By Jay Ledesma
Man at work and money at work: How to do both
GROWING up, the only way I know how to earn money is by working. Either one gets employed or one puts up a business. In most of the families I know back then, the only source of income was the MAN AT WORK, referred to as the breadwinner. During that time, double-income families were not yet common. The father was usually the breadwinner. Meanwhile, the mothers helped by running the household and/or doing buy and sell activities to add to the family’s income. Everyone was busy working on their office jobs or businesses to earn and support their families. And they did just that. They were able to put food on the table, send their children to school, and afford them some leisures. Having someone (breadwinner) in the family with a good and stable job almost guarantees a comfortable life for the family members.
Everything was okay until the man at work (breadwinner) stops working. Three reasons which may cause this: he gets sick, he retires (or loses employment/business) or he dies. When any of these 3 happens, the family’s financial means are adversely affected for sure. I saw these happened to the people I know. When one of our relatives was forced to return from his overseas employment because he got very ill and was not able to get another employment, they had to rely on whatever savings they had to fend for the family. From having a very comfortable life which most OFW families enjoy, they had to live a very modest life just so they can stretch their savings for his medication. As no other substantial income was coming in to replace what’s being spent, their savings were gone way much faster than they built it.
The same thing happened to our family friend who worked for 3 decades in a government agency. When he retired, he and his wife had little savings and had to rely on his GSIS pension to pay for their monthly rentals and bills, medications and to support their child’s family. Now, we all know that a government pension is not enough. Sad to see that already in their 70’s, they both still have to do some menial jobs to augment their monthly pension. And then, there’s this girlfriend of mine who lost his husband two years ago. Her husband was the sole breadwinner of the family. Savings was not enough so she had to transfer her two kids to another school, move to a smaller apartment and ask help from her parents while she looks for a job.
The above are just some of the realities we have to face when the only source of income in the family stops. When the man at work stops working, it’s as if the family has to stop living as well. But should this really be the case?
I am blessed and lucky that I landed a job in the life insurance industry which introduced me and gave me access to the other source of income — MONEY AT WORK. I learned that while the man at work is the biggest income source especially during the early years of our working life, it should not always stay that way. There should come a point when you are able to put a portion of the money you earned into financial instruments that can earn money for you, even without you working on them. This is what we call money at work. Thanks to this, while me and my husband were earning from our respective jobs, our money was also working and earning for us.
There are various ways how our money can work for us. Here are the most common.
Money in the bank. We earn interest income from our money in the bank. Interest income comes from lending money. It’s what we get when we put money in the bank because technically, we are lending our money to the bank when we deposit it. The bank, in turn, loans our money to other borrowers who pay back with interest too. We get a portion of that interest. The longer the bank is able to loan out money, the higher the interest they can give us. That’s why the interest rate for a 3-month time deposit is lower than a one-year TD. Just by putting our money in a bank savings instrument, it’s earning interest income for us. This was my first money-at-work instrument.
Later on, I discovered that there are other alternative investment instruments that can better cater to our long-term requirements. We were introduced to mutual funds, the investment-laden insurance products called Variable Unit Link (VUL), and stocks trading. These instruments, aside from providing a higher yield, also offer diverse funds, more flexible asset allocation, and management and the expertise of a Fund Manager. But when going into these instruments, always be mindful to be clear with your investment objective (why and what are you investing for?), time frame (when will you need the money? These are usually for the mid to long term), and risk appetite (how much loss can you tolerate?). We should also know when to get in and get out of the market. These have been our guides. So far, our investments have worked the way we intended them to. Some even during this volatile and challenging market environment.
Rental income is what we get from renting a property. A property can be a house, land, apartments, building, vehicles, etc which earns you income because somebody else is using it. That’s why we always hear this sound advice from the learned investors, “Only put your money on properties that can potentially earn income for you. Otherwise, you might just be acquiring a white elephant". We invested in a townhouse and a condominium which served as our residence for some time and which we were able to rent out after. That gave us a good steady stream of monthly income.
You can also experience a windfall income thru capital gains. When your assets increase in value and you’re able to sell them at the current market value, you earn what is called capital gains. This usually applies to real estate. I have a friend whose family is one of the landed clans here in Davao City. Just from the capital gains, the family earned when their properties were bought by the top condo developers, they need not work in their whole lifetime. A number of investors are purchasing pre-selling condos to realize capital gains when they are able to sell the finished product at a much higher price. We hope to realize some capital gains in due time.
My husband and I are now both retired. The man and woman at work in our family have stopped working. But because we were able to put some money at work, we did not have to make a drastic change in our lifestyle. We live comfortably…sakto lang (just enough)! And the best part of it all, we are even able to share and help.
You too can start building your money at work while the man is still at work. Note that the operable word here is “build”. Very few can do this big overnight. But everyone can start small early on. What matters is your resolve, commitment, and discipline to start and stick to it. So that one day, when you decide to stop working, you can rely on your money to work and earn for you…and enjoy life to the fullest!
About the Columnist
Ms. Jay Ledesma writes about local tourism and business bits that delve on investments and insurance.