Inflation, according to Wikipedia, is a rise in the general level of prices of goods and services in an economy over a period of time. Despite the notion that it is a negative attribute, it is not necessarily bad. It can be anticipated or unanticipated. Inflation, along with other factors, is an indicator of a growing economy. The Philippine inflation rate has slowed down to 2.8% as of June 2012. Historically, we were averaging at 9.1%. The purchasing power of the peso is getting stronger. That's great news, right?
If your entire life savings is stuck in a regular bank savings account, you probably won't regard this low inflation rate as good news. If you have been observant, you'll notice that the bank interest rates this year have already dropped from 0.05% to 0.0375% per annum. That means if you have ten thousand pesos (Php 10,000) deposited in your savings account, by end of one year it will only grow by three pesos and seventy five Centavos (Php 3.75). Totally uncool! Now imagine those whose savings accounts are just within the minimum deposit balance, feeding these piggy banks with the hopes that it could sustain and improve the standard of living will be a long tedious process.
The fact is regular bank savings interest rates will never go higher than the inflation rate. So if you're aiming for a secured future, a wise decision to live by is to ensure that your money is growing more than the country's current inflation rate every year. Is that possible? Definitely!
Here are some ways to strengthen and boost your wealth portfolio:
- Keep an eye on your earnings. Maintain a basic excel file where you can track your finances. The goal is not to be a scrooge; rather, to form a habit of discipline. Compute for the actual minimum amount you need to achieve by the end of the year. In doing so, you'll get focused (and hopefully, motivated) by knowing how near or far away you are from your annual target by the end of each month.
- Having a bank savings account is a good thing. But aside from a regular savings account, your bank surely has other products with higher interest rates. Know your options, talk to your bank officer.
- Create an investment portfolio. Bonds, mutual funds, treasury bills, unit trust investment funds, and stocks are not meant to scare people away. Nowadays, participating in these types of investments is as easy as depositing your money in the bank. There are online stock brokerages that only require a minimum stock investment of Php 5,000. On top of that, they offer free seminars. Similarly, banks are now offering products for as little as Php 1000 per month in form of automatic savings so small depositors could get to enjoy the higher yields of these types of investments.
- Don't put your eggs in one basket. As you start you investment portfolio, bear in mind that instruments with higher yields also have higher risks attached to them. Minimize risk by diversifying your portfolio. By this method, when an industry crashes, your investments in other sectors will be your safety net. Aside from monetary investments, plan out to purchase assets whose value appreciates over time.
- Protect your wealth. Consider getting a life insurance. It will give you peace of mind knowing that in the event of your death, your loved ones will be financially secured. Insurance companies have a vast selection of products which could cater to your needs and buying capacity.
You'll probably think of more ways on how to strengthen your wealth portfolio. Be creative, stay legal, and keep an eye on your health and family life too. After all, this article is only intended to guide you in building your wealth. There is only one person who is primarily responsible in giving you the perfect balance for a successful work and family life --- you.