You do have a choice. Yes. You read it right. By continuing to read this blog, you opted for it.

This is not an article about surrendering your free will or freedom. This is about YOU, cultivating an environment for you to succeed by limiting or eliminating your options which will ultimately lead you to achieve your goals.

I am a fan of this concept. And if you have had a coaching session with me, you know that I am an advocate of this principle.

The basic premise is similar to the story in 1519 of a captain, Hernan Cortes, who set sail to Veracruz, Mexico with his crew. Upon arrival, his men became weary and scared, with hopes of turning back home but Cortes had his men burn their ships, leaving them NO CHOICE but to press on! This POWER, allowed Cortes’ men to complete their mission because the retreat was no longer an option!

This POWER OF NO CHOICE can tremendously help us achieve whatever goals we may have specially on taking charge of our finances.

Willpower is a limited resource. I’m pretty sure that there are a lot of instances that you have been battling with yourself against a decision of getting a bite of that delicious brownie or keeping your diet regimen intact; a fight between you and your other self whether to buy that bag and latest gadget or to stick with your current budget allocation; to swipe that credit card or not for that beautiful necklace. Sooner or later, your willpower will deplete and you would give in, oftentimes, with regrets afterwards.

However, what if, you don’t have a choice? What if you didn’t go to the brownie shop, hence no opportunity for you to be tempted? What if you don’t own a credit card, what are you going to swipe your purchase with?  This is the Power of No Choice – and this has helped me take charge of my finances.

How?

1. Eliminating my credit cards. At the end of 2018, I decided to cut off my last credit card. By giving myself zero opportunity to use a credit card, I no longer have a choice but to only purchase items that are part of my budget. Remember, that consumer debt actually decreases your cash flow, hence, limiting you to allocate more money to your goals. You can read my credit card blog through this link.

2. Working on full commission-only without any salary. I have practiced my chemical engineering profession for 8 years in the UAE. I had a decent salary but when I found my passion for educating the Filipino community about personal financial management, I moved to work as a financial advisor. This allows me to get trained and certified in the industry while teaching back what I learn. I was given two remuneration options by the company: 1) basic salary plus commission; 2) full commission only. It was a tough choice. However, I had to “burn the ship”. I chose the latter.

Most of us would just be so complacent when we are receiving our regular salary. Whether we work hard or just playing pretend, we are receiving the same salary anyway, so why bother? However, by getting salaried on full commission only, I don’t have a choice but to work hard because I have bills to pay. And the interesting thing about this as well is that “sky is the limit” for your income. Your revenue is directly proportional to your effort.

3. Getting Whole of Life Insurance. The importance of life and critical illness protection is definitely adamant. Whether you get a term or whole of life insurance, that is all up to you. However, you have to get at least one. I know there are different schools of thought on this and various opinions (e.g. BTID vs VUL) but I’ll be specifically addressing insurance in the next few weeks. I just want to point out how the Power of No Choice plays in this example.

I have a unit-linked whole of life insurance; this means that I am insured all throughout my life by paying only for a specific number of years (e.g. 10 years). And after that, the investment component of the said insurance is expected to pay the cost of insurance for the rest of my life. The insurance is set up in such a way that if I miss few consecutive payments, I will no longer be insured. And if I am not able to reactivate it (“reinstate” in insurance industry term), my insurance policy will lapse and whatever I have contributed may just be gone to waste. Hence, I don’t have a choice but to make sure that I won’t miss any monthly premium payments. I am “forcing” myself to “save” in order for me to be protected in case when the inevitable happens.

4. Investing in locked-in mutual funds. Same thing with insurance, you are actually “forced” to save on a monthly basis because your savings invested in mutual funds may lapse without value if you miss some payments. It is also locked-in for a number of years and if you surrender before the maturity of your investment, then you will be fined with hefty charges. This actually discourages you to stop your savings plan thereby giving you no choice but to continue saving up for your goals.

The Challenge of Voluntary Savings

If we are really good at savings, have the willpower and the discipline to do it on a regular basis, we could have already saved a lot of money in our bank accounts. If you do have, then congratulations! Sadly, this is not the case for most of us.

You can always try to save some money in a piggy bank, savings account, or any voluntary savings scheme but the challenge is, no one is “forcing” you to save up, because like I’ve said, it is voluntary. You have a choice to either put some money or skip it for now. And most likely, you would probably end up skipping for reasons like, “I need the money today since I’m traveling”, or “I will double up the amount next month”, but the sad truth is, as the months and years go by, you will still end up asking yourself, “Where did all my money go?”.

Don’t get me wrong. I do invest in voluntary savings plans like Pag-IBIG 2/MP2 (which I always highly recommend), mutual funds, and a few stocks by doing it on my own. This will definitely lessen the charges (e.g. fund management charges etc) thereby optimizing my profit. However, as I’ve said, if you just do it on your own, then you will most likely not be able to save at all because you have a choice not to. This is like just going to the gym. You can exercise by yourself and may decide to skip the gym today, or you can pay an instructor to “force” you to come to the fitness club and do your circuit training routine.

