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Three Simple Steps To Financial Freedom

Updated

By Joe Ferreria with Jannette Ferreria

  1. EAT LESS, MOVE MORE

A healthy body is something we should pay closer attention to as we age. You’ll find that keeping the weight off will also help your wallet in the long run. The alternative to not being healthy is hefty hospital bills and living a life of physical pain.

Ask your friends about their last major hospitalization. There are more than enough horror stories to convince you to avoid getting confined for illness. Bills these days range from P500,000 to as much as P6 million. While having medical insurance does help, there are limitations as to the maximum amount you’ll receive, and you best be ready with enough cash in your bank account for the balance.

Now again, simple means achievable. When trying to Eat Less—there are many fad diets out there, but you want this to be a lifestyle change. For those of you who don’t have the time to calorie count, think about it as “eating better”—eat real food, avoid processed sugars, and most important, manage your weaknesses. Do you crave desserts, or have a tendency to snack midday? Replace those cakes and donuts with fruits or dark chocolate, and that bag of chips with some nuts. Make what’s healthy accessible and toss what’s unhealthy out of your kitchen.

It also helps to know how color plays a psychological role in dining. For those of you who dine out, notice how most restaurants have red and orange in their color schemes? That’s because these warm colors can stimulate your appetite. Blue, on the other hand, can help suppress it. Toss out those oranges and reds in the dining room, and eat off blue plates.

On your plate, get in the habit of portioning food. Imagine that your plate is divided into four quadrants and you decide what goes into each one. What works for me has been half the plate vegetables, one quadrant meat and as little rice as possible. After reading as much as I can, however, watching videos on nutrition and trying different diets and detoxes, I’ve realized it’s simply a matter of finding a healthy eating pattern you can sustain for the rest of your life.

With that, we come to the second part of this year’s resolution: Move more. Examine your current patterns of movement and physical activity and see where you can improve. Do you sit at a desk all day? Get up every now and then to stretch or get a glass of water. Go to your meetings early and park as far as possible from the exit. Take the stairs when possible. This way, you not only save money on gym membership but integrate movement into your daily routine.

A physically fit body is also great for the mind. Whether it’s a well-loved sport, immersing yourself in nature or even something as simple as playing with your children (in my case, grandchildren), I find that staying active really helps keep stress at bay. My once-a-week golf habit has stuck with me for some 30 years now, and being surrounded by the greens and working up a sweat makes me more effective during the week. The best exercise is the one that you’ll actually do!

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  1. LIVE SIMPLY

Most baby boomers have heard it over and over again from their parents “Stop trying to keep up with the Joneses.” What rings true in the ’50s is even more relevant today. Surveys have shown that only five percent of the total working population gets to the point of financial independence.

In my conversations with people who have financially “made it,” the most common theme is that sense of frugality and keeping their lifestyle expenses low. Truly wealthy people don’t spend just to keep up with the latest trends, rather, they look for “expenses” that are in fact investments—things like businesses or financial instruments that can even add to their income.

Personal bankruptcy is caused by your expenses moving in tandem with income. As your income increases over time, your expenses don’t have to increase to match this. My advice comes in only two words—live simply.

A good place to start is by bringing out your notebook and writing down all your expenses. Categorize it into three groups. One group is for non-decision expenses, which I like calling “Survival” expenses—basic food, shelter, clothing, tuition, etc. These should be limited to 50 percent of your income.

The next category can be tagged as “Work” or “Business” expenses such as transportation, fuel, parking, work-related dining, etc. These should be limited to only 10 percent or less, especially for those whose offices allow reimbursements for these types of costs.

The final category is “Lifestyle” expense, like social dining, vacations, or that unplanned three-day sale. These are decision expenses and, ironically, this category is the one that gets you into financial trouble. Filipinos are unique in that, Christmas expenses take out a big chunk of family budgets, what I call a “budget buster,” If you want to go into the New Year without your bank account feeling a lot lighter, you have to account for this and keep lifestyle expenses within 10 percent of your income.

If you spend more than 10 percent on work expenses and cannot decrease it further, try to decrease your survival or lifestyle expenses to compensate.  Just remember to ensure to live within your means, keeping expenses at 70 percent or less of your income.

Living simply allows you to accumulate money. Note that I said “accumulate,” and not “save” money. Savings has always been associated with something you want to buy. You save so that you can pay the tuition fees of your children, or go on a big vacation. This is not the type of saving money I am talking about, as saving to spend money leads you nowhere.

When I say accumulate, I refer to building a nest egg so that some time in the future, the income of this nest egg will be equal to or greater than your income generated from work. That is what financial independence is all about.

  1. CHANGE YOUR INCOME MINDSET

Most important for the New Year, you must shift your income mindset. In the previous resolution, we talked about financial independence and growing a nest egg.

While one way to do this is to cut down on expenses, the other is to increase your sources of income. I’m not talking about simply waiting for a salary increase or the next promotion to make you a millionaire. Rather, you have to begin opening your mind to more opportunities to generate income.

“Wala akong oras” or “Ay, hindi ako magaling diyan eh” are excuses we can leave behind in 2018. In this day and age, technology and our interconnected world have reduced the difficulty to get into business. Though we are used to being employees, we must now learn to think with a more entrepreneurial mindset. You don’t have to leave your job, but what you must do is to think of ways to supplement your income in your spare time.

Whether it’s a small business, online freelance work, or even something as simple as buy-and-sell, there are so many opportunities to generate more with what we already have. Have a knack for photography? Why not shoot small events on the weekends? Enjoy cooking or baking? Start an online shop. Have a laptop and a decent internet connection? Instead of playing games all weekend, get a job online as a freelance virtual assistant, graphic designer, or even writer.

The reason we fail to grab new opportunities is that our eyes are closed to them. If you want to be truly financially independent, you have to shift your income mindset and say, ‘Yes, I can do this!’ It’s all a matter of stepping out of our comfort zones. Instead of looking for ways to spend more, we can begin to look for ways to make more.

Once you open your eyes, the possibilities will be endless!

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