Wednesday, November 9, 2011

Make Compound Interest Your New BFF

We fashionistas love to shop, shop and SHOP!  Obviously, we need money for that.  If we don't have available cash we simply swipe our credit cards.  This is where the problem begins.  This is where "compound interest" becomes our  #1 nemesis.  Like most people I know, If you only pay the minimum charge each month, you'll have to pay 3.25% - 3.5% interest on the outstanding balance.  That goes on and on each month until you realize that you're paying double of the actual value of your purchase.  It's scary!  "Compound Interest" is definitely your worst nightmare!

Or maybe not...

You see, you can make "compound interest" work in your favor.  The only way you can do that is if you first cut back on your shopping.  After that, pay all your credit card debts and then start investing!  Oh I know what you're thinking... "Ho-hummmmm... Boringggggggg!"  But hey! think about it, a little sacrifice today could mean more shopping sprees in the future!

The most basic way to invest is by opening a Savings Account on a commercial bank, but, you can make "compound interest" your new BFF by investing in stuffs with higher interest rates such as Mutual Funds, Unit Investment Trust Funds, Bonds and Stocks.

One of my favorite investment vehicle is the Mutual Fund because you don't need a lot of money to start. Honestly, I wish I started investing in MF as soon as I started working 10 years ago... sigh... With only Php5,000.00 minimum initial investment and Php1,000.00 subsequent investments on a monthly basis, It's really not that difficult to start doing it - as in right now!  You're not even required to invest every month, you can do it every other month! Interest rates range from around 8%-20%. You have the option to put your MF in bond fund, equity fund (stocks) or balanced fund (combination of bond & equity).  And oh, did I mention that it's tax free?

Depending on your investment horizons and objectives plus your risk appetite, you should choose the best investment vehicle for you... or like me, you may choose all of the above mentioned.  Now, I'm no a financial expert so I suggest that you read my 2 favorite blogs which were very helpful to me especially when I was just starting out:  Ready to be Rich and AAFP Philippines. Happy reading and I hope that you'll learn a lot just like I did.


yNieL said...

i'll look into this, i've been wanting to try to invest in mutual fund. you can teach me :)

Money Savvy Fashionista said...

The sooner you start the better :) or if you want faster and bigger returns, I'll teach how to invest in the stock market, how about that? ;)