travel & lifestyle blog by ruth dela cruz

Personal Finance

The First 5 Steps to Really Start Building Wealth

July 25, 2022

Do you remember your childhood dream? I remember I couldn’t wait to get older so I could make my own money. I thought that by the age of 25, I would be driving my own car, attending parties and traveling the world.

Related Read: My Travel and Adventures

But when I was 25, I did not have a car and I was teaching Korean students English (I wonder if some of them are now Kpop Idols). 😂 Prior to that gig, I was an Assistant Store Manager for a coffee shop. For a fresh graduate, it looked nice in my curriculum vitae but I didn’t earn enough money for me to have something to save monthly. My mom even had to pay for my everyday taxi fares.

Fast forward to today, I have the time to write this article and enjoy my coffee at home. One thing that never changed is my idea of a rich life (will share more in a separate post).

I still do not have my own car (more on that in a separate post), but yes, I get to attend exclusive events and travel to different destinations.

So how do we really build wealth?

Step 1: Manage Your Cashflow

Cash flow refers to the money that comes in and out of your account.

  • If you have more money coming in and less expenses, you have disposable income/more savings.
  • If you have less money coming in and more expenses, this usually results in debt (and we don’t want that).
  • If you have an equal amount of money coming in and going out, you don’t have anything to save.

We all know that if we want to have more money saved, we have to increase our earnings and lessen our expenses. It is important for us to understand this concept so we can plan and take action.

Before I went freelance and started my own business, I worked in a multinational company where I earned a fixed salary. I wanted to increase my earnings so I did different side hustles – including making and selling accessories, buying and selling items, etc. If you know Multply and ebay, I had seller accounts on these platforms. Aside from increasing my income, I have also lessened my expenses (which include going out and buying things I do not need).

I always believe that if you cannot handle your Php 1,000, you wouldn’t know how to handle million pesos.

Step 2: Eliminate Debts

Not all debts are bad. It is okay to borrow money or take a loan if the money you borrow can be an asset for you to make more money – for example, a business capital.

Personally, I do not want to borrow from my future self to purchase items that I do not need.

I currently do not have loans of any kind. I pay my credit cards in full and before the due date (and make the most of the credit card points).

If you currently have debts like credit card bills, it is important to pay them off first before investing in stocks or making a big purchase.

Step 3: Get Life Insurance

I am one of those who used to say that I did not need insurance because I am young and healthy, but insurance is something we cannot buy when we need it. The beauty of insurance products today is it gives clients flexibility and living benefits, as well as an opportunity to invest in different stock markets (this product is called VUL or Variable Unit Link insurance).

Insurance provides death benefits, and it advances a portion of the insurance (sum assured) in case you met an accident or you get diagnosed with a critical illness.

Having life insurance coverage gives you peace of mind in case of an accident or critical illness. One can focus on recovering, as the insurance company will cover medical expenses. After a certain number of years, you can even withdraw your fund (from investments) which you can use for your retirement, or for making a big purchase.

It is true that we are one critical illness away from poverty.

If you need to request insurance and VUL calculation, you may send me a message @ruthilicious on Instagram.

Step 4: Get an HMO

When I left my corporate job to go freelance, one of the things that I had to let go is the HMO coverage I felt I was being careless to let go of the benefit. During the time of my employment, I didn’t get to use much of this benefit (which is good because health is wealth). Now that I am a freelancer, I had to pay for it separately as part of my financial budget.

Most of the people I know are too afraid to go to the doctor because of the consultation and medical fees. If we have HMO coverage, it will cover medical expenses like doctor’s consultations, laboratory tests, etc.

Step 5: Build an Emergency Fund

An emergency fund is money you set aside for when an emergency shakes your world. Emergency fund allows you to focus on dealing with the emergency itself and not worry about surviving financially. Some of the emergencies that we may encounter include job loss, pandemic, or home repairs.

Note that Shopee and Lazada sale events are not emergencies. You should also not use your emergency fund in purchasing a house, or car.

The amount of emergency fund varies based on your living expenses and lifestyle. It should be 6 to 12 months worth of your monthly expenses.

At some point in my life, I skipped these steps and started acquiring different things and experiences. Now that I have a solid financial foundation, I am excited to start building my wealth (and maybe, see if one of my Korean students is now a KPop idol). 😀💜

Join me in this journey to financial wellness?

Follow my page that talks about financial wellness and living a meaningful life – The Moneymalist Lifestyle:

For travels and everyday adventures, follow me and @ruthilicious on Instagram.

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