Saturday, November 21, 2009

Introducing Robert Kiyosaki!

Guys, here I am once again posting after a very long time. I just want to share with you a great guy that can really help you out with your financial education... Robert Kiyosaki!!

Here is a brief background of Robert Kiyosaki...

Robert Kiyosaki, author of "Rich Dad Poor Dad," is an investor, entrepreneur, and educator whose perspectives on money and investing fly in the face of conventional wisdom.

In arguing that "old" advice -- get a good job, work hard, save money, get out of debt, and invest for the long term -- is obsolete and flawed, Kiyosaki has earned a reputation for straight talk, irreverence, and courage.

"Rich Dad Poor Dad" is the longest-running best-seller on the New York Times, Wall Street Journal, USA Today, and BusinessWeek best-seller lists. It held a top spot on the New York Times list for nearly five years and was USA Today's No. 1 money book for 2004. Prior to writing "Rich Dad Poor Dad," Kiyosaki created the educational board game Cashflow 101 to teach individuals the financial and investment strategies that his rich dad spent years teaching him.

Born and raised in Hawaii, Kiyosaki is a fourth-generation Japanese-American. After graduating from college in New York, he joined the Marine Corps and served in Vietnam as an officer and helicopter gunship pilot. Following the war he went to work in sales for the Xerox Corporation and, in 1977, started a company that brought the first nylon and Velcro "surfer wallets" to market. He founded an international education company in 1985 that taught business and investing to tens of thousands of students throughout the world. He sold his business in 1994 and, through his investments, was able to retire at the age of 47.

Now how would he be able to help you out in your financial life? Well, I suggest you look at his videos.. Here is part 1 and just look at the related videos section for the succeeding parts!

Thank you and I hope this helps you out in your financial life!

Saturday, September 26, 2009

The Path of Financial Success: Step # 8

Using the power of one
Saving together provides better benefits

Learn and share with like-minded individuals who want to succeed as much as you do. Let me give an example.

Ms. Mathilda is a 33-year-old domestic helper in the States. She was working there since 1994. During her first few years, she was not able to save a penny. She was still single then and felt that she owed it to herself to live it up somehow. After all, she handles all the stress that comes from her work and she figured she should enjoy while she still can.

She sends some money to her 80 year-old mother. But instead of saving what is left of her income, she spends it on clothes, and other unnecessary items. She spent all of her earnings because of this type of attitude. During 1997, she eventually got married and it dawned on her that she had to save in order to go home to her own country and have a good life with her husband while they raise a family.

Let's say she earns about HK$3270 monthly in Hongkong. If she saved HK$500 monthly, it would take her some time to save enough and operate a sizeable business that would provide her with additional income.

Instead of doing it all alone, she encouraged six of her friends that also work as domestic helpers to start saving with her so they could save more in a shorter span of time. They knew that by having more money saved, they could have more capital to start a business and a bigger chance of succeeding than any business that anyone of them could set up on their own. They intended to use their joint savings to venture into a business that one of them would directly manage.

Three years ago, each of them started saving HK$500 monthly. If we compute their total income now if they placed all their savings in time deposits and savings accounts, then we would see that they would have a sizable amount of cash and their savings would continue to grow to this day as they consistently save up.

Their story is a good example of how working together, and in this case, saving together, can provide better benefits than doing it alone.

"The Power of One can lead to changes for the benefit of the many. These changes come from the many but only if many of them can come together to form that which is invincible, the Power of One".

Monday, May 25, 2009

The Path of Financial Success: Step # 7

Invest and Diversify

Wow, It has been a while since my last post here. I am quite busy with life at the moment and I have another blog to manage. So, sorry for all of you who has been waiting for the 7th step to financial success here at Compound Savings Interest.

Diversifying means that you are spreading the risk in an investment. Because there is always some risk involved in every business and investment opportunity, it would be wise to spread your money so that you don't lose it all once the market begins to crumble. Prudence demands that, whenever possible, you should actually spread the risks. Remember there is no such thing as a perfect business and so many things can go wrong! So, make sure that the investments you make are properly matched with controlled risks.

Always remember this when you are evaluating business or investment opportunities. Investing is not simply looking for opportunities. Investing must always match a specific purpose! When you invest, you must know what you are doing. Your expectation of investment returns should be very clear as to the amount and time of income.

But investment is not only about the amount of income. You must also try to understand what an investment return, or yield is. A yield is the percentage return that an investment delivers based on the amount of principal you put in. It is usually calculated per year.

In every investment, you must evaluate it in terms of:
  • Return/Yield - How much do I get from this investment? Is it enough for me? Does it beat inflation?
  • Safety of Capital - How safe is this investment and how large is the risk of losing my capital? Is it worth it to have an investment of higher returns but with higher risk? Can I afford to lose my capital/
  • Liquidity - How long will it have to be before I can take my money out if needed? Can I convert it to cash anytime I want?
Then ask yourself these next set of questions:
  • Why am I interested in this investment? What is the specific goal that this investment will achieve?
  • Will it bring me closer to my desired net worth and by how much closer?
  • How much of my investible funds or present net work am I putting at risk with this type of investment?
  • Do I have to decide now? Will this investment opportunity continue to be available tomorrow, next week, next month, next year?
  • Is the financial return or income I stand to gain commensurate the risk I am taking with my money?
These are the questions you need to ask yourself in order to help you choose the proper investments and to know when to diversify. If you are about 50 years old. It would not be wise to put a majority of your money in stocks, but you should put it in bonds for safety. If you are young, you should put most of your money in stocks and less in bonds.

The percentage of your investment capital all depends on you. However, it is not wise to put 100% of your cash in stocks or 100% in bonds. It would be very wise to diversify. For example, you should place 70% of your money in stocks and 30% in bonds if you have a long way to go until retirement. This involves a much higher risk that putting 70% in bonds while 30% in stocks. But when you are still young, stocks normally beat the market and have higher gains on the long run.

What you diversify all depends on what your need is. Just don't take out your money every time there is a little twitch in the stock market since there would be an ugly tax on your capital. Just leave it be and trust in the power of compound interest!

