Foolproof 5-Step Financial Guide

5 Step Financial Guide

This guide is a complete and simple 5-STEP FINANCIAL GUIDE towards from start to success.

This Foolproof 5 step financial guide is an easy-to-digest and complete guide: from Planning, Saving, Earning, Budgeting, and Investing.

There is only one and quick easy way into becoming financially wealthy: to be born into a rich family. Not all of us have access to a trust fund. Hence, plan B is the second-best foolproof way to financial freedom: taking control of your finances.

There are five steps to becoming financially wealthy, and the steps are very easy to implement.

LAST UPDATE October 10 2020 3:07PM: We are constantly updating this guide and adding information in order to make the information fresh and up-to date!

FOOLPROOF 5 Step Financial Guide

STEP 1: Define your Journey (?)

Let us first and foremost define your journey by answering the following:

By KNOWING WHAT YOU HAVE, KNOWING WHAT YOU NEED and KNOWING WHAT YOU WANT, you will then be ready to MAKE A PLAN to get you through the next steps.


Are you ready to change your life now and start your financial journey?

First and foremost, You must equip yourself with the right tools: a set of attitudes, behaviors, and habits to prepare yourself towards financial freedom.

Here are Key Essentials to Success:

1. WHY. Your why is your purpose in life; your ultimate driving force; establish a very compelling WHY. Your driving force has to be meaningful. (Read: How to Find your WHY)

2. Personal Commitment. This should go without saying: to be successful you need to be committed to the hard work. Successful people are marathoners, not sprinters.

3. Pro-Money Mindset. Have you ever noticed people hating on wealthy people for no reason? Stop thinking that money is dirty and evil. If you have a negative perception of money, you will never attract any in their life. Embrace money in your life. It starts with a pro-money mindset. 

5. Simple and Frugal Lifestyle. It all starts with living below your means. The more surplus you have, the more you can use it to invest in wealth-building opportunities. (Read: How to Live a Frugal Life)

6. Curiosity and Growth Mindset. Enrich your most valuable asset: yourself. Having a curious mind leads you to growth. Invest in talents, skills, education, and interests that will enhance your lifestyle and your earning potential.

7. Valuable Resources. We live in a time when a lot of valuable content is now easily available–books, articles, podcasts, documentaries and shows! Read, and read a lot. Do you know that an average CEO reads an average of 60 books each month? Warren Buffett himself reads up to a thousand pages a day.

(Read: CEO Reading List – 20 Must Read Books to be successful)

8. Sound Judgment, All successful people are thinkers with leverage. Successful make important investment decisions amplified with leverage. Forming sound judgment is through learned wisdom, knowledge from reading, and advice from mentors.

Go to 8 Key Attitudes to Success


Ask yourself the following questions to know what you really want: What is wealth to you? What are your financial goals? Know what you really want. Only you will be able to define your parameters: your start point and your end point.

The definition of wealth is subjective. Your dreams are yours…it’s highly customizable according to what you want. It depends on your preference.

What is your desired size? Whether financial wealth means ‘10 million’ or ‘100 million to you’, that’s for you to define the parameters.

What does wealth look like to you?

Whatever the size or specs, financial success should have the following components:

1. Financial freedom means zero or minimal debt. Minimal debt (housing mortgage) or best scenario-zero debt at all.

2. Right amount of savings for threats; a.k.a. emergency fund. Emergency funds cover for the unexpected: COVID-19, medical emergencies, unemployment, calamities, disasters, etc. (Read Best Digital Banks in the Philippines)

3. Right amount of savings for your future; funds separate from your emergency fund. Make different nest eggs for your retirement, for your kids’ education, for long travel, etc. 

4. Right amount of liquidity for opportunities. Having enough cash lying around so you can be liquid in case an investment opportunity comes along.

5. Successful wealthy people have multiple revenue streams. They do not rely on one or two income streams alone.

6. Wealthy people love passive income, a.k.a. royalty income. They let the money work for them.

(Read: Building Wealth: It’s Like Baking a Pie)


First of all, know this: what do you currently have?

What’s your Net Worth?

Your net worth is a snapshot of your total financial health at a certain point of time.

To calculate your net worth, use the formula: Total Assets – Total Liabilities = Net Worth

Assets + Liabilities = Equity
– Cash
– Savings Accounts
– Checking Accounts
– Bonds
– Stocks
– Patents, Trademarks
– Mutual Funds and Investment Funds
– Household items, jewelry, art (anything of market value)
– Properties (condos, home, property)
– Vehicles (depreciating value)
– Mortgages
– Student loans
– Personal loans
– Credit card debt
– Other debt

You can read more on Financial Checkup: How to Calculate for Net Worth and Cash Flows

Net worth is not a static number, so it’s best to assess your net worth on a regular basis: maybe every month, or every quarter. As you track your net worth over time, you can see your progress you’re making toward getting out of debt and saving money.

