By Dave Anthony Tan Monter
‘Your parents are not your emergency fund. Your children are not your retirement fund. Build your own wealth.”
With regards to building wealth, a man’s financial life goes through three different stages, which most of us don’t bother to realize.
Stage One: Man at Work
Stage Two: Man and Money at Work
Stage Three: Money at Work
The first stage applies to those who have recently joined and are already part the working class. Typically, individuals in this stage rely heavily and solely on what they earn from their job for the daily needs, as well as the obligations they need to fulfill. The individuals in this stage tend to simply save their money in the bank.
The second stage applies to those who have worked for some time already and have decided to invest or grow their money through the different financial vehicles available in the market, from the stock market, mutual funds and the like. The individuals in this stage tend to have a surplus between their income and their expenses. Also, they have built up a sufficient emergency fund or savings left in their bank account/s for any unforeseen circumstances (or so I believe).
The third and final stage applies to the retirees. These individuals have decided to retire from their full-time job or business. The money they use for their daily expenses comes from the savings and investments they have accumulated and grew throughout their working years. The metaphor here is that they already have a full-grown mother goose (which is their savings and investments) that regularly lays eggs (interest income). The eggs will be used to sustain the daily expenses of these individuals. If the mother goose has, indeed, grown throughout the years, there is no need for these individuals to go back to work for the reason that the mother goose is not big enough to sustain their daily expenses.
These stages are set. A man needs to go through them chronologically and can’t skip stages. All of us would want to reach that third and final step. That’s the ultimate goal. However, most Filipinos don’t shift stages, especially overseas Filipino workers. They remain mostly in the first stage. Most of them want to retire, but they can’t, despite having already fulfilled their obligations to their families back home. They don’t have the necessary retirement fund that would sustain them.
I know of a man who has spent most of his life working abroad for his family and two kids. He has spent more than 20 years of his life abroad, spending at least a month back here in the Philippines for vacation. When the global financial crisis happened, he was offered an early-retirement package by the bank he was working for and returned here in the Philippines. But after a few months, he had to go back and work abroad, as he and his wife were not financially prepared for retirement. Now, that man is retired for almost two years already, due to age. However, he and his wife have to set up some businesses in the province to sustain them financially. This man is my father.
Any man can make changes in his life. They don’t have to get stuck in the first or second stage. They need to pick up their mat and move! Invest your time in learning how to move from one stage to the next. The information is readily available to everyone nowadays. Lack of knowledge is no longer an excuse. An individual is just lazy or too comfortable where he is right now (and we know where that leads to).
Taking responsibility of one’s finances is a critical step in moving through the stages. A plan needs to be created and implemented, which will ultimately instill discipline to the individual in making through the different stages. If you’ve just starting working or still in your prime, time is on your side. Don’t waste it. If you’re about to retire, don’t lose hope. Work hard and make every second, every centavo count.
If you’ve already moved on through the next stage or have reached the last stage, that’s great! Then please share it with your family and friends on how you did it. Let’s inspire and help change the financial health of our people, one Filipino at a time.
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Dave Anthony Tan Monter is a registered financial planner of Registered Financial Planner (RFP) Philippines. To learn more about budgeting, retirement, investment and others, attend the 53rd batch of RFP program this April 30 2016. To register, e-mail info@rfp.ph or text <name><e-mail> <RFP> at 0917-9689774.)