Six Steps To Financial Freedom

Being a member of the International Marketing Group (IMG), I am so blessed to have learned the concepts of financial management at this early stage of my life. I may still be starting out, but at least I've got the fundamentals of financial management correct now.

I've always believed that God wants me to be responsible for my time, treasures and my talents. I have worked hard to manage my time and talents but it is my treasures that I have no idea of managing.

My best friend in high school introduced me to IMG just this year 2007 and I am glad I became a part of the company. My blog schedule for today is on financial management so I want to share with you IMG's 6 steps to Financial Freedom and how it has applied to me:

1.) Increase cash flow


a.) Earn Additional income

b.) Manage expenses

- I have strived to follow the first step by earning both active and passive income through IMG's system. I have also managed to teach part time and at the same time explore the possibilities of earning income online. With regards to the expenses, it is important that I list down all my expenses and work within a budget. That is what I had been doing now for months.

2.) Manage debt

a.) Consolidate Debt

b.) Strive to eliminate debt

- I've managed debt by resorting to lower interest rates. I have availed of balance transfer features. The regular interest charged by credit card companies is 3.5 % per month. But if you avail of balance transfer features by "transferring" your debt to other credit cards then you can avail of 0.99 % interest per month. I have discussed this extensively in my post entitled "Getting out of the credit card debt mess."

3.) Create emergency fund

a.) Save at least six months income

b.) Prepare for emergency expenses

- This is something I have not done yet, but will be planning to do in the months or years to come. Once debt is eliminated I can now start to save at least 6 months income. This is just to ensure that you are liquid enough in case there are some things that must be bought with in cash. This could also be used for emergency expenses.

4.) Ensure proper protection

a.) Protect against loss of income

b.) Protect Family assets

- I have achieved this through availing of insurance. Insurance policies protect loss of income by compensating the person insured and his loved ones if ever the person insured losses the capacity to produce active income because of death or accident. Protecting family assets is also achieved by availing of non-life insurance such as fire insurance etc.

5.) Build long-term asset accumulation

a.) Outpace inflation

b.) Reduce taxation

- This is normally what is known as the "investment" stage. If you are "investing" in something that is less than the inflation rate then you loose in the long run. Always make sure that you are investing above the inflation rate. For some who still does not understand what inflation rate means and how it could affect you I will probably discuss it in a future post. Most experts suggest that if you are in the Philippines you should invest in something that is above 7 % (Even if now the inflation rate is below 2 % +) Currently you cannot put your money in the bank an expect a return of above 7 % since interest for savings is way below 2 % and interest for time deposit accounts is from 3 to 5 %

Clearly, the only way to achieve this is through the stock market, mutual funds investments and other types of investments giving you a return of more than 7 % per annum.

With regards to taxes, remember that the government taxes income, not wealth.

6.) Preserve your estate

a.) Help Reduce estate taxes

b.) Build a family legacy

This is something that I plan to do probably 20 years from now. There are a lot of ways to achieve this. I would probably tackle this in another post since this is a somewhat complicated topic. ]

This is the overview of IMG's financial strategy which I have strived to religiously follow. The steps must be followed sequentially. It is advisable that you should go through them one step at a time. However since I have learned about this just lately, I have managed to invest without first eliminating my debt. I should have eliminated my debt first and invest later. But I believe that it still worked out for my advantage since the year 2005 to 2010 is considered by many experts as "a window of investment opportunities" considering that the stock market is at it's highest and the fundamentals of the Philippine economy are in place. I will discuss more on financial strategies on my future posts.

Zigfred Diaz is Vice president for operations for a group of family owned corporations. He is also a Financial & Real estate broker, lawyer, law professor & writer. He regularly blogs on diverse topics including financial management and investments. Visit his blog today at www.zdiaz.com

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