Money Matters: Tips by personal Finance Expert Francisco Colayco

Money Matters
Tips by personal Finance Expert Francisco Colayco

 We work hard to provide for our loved ones and keep their future secure. However, we sometimes fall victim to our own pecuniary crimes, such as impulsive buying, living beyond our means, investing in pyramid schemes—the list goes on. We lose our focus, and our heard-earned money along with it.


There’s also the recession, and the attendant inflation, layoffs, company shutdowns, and corporate bankruptcy.


In these times of economic difficulties, a good trick is to start and save early and invest wisely. Having another source of income thus makes for a sound financial management.

 The 20/20 Rule

We often ask, “How can I save with just this amount of salary?” In an interview with Francisco Colayco, author of several financial guide books especially designed for Filipinos, he responds to the question with basic answers: “At any income level, one can plan, execute, and achieve comfort if one has common sense and the right mindset.”


Even if one earns a hefty sum every month, if one overspends, nothing will be left to save. On the other hand, a person with a smaller salary and spends judiciously could have more savings.


To ensure that your basket is never empty, follow the 80/20 rule: live within 80% of your salary and pay yourself with the remaining 20%.


Put another way, it’s like having two horses—one that you ride, which is your income from work; and another that runs with what you pay yourself with (passive income from investments). It’s now easy to build wealth because you have two horses building your wealth for you, he says.


Just let your earnings from passive income roll, until one day you will just be surprised that your money can buy you a new house or a new car. “It’s so easy to build wealth! It’s so easy to get rich!” Colayco added.


So why are people not doing it? Because some are not aware of how they should look at money or generate wealth, while others who are aware don’t know where to put their money.


Furthermore, some people are hesitant to bring out money because they’re afraid of risk and failure. For my fiend who has her own business, “ there are no failures, only learning experiences. But never leap without a safety net. At the same time, always be ready to seize opportunities.”

 Trip to Financial Freedom

“Investing is like going on a trip, you have to know where you are and where you want to go,” shares Colayco. Then figure out how much speed and time you need to get there regardless of your income level. Set a destination (the kind of investment to take) and determine your pace (the kind of lifestyle that will fulfill your needs as you build your wealth).


In planning your trip (business, stock market, trust fund, time deposit, T-bills, etc.) you have to consider three things: distance, speed, and time. Their equivalents in investments are: returns (the promised earnings at a given reasonable period), risk (the capability or the person or company to perform), and liquidity (if you want to pull out your investment, can you sell it?). the three must always go together if you are to avoid most, if not all, of the unforeseen mishaps along the way.


No matter how near of far the trip is, get rid of unnecessary luggage. Pay off debts and increase your net worth (Asset – Debt = Net Worth). Your net worth tells you where you are right now and how close you are to your destination.


Unfortunately, many people continuously look for new investments even though they’re still deep in debt. “If you have debts, you’re not in a position to invest,” Colayco warns.


Leverage is different from debt way before the business starts.


When you pay off your debt which charges, for example, 3% interest per month, you are free from that monthly debt interest and can now save or invest the money, he says.


In deed, you don’t need to be a CPA, a summa cum laude in Finance, or an MBA graduate to secure your and your family’s future. You just need to plan your “trip” by doing a little tightening here and loosening there and by using part of leisure time to look for extra income.