Lastly, I believe, all of us are all seminaristas. We may not attend formal training and workshops but we all learn from our own individual and unique experiences. It is indeed the greatest teacher.

We came from a not-so-well off family. In the early years of our lives, we lived in an abandoned hospital, our room was the nursery and we literally sleep on hospital beds. Yet, I am very proud of it because I have used that experience as leverage to propel me to where I am right now. Ever since poverty for me is never an excuse for growth. It should not hinder us from reaching our dreams. Hard work, passion, resourcefulness, and perseverance will definitely lead us to where we want to be. We all have the resources, everywhere. It’s is how we use and optimize them that matters.

Fast forward, I and my 2 sisters have graduated already from the university and living our own lives now. I’m currently passionately doing what I love and earning a substantial income but I still felt that I was financially poor. And this belief has led to a lot of insecurities and fears in the past.

It was only later when I attended Tony Robbin’s Unleash the Power Within (UPW) Workshop 2018 that I realized the root cause of the “Financially Poor” belief. It was the idea that,

Don’t get me wrong. I totally love our country. It is just that, having been colonized by the Spaniards, Japanese, and Americans, it has totally affected our view on how we value ourselves as Filipinos. A close friend of mine jokingly said, “We Filipinos are racist. Not that we hate other races, we just believe that our race is inferior than others.”

The inferiority complex is so strong that it has greatly influenced our life decisions. Some of our fellow Filipinos would even migrate to other countries in order to change their nationality. “Their passport is more powerful than ours”, so they say. Some people would probably argue that they are just being realistic because the other country is “BETTER” for their family, children, and retirement. There is definitely nothing wrong with that. I am just trying to point out that the drive to migrate to other nations can be caused by this inferiority complex.

I believe this is not endemic only to Filipinos. When I shared this limiting belief to another attendee, an Eastern European, I was surprised because he shared the same view. He admittedly said that being an Eastern European makes him believe that their nationality is lesser than other European nations.

How was this limiting belief affected me in the past? When I met with “white” clients, or someone with a British or American accent, the mind automatically shifted to a “submission mode” or an “inferior mode”. The mind then reminded me by telling me “Hey Allan! Tread carefully. They are better and superior than you! Be sure to please them!”. As a consequence, I ended up having fears of ridicule, fears of failure. And what’s worst? Not even trying to mingle with them at all! It has really negatively influenced how I decided in terms of relationships, career, and business dealings.

However, all these fears and limiting beliefs were eradicated when I attended Tony Robbins’ workshop. As Tony would call them, “That piece of b*llsh*t crap!”

What was amazing about the 4-day UPW workshop, even with thirteen thousand attendees, was the ability to process yourself from the very core and eliminate the fears and limiting beliefs which hinder you from growing, and then propel yourself to the person you want to be, like a slingshot stretched to its maximum then suddenly released!

Day one was all about how the six human needs affect our choices and even compromise our values. It was also about conquering our fears. In fact, we walked barefoot on burning coals! We became certified FIRE WALKERS that day!

What I think was so powerful for me was the third day activity when you have to leverage with the worst possible future scenario of yourself and/or family if you are not able to achieve your goal or the person you want to be.   I believe it was more than 2 hours preparation in aligning our minds, our physiology, and the emotions as thirteen thousand souls screamed, howled, and cried. Trust me, it was like you were in “hell”, with so much anguish and emotional pain, you want to liberate yourself as rapidly and exponentially as you can. And after almost an hour of “suffering”, you rise up from the ashes, reborn, like a Phoenix, totally recharged, renewed, driven, empowered, and unleashed!

The Tony Robbins experience for me is truly life changing. I highly recommend it to all of you because I believe, real triumph does not come from the monetary value you gain, or from a successful career, or flourishing business. It comes from the Mastery of Self.

It is important to understand that there are specific steps that we need to follow in order to achieve financial independence.

Each step has to be strengthened before proceeding to the next to stabilize our financial foundation. Sad to stay, most of us Filipinos would take the shortcut to “Investments” without making sure that the first few steps of the ladder are well established. Like in any construction, building a solid foundation is critical. Otherwise, everything will just collapse.

1. Financial Awareness.

This is the pre-requisite before you start building. You have to know your ground on which you are going to begin your journey towards financial independence. This means that you should completely assess your current financial standing, your assets, and liabilities. In addition, you should at least have access to knowledge and resources which will assist you along the way. This is where Investhusiasts can aid you. Aside from the resources, belonging to a community of like-minded individuals helps you to stay focused.

2. Increase Cash Flow.

Before even increasing the cash flow, make sure that you have a stable income. This could mean a stable job that can provide for yourself and your family’s necessities. When we talk about increasing cash flow, the first thing that would usually come into mind is getting an extra job. However, we usually overlook the idea that reducing expenses actually result in extra cash. That is why having a detailed monthly budget comes in handy. This will allow you to see where your money is going and therefore be able to take control of your finances, and ultimately have the funds needed to achieve financial independence. 