Ok, I'm done with Step # 7. I hope you continue reading the articles here at Compound Savings Interest. Comment are very well appreciated!

Tuesday, May 19, 2009

Let's discuss scams

Why do people get victimized by scams? Very often, people fall victim to scams simple because they are not really clear on what they want. They tend to have this general idea of earning a little more money than the usual returns when investing.

Here are two basic rules that would teach you IF you should take out money to buy a product or to invest.
  • The personal reason on why you want to invest.
  • Is the company making the offer legitimate and credit worthy? Generally, scams offer very attractive and unbelievably high returns. Most likely, when you encounter an offer like this you would raise your eyebrows and ask "Is this too good to be true?". If this is your impression on a certain offer, then it would probably be 99% correct. IT IS TOO GOOD TO BE TRUE.
But what are the personal reasons I am babbling about?
  1. What is my interest in joining this network?
  2. Will I buy the product because I need it?
  3. Will I buy it because it is only available in this network?
  4. Will I buy it because I am getting a spectacular discount?
  5. Does someone I know need it?
If you answered NO to all of the above or if it is clear that your interest is not to buy but rather to make extra income. Then here is another set of questions.

  1. Will I earn extra income selling the products?
  2. Is the product worth the time and effort I must exert to earn extra income?
  3. Will I have the time and talent to spend for this product?
If you answered NO again, you should definitely walk away and save yourself some time and money.

It is very important to be clear and sure about your personal purpose in putting you money in a certain offer. You definitely should not put out money unless you are clear on what PERSONAL OBJECTIVES OR BENEFITS you stand to make out of the transaction. You have to be very clear about what you can expect to recieve and, more importantly, what you have to personally invest in terms on money, time and talent.

However, if your answers are YES and you want to earn extra income because the offer is very attractive, study the system a little bit further. Pursue the specific objective of finding out whether the offering is, in fact, based on sound business operations, whether or not it is legal and whether, in fact, the compacy and the agent making the offer are duly licensed.

Why be absolutely sure? Well, it is only to protect yourself from becoming a victim of unscrupulous individuals and companies. They set up businesses for the sole purpose of deceiving investors usually with a promise of high returns. Many people have fallen into the trap of investing their hard-earned money in pyramiding schemes disguised as legitimate multi-level networking marketing firms. Here are a couple of questions you need to ask before finally making the judgement call to invest you hard-earned money.

  1. Is the product something that will benefit a person and is legitimately priced?
  2. Is there a transaction? Is there a document or contract outlining details of the transaction that you can understand?
  3. Is there an actual cash outlay? Do you have to pay a certain amount before you can be a party to the transaction?
  4. Is the money being "pooled"? When the money goes into the business, is it kept in the business for the business?
  5. Is a third party managing the pool of money?
  6. Is there a reward or profit?
If you answered all of the above questions as yes, then the product in an investment product or a security. These fall under the jurisdiction of the Securities and Exchange Commission (SEC).

Do not be content with the Articles of Incorporation issued by the SEC, which most investment proponents present proof of their legitimacy. These are just like the birth certificate of a person and is not valid proof.

A legitimate company should also:
  1. Register its investment products with the SEC.
  2. Secure a specific license from the SEC to sell them.
  3. Secure a specific license from the SEC for each of their agents to sell them.
Ask for a copy of their product registration as well as the company's license to sell them to the public. I will be listing down the scams here later on. Hope you continue reading Compound Savings Interest for more articles!

Saturday, May 16, 2009

Understanding a Loan

What is a Loan and What is an investment?

This is very important that you ask yourself "Am I lending my money or am I investing it?". A lender typically requires the payment of interest and the return of the principle amount he lent out.

What is a Loan?
Usually, a borrower must give a collateral to the lender to secure the loan. Banks would normally ask for cash real estate collateral equal to 170% of the loan amount. Understand that a responsible bank does not give out loans just because there is adequate collateral.

The only correct basis for the grantingof loans is the ability of the borrower to prove that he will use the proceeds of the loan in an activity that will produce sufficient income to repay the loan.

To make sure the lender gets his money back, he only gives out when:
  1. The borrower has more than enough sustainable income to pay the load plus the interest.
  2. The lender really does not mind foreclosing on or taking over collateral.
If you want to be a successful lender in the future, you should follow this practice. Never lend money just because there is good collateral, unless you want that collateral at the price of the loan you gave. Just make sure you know that the price of collateral depreciates in value over time.

How about an Investment?
Investing in a company effectively makes you a partner in the business. The money that you put in as investment or capital is called equity (yeah you learned this word). This equity, whatever the amount, will be at full risk. Simple. You make money when the business makes money and you lose money when the business loses money. In investing, usually the institution/s offering such investment products do not guarantee earnings and return of the principal. They make best estimates based on extensive financial and operational studies conducted by reputable professionals.

Usually, the value of your investments rises or falls, depending on the profitability of the business you invested in. However, there is an added risk in the stock market. The values of the best stocks in the market fluctuate. These could go up or down, sometimes based on rumors, sometimes based on facts. So, you can never be 100% sure that you will earn money. The selling price (real value) of a stock is ultimately dependent on the investing public. Later I will tell you what stocks to invest in to earn money!

When you invest in shares of stocks that aren't listed on the stock market, the ability to take out your money is somewhat limited. There is no established way to withraw your investment when you need it (another reason to keep an emergency fund). Generally, you become dependent on the controlling shareholder and/or the management if you want to sell your investment.

Each private investment transaction is unique. Each one is different from the other. If you invest in a private offering, you must make sure you understant:

  1. How income is generated
  2. Who else is investing on this business
  3. How can you get back your investment when you need your money back.
Just remember these and your money will be safe. Later, I will talk about index mutual funds that generate good returns. So stay tune here in Compound Savings interest for more investment tips.

