The Simplest Financial Plan I Ever Learned pt.3

Invest 20%

Ok, today let’s talk about investing.. but before that I would like to talk about the concept of “PAYING YOURSELF FIRST” Maybe most of you had heard this statement quite a few times but let me ask you, are you practicing this habit?

So what is paying yourself first by the way? Simple. It simply means that you have to set aside some money for yourself first the moment you receive your paycheck or any income for that matter.

The next question is, by how much? Now, here’s where our topic focuses on. I say at least 20%, financial planners say at least 20% and the Bible says 20%. Huh? How did the scriptures get in here. I thought this is blog post is about investing? Well, you see, the Bible is one of the best sources  of financial planning. Really? Yes. And the concept of investing or saving 20% came from the story of Joseph the Dreamer. Do you still remember that story? I hope you do well if you don’t then let me summarize that for you.

Ok, here it goes “The King of Egypt had a peculiar dream that no one among his counselors could explain. Until God told Joseph to explain to the king what his dream meant. Joseph did explain to the king and told him that his dream foretells a 7 year of bountiful harvest to be followed by 7 years of famine that will strike upon Egypt. So what did he tell the king to do? Save 1/5 of the harvest during the season of abundance and they can survive the famine.”

Wow, 1/5 or 20%, isn’t that amazing that even the Bible taught us about investing. So now your asking, what happens next when I invest 20% of my income. Here’s what.

Do you know…

That if you will invest P5000/month(Well that means your earning at least P25,000 a month) in an investment vehicle that will yield at least 12% per month compounded then you’ll end up with…

P1,150,193 in 10 years

P4,946,277 in 20 years

P17,474,821 in 30 years

P56,667,739 in 40 years

Hmm.. not bad huh? Even if you consider inflation and the devaluation of the peso I bet you can still buy a lot of things with P56 million. Right? And I think you can already have a comfortable retirement with this amount.

Am I making this up? No, I don’t and if you’re skeptic with the figures then you can consult your financial advisor if you have one. By the way to add credibility to this you might want to check my older posts specially the one entitled Investments and Compounding Interest: Do they really work?

 

So that’s it for now, I sure do hope that you learned something from this and you will start practicing the habit of paying yourself first. Well I must say that it’s quite hard at first specially that you have to make some sacrifices and lifestyle adjustments. But every good thing in life entails some sacrifice right. So let me leave you with this question.

 

“Sacrifice now, enjoy later or Enjoy now then sacrifice later? Your Choice”