Cash Flows

A cash flow statement is a summary of your income and expenses. This will give you a better understanding on the minimum amount of money you need to maintain a standard of living you’re comfortable with

– Main job
– Part-time job
– Freelance income
– Business revenues
– Rental income
– Dividends / Interest
– Tax refund
– Cash gifts
– Other
– Mortgage or rent payments
– Loan payments
– Auto payment
– Insurance
– Transportation (gasoline / commute)
– Utility bills
(electricity, internet, water, phone bill TV, Netflix)
– Entertainment / leisure (dining out, gym)
– Clothing
– Other
Identify monthly cash inflows and outflows

The primary goal of this DIY financial check-up is so you can understand your current status. Your net worth provides you a bird’s eye view of your finances, while the cash flow statement provides you the minimum income you need day-to-day.

Both statements will help you in defining your goals and making a foolproof action plan, the next step of financial planning.

More on How to Calculate your Cash Flows at DIY Financial Checkup.


Taking control of your life requires planning, and this starts with defining SMART professional goals. Write down some ideas of things you aim to achieve or improve about your life. 

S.M.A.R.T. goals

Identify your S.M.A.R.T. goals. Everyone dreams of becoming rich, but that’s a very vague thing to say! It’s very difficult to measure the success of vague, unclear statements. (Read More: Setting SMART Professional Goals)

S.M.A.R.T. is short for Specific, Measurable, Attainable, Relevant, and Timely.
For example:
  • Specific: I want to save 50,000 pesos in 12 months to open my small business.
  • Measurable: I will set aside 4,200 of my salary every month.
  • Attainable: Absolutely. 4,200 per month is 20% of my income.
  • Realistic: Yes. I know I can make it, with a few habit adjustments and sacrifices.
  • Timely: 12 months to save up for 50,000.

Time to put in the action! Step 2 to 5 of Financial Planning will have you do the following, which we have simplified like the four basic functions of math.

STEP 2: Reduce & Save (-)

Reduce Expenses Drastically

Among the four functions in Financial Planning, Reducing Expenses is the easiest to do. This part is where you have the most control.

Here are some of the unconventional tips we can give to reduce your expeneses:


80% of the time we buy things we don’t really need (or even want), but unconsciously do it to keep up with the Joneses.

Don’t give a damn of what other s think. If we stop giving a damn about what other people think, we free up ourselves from a lot of things–mentally, emotionally, and financially.

We want to show our status by the material things we own. The truth is, we spend too much time trying to impress our peers. Other people probably don’t give a damn–they are too busy thinking about themselves and they could not care less about you.

Focus less on what people think, and focus more on what you want. Do as you prefer, treat yourself to thinks you want, don’t lead a lifestyle created by shallow peer pressure.

Live Frugally

Adopt a Frugal Lifestyle. Practice minimalism.

Frugal is not cheap. Frugal is focusing on what you spend, not focusing on what you save. By focusing our resources on our priorities, we will make better purchasing decisions on those of true value to us.

Our Foolproof Guide to Frugal Living will give you my story from foolish to frugal; and concrete, reliable tips on how you can reduce your expenses drastically.

Forced state of scarcity

If you do know yourself and find that spending does get the best of you, then force yourself in a state of scarcity.

Set up circuit breakers. For example, if you do get sudden windfall: an annual bonus, a sales commission, a tax refund, an inheritance, put it away immediately for investment in order to avoid spending it carelessly on impulsive purchases.

STEP 3: Earn & Hustle (+)

Step 3 of the 5 Step Financial Guide is to Increase your Income drastically.

We want to give realistic points, and we DO NOT recommend you to quit your job and pursue your dream business.

We get it. You want your own business. You want more freedom. You want to build meaning into your life. But there are a lot of risks when it comes to starting a business.

The success rate of small businesses is low. Plus, if you have bills to pay and mouths to feed, you still have bills to pay with no assurance of your business success yet. If in the worst-case scenario you fail, you will end up emotionally scarred, traumatized and a thousand dollars in debt to your name.

What we’re basically saying is you should not quit your job. (at least not just yet.)

These are the stops we recommend you to take:

First, Do well on your 9-to-5. Increase your income potential and be noticed for the hard work you put in your job.