Wednesday, May 13, 2009

The Path to Financial Success: Step# 6

Assess risks and options: The higher return, the higher the risk

As an investor, you should know that all investments come with risks. However, you can help reduce risk by knowing how to use both time and compound interest at your advantage. You need not put your well-earned money in jeopardy, so read on the rest of the chapter.

Keep in mind the risks involved every time we enter into any transaction. Always remember that there is NO SURE INVESTMENT and that all investments carry risks. When you are offered the opportunity to invest in something, you are practically being asked to lend them you money.

It is important to assess risks as carefully as we can. All investment opportunities come with corresponding risks. So, before engaging in an investment, ask yourself first whether or not you can really afford to lose the money you are investing, just in case an investment turns sour. A perfect example of a high-risk investment would be stocks. Stocks give the most returns but are also the most risky investment. This is because the stock market constantly shifts so returns are unbalanced.

Apart from understanding the risks in a given investment, you must also have a very own risk profile. Risk profiles differ with age, health condition and financial obligations. The extent and timing of the risks you take must be consistent with your financial goals. For example, a man in his fifties in not recommended to invest in high-risk investments such as stocks but should rather invest their money in government bonds in order to protect retirement money. A person in their twenties should not be conservative with their money but rather be aggressive in their investments and put money primarily in stocks, say 80% in stocks and 20% in bonds. This enables maximum growth given he would not remove his money with every little twitch in the stock market.

Successful investing requires that the investor's risk profile matches the type and extent of the attendant risks in a given investment. So, asses the risks involved every time you make choices in your path to financial success. Be Smart!

Here is a couple of risks you would probably encounter:

  • Risk of inflation - This would probably be the most popular type of risk. We know that money is an ever declining value so we must invest money on investments that grow beyond the inflation rate
  • Risk of non-payment - This has to do with the financial credibility of the company or of the person you making the investment offer. You should look at their history for proofs of payment or look into their company profile to see how the company fares.
  • Risk of liquidity - When you invest, you should be absolutely sure you won't need the money until retirement. Liquidity typically means how fast you can take out the money in case you need it. Some investments require a certain period of time before the investment matures so check the liquidity of the investment so make sure you can do without the money until it matures. In case of emergencies, you should stash money on a savings bank account as previously recommended.
  • Risk of new taxes - Taxes are your worst enemy when investing. Over time, the government may decide to impose a new tax. So, ask yourself what would happen to your investment if ever a change in taxation would occur.
  • Business risks - This has something to do with the market, production and finance risks relevant to how the business produces the product or service and how it is financed and delivered to the consumers. How stable is the business you are investing in? Always ask yourself if the company has a sufficient history of profitable operations. Start-up businesses often end up as scams so you need to find out if the business has sufficient sources of financing for equity and working capital.
  • Fraud or Scam risks - This has something to do with the integrity of the business process and how it is documented. As yourself If the investment documentation is complete and legally binding. Find out whether the margins of its products provide for all the overhead and marketing expenses.
  • Foreign exchange risks - This has to do with the devaluation or revaluation of your currency. You need to understand this factor as it relates to the long-term valuation of your investment.
Be careful in choosing the right types of investments. One technique to reduce risk is by diversifying you investments which will later be discussed. I will also discuss later the best types of investments you can have. So stay tune here in Compound Savings Interest for more tips. If you are interested in what is being written here, kindly subscribe to our feed. Thank you and happy investing!

Friday, May 8, 2009

Some Investment terms you just need to know

Hi to everybody! Well, I just got back from a couple of days vacation. For those who are waiting for step #6 in our series, I am so sorry because I will first tackle on important words you need to know when investing or when talking to financial advisers. I promise to make it a very short list so just stay with me for a couple of minutes. Smart and sensible investment choices can be fully explained using these words.

  • I'll start the topic with stocks, the investment you hear about the most. Stocks represent a tiny bit of ownership in a corporation. If you own 100 shares of Apple, for example, you own 100 bits of its profits, dividends, and its underlying value. When a company excels in the market, the market price of its stock goes up. If the company is not doing well at all, the price of its stock goes down. You won't know how a particular company's stock will perform in the long run. But, stocks tend to build more wealth than other investments do and because of this most investors put a large sum of money there.
  • The general word for ownership interest is equity. When you say "I have invested in an equity mutual fund" or "I have invested in equities", this means you have invested in stocks or have bought stocks.
  • A dividend is a small piece of profits that companies pay out to investors.
  • Bonds represents debts. When you buy a bond, you are lending money to the entity that issued it may it be a government body or a corporation. You earn interest which is usually paid out twice a year.
  • Bonds are scheduled for a fixed period of time. At the end of the period, the bond then matures. This means that you will get your money back. When the issuer repays before the bond matures, this is known as a call.
  • There are a lot of different kinds of bonds. Treasury bonds are bonds issued by the federal government. Municipal bonds are issued by cities, states, or various public authorities. Corporate bonds are issued by corporations.
  • A mutual fund is a big pool of money, contributed by thousands of people who invested in it. The manager of that money invests it in stocks, bonds, or even both. Your share in the fund gives you a tiny ownership in all the fund's investments so you are actually spreading your money around. As a mutual fund shareholder, you receive a piece of the dividends that the fund's investments earn.
  • A security is a term used for a "paper" investment, such as stocks or bonds as opposed with "hard" investments such as golds or real estate.
  • An asset is anything you own that has monetary value. All your investments and bank accounts are considered assets. So are your home, cars, jewelries and any other real estate investments.
  • Asset allocation is a term used to describe how you have split your money among various types of investments.
  • Diversification means spreading your money over many different kinds of investments. Doing this reduces risk because when one market value goes down, another will probably go up.
  • Your portfolio refers to all the investments you own. It is a word that means "everything".
  • The market refers to the activity of buying and selling products or services.
  • A trade happens when you sell a certain stock or bond and buy another. The buyer believes that the price of the stock is going up while the seller thinks otherwise.
  • The economy refers to general business conditions and everything that affect our spending and our standard of living.
Well, there you have it. Throw in a couple of these words out when talking about investments and you'll probably get through without being cheated at. This is to help you out with advisers who guide you to investments with FAT, Hidden fees.

