The beginning of my journey towards financial freedom

A few weeks ago, bored and with nothing fun better to do, I clicked on and watched a personal finance-related video that popped up on my feed. One video turned into another, and another, and another. It was a black hole I could not and did not want to get out of. It was like I was living under a rock and I finally saw the light. These videos made me realize how bad the state of my financial health was and how little I knew about finance in general.

Both my parents are entrepreneurs who grew their business from nothing. They're quite good at it too. Not Henry Sy (SM Holdings) levels, and let's face it not very many are, but good enough to improve our family's financial status and now we're a comfortable middle class. This distinction is important because my parents both came from poor farming families. As their eldest child, I can look back and see how much our station has improved over the years --from living in an apartment and not being able to afford vacations that required air travel, to buying our first home (with a lot of help from HDMF and bank loans), my dad being able to afford a "nice" car, to my mom buying investment properties as pamana (inheritance) for her children. I am very, very fortunate. I know that and I am thankful every day.

I mention all this to illustrate that while my parents did alright for themselves, they didn't really put much emphasis on educating us, their children, about money. You could say they are street smart and business savvy but they didn't teach us those skills that are mostly instinctive to them and that they learned through trial and error. They were too busy earning a living and our duty as children was to do well in school.

My mom often told me to save, and she opened savings accounts for all her children, but she never really told us why and what for besides the vague "para may magamit ka" (so you have something to use). "For your future" was the unspoken implication.  My high school and university education weren't any help either. I went to a science high school and my university education was in the health sciences. For all intents and purposes, I had no financial education to speak of. As a young professional, I did I wanted with my income. I saved some of it, I was generous with gifts to friends and family and to myself. I spent and spent because I had no plans for my money. I didn't think to make plans.

Going back to the YouTube thing, I learned a lot about personal finance that I never knew before and that I'm still learning about. There were steps I should have and could have taken when I first started working, mistakes I made along the way that I could have avoided. I'm just glad my eyes were opened now rather than later. So following their advice, I made a plan. My personal finance journey starts here.

Financial health check

I took a close look at where I am in life and the state of my finances, my assets, and my liabilities. I am in my early 30s, recently graduated from medical school, unemployed but with no debt or liabilities thanks to my parents who graciously underwrote my tuition. I don't have to pay for anything. I don't have to worry about food or utilities. I have a small amount of savings -- a depressingly small figure when I compare it to my younger siblings. Yes, they're gainfully employed and I'm not. That's entirely beside the point. In my culture, the eldest child usually leads the way. But when I went back to school full time and my siblings graduated from university one by one and entered the work force, that dynamic reversed. My youngest brother and I often joke that he's my kuya (older brother/chin oppa to you kdrama-loving folk) who works hard to give me spending money.

Anyway, I digress. I wrote down what I had - cash, e-wallets, savings accounts, foreign currency gifted to me by relatives, and my only real liabilities, which are app subscriptions and voluntary "contributions" to health insurance and retirement fund programs by the Philippine government. I have property in my name but I don't really consider it mine. It's my mom's. I put it all on a spreadsheet I got off a free template made by a finance YouTuber. It was really helpful and gave me a good overview of my finances.

Goal setting

"A journey of a thousand miles begins with a single step" sayeth a famous Chinese proverb. And now that I knew my starting point, I could decide on a direction to take my first steps in. I thought about my financial goals. This is important because having goals will set the tone and direction of the entire plan.

• What do I want out of life? Be financially comfortable.
• What age do I want to retire? 55-60 years old. The earlier the better.
• Do I want a family/have dependents? I don't know. But I plan to take care of my parents as much as I am able to.
• Do I want to own my house? Yes, if I can afford it.
• Do I want to be a chill retiree or travel the world? Definitely travel the world if I can afford it.
• How much would be a comfortable amount to retire on? I'm still researching this. What works for others, may not work for me.
• Do I still want to be working past my retirement age? Yes, but only because I want to, not because I need to.

Making a plan

Finance resources and experts would say that, at my age, to achieve my financial goals I can be more aggressive with investing depending on my risk appetite. Caveat is I have to be somewhat financially stable and have disposable income. I am unemployed. I'm technically a postgraduate medical intern, but everything's virtual and I won't get paid (a nominal amount) unless we go back to in-person internship. It doesn't feel real. You know what I mean? I can only work with what I currently have and make semi-concrete plans.

