching someone play guitar?  Can you play piano?  Teach someone online, offline.  I don’t know, selling your services is one way of making money without having to have capital.  Your capital is your skill.  If you are good in cooking, you may make an online business that sells your goods.  That doesn’t cost a lot of capital.  As for your savings and investments, well – I’ll be honest, Php30,000 forever is not gonna lead you to your financial freedom.  Realistically, I would want your savings and investments to be at least Php5,000,000 as well, other than your house.  You know that another P10,000 deposited in the Philequity fund will give you that extra P5,000,000 by year 13.  By age 35, you have a house, you have 5,000,000 in the bank and you also only “shelled” out P20,000 for the past 12 years earnings 20% return every year.

Sounds crazy?

I know. It’s so cray cray.

That’s the power of investments when compounded.

By the way, even if a bear market happened mid way on those 12 years, just do the same thing, because a bear market lasts normally only a year or 3 years and the gargantuan gains you make after that is more than enough for you to live comfortably.  As for your property – you might as well keep it – one day, maybe Batangas real estate values will rise – and you can also use the money you have to build your business there and create jobs there. 🙂  Hope I answered your question.

If you have any problems with my computations, please feel free to write in the comments section. 🙂

– Faceless Trader

(If this blog sounded too much of a plug with Philequity fund, I’m sorry for that but you can of course check all the rest of the mutual funds in the Philippines that can offer or beat the 20% average CAGR, if you know it, let me know.) 

 

You can now fund your Philequity via BDO transfer.  This makes it less hassle for you.

fund via bdo transferaccount number

All the step by step is carefully  done with uttermost kindness by Ms. Ella Ganzan (perhaps another happy Philequity client as well as a proud member of the Truly Rich Club.)

read it all via her blog – http://www.imgpinoyinvestors.info/2013/07/funding-philequity-mf-via-bdo-fund.html

P.S. Philequity Fund had a March 8 2014 briefing and this guy Mr. Value Investing Philippines summarized it all in a blog!  Woah! Thanks man!

read it all via this blog: http://valueinvestingphilippines.wordpress.com/2014/03/09/philequity-time-to-buy-stocks-worst-is-over-wild-cards/

*****

Okay the point is, you can be financially free.  Another point is, there are people such as Truly Rich Club members (mostly $COL Financial Easy Investment Program traders and investors) who will help you out.  There are hopefully members of Faceless trader Facebook group too and other friends of yours who will help you achieve your financial freedom.  There is this The Global Filipino Investors (TGFI) conducting seminars all over the Philippines and abroad just to help you out.  There’s Traders Apprentice Pilipinas, there’s Tsupitero.  You can find all groups that you choose to watch, sneak a peak and learn about. I also suggest watching the shows Pesos and Sense as well as ANC on the money by Edric Mendoza and Salve Duplito. Follow many people via Facebook

Just search – Faceless Trader Open Group 🙂

We’re mostly online. 🙂

 

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5 Responses to March 25, 2014 – Can I Realistically Be Financially Free?

  1. disturbed says:

    Good read, but I just wanted to point out that most call center agents upon 1st entry ranges from 15k to 18k in Manila, in province probably less than that. I know because I have friends in that industry

    Like

  2. pong100 says:

    LIKE LIKE LIKE. This is good stuff, Nikki. 🙂

    Like

  3. nat says:

    hello! this article is very informative. for the 20% per annum interest ng philequity how much is the management fee? is 20% consistent?
    thanks so much!! 😊 i was just surprised coz most investment books (although based sa US market says to expect 8%)

    Like

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