The Importance Of Having Multiple Streams Of Income

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I was listening to an audio seminar sent by Bro. Bo Sanchez to Diamond EntrepCircle Members of the Truly Rich Club while I was on my way to Makati. The topic that I was listening to was to "Create Money Machines."

What Bro. Bo was saying in this audio talk is that it's more important to have multiple money machines or streams of income, instead of having more money. He said that more often than not, people pray to God for more money instead of praying for multiple streams of income.

While having more money is not bad and is a short term solution to financial problems, it is better though to have multiple streams of income instead for your long term financial goals. Having more money but with only one or even two source of income is not a formula to fixing a financial problem or achieving financial freedom. With the uncertainty of job security and the continuing financial influx some countries are experiencing, its never been more important to have multiple streams of income to counter whatever financial problems may arise due to downsizing or the continuous recession of some countries.

If you only have your job or your business as your only source of income, you leave yourself vulnerable to the negative impact of financial problems that the world constantly experiences. But if you have multiple sources of income, you'll be able to weather any financial storms that come your way.

But how do you create multiple streams of income?

In the audio seminar that I was listening, Bro. Bo mentioned two types of money machines, the Manual Money Machine and the Automatic Money Machine.

The Manual Money Machine is a form of money making machine that requires you to be present in order for it to work. These machines are having a job or being self-employed. Having a job or being self-employed requires you to be present in order for your machine to make money. You're trading your own time and talent to make money and without your presence, money won't be coming.

The Automatic Money Machine is a form of money making machine that can be set-up in a way that it makes you money automatically even if you're not present there. This is another term for money working for you and passive income. There are three types of automatic money making machines: paper assets, real estate and business.

Paper assets are stocks, corporate and government bonds and mutual funds. You make money through the high interest rate that it earns when you invest your money in these assets. For example, your money can earn as high as 30% interest annually when you invest it in the stock market (see my article on stock investing vs stock trading to learn more about the stock market). The downside with paper assets is that interest rates are not guaranteed because it depends on a lot of factors.

In real estate you make money when you sell property at a higher value than the value that you've bought it in (similar to the buy low and sell high policy of the stock market) or if you rent you're property out. I prefer the latter method because it puts money in my pocket in a monthly basis whether I work or not and I still get to keep the asset. The downside of real estate is that you need big money to purchase a property, unless you're financially literate and you already know ways to buy property with little to no cost at all to you.

The last type of automatic money making machine is businesses. Having a business is different to being self-employed. A self-employed person needs to work in order to make money, while a businessman can still make money with his business even if he doesn't work for a year or more. For me this is the most financially rewarding asset of the three, but it is also the most difficult asset to set-up. It requires hard work at first and a lot of financial education to ensure that you'll put up a business that will succeed. But once you get over that and you set-up your business successfully, you'll have an asset that can make you a lot of money, even if you're not working in it.

Most people have Manual Money Making machines, working for a company or working on your own, to create money. The problem with this money making machine is that you trade your own time and talent to make money. This leaves you little to no room at all to multiply it to create more money making machines for you. So you work to also create Automatic Money Making machines. The beauty of these money making machines is that, since it's automatic, you don't need to dedicate your attention to them once you've set them up successfully, allowing you to create more of them and in the process create more money for you.

Remember that it's not enough that you aim to just have more money, more money won't make your financial problems go away or help you achieve your financial goals. Instead aim to have multiple streams of income and have money continuously flow to you from different directions.

5 Reasons Why Healthcare Is Important

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Disease has been one of the main causes of death here in the Philippines. According to the DOH website disease of the heart, disease of the vascular system, malignant neoplasms, pneumonia and accidents are the top five causes of mortality in the Philippines from 2004 - 2009.

The high mortality rate due to disease is not caused by inefficient doctors or hospitals, its because most people don't have the financial means to pay for their medical expenses. They tend to self medicate and rely on buying generic medicines because its the only thing they can afford. Other's go to doctors or hospitals only to have problems getting the needed attention and treatment because of lack of money.

The lack of money should never be a problem for people to receive treatment for their health issues and this is one of the reasons why its important to have healthcare.

Healthcare provides people with the means to get medical treatment without the use of money. Yes they pay a certain amount for the premium of the healthcare, but its relatively cheaper compared to paying for your own medical expenses using cash.