Well, I'm going to write Step #6 next so please stay with me here at Compound Savings Interest!

Sunday, May 3, 2009

Tips on staying healthy

Ok, let's take a little break from this long series about financial success. If you have been reading the blog, I mentioned in Step #4 that you MUST, no you SHOULD keep yourself healthy. This is to protect your greatest income-generating asset, YOURSELF!

Now let me present to you a couple of practical ways to stay healthy and save at the same time!

Here is the list:

1. Cut costs on softdrinks, juice, and other treats- I know for sure that it would be difficult for you to stop drinking your daily dose of coke or juice everyday but this certainly is a must. If you are attentive with what you drink, you will notice that one CAN of coke is about 140 calories. One can has about 39g of carbohydrates, but observe the nutrition sheet well because the 39g of carbohydrates is actually 39 of SUGAR. No wonder a lot of people are obese today! They pay to drink sugar!

It is actually the same for almost all drinks. Almost all drinks are made mostly of sugar for two reasons. Sugar is cheap and everyone likes it. Drinking sweet things often leads to the drinker looking for more. This is because our thirst is not fully satisfied.

The alternatives: Water and healthy fruit drinks with NO SUGAR ADDED. This is important because our body adapts well with artificial sugar. However I would advise you to drink water because water truly quenches thirst, and it's 100% NATURAL. Also, by drinking water you not only benefit yourself because of less sugar intake, but you also benefit your wallet because water is so CHEAP!

2. Exercise- You've heard this a million times so let's make it into a million and one. You should excercise your body to keep it in shape and also to work up your muscles. I would recommend gym sessions but it should not be entirely so. There are plenty of ways to exercise your body without going to the gym and having serious gym sessions!

Here are some tips:
  • Push up a few times daily
  • Sit-up a few times daily
  • Walk Briskly
  • Use the stairs instead of an elevator or an escalator
  • Stretch your body when you wake up
  • Strech your muscles throughout the day
  • Don't be a whimp! Walk short distances instead of riding a vehicle!
  • Jog on Saturday and Sunday mornings when your free
  • Be engaged in sports
Well, those are just some of my tips. Remember this not only keep you healthy so that you can continue to earn money but it also gives you a sexy shape. After reading this article, stretch a little bit or do about 5 push-ups. It won't hurt. Soon, It'll just come out of habit.

3. Quit Smoking and Drinking- To be honest with you I am not a smoker. I believe smoking is a serial killer and that smokers should stop. This is also one way to cut costs and keep your body as healthy as possible. It would also help you buy insurance because smokers pay more money for insurance JUST FOR THE FACT THAT THEY SMOKE! So, stop smoking and pay a little more attention to your health!

As for drinking, just do it moderately. Here is a tip, don't drink for fun or when you are on your own. Drink only on special occasions when you are with a couple of friends, family or in important corporate meetings. This is what I call social drinking. It keeps off the beer belly but it still gives others the impression that you aren't a whimp.

I may edit this post if I remember something important to share. But keep in touch with Compound Savings interest for more articles of financial freedom!

Friday, May 1, 2009

The Path to Financial Success: Step# 5

Grow with the economy and beat inflation

What you guys should really understand is that money is an ever-declining value. You must always remember that you are working against time and money.

Now, you must make sure that your investments earn more than the inflation rate. It is not enough to start saving. You must also consider where you are putting your money. If you leave you money on a savings account, or lying on you pockets, you lose the chance to earn income and your cash also loses it's value. Double trouble right? So, put your money in an investment that should always generate an income that is higher than the inflation rate. This is how you can maximize the effect of compound interest.

Estimate your desired Net Worth
One way to plan for your financial future, given the reality of inflation is to make projections of how much your net worth should be by the time you retire. Let us say you are about 20 years of age. You are earning $130,000 annually and you want to maintain this purchasing power when you retire at the age of 65.

To be able to retire with the same purchasing power, you should know the equivalent of your present income at age 65. This amount is what your net worth should be earning at the time. Therefore, you should aim to build your wealth to this amount before retirement.

At 5% inflation rate, the equivalent of your present annual earnings of $130,000 is $1,168,050 when you are 65 years of age. At an earning rate of 10% per year, your Earning Assest or investments should be $11,680,500! This means that by the time you retire, you should have $11,680,500 worth of investments to live as you are living now! And if you start at 20 years of age, you have 45 years to achieve it!

Here is a tip, if you start saving at 20 you only need to save 11% of your income annually to maintain how you live today. This amount increases to 15% when you reach 30 and 22% when you reach 40! Now how can you save 22% of your income if you have children and are educating them in high school or college? Well, I have some healthy advice for you. The earlier you start saving, the more peaceful your life would be without worrying about retirement. Remember that delaying savings or cheating it is like "planning" for a diminished standard of living when you retire!

Whew, done with the 5th article.. I'm gonna be writing the 6th one soon so keep in touch here at compound savings interest!

Thursday, April 30, 2009

The Path to Financial Success: Step# 4

Protect you greatest income-generating asset, YOURSELF

This should be your first priority in your path to financial Success. Why? Well, because YOU are your GREATEST INCOME GENERATOR and YOU should be protected to the fullest. How?

Your family depends on your ability to generate income to help pay the bills or for the education of your children. Now, imagine what would happen to them if you are not able to generate income. Surely they will experience a serious financial loss. Therefore, it is important to cover yourself with insurance. Insurance is needed only when there is a possibility of unbearable financial loss.

But how much insurance should you buy? Well, the amount you need depends on who would suffer financially in case you died. It is also dependent on how much income you provide for your family. If you live alone then it is probably wise not to buy any insurance at all. If you live with your spouse and have no children, and if you are the sole source of funding for you and your spouse then it is probably better to get insurance enough to cover all the bills until your spouse can find a job of his own. Just think of how much time he would recover from losing you. Would it be five or ten years? It all depends on you and how much you need to live comfortably. The longer the time, the more amount of insurance is needed.

