20/20 vision for your 2020 mission

Question: It’s the New Year again. What is the best way to make money in the New Year and the new decade?

Asked at “Ask a Friend, Ask Efren” free service at www.personalfinance.ph, SMS and Facebook

Answer: In many organizations, strategic planning is done to define direction and make decisions on allocating limited resources to pursue such direction. But that is just one-half of the job. The other half is to implement and remain committed to the organization’s direction.

The same is true for New Year’s resolutions and other promises people make to themselves for the purpose of improving their lot, whether they may be financial, physical, emotional or spiritual. But plans remain “cheap” if they are not executed or, if executed are done in a nonsustainable way. That is why the plan itself needs to be sustainable.

Luke 14:28-30 says it best—“Which of you wishing to construct a tower does not first sit down and calculate the cost to see if there is enough for its completion? Otherwise, after laying the foundation and finding himself unable to finish the work the onlookers should laugh at him and say, ‘This one began to build but did not have the resources to finish.’”

It is easy to devise a plan. But if that plan is detached from reality, it will not be sustainable.

So, for a 20/20 vision for your 2020 mission, set your goals based on what you can work with right here and now. But first, have a grateful heart, for it is only with the mind-set of giving thanks will you be able to build on whatever is thrown your way, good or bad.

Next, you will need to formulate both long-term strategies and short-term tactics to work at your goals. Focus on the goals and not the tool with which to realize those goals; in other words, do not make earning money your goal.

So, let’s say your goal is to buy a house after ten years. You need to quantify the value of that house today and then forecast its value ten years into the future. You then need to assess what you can realistically save now toward buying that house. There is a good chance that you will not be able to raise all of the money to buy that house on cash. So, you may also want to consider getting a loan in the future assuming a certain loan interest rate and term that will keep your monthly amortization affordable (i.e. within 20 percent of your gross monthly household income).

Now if you compare the future cost of buying a house to your starting savings and to what you can periodically save, taking into consideration the servicing of a housing loan in the future, you can derive an investment return you need to earn. Remember that the higher the return, the higher the risk. So, you may want to temper the required return by increasing your starting savings, increasing your periodic savings, reducing the cost of your target house and/or delaying the time that you will buy the house. The resulting required investment return will now tell you in which kind of investment product you should put your savings.

I know I may have lost you at having a grateful heart. Don’t fret because there are financial advisers who can help you do the math. Just make sure the adviser provides advice first, independent of any investment, into which you will need to enter, that he or she may pitch later on.

Just one other thing, to help you keep your periodic savings sustainable, do not present it as a loss to yourself, otherwise your brain is just going to reject the act. The brain hates to lose. So, instead of say saving 20 percent of your income, tell your brain that you will live off 80 percent of your income (i.e. the former is perceived by the brain as an outright loss while the latter is seen as a foregone gain). Then have that 20 percent automatically swept into an investment account.

Here’s to your clarity of financial vision for your 2020 mission and beyond. INQ

Efren Ll. Cruz is a registered financial planner of RFP Philippines, seasoned investment adviser, bestselling author of personal finance books in the Philippines. Get a financial plan for as low as P100 at the PFA Financial

Planning Fair on Jan. 11, 2020. Inquire at

0917-5050709. To learn more about personal financial planning, attend the 81st RFP

Program this January. To inquire, email

[email protected] or text at 0917-9689774.)

Copyright 2019 Efren Ll. Cruz, RFP. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without the prior written consent of the author.