Earn MORE and Desire LESS!
As I read the the blog that talks about the Two Ways to Achieve Financial Freedom, the second of “Generate Passive Income” which is to “Earn More and Desire Less” catches my attention. It is a kind of character that almost all of the Filipinos don’t have though it could be achievable by anyone: it does not require a college degree nor any monetary value to have it; a minimum wage earner can achieve this if there is a will.
Looking behind it, there are factors I can understand why having this kind of behavior is a challenge to every Filipino.
- Social Factor
My elder daughter (elementary grade) is implicitly desiring for the latest gadget (i.e. iPhones & iPads). Though she is still a little girl, the thing that drives the craving within her heart and mind is already sown within. I believe this is common even to us adults. We care so much on what is the latest, what our friends have, what others have. It is part of our subconscious to be Socially-IN. Ayaw mapag-iwanan ng trend and the common option is to acquire loan to buy the House, car, latest gadget, etc… which is if carelessly done, will lead anyone to a negative cash flow month-after-month – an express way to stress, in heavy debt & eventually bankruptcy. - Impression of Others
Mostly, we Filipinos feel good when we look good to others. We use to build good impression and we pay much attention on what others may say about us. The word “galante” and “kuripot” means a lot. In relation to that principle, no wonder why housing loan, car loans, salary loans, pension loans, and other loans are buyable: We feel good when we drive our own car (even if di pa bayad – loaned), we feel good if we reside in a nice home (Pag-ibig mortgaged for 24 years paying 400% interest).
There may be other contributing factors that can be cited why desiring less is a challenge to every one. In contrast to these factors, we are taking out the opportunity of our money to work and earn for us. Let me illustrate below how much opportunity would be lost in embracing a mortgaged home at 3,950 per month compared to just renting 3 thousand and saving the remaining 950 per month consistently. Fast forward, it could be seen that renting is far advantageous than mortgaging a home.
| Housing Loan | Renting | ||
| Rent/month | Save/Invested | ||
| Principal Loan | 240,000.00 | ||
| Monthly Amortization. | 3,950.00 | 3,000.00 | 950.00 |
| After 25 years | |||
| Spend out/Saved | 1,181,050.00 | 897,000.00 | 284,050.00 |
| Paid to Interest (19%pa*) | 941,050.00 | - | - |
| Added to your Assets** | 774,023.99 | 1,259,541.73 | |
| ----------------------------------- | ------------------ | ||
| * 19% pa interest / Diminishing | |||
| ** Includes appreciation of 5% per year of the house and the equity fund value of the money saved and invested in an investment earning at least 10% per annum compounded. | |||
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