Building Wealth from Scratch

There is no easy way to gaining wealth. Well, unless you are an heir to any of the conglomerate families in the country. Or you come from a family of business owners. Or your family is in the business of politics. Or your grandparents won a multimillion prize in lotto, and they were financially savvy enough to invest wisely in various assets that have been earning for decades already, that their grandkids no longer need to work for a living for the rest of their lives—instead, they can choose to work on what they love to do.

But for the majority of us, it is an arduous process. Working a minimum of 50 hours per week, for 30 to 40 years. Retiring when you’re between 60 and 65, with quite a bit of health complications (God forbid) due to the grind you did decades ago. And then waiting for that SSS lump sum or pension. Hopefully cash in on some of your insurance money (if you managed to buy any). And you’d still get what, around 15 years to enjoy the fruits of your labor? Assuming you retired at 65, and you plan on travelling and doing other “retirement stuff”, I think you’ll still have around 15 good years to really enjoy them without too much hassle (until 80 years old?)—that is if you are fit and healthy.

Sigh, how it feels good to have instant wealth, or a recipient of “old money”.

But the reality is, majority of Filipinos are poor to having low income. (See table from CNN Philippines below.) Around a third, meanwhile, are now considered lower middle income—thanks to our young demographics. The country, in fact, is in a position where majority of the population has the potential to reach the upper levels of the middle-income group.

But that still depends on the opportunities available for Filipinos.

And that brings me back to the topic of this post. Building wealth from scratch. Or, for most Filipinos, crawling out of debt and then building wealth.

My 25-year-old cousin working for an IT company in Alabang earns around P15k per month. He is an IT hardware admin for the company—a startup for quite a few years now—yet my cousin’s salary is just around the same level as what I was earning 18 years ago (March 2003). It is sad, really, if you’ll think of the level of income one has to work with.

One time, I was having dinner with our friend and her boyfriend, who works for a call center company. He mentioned something about setting up offices and hiring people for said offices. He went on to say that even now, it will still be possible to get an employee on a P12k monthly salary. He said they are those college graduates with no work experience yet and are very enthusiastic about having their first job and getting an income, that they will accept a P12k offer in front of them.

Imagine, just how can these people build wealth?

It takes money to make money. But if you are living paycheck to paycheck, just how will you be able to build wealth if what you earn is barely enough for your expenses—if not lesser? What more if you have accumulated debt along the way? Building wealth will definitely be the last thing on your mind.

But how can you start? Even the wealthiest people started from something.

For starters, you need to keep your expenses in check. Keep them as low as possible, for as long as possible. To start building wealth, you need to have a dispensable income that you can use for your potential investments—either in stocks or any business. Dispensable in the sense that, if you lost it, it will not matter or will not make a significant impact in your finances.

Then, address your debts. It has become easy for Filipinos to accumulate debt. I always keep hearing about “Home Credit”, and how some of my cousins wanted me to become their guarantor to be able to loan something from Home Credit. To build wealth, address your existing debts, and avoid getting new debts. Just how? Well, the money you will save from keeping your expenses, for starters.

Next, find other sources of income. You can either take a part time job or monetize your skills. Or find something that you think people will pay you for doing. It also helps to have network of friends that you can tap to potentially offer your services—whatever skill or service that may be (well, this is a long shot, but if not them, they can maybe recommend you to other people). Cleaning houses, gardening, editing, writing, or others. There are also freelance sites that you can check. The thing is, you need to be able to think about what other stuff you can do to augment your income source.

You have to create a wide gap between how much you earn and how much you spend. That will be your savings, which you should invest wisely. That’s the last step in this simplified guide to building wealth. Yes, we do have the SSS or GSIS. But that’s not enough. Some companies and organizations offer provident funds that offer attractive returns. Take advantage of that. PAGIBIG has the MP2, and SSS has the PESO Fund (I’ll offer some insights on these in my next posts.).

You can also start looking into investing in the stock market. Here are some guides to get you started: The Basics, The Pitfalls, How to Start Investing in Stocks, and My Online Stock Broker. It is never too late to get into investing in the stock market. What’s important is that you get started.

Overall, the principles of building wealth are just simple: spend less than what you earn, and then invest the difference wisely. And then strengthen your knowledge on personal finance. You don’t need to attend paid seminars and conference. The internet is chock full of FREE information on personal finance, investing, saving, tackling debt, and lowering your expenses, to name a few.

You just have to have the initiative, and that burning desire to really get to being wealthy. It may be difficult, and the results may not as huge of an improvement as what you are initially expecting. But just keep at it. It is better then getting nothing from doing nothing.

Article by Stephen Las Marias


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