3. Eliminate Debts.

Debts can really drag you behind if you are aiming for financial independence (read my blog on Credit Card Debts here).

There are two types of debt: good debt; and bad debt. Bad debt is used for a purchase that does not provide any financial return. An example is the purchase of consumables. Good debt is used on purchases that give higher returns than what you are paying for like a loan made for a rental property with current rental income higher than the mortgage.

Some proponents of debt elimination would argue that any debt is bad debt. However, some financial mentors, especially those involved in the property market, would also recommend good debts (e.g. leveraging) as long as your monthly debt settlements should be lower than the income gained through your loans. Nevertheless, it is important that your total debt payments should not exceed 20% of your monthly income. Or more importantly, eliminate all debts if possible.

4. Set-up an Emergency Fund.

The most common answer when people are asked what the emergency fund is for a medical emergency. However, the most surprising and eye-opening question for an emergency fund is this:

“If you will lose your job tonight, with no separation pay, gratuity, or end of service benefits, with what you have right now, in your bank or savings, how long will you and/or your family be able to survive considering all your expenses and liabilities?”

Realizing that they are not truly prepared, a lot of people are taken aback by this question. In fact, most people would answer that they can only survive a month or less, which is a bit scary.

So how much emergency fund do we need? The minimum should be at least three times the monthly salary or expenses, whichever is higher. Why expenses? It is because sometimes our expenses are higher than our income.

You may ask,

“How would I be able to save up three times of my salary when in fact, I’m even having a hard time saving a penny due to my responsibilities and expenses?”

That is why it is important to have what we call income allocation (click here to know more about how to allocate for savings). Every time you receive your salary, allocate immediately some funds for savings, including that of your emergency fund. As they say, pay yourself first. If you think three months as an emergency fund is huge, think of the first month first. Make your initial goal. Once you achieve your first month, it will provide you a sense of accomplishment and fulfillment which will encourage you to complete another month.

On average, an emergency fund should be enough for six months, while the maximum is for one year.

Having an emergency fund is like having your spare tire as your journey towards your financial independence.

5. Protect Oneself from Life’s Risks.

Take life insurance, whether it is term insurance or permanent life insurance. There are pros and cons between the two so be sure to ask your insurance agent / financial adviser about it so that you will know what is best for you. (Read this blog before approaching an insurance agent)

You may have medical insurance from your company but always remember, with that insurance, you are only medically insured while you are employed. You are no longer protected once you leave the company or retire back to the Philippines.

Today’s life insurance not only includes death benefit but also living benefits. Living benefits include critical illness benefit. This means, once an individual is diagnosed with a life-threatening illness, his/her insurance will provide compensation which will help with the treatment. Term life or permanent life insurance will only cost a fraction of the total treatment cost, therefore it is a wise investment.

Fact of life, everybody dies. As we grow old, our health will start to deteriorate, our organs will start to fail. We don’t know when, but that will inevitably happen. And when that time comes, and if you don’t have life/critical illness insurance, where will you get the money from for the treatment? If you don’t have one, then your life savings will be drained. And what’s worst, if you have saved some for your retirement, your children’s college education, or for that dream house, you might end up consuming it all just for you or your loved one’s treatment. Hence, it is very important that you should protect yourself and your family with life insurance.

Consider life insurance as your “bulletproof”. If in your financial independence journey you are hit by a “stray bullet” causing physical incapacity, then your life insurance already secures your family or dependents.

6. Investments.

It is now time to let your money work for you. However, it is important that you should have already stabilized your financial foundation (steps 1 to 4) so that if in case your investment doesn’t work, you will have a better fallback. Also, the money that you should be investing in should always be your disposable income. This means that whatever happens to your investment, whether it earns or not, your lifestyle and standard of living will not be affected.

Investments can help you achieve your financial independence faster.

There are several investment instruments that you might want to consider depending on your risk appetite. You can venture into stocks, mutual funds, franchising, real estate, or be involve in business partnerships and ventures. Whatever investment instrument you would like to get into, make sure that you have studied them carefully, especially their legality since a lot of people have been victims of scams lately. If you think it sounds too good to be true, then it is.

7. Estate Planning.

Prior to Pres. Rodrigo Duterte signing the Tax Reform for Acceleration and Inclusion (TRAIN), the tax of a net estate worth P10 Million is P1.215 Million and 20% of the excess over P10 Million. After the approval of TRAIN, the estate tax now is subject to a flat rate of 6% on the amount in excess of P5 Million. You have to know about estate taxes because the amount mentioned here should be paid by your lawful heirs and beneficiaries if they will inherit your properties.

Moreover, estate planning is not just about real estate but is also about the preparation of your Will & Testament, Succession Planning for your Business, setting up a Trust Fund, and more. There is what we call a Golden Envelope, wherein all these documents, among others like insurance policies, investments certificates, etc., are kept, so that when the uneventful time comes, everything is already in place.

This 7-Step ladder discussion, hopefully, will provide you an idea of how to start your journey towards financial independence.