Question: I have seen a lot of blogs, discussion groups, articles and even videos on investing. I am truly convinced that we need to invest. However, I am having trouble getting my spouse to buy in on the need to invest for our family’s future. What is the best way to do so? – Frustrated spouse
Answer: Investing is actually a boring activity with no immediate benefit to enjoy. Just try watching those investing channels and see how fast you either press the channel change button on your remote or fall asleep. If you insist on watching, you better put on a lifesaver as you may also drown in the myriad of alien terminologies that they use.
The world wants to play and have a good time. Just look at how much money celebrities make. Actors and actresses, basketball players, musicians all the way up to Oprah earn more than enough money they will ever need in their lifetime. We pay them tons of money to keep us entertained. Even People’s Champ Manny Pacquiao talks about entertainment when he is in the ring. So why bother with investment when it is all hard work? Let’s all just be entertained. After all, you cannot have your cake and eat it too.
Yet you can have your cake and invest too. Here are some suggestions on how to make investing easier.
1. Learn as a team
In our EnRich personal finance training programs, we found out that having the husband and wife team attend is an excellent way of getting people to buy in on the need to invest. Not only do family members learn at the same time, they also get to support one another in expunging inappropriate beliefs about money management and espousing better ways to practice personal finance. Such beliefs are converted into action plans that we monitor for the next 30 days.
2. Gaze into the future (good and bad)
Who doesn’t want to see what’s in store for the future. With the help of some simple finance math magic, it would be easy to see how much easier your finances will be if you simply invest money. Now, while returns on investments are never guaranteed, neither is your future. So rather than just drift with the tide, wouldn’t it be better to harness the winds of the economy to steer you to your life vision? Given certain assumptions, a child’s four-year college education for example can cost almost a total of P3 million 16 years from now. This would require you to save P20,733 per month for the next 16 years. However, by just investing the monthly savings at a potential 5 percent net per year, the required monthly savings goes down to P11,552 (based on the companion software of “Pwede Na! The Complete Pinoy Guide to Personal Finance”). Now imagine how much more affordable this could be if you were to put your money in instruments with higher potential returns. Just remember though that the higher the potential return, the higher the risk of loss.
3. Have fun(d)
We all know that learning can be fun. This is why a lot of financial planners in the Philippines have painstakingly developed training programs that marry entertainment and even comic skits to learning. Visit www.rfp.ph if you want to see the list of registered financial planners.
Invest in funds. Managing money is no easy task. You will need to expose your wealth to the elements (i.e. economic, corporate, political, social factors here and overseas). You will go to sleep every night asking yourself if you did the right thing with your money and wake up the following day hoping that no major upheaval happened while you were resting. You may be able to minimize this stress by poring over books, reports, magazines and newspapers while keeping abreast with the latest financial news through cable TV. But these just add complexity to the already intricate world of investing.
There is no need to complicate your life by investing directly. Invest indirectly by paying people to do the dirty work for you. Pooled funds have professionals who do nothing but manage your money. What they charge you will be worth it compared to the stress you will bring upon yourself if you were to invest directly. Just stick to what you do best, which is to work as an employee or as a businessperson.
4. Start small but think big
You need not invest big amount when you begin investing. Start small as a newbie weightlifter would but keep on adding to your investments. Don’t waiver when investment markets fall. They only do so to allow you to buy more. The world’s greatest stock trader, Jesse Livermore once said, “The market does not beat them. They beat themselves, because though they have brains they cannot sit tight.”
If you want to know more about investing, attend one of our EnRich training programs to see how you could best manage your finances with what you already have. There is one scheduled on July 16, 2011.
Happy investing.
(Efren Ll. Cruz is a registered financial planner of RFP Philippines, investment adviser and bestselling author. For questions, text to 0917-5050709 or e-mail to efren@personalfinance.ph.)