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Before You Invest, Build this Fund

I don't want you to do the same thing I did in the past so I decided to write this blog post.

I invested some of my hard-earned money into mutual funds and later on, in the stock market. But you know what, I realized that kind of approach and strategy (when it comes to building wealth) is truly wrong.

I read in finance blogs and heard from the speakers in seminars I attended that before anything else, we should gradually fill up our emergency or rainy funds.

What is it anyway? It is a fund that basically serves as a cash for an emergency such as when something in your home needs a repair or if certain bad thing happens. If you ask me how much should be your emergency fund, it depends on which of the two you would like and ideal to you. Some say that it should be equivalent to your 6-month salary. But others say that compute first your total expenses in a month and multiply it by 6. Let's say your expenses for a month is 5,000. Your emergency fund should be 30,000 or if you're earning 10,000 a month, it must be 60,000 pesos.

I think the reason why it is very important and practical to have this is because if you badly need your money, you don't go and get your money from your investments (be it UITF or from your stocks). Because the number one reason why you invest your money in those kinds of investments is it is just an extra cash which you don't need right now. Also, it's okay if it depreciates since you plan to leave it there for a long period of time. And the study shows that your money double, triple or produces its own kind after you leave it there for 10, 20 or 30 years. I agree with Albert Einstein for saying that compound interest is the greatest invention that man discovered.

So if a misfortune comes up like losing your job, you have something to lean on and you are worry free. That is the purpose of the rainy fund. Once you drained it, fill it up again and discipline yourself to complete it before going to the next level.

I hope you get what I mean and I'm hoping that you apply it into your life.

Start building your emergency fund now!

Comments

  1. Super like ko 'tong entry mo na 'to. Kudos Jet! Magblog ka pa parati. Hehe.

    ReplyDelete
    Replies
    1. Sure Cindy! Thanks for visiting and coming here just to read my blog posts.

      Di na nga ko nakakapagblog eh, ahaha! But no worries, I am thinking of creating more useful posts in the nearest future. :)

      Delete

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