How to Become a Millionaire Like a BOSS

 

Being a millionaire sounds good, right?

But the question is: what does it take to become one?

Richard Branson would say that the easiest way to become a millionaire is to start off as a billionaire and buy an airline. But most of us won’t.

So what is the easiest way to become a millionaire?

By definition a millionaire is a person whose assets are worth one million or more.

There are many ways to be a millionaire but let us focus on investing.

They say that making the first million in investing is the hardest. Which is correct, the second one will be much easier since your money will start making more money.

So what does it take to earn your first million?

If you can save at least 100 Php a day and you invest it in an instrument with 8% annual growth then you will have your first million after 14.77 years, contributing only a total of 537,600 Php. Using the leverage of time and interest rate to your advantage.

Another thing is buying shares from a growing company in a one time basis.

If you bought shares from Universal Robina Corporation also known as URC on May 15, 2009 with 7.70 per share as trading price and sold all of it after 4 years on May 15, 2013 with 132.00 per share then you have a 1,714.286% growth! Imagine investing 60,000 Php in this company 4 years ago and selling it with 132 per share. Your 60,000 Php grew into 1,028,571.6 in just 4 years without even doing anything.

Setting aside Stock Trading, the best way to earn your first million is by regularly placing money in a much more diversified instrument.

Options are wide from Time Deposits to Mutual Funds or even investing directly to conglomerate companies listed in the market.

In recent years, Mutual Fund companies in the Philippines generate massive growth averaging 18%* annual growth.

Some companies need only 5,000 Php for initial investment and have a minimum of 1,000 Php for subsequent investments.

So if Pedro invests in a Mutual Fund company with 10,000 Php as an opening investment with 3,000 Php monthly contributions for 10 years. His fund will be 979, 578.54 Php, contributing a total of 370,000 Php, the rest is earnings.

However, we cannot guarantee that previous growth will be the same on the upcoming years.

No matter big or small, saving money and investing it in an instrument that yields return is a huge factor to earn your first million.

Start investing and use time as your advantage!

Disclaimer: The calculations above may not be accurate but are shown for better understanding of the topic.

Variable Universal Life VS Term Insurance + Mutual Fund

There has been a lot of discussion about the better product: VUL Insurance or Term Insurance plus Mutual Fund.

Let’s start with Term Insurance.

A term insurance by definition is a life insurance which provides monetary coverage for a limited period of time. If the insured dies during the term, the death benefit will be paid to the beneficiary.

When the contract expires and the applicant decides to reapply for another term insurance policy, the premium rates (insurance charges) may differ from previous term due to additional risk.

And the applicant must undergo again through medical underwriting to check if the applicant is still insurable. This is the bad part about Term Insurance; since we cannot control factors that surround us, we might not be so sure if we are still insurable for the upcoming years.

Next is, Mutual Funds.

A mutual fund is an investment vehicle that is made up from pool of funds gathered from many investors for the purpose of investing in securities such as bond, stock, real estate or money market instruments.

A mutual fund is an investment vehicle; it will help deliver you to your financial destination.

It is just like going to your workplace. Instead of driving a car where you need more time, focus and expertise to travel; you just simply ride a jeepney together with other people and stop over when you reach your destination.

Same with riding a jeepney, you pay a fee.

Now let us move on to VUL Insurance.

Basically a VUL is a Term Insurance plus an Investment component similar to Mutual Funds.

VUL is like a combo meal. You pay for one service to receive three benefits: First, the insurance coverage your family will receive in case your time runs out. Second, the investment component that will help you save up for college or provide retirement income when you live too long. Third, the monetary benefit you receive if you are hospitalized for a period of time and the insurance you receive when diagnose with a Terminal Illness.

Now that we have characterized the Term Insurance, Mutual Funds and Variable Universal Life Insurance; Let us move to the next step: Comparison of its advantages and disadvantages.

Advantage of Term Insurance and Mutual Funds

–      Cheapest type of life insurance in the industry, for the early years

–      Higher Returns than VUL since it has less charges

–      The investor is not obliged to save regularly

Disadvantage of Term Insurance and Mutual Funds

–      Premiums rise every renewal period (either 1 or 5 years) so time will come it will cost more than VUL

–      If you cannot pay for a year, the policy terminates.

–      Sometimes the applicant will undergo more than one medical underwriting. If the company finds the applicant risky (old age, sickly, social and work risk) they will decline the application or demand higher premium to offset the extra risk the applicant carries.

–      Some Mutual Fund has a holding period. If you pull out your investment ahead of time then certain charges and subtracted

–      Slightly difficult to redeem when the investor is dead

–      Mutual Fund is subjected to Estate Tax

Advantage of Variable Universal Life Insurance

–      Convenient. Like buying a cellphone with camera, radio, video player and internet browsing

–      Easy to redeem either dead or alive

–      Obliged to invest on a regular basis because you are billed regularly

–      If the investment fund is enough, you can enjoy not paying the plan since it can pay the charges on its own

–      The applicant will only go to medical underwriting only once unless he will reapply for another VUL contract

–      Loyalty Bonus – the company will give you extra units

Disadvantage of Variable Universal Life Insurance

–      Expensive at first compared to Term Insurance

–      Some VUL has charges when you withdraw your investment

–      Lower returns than buying term insurance and investing the difference

–      You are billed regularly reminding you to pay

VUL is intended for long-term insurance protection for paying your funeral expenses, final expenses, hospital expenses, estate taxes, and sometimes to substitute an individual’s earning capacity to leave his family the privilege to have a comfortable life even without the breadwinner’s salary.

On the other hand, term insurance is intended for temporary insurance for paying of outstanding loans, personal debts, loss of income to a business partnership and to provide money for the family’s future expenses like college education and such.

Choose wisely.