Saturday July 21, 2018

Financial and personal investments

WE TRY our best to secure our hand-earned money. But hey, we also want to take care of ourselves and enjoy life with family and friends.

Here we explore what I deem to be the two most basic kinds of investments: financial and personal.

Financial investment

Financial investments take on the form of instruments that give birth to more income whether on a short-term or long-term basis. Let’s assume our regular income and emergency fund are secured, and our debts well-managed. We are now ready to maximize our savings by putting some part of it in other investments.

1. Business – nothing beats the profit margin that a business can generate. Handled effectively combined with the tenacity for long hours, multiple responsibilities, competition, and relational issues, having a stable business can assure us both of active and passive income.

The catch? As with life, nothing is certain. We have to take the risk of losing it all along with the possibility of a high income and business legacy that can last through generations to come.

Income, whether from commissions, increasing annual base salary, or professional fees, may also be categorized as business. The essence is the earning derived from work that can hopefully beat inflation and give you enough room for savings.

2. Real estate – this is usually the investment of choice for those who already have a stable business or those with a large chunk of extra money just sitting in the bank. Because real estate takes on more cost than just the initial price, we have to be prepared for brokerage fees, land tax, and capital gains tax, to mention a few. Although it’s quite prestigious to own a land, we must bear in mind that this is not a liquid asset.

Meaning, should you need cash for emergencies and most of your investment is in real estate, you may have to compromise and sell it for a lower value just because you need money urgently. The paperwork involved in selling or donating land is long, tedious, and expensive. Maximizing real estate is to let it grow in value or put a thriving business on its spot.

3. Financial institutions – people engage financial institutions for the sense of security they provide and the ease in which we can conduct our business. Newbies to the investment world choose this type because of its low required minimum amount for opening accounts and the assistance provided by financial advisers. It’s the perfect vehicle when we’re training ourselves to save more and build a financial portfolio. With banks, insurance companies, and other financial institutions, we can learn about our personal investment attitude and the fundamentals of savings and current accounts, mutual funds, bonds, stocks, or diversified funds.

Personal investments

Personal investments are those that on its face seem to be expenses. However, when appropriated wisely and not at the expense of putting ourselves into pits of debts, then these can turn into valuable assets which exceeds monetary value.

1. Education – we heard our parents say that education is a wealth nobody can ever take away from us. It rings true with all generations. Although we spend a lot on it, education equips us with more skills and knowledge that can increase our basic income, broaden our choices, and make us more competitive and updated. It makes us feel confident and able to handle the highs and lows of business or profession. It can also provide us with the opportunity to meet like-minded people who can help us progress in life.

2. Home – one of the biggest comforts we experience is coming home to our family. We want to invest in a house we can call our own. We dream of making it comfortable and full of love.

Financially, though, buying a house is a negative investment. It incurs expenses as long as you have it with all the maintenance and taxes you would need to pay. Having a house shouldn’t be a deadly burden that can cause conflict within the household. It’s painful to see unplanned home purchases go down the drain when the family has to sell it because they can no longer pay the mortgage. A home, just as any beloved personal investment must be parented by careful decision-making process as not to corrupt its emotional value.

3. Car – a car can be a person’s symbol of efficiency, empowering us to go places and can help maximize travel time. The blessed protection of having our own car in the midst of a downpour while caught in traffic can be heavenly. Psychologically, it can take a symbol of security and status. But like purchasing a house, any vehicle is a losing financial investment.

Half of its value is taken away the moment you bring it out of the car store. The constant maintenance and gas expenses are constant. Emotions, therefore, must not take the place of reason and practicality. Choose a car that will be like one of your closest ally, something you can be proud to have but won’t stab you at the back.

4. Travel – the learning you get from travel exceeds any material purchase. Experiencing the beauty of another place, taking a break on a wonderful beach, or meeting people from another culture are memories we take until our deathbed. We deserve to travel. What we don’t deserve is come home to debts after being drunk on vacation-spending. As long as travel does not shoot up our heads and make us sacrifice our essentials, then we’re okay.