If your spouse needs about $50,000/year to and he gets over you after 5 years, then you need $250,000 of insurance to cover all his living expenses.

What kind of insurance?

For protection purposes here are the best types of insurance you should buy:
  • Term life- These are life policies that you pay premium for year to year. There are no cash values for this type of insurance. The benefits of the policy are only paid out to the recipients if ever you pass away.
  • Accident- This is similar to term insurance because the benefits are only paid out if you die or when you are injured due to an accident
  • Medical Insurance- Here, you buy specific amounts of benefits for every day you get to be hospitalized. Normally, the benefits are given as a fixed amount per day for one month per year.
  • Educational Insurance- This is important if ever you have children. This will ensure their education in the future in case something unexpected happens.
These are very economical types of insurance and the best thing is that THEY ARE CHEAP considering their benefits. These protection measures are so affordable that you must make sure you are covered by these. Most people buy more insurance because of interest built with the insurance policy. Forget about it, if you want to earn money then invest it in mutual or equity funds because this type of policy costs you more that what you truly need.

Stay Healthy
Honestly, you must take care of yourself as much as you can. You must eat a balanced diet and reduce junk food, softdrinks, and alcohol intake. Also, have at least 8 hours of sleep daily to ensure that you are truly physically fit. I suggest that you exercise or have gym sessions about 2-3 times a week. However, if you truly don't have time then I suggest you WALK and WALK instead of the luxury of using cars, elevators and the like. This is what I call improvised exercise.

Be Spiritually Healthy
Why do you need to be spiritually healthy? Well, studies show that those who believe in God are able to endure trials and hardships better. Despite all the setbacks in life, learn to trust in God always and he will make the way right for you. Remember, GOD HELPS THOSE THAT HELP THEMSELVES.

Mental Health
It is important that you keep in touch with friends and family members. Talk with them, eat with them and hang out with them. This way, you can experience the joys of life and you will always have a smile on your face. Smiling is said to help improve our health a lot. So don't be gloomy and share a smile!

You should improve your knowledge on a lot of things you are interested in. Reading this blog means that you are hungry to learn how to succeed online, VERY GOOD. If you need to take courses to improve your skills then please do so. In fact, it is always good to have formal classes because it will better your credentials. Also, a passion for education exercises the mind and this helps with your overall health!

Some tips? Attend free seminars or talks and listen to the speaker. Please, do not sleep when the speaker is talking to show some respect. If you come to the seminar only to sleep, then it is better to not come at all.

Whew, this has been a tiring article. Hope you read a lot more topics about this series on the steps to financial success here on Compound Savings Interest!

The Path to Financial Success: Step# 3

Stop spending on things that decline in value

When you start analyzing the difference between your assets and liabilities, chances are you will realize you have spent a large amount of money on a lot of things that lose value over time. It is common for a lot of people to buy appliances, furniture and gadgets that we can actually live without. We thing these things are assets, but actually they are not. This is why it is very important to stop buying on impulse when something you want is for sale. Before buying, ask yourself if you really need it or not. Remember, every penny spend is another penny lost that would otherwise go to your savings.

This is why it is important to know the difference between an asset and a liability. To know what an asset or liability is you must first make a summary of your total assets and liabilities. If you keep a list of your total assets (Cash, Property, Receivables, investments and insurance) minus liabilities (Loans and everything payable) you get your net worth. Here you will find out whether your expenditures are increasing your net worth or not. "Assest put money in your pocket. Liabilities take money out."- Robert Kiyosaki.

If your are a salesman will a car be an asset or a liability? Well, most of you would answer that it is an asset because a saleman would need a car to move around and sell his products or look for new costumers. In principle, this is correct. But it may not be so in personal finance.

You may be rich is assets however it might not increase your net worth. Most of your neighbors spend and spend for a "better lifestyle" but they are not actually increasing their net worth. If they placed their money on government securities rather than spending it all the time they would have accumulated a much higher cash value for their investments. Here their money would truly grow and so would their net worth!

Some people buy and sell gold or jewelry. Some keep them for investments because, according to them, the value of jewelry over time grows faster that other types of investments. This is not entirely true. What will make it right or wrong depends on the financial situation of the investor. It is a good business if you have a good market and know which items to sell. But, if you do not have sufficient resources, you might just end up being forced to sell your jewelry at a loss to cover your expenses. The value of any asset depends on what the owner can do with it. So, ultimately, the disposition of any asset has to result in an increase in personal net worth otherwise it is a liability.

This is just the third step and we still have a lot more steps to go to financial freedom here at Compound Savings Interest.

Tuesday, April 28, 2009

The Path to Financial Success: Step# 2

Set Up Your Financial Goals

Setting up you financial goals is like dreaming you dreams. It is like imagining your wants and describing them to yourself in terms of what, when and how much. To help you set up your financial goals, Here are a couple of questions you should answer.

  1. What kind of lifestyle do you want? Are you contented with your lifestyle today or do you wish for some improvement?
  2. How do you want your lifestyle to improve? By how much more do you need to save to have a better lifestyle?
  3. How much financial comfort in terms of passive income do you want to have in the next five, ten or fifteen years? Should you prioritize insurance, investments or business?
  4. How and by how much can you augment your current income? Think about sidelines and small businesses or investments.
  5. How much can you afford to save every month? Do not think about an actual price but think about percentages.
  6. Which of your current expenses can you live without? What things are optional and what are necessary?
Now you should be able to write down your goals. First, put all your answers into writing. This way you can internalize your goals and realize what you need or what you want to enjoy in the future. Second, State it positively. Do not say "I will save $200 per month because I will not go malling or go watch movies". Instead, state it as "I want to save $200 every month for a new car soon". And last, set up how soon you want to accomplish your goals. Things like soon, in a couple of months, or sometime in the future should do it. Monitor your progress and adjust depending on some unexpected occurances.

