A Simple Strategy to Raise Capital from Your Salary

Many people don’t start a business because they don’t have enough money for the capital.  But is that really the problem?

According to Startupremedy.com, the lack of money is the primary reason cited by individuals who opt for employment than entrepreneurship, in addition to lack of knowledge, leadership, skill, and drive. Lack of money seems a valid argument – and should be a temporary situation. But for many employees, it becomes the way of life. They earn from their day jobs but never get around to saving for that dream business.

Savings Not a Priority

A 2014 Consumer Finance Survey from Bangko Sentral ng Pilipinas found that only 14 percent of the 24 million households – or 3.4 million households –  in the Philippines had bank accounts. Of these, 1.6 million had deposits amounting to only P5,000 or less. The rest had no accounts.

This reflects how Filipinos view savings. Blog site Powerpinoys.com blames this on the Filipinos’ spending habits and behavior.  These include the mañana habit or procrastination; the “Bahala na si Batman,” or leaving future to fate; the Filipino’s penchant for partying, shopping, and going out in the name of YOLO; or treating out family and friends as pakikisama.

Thus, no matter how hard some people try, saving remains a plan. Is it really that difficult?

An Envelope Is All You Need

According to Catholic lay preacher, best-selling author, and entrepreneur Bo Sanchez, saving up for investment need not be a complex thing. In his book, “My Maid Invests in the Stock Market…And Why You Should, Too!,” he detailed a strategy he taught his helpers.

Sanchez has taught his helpers to divide their salary into five envelopes and label them according to the following:

  1. Tithe Fund (contribution to the church);
  2. Expense Fund (daily expenses);
  3. Support Fund (for their family in the province);
  4. Emergency Fund, and
  5. Retirement Fund.

You can use the same method. Set aside a Tithe Fund for the church or charity, depending on which one you feel more connected to; 10 percent of your salary is a decent amount.

The Expense Fund is for things like food, clothing, and toiletries. Allocate about 14-15 percent. If you’re single and living alone, your transportation fare, house rent, utility bills, and laundry cost will fall under this category. If you’re married, with children and a car, add your budget for tuition, home maintenance, gas, and auto repair.

Sanchez’s maids send their Support Fund to the province, for their family’s food and upkeep. If you have elderly parents or relatives who depend on you, set aside 28-30 percent.

The Emergency Fund is self-explanatory; 14-15 percent of your salary will go a long way. Just make sure it’s for a legitimate emergency, and that it must never be spent on sudden frivolous expenses, like Happy Hour sessions due to stress.

What remains is your Retirement Fund, which is about 30 percent. This is your savings or investment money. Assuming that your take-home pay is P25,000, setting aside 30 percent gives you Php7,500 per month. Multiply that by 12 months, and you’ll have Php90,000 on your first year. It means you’ll have P270,000 by the third year, and P450,000 by the fifth year. That’s almost half a million pesos in just five years!

So who says it’s hard to raise funds for capital from your salary alone? It’s all a matter of perspective and discipline.

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