Here are five reasons why you need to have healthcare:

1. Cheaper - as stated above, getting healthcare is relatively cheaper than paying for your own medical needs. For most its free because their companies pay for their healthcare. For those who have to shoulder their own, its usually P13,000-P14,000 a year for a coverage of P70,000. That's less than P1,500 a month for your health coverage, it may be big for some, but its still affordable with a little money management and lessening of unnecessary spending and you'll be able to afford it. For those who really can't afford healthcare, there are health cards available that really cheap (I remember paying only P1,500 for this one for one year) that gives you benefits of unlimited check-up only for a year to selected health centers (the good thing about this one is at least you'd get proper treatment and recommendation regarding your illness, instead of treating yourself blindly.
2. Convenience - Having healthcare makes it easier for people to get treated in hospitals and clinics. Before getting treated the first that nurses usually ask is if they have a health card. Once the patient says yes, they immediately admit the patient and have them wait in line to get treated. They'll just confirm with the healthcare provider some of your details and let you fill up a form for their records. Once done you'll get your treatment. If a patient says no, its usually a different scenario, more questions are asked and you're required to fill-up forms first before getting admitted or placed in line to get treated. Some even ask for upfront money first to make sure that you'll be able to pay.
3. Accessibility - Healthcare are accepted in almost all hospitals and clinics nationwide, especially the major ones. So you won't have to worry about your health card being rejected by a hospital and you paying for your own health expense. Other's even offer reimbursement in case you get treated at a clinic or hospital that doesn't accept your health card.
4. Peace of Mind - Having healthcare offers you the peace of mind that regardless of what health issue arises, you know that you're capable to deal with them because of your healthcare.
5. Retirement Security - This is for having long-term healthcare. All short-term have age limit when it comes to health coverage (the highest I heard was 75) and after that you're on your own. Having long-term healthcare though covers that. In the period where our health becomes our biggest concern, having healthcare becomes more important because we'll be the security that we'll be covered in our old age, allowing us to enjoy the money we saved up for our retirement.

Healthcare provides people solutions for their health needs, especially for those who don't have the money to shoulder all of their health needs. It is important that everyone has some form of healthcare for their use. Having healthcare is also one of the foundations of your financial foundation, it is a basic need to building a solid financial foundation.

As the saying goes "Health is Wealth" so have your own healthcare and have the peace of mind that your health is already covered.

6 Steps To Spending Your Money Wisely

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How do you spend your money?

Do you spend it on impulse or you think things through first?

Do you use cash or credit card?

Anyway, regardless of how you decide to spend it, I believe though it's important that you spend your hard earned money wisely. Why? It's because you worked hard for it. You poured in your time and energy to earn it, so it's only fitting you spend it wisely.

I'd like to share something that I read more than a year ago. It's an article that mentions 6 steps to becoming a wise spender. It's a great article that, I believe, doesn't have an expiration, so the steps written there can still be applied even today.

Here are the 6 steps:

1. Buy for quality, not cost - Cheaper doesn't necessarily mean better. The author states that in buying something always go for quality than lower price, this will save you money in the long term as a quality product lasts longer than a cheaper one.
2. Keep detailed track of your expenses - Know where you spend your money. The author states that keeping track of your expenses is key to understanding on how you can spend wisely and minimize expenses.
3. Find alternatives - Look for cheaper but also better options. The author said that once you have a list of your expenses, take a look at it and see where you can cut your cost by finding alternatives for a particular activity or item that you spent on. Like instead of going out on a date, try having a romantic dinner at home instead.
4. Become less dependent on credit - Cash is still king. Using credit card requires discipline that most people doesn't have. The author said that unless you are 100% on top of your finances, its best that you use cash instead of credit cards.
5. Do your research - Don't instantly buy something that you like that you saw at a store. The author states that do a research first, canvass the item you want at a different store, you might get it a cheaper price from a different store.
6. Wait it out - Don't give in to impulse. The author says that we're all usually guilty of purchasing something because of impulse. So instead of giving in, wait it out for a few days, the urge to buy might be gone, or you might get the item on sale.

These tips are really useful to follow if you want to be a wise spender. But like in any advice that comes our way, the decision is still up to you. Unless you decide that you want to be a wise spender, no amount of tip or advice will be able to help you.

To read the full story click here.

How To Become Debt Free

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It's important that we become debt free first before we even start investing and building for our retirement (if you have the money to do both go right ahead). This is because interest rates in debt are usually higher than the interest rates earned from investments. So any money you earned from your investments will just be eaten up by the interest of your debt and you'd be money in the process (not all debts are bad though, there is what we call good debt as well; click here to know more).

For example lets say you put P10,000 in an investment vehicle that is earning you 10% annually. So you're money would be earning P1,000 pesos in its first year. Now let's say you have a personal loan of P10,000 payable in 12 months with an effective rate/annum of 17.07% (This is the rate for an Asenso Kabayan Program - Secured in BDO), so you're debt will grow by P1,707. Now your investment earns P1,000 but your debt grows by P1,707 so you're still down by P707 Instead of making money, you're losing money because of your debt. So its important that we become debt free first before we start investing (especially those who don't have money to do both) so our money can truly grow without worrying about interest rates on debt eating it up.

But how do we become debt free? Is there an easy way to eliminate our debt without using up your entire income to pay it off?

There is actually a way to do it. Its a method that I learned from reading Robert Kiyosaki's Rich Dad's Guide To Becoming Rich Without Cutting Up Your Credit Cards.

His method involves you finding additional money from your budget (this can be easily done by cutting some of your expenses and spending wisely, check this article for more ideas). Then cut off your other credit cards (not all, but some to refrain you from using it and add to your debt already).

