I have been working for more than three years now and I’m lucky enough to learn the basics of personal finance and investing even before I got my first paycheck.
I know a lot of people who just earn enough to get by and support their families. I also met people who have no obligation.
Through these people, I learned that it doesn’t matter how much or how little your salary is. As long as you don’t have the proper mindset, it will be challenging to obtain financial freedom.
As the saying goes, it is not how much we earn but how much we keep.
Here are eleven of the most important investment and personal finance lessons that I learned through my first 3 years of working:
1. Never start investing unless you have an emergency fund.
During my first month at work, I was so excited to try investing. In my mind, I know that I need an emergency fund first before I start, but I want to start building my portfolio.
As soon as I received my first paycheck, I opened another bank account, which was different from my payroll bank. After this, I subscribed to its Unit Investment Trust Fund (UITF) Equity Fund.
Note: UITF is a pooled fund that collects funds from multiple investors and is then invested by a fund manager. Equity Fund is invested primarily in the stock market.
Unfortunately, when an emergency came, and I needed money, I was forced to withdraw my investment. The good thing, however, was that the stock market was “up” during that time, and I did not lose any money.
The downside is, my portfolio could have grown more if only I left it invested.
It was a big lesson for me, that to be a successful investor, I should know how to follow the correct order, and not jump blindly to investing just because everyone seems to be doing it.
2. Have an investment plan and stick to it.
Am I a long-term investor or a trader?
Am I conservative, aggressive, or a little of both when it comes to investing?
What do I intend to do with my investment? Is it for retirement, to buy a house or car, or for education?
These are the first questions that need to be answered before choosing an investment vehicle.
Carefully consider where and when you will need the money to maximize your profit.
3. Never stop learning.
In the past three years, I learned a lot from different media. I read books, watched videos, listened to podcasts, attended seminars, and subscribed to blogs.
And each time I learn a little more or refresh my memory.
Besides what I learned from reading, listening, and watching, finding a mentor or talking to someone who has been investing longer is also essential.
They can share their experiences and mistakes. Through them, you can skip a lot of heartaches, losses, and sleepless nights.
As the saying goes, we must learn from our mistakes, but learning from the mistakes of others is a better and less expensive alternative.
Always remember that there is still room to grow. Don’t let pride get the better of you because as soon as pride creeps in, learning will be difficult.
4. There will always be ups and downs.
Unless you are invested in real estate or just parked your money in the bank, you should be prepared to see its ups and downs.
It is the natural behavior of the stock market, so other investments directly connected to it are also affected.
A significant driving factor of the frequent swing of the stock market prices is its investors’ emotions and current events.
5. Opportunities are everywhere; you just have to look.
Investing is not only in the stock market, mutual funds, VUL, or UITF. There are also real estate, Forex, and businesses.
Many people became millionaires using different investment vehicles.
6. Live below your means.
When I was just starting to earn, it was challenging to create a budget. I had to get my priorities straight.
Besides my regular expenses, I was also paying for my sister’s rent while she was reviewing for her board exam.
It was challenging to have some extra to invest in. That is how I applied the principle of living below my means.
Some people may say that I was depriving myself, but in my head, I just don’t want to deny my future self.
It is better to sacrifice a little bit now because things will get easier eventually.
7. Time is more important than money.
Three years had passed, and I can say that time is crucial when it comes to investing.
Even if I started with a small amount, it slowly increased as time went by. Yes, there are ups and downs, but if you look at the bigger picture, you will see that the general trend is always up.
The stock market is the best example of how time is an investor’s best ally. The market may show some ups and downs, but if you look at the 10-year historical table, you will know that it just keeps on going up.
8. Control your emotions.
If time is our greatest ally in investing, then our emotion is our greatest enemy.
When emotion kicks in, it can alter your carefully well-thought-of investing strategy.
A lot of people lose money in the stock market because they get succumb to their emotions. As soon as they see that their portfolio is red, they are quick to withdraw their funds and never touch the market again.
The worst part of this is they give negative feedback to other people wanting to start in the stock market based solely on their failure.
If you can only block any emotional bias in investing, it will make things easier. You will not panic when the market correction happens.
As the saying goes, do not put all of your eggs into one basket. The same is true in investing.
It is best to have investments in different vehicles so that if the market is down in one category, it will not pull your whole portfolio.
10. Pay yourself first.
If you still don’t have a budget plan, please create one. It will be easier to put your finances in order.
The idea is as soon as your payslip arrives, put a portion (usually about 10 to 20%) of your income into your savings/investment fund.
Because if you don’t, you will just ask yourself why you are unable to save anything even though you earn a significant amount.
Paying yourself first will allow you to budget because you have to admit, our expenses are unlimited.
11. Learn to give back.
It is good that we are starting to earn, save, and invest, but we also need to know that our portfolio is unimportant.
We should learn to give back and share our blessings with others, especially our family and the less privileged.
Let us always remember that money is only a tool, and we should use it for the betterment of ourselves and others.