Learning The Hard Way
Educating ourselves and learning from other peoples’ experiences will help minimize learning things the hard way
Throughout my 34 years of existence, I never really had formal education about managing money. There were no courses about personal finance. So most of what I know comes from experience or from reading blogs by financial-freedom advocates, like Randell Tiongson or Dave Ramsey, and going through courses like the Registered Financial Planners program. Reading and formalizing my knowledge through studying gave me a better understanding of the different aspects and tools in personal finance. But it was the experiences that really taught me lessons that stick. These are lessons I had to learn the hard way.
Debt is not healthy—emotionally and psychologically. When I was around 26, my mom broke the news that our family business was in serious trouble. My mom owed different parties debt reaching nearly seven digits in value. She was having difficulty funding checks issued to suppliers or to those she owed money to. The business’s cash flow was practically negative for years even with the receivables. It came to a point where my mom had to pawn her jewelries (without my dad’s knowledge) just to pay or fund checks. Our situation rocked our personal relationships. My parents fought, we had sleepless nights. I couldn’t focus with work and was always worried about my mom. Accumulating debt is not financially healthy, but more than that, it can strain relationships and challenge our emotional stability.
Be ready to invest, especially during the bad times. I started investing at the age of 28. I invested in mutual funds and put P20,000 just to try it out. I was not really familiar with this type of investment other than it was popular in the forum I frequented. A few months after I made my investment, the global financial crisis broke. I got so disappointed and frustrated, as my investment lost around 40 percent in less than a year. I knew it was paper loss, so I did not withdraw my money, but I didn’t invest again. Three years after, that investment nearly doubled. Had I invested at the point when the share price was close to rock bottom, I would’ve even tripled my earnings.
“Trying out” stock investing can be dangerous. Four years ago I got my feet wet and started investing in the stock market. Honestly, I was one of those who just wanted to ‘try’ it out without really any strategy or understanding of how it works. I just had the money. If the stock market was the small poultry in your backyard, I was the headless chicken running around not knowing what was going on. I monitored through my online broker account from 9:30 AM to 3:30 PM trying to figure out which stocks to buy and when. I bought stocks that were famous in forums, and then I sold some. Had I just invested that money to learn before I dipped my feet, I wouldn’t have wasted time. Still, it was a lesson for me to study before investing in anything.
Owning a business is not sure money. In 2009 I had about P150,000 of savings I wanted to use to start my own business. Back then, franchising was the “in” thing. But since I didn’t really have a significant capital to get a well-known franchise, I got a smaller franchise that sells hot dogs and burgers. I spent half of it on franchise fee and the remaining P70,000 was used to revolve to sustain operations. During that time, I had a day job as well, so every day was a grind. I didn’t have a healthy cash flow with most days I was in the negative. This was where I realized how similar business and personal finance are in some ways. I lost my P150,000 in eight months due to poor planning, poor cash management and lack of business sense. My learning here was that business is not a guarantee to making money. In fact, it has the highest risk compared to other investment instruments. But with good cash management and planning, businesses can be a worthwhile investment.
Experience is always the best teacher. However, when money is involved, a bad experience is a bitter pill to swallow. Thus, educating ourselves and learning from other peoples’ experiences will help minimize learning things the hard way. And I hope these experiences of mine would help you sidestep the pitfalls as you journey toward financial freedom.
Jeremy Jessley Tan is a Registered Financial Planner of RFP Philippines. He is currently a Wealth Portfolio Manager for one of the leading insurance companies in the Philippines.
Source: http://www.businessmirror.com.ph/learning-the-hard-way/
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