Here are some important financial targets you should aim for.
  1. A cash reserve in case something unexpected happens such as an injury, disease or if you lose your job. It should be good enough to cover all your expenses for six months when unemployed.
  2. Term life insurance
  3. Medical Hospital Insurance
  4. Long-Term savings plan for important things such as education, pension and housing.
The ideal savings per month should be 20% of your current income. Now I know this is a lot but your expenses should adjust to this and you should find out that you can certainly life without this amount. One way to do this is to NOT think about that 20% and treat the 80% as your full salary.

Now, one way to save efficiently is to give a certain percentage of your savings to each. If you haven't finished your cash reserve then make this your primary target. like give 10% of the 20% savings for cash reserves. Then distribute what is left to your other investment goals. I know this may be hard but trust me, those 4 invesments are really important.

For more, continue reading Compound Savings Interst!

Thursday, April 23, 2009

The Path to Financial Success: Step# 1

Pay Yourself First!

This is very important. You are your first source of capital to generate investment income. For most of us, our capital comes mostly from some form of active income such as our salary, allowances, bonuses and other sidelines. You need to set aside a portion of this amount to be dedicated to savings that will generate investment income.

However, we also have other sources of capital. Our intellectual abilities could serve as our capital and should not be ignored. Remember that intellectual capital is just as important as our savings. Bill Gates, for example, only started out with his brains and now, being the founder of Microsoft, he is constantly crowned by Forbes as the richest man today. You might even be using his “Windows” operating system while reading this article! There are a lot of entrepreneurs today that only started out with their brains and look at where it got them today. Entrepreneurs starting with simple ideas that end up as multi-billion dollar ventures.

If you want financial freedom then you should start saving NOW! This is very critical because time is very important in the journey to financial success. Let me give you a tip, set aside a portion of your salary as savings instead of saving what’s left of you money. This way you can start building up your capital.

Income – Expenses = Savings (IS A BIG MISTAKE)

Income – Savings = Expenses (IS WHAT IT SHOULD BE)

Never forget that savings in itself is an expense however it is an expense that pays for your future! Most of us look at our salary as ours to spend for whatever we want. However we should actually put aside a part of our salary for our future.

It is very important that you pay yourself first and this should be a priority. Paying yourself in this instance means compensating yourself for the “use” of an income-generating asset, which is yourself.

Thus your income must first be reduced by your savings needs and what is left after is then available for living expenses and wants.

If you really look at your expenses, you will find out that most of your expenses are actually optional. If you immediately set aside 20% of your income for savings you will find out that you really can live with a budget of 80% your total income! This is because a tiny portion of our brain adapts to the circumstances once the money is actually put away. I know, it might be hard at first so start small! Save 5% of you salary this year, 10% on the next year until you reach your 20% mark!

Remember pay yourself first and start saving now and you're on your way to financial success! Stay tune here at Compound Savings Interest for more Finance Tips!

Thursday, April 16, 2009

Our Allies to Financial Success

I have mentioned the obstacles in the path to financial success. but, don't worry, you not only have enemies in your journey but you also have allies! What you need to do is to learn to use your allies to your advantage because they are just there, waiting to back you up.
  • Time
Time would be your first ally. Time, is honestly by your side because all people, whether rich or poor, have the same amount of time. Sixty seconds per minute, 24 hours per day, 30 days per month and 12 months per year. It is your ally to financial success if you use it properly. It is a great ally because it will be used in planning your path to financial success. Also, timing is of utmost importance and you should know when is the proper time to invest or divest your money to your advantage.

But, if you look around you, time seems to be taken for granted. People don't seem to understand that "one hour lost" means you can never get it back. Take for example you have an appointment and you were 10 minutes late. You not only wasted 10 minutes of your own time but you also wasted 10 minutes from another person's life! 10 minutes that could have been productive but instead was wasted waiting. Making other people wait is honestly stealing time from them, time that they can never have back!

So, next time you are about to attend a party or an appointment, be fair and be on time. Being on time is one major success attribute found everywhere around the globe. My advice for you is, be on time for appointments, always meet your deadlines, and invest your time wisely. Ask yourself if you really need to use up your time and think of the opportunity cost of your decision. Also, never forget to spend time for yourself, for those you care about, and for God. It will keep you healthy and motivate you to succeed financially. Everyone needs a break from work.
  • Compound Interest
Another powerful ally would be compound interest which, according to Einstein, "is man's greatest invention". Wealth and financial success can be achieved if we allow the power of compound interest work for us. Also, investments allowed to compound can help beat inflation and, when partnered with time, is your most powerful ally.
  • Leverage
Finally, another very powerful ally is also within our reach. It is what we call leverage. This is also sometimes referred to as "Good Debt". Dept, when used for productive investments, increases your financial return even with very little capital. Leverage in itself does not only refer to money, but to people too. When you pool resources, your gains increase while risk is lowered. Other forms of leverage are multi-level marketing and business systems. These allow you to earn on your "down lines" even without being active in selling.

These are your allies to financial success and they are always there waiting for you. Using these will ensure your success.

Next, I will be posting step-by-step guides on how to achieve financial success. With a little patience, I know anybody can do it. Compound Savings Interest believes that anyone who wants to succeed and is serious about it will get what they are looking for. Thank you for reading the blog and I hope you stay with me in the succeeding chapters here at Compound Savings Interest!

Wednesday, April 15, 2009

Why is it Important to be Financially Literate?

Financial literacy is important in the path to financial success. A lot of people who are smart, intelligent and hard-working tend to lose their money because they invest on something that they believe could help them succeed financially but end up losing it. Simply said, they lack the understanding of money, assets, and liabilities. We need to know the difference of assets and liabilities because this is one of the most common mistakes people make. They would spend on what they believe are assets when in fact they are really liabilities. Compound Savings Interest blog has seen two losses when people make this mistake.

1. They incur a loss because when they sell the product, they would not recover the same amount for that product so there would be loss of money. Also, the product would depreciate over time so the product gets cheaper the longer you hold on to it.

2. They lose the opportunity to invest the money. If you lose $1,000 because of a bad transaction, then you lose the opportunity to grow this $1,000 to $2,594 in ten years if it was invested with 10% annual interest!

