Money Magnets

First step is to figure out your current financial position.  This is done by determining your Net Worth.  Your net worth can be derived from subtracting all your liabilities from your assets.  In equation form, Net Worth = Assets - Liabilities.  Use a clean sheet of paper and prepare two lengthwise columns.  On the left column, list down all your Assets, while on the right column list down all your Liabilities.  After listing all data, get the total of each column.  Use these totals to compute for your Net Worth.

This part of the check up process calls for us to analyze and investigate our cash flow.  In this stage we must prepare an Income and Expense statement.  First part is to list down all sources of income.  This can be from your monthly salary, profits from your business, interest from your bank deposits, return / yield from your investments like Mutual Funds and UITFs, income from a second job, your monthly allowance, and all other instances where money goes into your pockets.  The next part is to list down all expenses.  Ideally, you should list down every transaction from a single candy purchase to a major appliance purchase.  Even small matters like junkfood purchases when done regularly can be of significance to your monthly budget.  Conscientiously taking down notes of your expenses will give you sufficient data to be able to analyze where the bulk of your money is being spent on.  This data will help you decide which expenses you can cut back on whenever you decide to save more. 

Set your financial goals in numbers.  A practical goal would be to increase your Net Worth to a certain amount for a given period of time.  Let's say your net worth as of today is 100,000 pesos.  For the next 6 months, you can aim to increase your net worth to 150,000 pesos.  Doing this will give you a purpose and a benchmark to achieve for the succeeding months.  

You can also set your numerical goals as percentages.  You can aim to increase your Net Worth by a certain percent.  In the example I gave above, I set my goal to increasing my Net Worth by 50% in 6 months.

The last part of the process calls for us to strategize.  We must develop and implement strategies to achieve the goals we've set on the previous step.  This is a crucial part of the process.  If we don't strategize and if we simply opt to continue what we've been normally doing, we shouldn't expect an increase in return compared to our previous evaluations.  If we want our Net Worth to increase significantly, we must develop strategies that will allow our savings to give us more yield.  This can mean taking in more risks for possibly higher returns.  Or simply, looking for ways to earn more money within our limitations.

As a final note, financial check ups should be done on a regular basis.  It would be good to at least do this twice a year (every 6 months).  It is also recommended to do financial check ups when something that alters our cash flow significantly happens in our life.   Like when somebody wins the lottery (*fingers-crossed*), , inherits a huge amount, gets a promotion, or God forbid losses a job.


The resource person from Wealth Bulb, Inc. who gave this presentation is Mr. Jun Gomez.  (My apologies if I got the name wrong as I wasn't able to get his name clearly before the show ended.)