April 20, 2008

4 Steps to Financial Freedom: ASPIRE

Posted in 4 Steps to Financial Freedom at 11:32 pm by kimsan23

This is where I start plotting my very own financial calendar. Last week, I briefly discussed The 4 Steps to Financial Freedom. I didn’t elaborate much on the personal application of these steps then so today, I’m gonna do just that.

STEP 1: ASPIRE (for your financial goal)

Dream about owning your own home, being debt free and having enough money and assets that will work for you through means like investments and deposits. Make a plan that you feel will get you to your financial goal.

The first step in the first step is to IDENTIFY LIABILITIES. The reason we’re listing this first is to develop a a sense of financial urgency. What do you owe people or agencies? How much debt have you incurred?

My liabilities list:

  • Monetary Loan – 30k (0% installment plan 6-mos.)

Second, RECOGNIZE and LIST DOWN your major assets that do not involve risk investments. You need to be able to determine your actual net worth. Assign monetary value (research to get accurate figures if you don’t know) to your major assets if they are not in the form of savings accounts or other investments. Identify your sources of income for each if applicable.

My assets list:

  • Car – 120k
  • Land – 200k
  • Savings – 100k (since June of 2007 – out of micro financing, small businesses, freelance jobs and salary)

Third, APPROXIMATE RISK INVESTMENTS. List down how much you have put in stocks, businesses (w/ running ROI), mutual funds and other risky enterprises. We do this to see if out risks cost higher than our assets.

My risks:

  • Business 10k – (ROI due in 2010)

Fourth, DO THE MATH. Compute for secure assets vs. debt. If your assets currently over-shadow your debts, then you are financially secure. If your assets total lower than debts, it’s time to try making your assets work for you to help you pay for your debts. If you own some land, try to see if you can lease it. Or maybe your current bank account isn’t the right one for you, you might need to switch to something with a bit of higher interest rates. As for the risk investments, you identify them to predict possible losses in the future. Do your assets cover those losses? If not, than play your investments smarter. Every time my business shares turn a profit, I actually take half that profit to put into savings. The other half, I re-invest into the business or I use when I micro-finance.

Fifth, SET GOALS and TIME LINES. Setting goals will help you determine how much you need to earn in a particular time frame to get to them.

My Goals:

Short Term:

  • Finish off debt by June 2008 (no extensions)
  • Make an extra 2-3k a month on small businesses
  • Buy life insurance by the end of 2008

Long Term:

  • 1 Million Pesos in 2010 (CASH)
  • Start buying a house by 2010
  • Retire by 2016 at the earliestL

Lastly, PLOT FINANCIAL PLAN. To be honest, I haven’t really plotted any of my long term goals just yet as I am still starting to explore personal finance. Still, I believe it is wise to do this early on (so, let me start tomorrow with a template). On your plan, include approximate amounts for savings, risk-investments, as well as emergency needs. Make a plan for each of your assets as well — it’s a smart thing to know where you envision them to be in a few years.

ASPIRE summary:

  1. IDENTIFY LIABILITIES
  2. RECOGNIZE and LIST DOWN ASSETS
  3. APPROXIMATE RISK INVESTMENTS
  4. DO THE MATH
  5. SET GOALS and TIME LINES
  6. PLOT FINANCIAL PLAN

Of course I’m aware that my goals could change but hey, let’s see how it goes in a few months or years or so. I will definitely work on a template for this. At least when my goals shift or change, I can easily see what my options are if everything is listed down for me.

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1 Comment »

  1. al samson said,

    To know more about stocks, stock market and stock investing, you can visit our PSE Website- http://www.pse.com.ph and PSE Academy Website- http://www.pseacademy.com.ph .We hope that we could help you give information to your readers about basic stock investing. Thank You.


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