This is why it is so important that you realize that every time you spend, you must take note of the opportunity cost of that transaction. Ask "If I spend this amount of money on a certain product, will it get me closer to financial success?". This is only true if what you spend on is not at all necessary or something you could live without. Please don't cut meals in order to save.

A lot of people are just tired of learning and that is a particular reason why they don't want be financially literate. They believe that only people who are graduates of business and finance courses could be financially literate. Because of this, Most people ask friends and family on financial advice and end up on a bad deal.

However, EVERYONE CAN BE FINANCIALLY LITERATE! Yes, you are included! It is actually about common sense. It is knowing what money is for and how to spend your money. It is prudent to ask know what are assets and what are liabilities, how to handle money against inflation, what are dangerous investments and how to avoid them, and what is the path to financial success. Everyone should know that this does not require a college degree and anyone who is eager to learn will be rewarded. Books, seminars and even websites such as this can help you be financially literate. I hope this site, Compound Savings Interest, can help you in your path to financial literacy and in achieving financial success.

More to come here at Compound Savings Interest! have an abundant financial life!

Saturday, April 11, 2009

Things that hinder Financial Success

Do you think that after making that first deposit on some mutual fund will mean you are on your way to financial success? Well, think again! You may have started the journey but the difficult part is the things you encounter on the way. During your path, you may fall into the temptations of life that you would gradually let go of whatever it is you may have started! You might tell yourself "This is just for this month, I will not save so I can buy a new car" but once you stop a "habit" you might find yourself forgetting it one way or another. So, in order to avoid these hindrances, you must first understand what these hindrances are.

I will now jot down the obstacles to financial success other that inflation.

1. Procrastination and being lazy
This is a habit a lot of people seem to have. Procrastination is doing things tomorrow what we can do today. It is saying "Nah, I'll do it next time" or "Maybe it can wait until tomorrow" when there is something to be done. Sooner or later that one day becomes a week, and then it will turn into a month, and next thing you know its already been a year and you still haven't done anything about it. You would say "I can save/invest next time" but ONE YEAR of delayed savings of $3,000 at 10% annual interest would lose you $137,000 after 40 years of savings!

Delayed savings may also sacrifice high yield investments that may not be available in the future. Mutual or Equity funds that reach 15-20% annual interest may only be 7-10% in the future. So, you would lost the opportunity to EARN MORE! Everyday a lot of people are guilty of this habit. We lose the opportunity to buy cheaper homes and land, cheaper loans or stocks and a lot more because of this habit. Remember Procrastination would not only waste you time, but your money as well.

Laziness is also a big problem when it comes to financial success. Too much dependence on other people often lead to laziness. Not only do we lose the opportunity to earn cash in order to invest, we also make the person we are dependent to lost that opportunity as well! we should not rely on others. Not all the time would there be someone, somewhere for us to depend to. This path to fincancial success is all about you. It should be independent of others. Remember, this is YOUR money, YOUR path, so YOU should be responsible for it.

Since this is your path to financial success and you alone. So, because of this, negative values can hinder us from achieving our goal. However, if we are determined, decisive and if we really desire to achieve financially, we can overcome these obstacles to financial success. Remember always. Losers criticize, winners analyze!

One major negative value that we must overcome is the fear of failure. Everyone fears failure. We are all afraid of making mistakes. However, people only see how they are bound to fail but not how to succeed. What we need to understand is that life is certainly not fair. We experience the good times, but we also get a taste of the bad. We need to understand that failure is a key to success. Yes, you heard me right, whenever we fail we must learn from our mistakes. We must analyze the situation and look for a way to turn it all around to our advantage. We cannot succeed unless we fail. Also, failure is a very powerful tool to motivate us to act. Remember 20% of the 2008 world billionaires started from very poor families and never even finished college because of this. Look at where they are now, enjoying all the pleasantries of life. So, don't let failure put you down but look for a way to make it push you towards the path to success.

Remember failure is not a person, you are not a failure. Failure is the key to success and to better ourselves!

3. Poor spending habits
This is one of the major habits that you must learn to control. It is very important that you discipline yourself when it comes to spending your money on wants. Look around, almost everything you see is actually optional, optional in the sense that we don't need it. Try to keep track of all your expenses for about a month or two.

You may be surprised when you look into the list that more than half of your expenses are actually unnecessary. Why is this so? Well, here are the reasons on why people spend on optional expenses.

  • Impulse Buying
People almost always end up buying more than what they intend to. This is the fault of sales and promotions for product and services in the malls. The usual "30-50% sale" in the malls never fails to attract customers. This is because customers seem think that they are saving money on spending on things that are "on sale". One important thing to learn is that we must not buy the price but the value of the product. Now, what if the product you would buy in a midnight sale is of no use to you in the moment. It would be OK if you would find a use for that product later on but what if it was never used and just lain around the house? Sooner or later these items bought on sale just end up being given away as a gift, given to charity, or left to accumulate dust in the closet. Imagine how much you would earn if you saved the money to invest in equity funds or government bonds!

  • Trend Spending
This is probably the real culprit to financial success. So many people spend their hard-earned money on items they can actually live without. I have a lot of friends that regularly update their cellphones, ipods, and laptops just because there is a new model. For women, jewelries and cosmetic products or services while men are more likely to spend money on a few gulps of beer and snacks while watching the sports channel. Let me point out that this is totally unnecessary because you can still live comfortably with what you have!

Remember that your spending habit determines your financial success. What counts is not the amount of money that goes into your pocket but the amount of money that actually stays there. You must control spending and even let go of some things in order to succeed financially. This is a value that you must practice daily. Always ask yourself whether buying a certain item puts you closer to your goal or not. Remember that this is your battle so you must control yourself and your spending habits. So go for it!

Stay tune here in Compound Savings Interest for more articles regarding the path to financial success!

Friday, April 10, 2009

Inflation: A very ugly thing

What are the things that hinder us in succeeding financially? How can we cope with these obstacles we face?