Using the methods that I learned, I added some modifications in that its important to pay off you're smallest debt first regardless of interest rate.

More often people tend to pay off a little extra to each debt in hopes of paying it off sooner. The problem though is that it usually doesn't happen that way, the debt just doesn't seem to lessen. Robert Kiyosaki suggested to add the extra money you can find in your budget to pay off one debt and pay the minimum in the others. My suggestion though is to pay off the debt with the smallest amount first while paying minimum in the others.

In short you should eliminate first the debt that is easier to eliminate so you'll actually lessen the debt that you have. Once you've paid off the easiest debt to pay, add the amount that you pay to that debt to pay off the next debt that is easiest to pay off.

For example:

Debt A is worth P1,500

Debt B is worth P5,000 

Debt C is worth P10,000 

The minimum amount for each debt is 10% of the debt amount (P150 for debt A, P500 for debt B and P1,000 for debt C). 

Your budget for paying off your debt is P2,000 so this is how you divide it:

P500 for Debt A

P500 for Debt B

P1,000 for Debt C

Let's say you have an additional P300 out of your budget due to some financial management, so add that to pay off Debt A.

So with P800 a month budget, you'll be paying off debt A in just 2 months. After that use that P800 and add it to pay off debt B, increasing your budget for debt B to P1,300. You'll be paying off debt B quickly that way (even if the debt increased in amount because of only paying the minimum, the added amount to pay for your debt will more than cover the increase due to the interest rate). Follow this method as well to pay off debt C and you'll see yourself eliminate your debt.

This method might not eliminate your debt quickly, but it will surely eliminate it at a rate faster than if you just keep on paying all of your debt just above the minimum in hopes of eliminating them faster.

Becoming debt free is important if we want to fully see and feel the earnings that our investments are making. You can also use the added money to fund your other ventures. So rid yourself of bad debt and take full advantage of the interest rates that our investments are earning.

5 Reasons Why It's Important To Prepare For Your Financial Future Earl

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In the health industry, they say that prevention is better than the cure. That also rings true in the financial industry.

Preparing for your financial future now is better than waiting for a financial problem to appear before you do anything. This is because its harder to look for possible solutions to existing and current financial problems than to prepare for them in advance.

To help you fully understand why preparing for your financial future early is important, I've prepared 5 reasons why you need to do it:

1. It's cheaper to prepare for your financial future early - You might think that getting insurance, long term healthcare and investments now are expensive. But if you look at the long term implications of these financial tools, you'll actually be saving more money (especially for healthcare and investments). Once you start approaching retirement age, these financial tools become even more expensive to acquire. And it will be more expensive for you and your family in the future if you don't get them. Because as we get older, we tend to experience more medical problems, so having long term healthcare will address that need. Once we retire, we stop earning money already. Yes you might receive a big retirement package from your company, but will that be enough to cover for everything you need until you die? That's where investments come in. If you were able to start early, you might have accumulated a big enough amount already that can cover for everything you need, until you die.
2. It's easier to prepare for your financial future early - It's easier to get financial tools early in your life, when you don't need them yet. Healthcare and insurance companies don't just give plans to anybody. They conduct a background check first to see if the person has undergone or is currently undergoing any major health problems. They also check the family medical background to see the likelihood of them experiencing major health problems. This is because it's going to be costly for them to give plans to people who will be using them in less than a year of paying for their plans because of a major health problems. Imagine these companies just giving plans to everyone regardless if they are more likely to get sick or not, they'd go bankrupt in less than five years. That's why it will be harder, not to mention costlier for older people to get these services. Because of the higher risk they provide.
3. It's more convenient to start early - Healthcare, insurance and investments are financial tools that you'll need to acquire before you actually need them. Yes, it is possible that you may not need them in the future. But what if you did? You can't just suddenly go to any healthcare company or insurance company and demand that they give you a plan because you've been diagnosed with a terminal illness. Or go to any investment house and demand for a big amount of retirement money because you're savings won't be enough to cover you. So it will be more convenient for you to get them when you don't need them yet, just in case you will in the future. This will be your protection from any unwanted and unctrolled circumstance happening to you.
4. Time is precious - All of grows old, no one stays young forever (unless you're immortal or something). So preparing for your financial future while you're still in your 20's or early 30's gives you ample advantage to grow your investments or get plans at lower prices, as opposed to starting in your 40's or 50's. Take a look at investments. If you start investing P10,000 in a mutual fund that grows at an average rate of 12% a year while you're still at 24 years of age, you'll have grown your money to P640,000 by the time you reach the age of 60. Save the same amount of money at the same mutual fund with the same 12% average annual growth at the age of 40, it will only reach P100,000 by the time you reach 60 years old. So which do you want to have, P640,000 or P100,000? So start early.
5. No one will do it for you - If you don't prepare for your financial future, no one will do it for you. You can't expect your company, your friends or anybody else to do it for you. Because it's not their life, it's yours, and you are the one responsible for it. So be responsible enough and take care of your own financial future.

It's important that you prepare for your financial future as early as possible. You never know when you might need it.