Short- and medium-term plans:

• Make a budget and stick to it. This one's easy since I don't have many personal expenses.
• Build an emergency fund: Save X amount that I'll store in high yield savings accounts. (Digital banking is the way to go. Traditional bank returns are peanuts in comparison.)
• Capital preservation + modest growth: Set aside X amount and invest in relatively low-risk instruments with short-term horizons and money market funds. (The former is higher risk than the latter but the ROI is decent and I get my money back plus interest in 9 months. I'll hold the initial capital there to reinvest and save the dividends.)
• Build my credit score: Get a secured credit card by "holding" X amount in a savings account, then after a few months to a year, apply for a regular credit card. This is necessary because I've never had a credit card and would not be approved for one now. I grew up in a family that feared bad debt and the many horror stories of credit card debt did not help. It wasn't until a few years ago that my family as a whole started to look at credit cards more favorably. Credit cards are the easiest way to build up my credit score and potentially help me secure loans should I need it in the future.
• Capital growth and learning opportunity: Use a small amount of seed money and invest in crypto trading. The plan is to grow that small amount and reinvest any gains back into crypto and repeat cycle. I realize that I may very well lose the initial capital and that's fine. The main goal here is to get a feel for crypto and trading. Crypto is, I feel, easier to get into than stocks because of mobile wallets and lesser entry requirements.
• Diversify my investment portfolio: Study index funds, mutual funds, bonds, stocks, etc. I don't have much money to invest so I have to carefully pick promising instruments that are also within my budget.
• Generate income: I can fiddle my thumbs and rack my brain all day thinking about how to grow my savings but without steady cash flow, I won't get far. I have started plans that'll hopefully generate passive income over time however small, and I also plan to start an online shop. My youngest brother has found modest success there and it's something I can do part time even as I study for the boards.
• Pass the physician licensure exam, get a job: If I can take the licensure exam (at this point I'm not sure my batch will be allowed to due to COVID-induced problems) and if I am fortunate enough to pass on my first try, I don't know yet if I'll immediately go into hospital residency (specialty training). Right now I'm leaning towards starting immediately just because I feel like this pandemic has been one really long, stressful "vacation." I want to be gainfully employed again and have a steady stream of income. But, and this is a big but, I'm also deathly scared of contracting COVID-19 and passing it on to my family, so I'm not  averse to the idea of postponing residency and moonlighting for a while. I came to terms with the possible consequences of delaying my career development last year when I was considering postponing postgraduate internship.

Long-term plan:

• Retirement fund: Set aside X amount each month and invest in low-risk, medium to long term instruments that assure capital preservation. Right now I only have Pag-ibig MP2, which has higher yield than even digital banks AND is tax free but the capital is locked in for 5 years. The amount I invest within these 5 years will be the starting point of my retirement fund. I even made a 10-year projection on Excel assuming I could continue investing a set amount for 10 years (two investment cycles). As I earn more, the amount of money I can put in my investments will also increase. After 10 years, depending on what I gain from this plan and my then financial status, I will make a new RF plan. The goal for my RF investments is to generate enough passive income/dividends to comfortably live on after retirement.

There's my plan for now. I failed to mention figuring out what kind of investor I am, my risk appetite, and time horizon but this post is long enough. For the record, I am a moderately conservative investor. I really can't afford to be more aggressive than that. But with time (and disposable income) who knows. You'll notice I currently do not have provisions in my plans for a car, house, or even children. I know I want to set aside money for my parents too. I just figured it's too early to make those plans given the current state of my finances, so this plan will suffice for now.

Resources

There are lot of resources on the internet but these are the ones that I found particularly helpful for me as a beginner.

• Blogs and websites: https://katiescarlettneedsmoney.com/, crypto and secured credit card articles on Moneymax.
• YouTube: Thea Sy Bautista (millenial tita - her budget spreadsheet video was my gateway into this world), Nicole Alba (personal finance for beginners - she's funny!), Minority Mindset, and many more videos on individual topics. Not my favorite but I did learn a lot from them: Vince Rapisura, Rampver Financials. This video on how to read the mutual fund fact sheet was the easiest to understand. Humbled Trader for a look into day trading.
• Books (only listing the one's I'm reading/planning to read soon): Rich Dad, Poor Dad by Robert Kiyosaki (Very insightful. It's a long time best seller for a reason!), Increase Your Financial IQ by Robert Kiyosaki, The Compound Effect by Darren Hardy, Trading For A Living by Dr. Alexander Elder.
• Reddit PH invest community, specially their FAQ. There are more resources in this FAQ link sorted by topic and by medium.