The best things in life aren’t free

So maybe investing the money I earned hawking soft drinks on national television back in the ‘80s in a complete X-Men Universe action figure collection wasn’t such a prudent investment choice. 

After attending a recent investment conference where I was lectured — este, where I listened to seasoned financial literacy consultant Rose Fres Fausto, the blogger behind FQMom.com and the author of (The Retteling of) The Richest Man in Babylon and Raising Pinoy Boys, I realized that it doesn’t matter how much pubic hair you have accumulated over the years — you can still possess the financial IQ of a toddler.

In an interview with Rose, she shared with me why some people have a love-hate relationship with money, the three laws of financial intelligence and the non-secrets to becoming a millionaire. 

RJ LEDESMA: Aside from winning the sweepstakes, becoming a reality TV star or overachieving in a multilevel marketing company, how do you become an instant millionaire?

ROSE FRES FAUSTO: You start off by being a billionaire. (Laughs) But when it comes to being a millionaire, it’s really about wealth accumulation. What’s important is the fundamentals: is (your wealth accumulation) sustainable? It starts by understanding your relationship with money.

What sort of relationship is that? MU? Frenemy? It’s complicated?

Sometimes your relationship with money could be all about self-esteem. Do you really see yourself as so aesthetically “unpleasing” that you need to spend a lot of money? (Laughs) What you need to do is to go back to your childhood memories about money. What did your parents say (about money) when you were growing up? You will get to better understand your relationship if you consciously “go back” to your childhood.

(Dirty Old Man [DOM] representative: When I was growing up, they still used cow dung for currency.)

Some people are galit sa mayayaman, dahil inapi sila. So, in their subconscious, when the opportunity comes along for them to…

Write and produce a blockbuster Pinoy teleserye as a conduit for their revenge?  

…Become “rich” themselves, they refuse to do so because they may become mayabang or mapangapi.  You need to understand your relationship with money, then develop a “healthy” relationship with it. Finally, you need to understand that is the “purpose” of money in relation to the things that you value in life. 

(No Girlfriend Since Birth [NGSB] representative: My relationship with money is like my relationship with women. Lagi akong basted.)

For example, your priority is your family but you spend all your time accumulating money. If that is the case, then it doesn’t matter how much money you accumulate, you won’t be happy. 

(DOM representative: That’s why my neighborhood KTV is like my family. They all me “kuya.”)

Oftentimes, the common problem is “accumulation of the wrong stuff.” That’s the common cause of a mid-life crisis. For example, some people decide to buy things to “keep up” with other people. Then one day they wake up and realize (what they bought) doesn’t make them happy.

(DOM representative: You mean to say my collection of designer clutch bags will not make me happy!?)    

So how exactly can I increase my financial intelligence (FQ)? And does it require remedial classes in trigonometry? 

FQ is all about how you handle your personal finances. You don’t have to be a genius in math to handle your personal finances. On the other hand, a genius in math isn’t necessarily a person with a high FQ. It’s all about having control over your money and not the other way around. In my book, The Richest Man in Babylon, I simplified the three basic laws of FQ. Law number one is “Pay yourself first.” 

Hey, I follow that law! I always pay myself first with my credit card. Then I let Batman take over my credit card payments.

Um, that’s not what I mean. “Pay yourself first” is a switch in perspective: the (character of the) mentor in my book explains that we end up “paying” other people (i.e. sandal maker, food vendor) but we often fail to pay ourselves first. That’s because when people “save” money, the common mindset is that they think they are “depriving” themselves. But what you are really doing is paying yourself to set aside for your future. And when you pay yourself first, you need to treat it like a tax: take it “off the top.”

So the lesson here is to go all-out Kim Henares on our personal finances. How do you start going about paying yourself?

With my kids, we started them off with (having them pay themselves) 20 percent whenever they would receive Aguinaldo or do part-time gigs. And the idea was that the percentage that they paid themselves eventually got higher as they increased their earning capacity. Then by the time they reach mid-life, about half of what they are earning should already be set aside for “safety investing.”

(DOM representative: Yes, I remember hanging out with Aguinaldo.)

The second law is to get into something that you understand and to seek advice only from competent people. I have heard many sad stories from retirees who get into business using their retirement money, but they (end up losing their money) because they knew nothing about the business they got into.

(DOM representative: Hay, things were much easier when we use to pay for things in cow dung.)

You need to understand what your core competency is, something that is also your passion, because that (should be the business) you get into. There are many needs in the world, and you might have more than one passion. But eventually, there is an intersection between needs and passions and that is your “sweet spot.” This is where you will most probably become successful because it is something that you will do without even getting paid. If you find something that you are both passionate about and good at doing, and you are able to do it joyfully, then money will follow. 

(NGSB representative: Ooooh, I have a lot of things that I am both very good at and passionate about, but they are either illegal, immoral or both.)

(DOM representative: I think we should do business together.)

The third law is to make your gold work for you or “make an army of golden slaves.”

(DOM representative: Ha! I’ve got enough gold from the Yamashita treasure to last me until the end times.)

This is very important because it separates those who just get by from those who are able to accumulate wealth. This is essentially about delaying gratification.

(NGSB representative: What? FQ is about delaying gratification!? Then I will forever remain an idiot.)

I came across a female employee who told me that when she saved enough money, she was going to buy a designer bag. I tell them you can’t do that, because that might be your only savings! I have a rule of thumb: only buy a luxury item if you can afford 10 pieces of it. Remember, do not sacrifice a need to buy a luxury. “Afford” can be a relative term, but it would be better if you could “easily afford” a luxury item.

(NGSB representative: With that third law, I will never get to complete my 52-piece limited edition Justice League action figure collection.)

Despite my boyish charm, I am already in my tasteful 40s. Does that mean it’s too late for me to develop FQ? 

It’s never too late, but it becomes more challenging because your ally in wealth accumulation is really time. If you start late, then you have less of that most important resource. Even in the stock market, they say it’s more about time than it is about timing. Because who knows how the stock market is going to go? The best investors like Warren Buffett have acknowledged it: you can’t really time the market.

(DOM representative: I should have started investing in the stock market when I still owned mountains of cow dung.)

There is no secret to becoming a millionaire. It’s really the discipline and the regularity of saving money, no matter how big or small that you earn. You have to set it aside. And don’t just leave it at the bank! You have to invest and you have to fight inflation (to make your wealth accumulation) sustainable.  Eventually, you have to find that making a (worthwhile) investment becomes enjoyable.

(DOM representative: And with that, I will continue to invest in designer clutch bags.)

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For comments, suggestions or cow dung, please email Ledesma.rj@gmail.com or visit www.rjledesma.com.  Follow @rjled on Twitter and @rjled610 on Instagram.

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For more information on financial planning, visit www.FQmom.com.