There are many good books about financial matters, but this is really good. I would like to share you this book that I read from Francisco J. Colayco entitled "Wealth Within Your Reach, Pera Mo Palaguin Mo!". I really appreciate the book, the way he write and his concepts about financial freedom. His idea is very easy to understand not only because of its taglish content but on the way he emphasizes his concept which he called Kalayaan sa Kakapusan (KsK). The book is really applicable to all. Thanks to the author. I will rather say he really have the K (Karapatan) to discuss and share his idea.
Here are some excerpts from the book on how to prepare for financial planning:
- Know where you are. There are certain stages of financial readiness: Start-up, Buildup, Asset Allocation, and Retirement Stage. You are in the Start-up Stage if your only source of income is your salary or sideline earnings. Buildup is when you have income from your savings and investments, which contribute at least 20 percent of your total income. You are in the Asset Allocation stage when 30 to 60 percent of your income is provided by your savings and investments. Retirement comes when the income from your savings and investments is your only source to support your living expenses.
- Match your financial goals to the financial stage where you are in. Chart your goals in realistic terms. As most people are still in the Start-up Stage, as Colayco has observed, the first objective is to find how you can graduate to the Buildup level.
- Do not spend your active income for wants. Active income comes directly from your own hard work, skill, talent and time. Passive income is generated by your earning assets and investments. "Active income must be used for necessary living expenses and funding your investments," Colayco said. "If you need a car, buy a simple one first. When you earn money from your passive income, that's the time you can think of buying a luxury car."
- Create your own balance sheet. This would give you an understanding of your net worth, and give you a clear picture of what your net worth should be at each financial stage. In due time, especially when you retire, your passive income should be enough to pay for your living expenses.
- Do not equate wealth to having lots and lots of money. Your goal is to become wealthy, yes, but wealthy in the sense that your present financial resources can support your lifestyle over a long period of time, even if you do not work to generate income.
- Don't be afraid to take risks. But if you're taking one, remember not to put all your eggs in one basket. The best option, especially when you're investing, is to spread the risks.