In the workforce, employees always look forward to their monthly salary. After getting paid, people tend to celebrate with their friends or place their earnings in the bank. However, this way of living can cause you to have problems later on, especially during Enhanced Community Quarantines. To help you, dear reader, here is a method on how to divide your salary in a way that your long-term needs will be provided for. If you follow this method, then you will be able to remain financially independent in the long run.
The Bank is the Place to Store the Funds You Need Right Now
When you get your salary, be sure to place the money that you are sure you need to spend immediately (meaning for the next 6 months) in the bank, for it is easy to withdraw your funds from a bank account. However, the bank is not the place to put long-term savings, for the average historical inflation rate in the Philippines is 3%, while bank interest rates are around 1% or less.
Remember, what you save is intended for future expenditures, but the bank is not for long-term savings because inflation will eat up the purchasing power of your money.
Invest in the Stock Market
For the funds that you don’t need to spend, I would suggest that you place them in the stock market by buying shares in banks, utilities and other so-called blue-chip companies. These companies will never go broke under normal circumstances, so the risk will not be as great. Also, buying shares in your bank will allow you to get a dividend, so you will get a cut of its profits, which came from their investing the money you deposited in your account.
Another benefit of investing in the stock market is that it prospers due to inflation. So, if you buy shares of stock, you will be taking advantage of inflation, and thus, protecting your money from it. As a result, the stock market is a great place to grow your money, if you are willing to take the risk. Just make sure you buy shares in multiple companies, to avoid placing all your eggs in one basket.
If Risk-Averse, go for Government Bonds
For those who are averse to risk, I would highly suggest that you use the money you wish to invest to buy government bonds. When the government sells bonds, it borrows money from the buyer, then it pays the interest every year until the maturity date, when the buyer gets their principal back. Government bonds are safe investments, since the state can print more money to pay its debt.
Also, your money will be used by the government for its projects and livelihood programs, so you will also be helping the country when you buy bonds. So, buying treasury bonds is not merely an investment, but a patriotic act as well.
Other Ways to Allocate Your Salary
In the end, since your salary is your money, you are free to allocate it any way you wish. However, I highly recommend that you invest your funds in bonds and stocks in order to beat inflation. I also recommend that you get some life insurance too, so if something unfortunate happens (hopefully not), your family will not be in want. Also, start preparing for your retirement while you are young, so you can assure your family of a brighter future even if you are no longer around.