Millionaires don’t always earn their money overnight; they often get there via hard work and shrewd investment. Many of us don’t mind doing the former, but it’s the latter that often stymies those who need a little chat from a mentor to know where they can start.

As a financial adviser and the director of the Registered Financial Institute of the Philippines, people have come to me asking what’s a good investment, and when to stop throwing good money after bad. I usually give twelve simple guidelines, and people can put into practice the first three or six steps depending at what financial point in their lives they may be when starting out. If you’re just starting out on the road to financial health, set these three goals to achieve in 2011: positive cash flow, savings goals, and building your capacity to invest.

I never tire of speaking on the topic of personal finance, even after 20 years in the financial services industry, which is why I agreed to be tapped by UCC as one of their key speakers or beacons for exclusive dialogues in a series called “Beacons of Change: Coffee Collaboration.”

The first step is making more money and/or spending less, in essence achieving positive cash flow. You can do this by increasing the ways you get active or passive income, or decreasing your expenses (especially after you identify non-essentials you can defer to another date or do without). Positive cash flow involves earning more money or spending less money, although the ideal state is doing both.

Savings goals involve setting up your emergency fund (equivalent to at least three months’ worth of expenses) then other funds for your short-, medium- and long term needs (ex. a new car or vacation abroad, further studies to advance in your career, retirement). Building a separate fund for investments will take time, but so will your capacity to decide which investments are good for you.

There are many important aspects of financial management that money-smart people should learn or know about. In my columns for Business Mirror and Moneysense, I have talked about these basics and you can always hear that from me in my live seminars.

Those who attended my previous talks told me that it was an “eye-opener” as they learned things they had previously overlooked or ignored in their quest to financial well-being. Education is an investment not only for your children (if you have any), but also for yourself to gain an edge in the market or workplace. I advise you pay close attention to building your skills, whatever the job or position you hold. Education is an investment. Build on your competence. In fact, education could be what sets you on the road to earning more money.

Like the parable of the talents in the New Testament (Matthew 25:14-30), each of us is given something we can use to invest and grow exponentially, rather than hide and bury it in the ground. So if you have Php 100,000 what can you do with it to make it grow even more? Assuming that you already have an emergency fund and no debt, you should determine your investment objective and time frame as well as assess your tolerance for risk. From there, you can explore what investment works best for you, from time deposits or treasury bills (low-risk), to mutual funds that have both bonds and stocks in the fund (medium-risk), to high risk ventures such as the stock market. In the UCC vision logbook, I recommend that beginners should practice with small amounts. Taking risks can be very profitable, but being good at it requires practice.

Whatever your goals are, you have to become a no-nonsense investor, because great investment opportunities can be losing poker games if one does not pay full attention to what is going on. I also caution many people against putting everything they have in a high-yield investment, because one should only take risks when you already have savings and non-risky investments to fall back on.

Following my advice may take some discipline and attention to detail, but if one believes in making money work for you, after all the hard work you put into earning it—you’ll be part of a generation that’s working smarter, not just harder.

Here is a guest post by my good friend and wonder boy Dodge Ronquillo. Awesome read!

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Rethink Expenses and Spend Happily

Expenses are things we spend money on, sometimes wastefully. That’s why all successful businessmen and all respected finance gurus advocate living disciplined lives and reducing expenses–to set aside money for savings, investments, and emergencies.

However some of us may think that to have a wealthy life, we should scrimp out on everything else until we amass a big amount of money. I think that living that way is missing the point. Save up a good chunk of your money and place it in places where it can grow and spend the rest–but stay within budget and don’t get in debt. Expenses are and always will be a part of our lives (unless we live in self-sufficient farms with a water supply and a source of renewable energy).

Ironically, that means we are free to spend. The question is, how do we spend the money that we work for? This is not a blog post on how to save more. This is a post on how to spend more happily.

Two Kinds of Expenses

I believe that there are two types of expenses. The first kind is what we normally pay for. Let’s call these requirements. In other words, our cellphone bills, utilities, association dues, transportation costs. We need these to live.

