How to Accumulate Wealth and Become Financially Independent

Accumulating wealth can be attained through proper planning and determination, no matter what your current financial status is right now. There are a lot of people who want to accumulate wealth but don't know where to begin. I have listed a few guidelines to help you get started with your path to financial freedom. With a little discipline, patience and determination, you will attain your goals in no time.

Start now! 

Money invested today will earn more than the money that is invested tomorrow. Ask yourself how many times you planned to save or invest but never started. If you don't start now, you will always find a reason why you can start tomorrow. Some of the common reasons people tell themselves are "It is pointless to save now since you can only set aside a small amount." and "I am still young I can always start preparing when I am older". These are the most common misconception among young adults.

When you have few responsibilities and a low cost of living, it is the best time to plan for your future. It is when you are young that you will have more cash to spare for your future. Even though if you are earning a low salary, your expenses are also at a minimum. As you grow older, it will be harder to set aside a portion of your income for your future. Once you start a family, there will be more expenses to worry such as rent or monthly amortization, groceries, utility bills, and tuition fees. Starting young will give you an edge when you grow older. Time is the best tool you have in increasing your retirement fund.

Invest Now Even If Your Income is Minimal 

If you think it is better to plan for your retirement once you earn a bigger salary. Well, guess what? by the time you have a bigger income, your expenses will also rise. Your needs and wants are usually determined by how much you can afford. If you think your salary is not enough to start preparing for your future, then you'll probably feel the same thing even if you earn twice what you are currently earning right now. Having a limited income is not a hindrance to investing. Numerous investment products offer minimal initial investments. Banks and mutual fund companies also offer monthly investment programs for as low as Php2,000 a month.

Spend Less than What you Earn

When it comes to accumulating wealth, one must set aside a portion of their income for investment and spend less than what you earn. It doesn't matter how much money you make. What matters is how much money you keep. Tracking your expenses and establishing a budget will allow you to determine and lessen unnecessary expenses.

Try to set aside ten to twenty percent of your monthly income as funds for your retirement. You don't need to restrict yourself from all your wants. It is ok to splurge once in a while, as long as you save something for your retirement.

Stay Out of Debt

Paying all your debts should be your number one priority. The interest you save from your debts is guaranteed savings. The monthly interest from your credit card in the Philippines is at 3.50%, which is equivalent to an annual rate of 51.169%. It is nearly impossible to earn these returns from investing. Paying off your debt first guarantees you 3.5% savings. Instead of looking for investment opportunities to increase your net worth, eliminate all of your debts first.

Prepare for the unexpected

Establish an emergency fund immediately. This fund is vital in keeping you from acquiring debt in unforeseen events such as accidents or losing your job. Try to maintain an emergency fund worth six months of your income or expense. Your emergency fund will serve as a buffer when you lose your income or face unexpected expenses.

Invest in Life and Health Insurance


Most life insurance have options to attach health insurance known as critical illness riders. Critical illness riders provide you with financial protection when facing a life-threatening disease.

Most people don't expect to get these diseases and never prepare for them. Even though the chances are slim that you will suffer from these deadly diseases at a young age, it is always better to be prepared than regret it later. The consequence of being caught unprepared is too high a risk. Being unprepared will wipe out your savings and may put you in a lot of debt. Health insurance will increase your chances of surviving deadly diseases by getting the best medical attention without worrying too much about the cost.

Look for Alternative Sources of Income

Increasing your income will help you achieve your financial goals faster. Whether you work as a freelancer or establish a small online business, each extra income you put in will bring you closer to your financial goal. Make the most of the skills or hobbies that you possess. You can also sell unused items or buy and sell items at a profit. The extra effort you put in earning those extra pesos will go a long way. There will be some instances you will make more from your alternative income than what you earn from your job.

Save to Invest. 

When you build your retirement fund, it is unwise to put it in a bank savings account. You are guaranteed to lose the value of your money once you put it in a bank savings account. The returns offered by these type of products are so low that it is not even enough to counter the effects of inflation. The average interest rate for a savings account is 0.35%, a far cry from the average inflation rate of 3-4%. You shouldn't place money in a savings account for a long time. To increase your wealth faster, you need to let your money work for you. Your primary goal should be to find ways to counter the effects of inflation.

Don't be tempted by investments that offer unrealistic returns. If it sounds too good to be true, then it most likely is. These are probably scams that could wipe out your retirement fund. You should invest your money in sound investment vehicles. There are different investment products available depending on the risk appetite. There is always risk involved when it comes to investing, there is no such thing as guaranteed returns, but you can lessen your risk by diversifying and investing for the long haul.

Unless you know what you are doing, you should diversify your investment. You can split your portfolio with equities, bonds and tax-exempt time deposits. Suppose you don't have the time to monitor your investment portfolio. In that case, you can invest it in a reputable mutual fund company or bank trust department and let the professionals handle your money. Even if you invest in an established company, it is always better to spread your investment in several reputable companies.

If your plan is long term investing, you can take advantage of the stock market's volatility by using a tried and tested method of investing. Cost averaging requires you to regularly invest in the stock market and ignore the price of the market. When the market is down, you can buy more shares. When the market is up, the value of your portfolio increases, cost averaging puts your investment portfolio on autopilot and prevents you from making emotional and unreasonable financial decisions. Most people commit financial mistakes when they let emotions cloud their judgment.

Research, Learn and Persevere

People are usually emotionally involved when it comes to money. If you don't understand what is happening to your money, investing will be an emotional roller coaster ride. It would be best if you learned the basics for you to make better decisions.

Building your nest egg requires a lot of patience and determination. There will be times when fear and frustration will push you to cut your losses and give up. It is important to focus on your goal and don't give in to temptation. Don't rush things. Most commit investment mistakes because of the allure of easy money. People fall for scams due to the urge of getting rich quick.

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