There are several obstacles on the path to financial success. But, as everything is with our financial life, the decision on what to do with these mistakes is up to us. What is important is that we learn to recognize these mistakes and accept it so that we can take action.

Inflation is the economic condition of sustained price increases. Money continually loses its value over time. As the prices of goods and services increases, the value of money decreases. So, in order to succeed financially, we should look for ways to beat inflation. We cannot run from inflation. Most of the basic goods in life are subject to inflation as it affects the basic commodities such as food, water, shelter, and in some cases fuel or energy. Inflation is a condition that will never leave us. It has been so that all the countries in the world experience inflation. It is like a disease in the world of finance.

So, how can we beat inflation?

If the inflation rate today is 6% then prices of certain key commodities increase by a rate of 6%. So, in order to combat inflation, we must make sure that our income, savings and investments should be above 6%. If we invest our money on a savings account with 4% annual interest, we lose. This is because we cannot buy the same amount of goods this year as we did last year therefore reducing our purchasing power. This is probably the main reason why savings accounts are not good investments and must only be used when you need to keep your money and use it after a short amount of time.

It is not enough just to save and invest in something with an annual return. We must have investments that are above the inflation rate so that we can beat inflation. This is important because we could not achieve financial success if our savings depreciate over time thus lowering purchasing power. The sad part is that most investments today simply just breaks even or sometimes lower than the inflation rate. This is due to the global financial crisis that the world is experiencing today. So remember, always keep your money where it could EARN.

There are a lot more hindrances to financial success which I will discuss in the following chapters. So, stay tune in Compound Savings Interest.

For Compound Interest to work, Time is Important!

Let us have another example of compound interest along with the power of time. We have two friends, Mike and Rey are two close friends of the same age. Mike, being taught the virtue of savings sooner, started saving $3000 every year with 10% annual interest at the age of 18. He stopped saving at the age of 26 but left his savings intact. Rey, however, started saving $3000 a year at the age of 26 and invested it with 10% annual interest until he retired at the age of 65. After retirement, it’s surprising to see who has more money.

Mike, saving from 18-26 has invested only $24,000 by saving $3,000 yearly for 8 years. He allowed his money to grow for a total of about 48 years. Rey, on the other hand, invested a total of $120,000 saving from the age of 26 till retirement at 65. He also left his savings remain intact in all those years.

Upon retirement, Mike would actually have more money than Rey. He would have a total of $1,707,994 while Rey would only have a total of $1,460,555! But, didn’t Rey save about 5 TIMES MORE that Mike? Well, the key here is that Mike saved EARLIER. Time, it may seem, is a really important part of investing in compound interest. It is not about how much you save but when you save that matters! TIME is more important than the AMOUNT!

If you would like to learn more about Compound interest, stay in touch in Compound Savings Interest!

Thursday, April 9, 2009

The Power of Compound Interest

"man's greatest invention is compound interest" - Albert Einstein

Compound interest gives money the opportunity to grow all by itself. By using compound interest we "don't work for money but we let money work for us". You leave money in investments that give you good returns and it will grow all by itself. Just like a little plant, you leave it alone and come back after years only to find out that it just isn't a plant anymore but a large tree.

Let me give an example:
You have $10,000 right now but you don't know how to spend it. So, you placed the cash on an investment that earns 10% interest yearly. So, you will be receiving $1,000 a year and if you take that money and use it, you will be left with the same $10,000 you began with. Ok, lets say you decided to leave that $10,000 alone to grow. After 10 years that $10,000 would be $25,938! Even better, after 15 years it would be $41,772! So, if you took the yearly interest, you would benefit only $15,000 however if you leave it alone you benefit $41,722 after 15 years. That is more than DOUBLE the amount in which you would have received if you took the yearly interest.

This is the power of compound interest. It can make you earn a lot more than just saving the money!

Let's say you save $100 per month earning 5% yearly for 40 years. By the power of compound interest, it will grow to about $152,000 and if you double it to $200 it will simply be doubled to $304,000!

At 10% interest rate, saving $100 a month would earn $620,000! That is Quadruple the amount of the 5% interest rate! Ok, now can you see the power of compound interest?

And on top of all that, you are not taking high risks when you use the power of compound interest. You just need to know how to use compound interest at your advantage! Your key here is TIME and CAPITAL money. They more time you let the money grow and money you put, the larger the amount would be! Just make sure to look for investments that has above 10% interest rate in order put your savings into good use!

I will be adding more posts soon! To learn more, keep in touch here at Compound Savings interest!

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Wednesday, April 8, 2009

The Importance of Financial Planning

What is personal finance? How do you let money work for you even after you retire to live the life you want to live? How do you want to live your life 20 years from now? 30 years from now? When you retire at 65 and later?

I want to share with you the path to financial success through this blog. These are lessons taught to me by friends, wealthy relatives and more importantly, people who have earned success. Just stay with me and read a couple of my entries in Compound Savings Interest and I promise you would be on the way towards financial success.

A lot of people believe that in order to achieve our goals in life, we need to earn a lot of money. This is not entirely true since anyone, as long as they have the proper discipline, can achieve financially. The most important thing to consider is the need to plan your finances for the future. You would need to set your financial goals according to how you want to live your life when you retire. What people do not realize is, the more money you earn or the more cash you have the more problems they will face. This is because the more money we have in our pockets, the more confident we are that it will never run out. THIS IS THE WRONG WAY OF THINKING AND WILL ONLY LOSE YOU A LOT OF MONEY.

If your problem is your inability to manage your earnings, no amount of earnings will solve your problem. They key to financial success lies in knowing:
• What are your financial needs.
• How to manage your savings to produce passive income
• Knowing the power of Compound interest and using it to your advantage

What you need is to be financially literate and to commit yourself to plan and monitor your
financial progress.

A lot of people have gone into business and investments that generated a substantial amount of earnings for many years, later they end up losing more than all they have ever gained. These are people who may have been doing well but do not know how to manage their personal and business finances. Hard work and perseverance are not guarantees of financial success.
So, stay with me as I explain the path to financial success with you and explain the benefits of compound savings interest.