The other kind of expense is the kind we splurge on. Let’s call these happy switches. Our movie tickets, dinners out, gadgets, books, clothes. We want these to reward ourselves.

Now, do you feel better spending Php 1,200 on your cellphone bill or on a few new tops or new Mac accessory? I hope you see what I’m getting at. If we aren’t happy with how much we earn, then we should probably rethink how we spend. Don’t reduce spending; rethink it. How much of your money goes to paying bills instead of going out with friends?

So yes, the trick to being happier is reducing our expenses, but just one kind–the requirements. I suggest cutting down on requirements and spending more on happy switches. I don’t think I know anyone who prefers paying bills over going out to dinner with friends.

Two Things You Must Understand

1) This assumes you follow a rule for saving up. I like I like a ratio shared by a friend of mine (According to him it’s T. Harv Eker’s ratio): 10% Savings, 20% Investments, 10% Charity, 10% Education/Self-improvement, 50% Expenses. Spend happily but don’t go beyond 50%.

2) This is a way to feel rewarded no matter what our income level is. It’s a realistic and short-term way of enjoying what we work hard for. This allows us to feel rewarded while still saving up money for the future. I’m sure I’d prefer to watch movies and go out for dinner rather than give that money to the bank for my credit card bill.

Apparently, there is a way to be happy now and in the future. Go ahead and spend happily!

Dodge Ronquillo’s contacts:

Posting a column I wrote for Moneysense Magazine.

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Beyond a mission, a cause

As I write this column, 2010 is about to end. 2010 is an eventful year indeed: a new President that ushered a new hope for the country’s future; a stronger and more stable Peso; a fantastic upswing in the Stock Market , accelerating in a rate we have not seen in a long time; and many more – both good and bad.

On a personal note, I am about to end a full 2 years since I have gone independent and not be affiliated with any financial services institution in my 22 years of professional life. My affiliations today have been limited to the Registered Financial Planner Institute Philippines (RFP) – an organization dedicated to the education of financial planners; and my church – Victory. Both affiliations have been largely influential in my professional, personal, and spiritual growth.

In 2010, I found myself doing more advocacies – speaking and teaching in small and large crowds from North Luzon down to Southern Mindanao and even out of the country. Venues has likewise been diverse, from corporate offices, to convention centers, hotel function rooms, university classrooms, churches and even in tables in fast food restaurants. Programs were varied: financial planning, investing, and entrepreneurship, among others. I also found myself working with the youth teaching them personal finance through a program called Blue Chip which we organized last summer and I was invited to volunteer to handle a class on entrepreneurship for a group of hybrid home school students. This year also gave me amazing opportunities collaborating with wonderful individuals that really inspire me like Cito Beltran, Francis Kong, Chinkee Tan, Paulo Tibig, Carlo Ople, Miriam Quiambao, Donita Rose and Eric Villarama, among others.

All these because I believe in a cause: the financial education of the Pinoys.  We all know that the biggest problem of the country is poverty. I used to think that the reason poverty is such a problem in the country was economic in nature; we lacked capital, poor distribution of wealth, undesirable macroeconomic foundations and the like. Then as I got a little older, I thought that our problems were political in nature; poor governance, dynasties, poor delivery of basic services and hostile environment for business. While the two factors I mentioned contribute substantially to the mess we are in, I began to see and accept that our problems are also social in nature. When I saw the way many handle their finances (myself included) and the way the nation saves (one of the lowest in Asia) one will see the root cause of our poverty issue. To make things worse, so many Filipinos are stricken by a poverty mindset that keeps them in bondage.

Such a herculean task should be made a cause by many. While there have been more and more advocates of financial education, we are drowned by the sheer numbers coupled by our limited exposure. The solution? We need to look at this as more than a vision and beyond a mission. We should embrace this as a cause. The Bible is full of encouragement and holds many answers to our questions, and yes – even our financial questions. We must be encouraged that even if this cause is a near impossible one, we just need to build on it, one advocate at a time.

Then he said to his disciples, “The harvest is plentiful but the workers are few. – Matthew 9:37, NIV.