Second, Build your 5-to-9. On your free hours, hustle: build that side project you have been wanting to do.

Third, Scale your 5-to-9 so it could replace your 9-to-5. It’s time to quit your job and employ yourself.

Most people only have 1 or 2 income streams, so after you’ve done well with 2, you have to increase your income streams. More on how to in this later on part 5, on investing and diversifying investments.

Do well on your 9-to-5.

A stable paycheck and good job is hard to come by these days. If you have a job, we recommend you to do well on your 9-to-5.

A 9-to-5 provides a stable paycheck every 15th and 30th. Your job provides good professional experience; and valuable training and insights on how to run a business. You get access to a wide professional network.

To get a promotion, you need to be noticed. I don’t mean that you should brown nose or kiss ass–although some people have employed these shady techniques successfully. Do the hard and dirty work that no one wants to do. Have amicable relationships with your coworkers.

At work, learn how to solve problems. Learn skills that will be handy in the workplace. Do not wait for your boss to ask you. Companies love proactive problem solvers–they add extreme value to the workplace. This will increase your income potential significantly.

Read more: How to (quickly) Move up the Career Ladder

The downside to a full-time job, of course, you will be working for someone else and not for yourself.

Not a lot of people love being corporate slaves. But if you do love your job and if you are successful in climbing the corporate ladder, than by all means thrive well and don’t resign your job. The truth is, not everyone is built to be an entrepreneur. Everyone has a different calling.

If your dream is to have more freedom with your time, to work on something you find fun and financially rewarding, to travel more, to retire early, sticking to a 9-to-5 isn’t enough.

That’s why you need a 5-to-9.

Build your 5-to-9.

Build side hustles, freelance gigs, a part-time job, outside of your 9-to-5.

A 5-to-9 is where you can work on your side hustle and building your side project.

Keep your current job while working on your side project. Have equal headspace for both, keep them separated. Maintain above average performance level on both. Do not make your colleagues your customers.

We don’t recommend you to do your side project during your 9-to-5 job. That will be unfair for your employer and grounds for termination.

We don’t want you to kill yourself by fatigue and overwork. Avoid being a workaholic. Be well-rounded and spend as much time with family and self–this is for your sanity.

Budget your time–you only have 24 hours a day, and 7 days a week. For as little as 4 hours a day, 5 days a week, you can give your side hustle up to 20 hours a week to earn more and be closer to your dreams.

Replace your 9-to-5

Next step is to grow your side business in such a size that it can now replace your 9-to-5. This means focusing on your first 3 customers (not counting your family and friends) and give them amazing service.

Make a target. Once you are able to satisfy your first 3 customers and turn the one-time purchase into repeat busienss, now focus on how to get your next 10–and when you meet them, focus on how to make your next 30.

Create benchmarks and deadlines. If in three months you have not earned enough money yet that is within your threshold (e.g., do I get compensated at least for the hours I spent working on this?), you need to rethink your business strategy or business model.

If your 5-to-9 starts to make more than your 9-to-5 income, you have to evaluate if your current job is worth keeping, or if its time to employ yourself.

Ask yourself: is this the business I want to build in the long term? Do I feel fulfilled? Is this fun for me?

Running a business is not easy. In fact, it is 10x harder than working for someone else. Rather than thinking about work for your prescribed 8 hours, you are thinking about work for 24 hours a day, 7 days a week. If you realize you don’t like it, closing down a business is not as easy as filing a resignation letter

You can then set yourself off to early retirement. Once you replace your 9-to-5, you can then focus your time and efforts towards where you can growing your business, multiplying your wealth, and enjoying life to the fullest.

Read More: Investing and Earning during a Crisis

STEP 4: Budget & Manage (/)

Step 4 is budgeting and money management. How are you going to allocate your resources into the different investments and expenditures?

Be conscious about cash flows

Just because you have significantly increased your income doesn’t mean you should forget about budgeting.

It is very common for people to upgrade our needs and wants once they start earning more. It is easy to fall into the trap of inflating your lifestyle once your paycheck fattens up a bit. Before we realize it, many people end up being more in debt than when we were earning less!

I myself was guilty of this before. (Read Before finding my WHY, I was a hot mess) I knew I was going to be earning more in the future, I was too confident–and I ended up spending money I haven’t even earned yet!

Avoid the trap by being mindful of your cash flows. Some manually track their cash flows through an expense journal. I myself prefer to monitor my expenses through an app. Every time I make a purchase–no matter how small (like tips or car park ticket–I log it in.

My friends have teased me about this habit. They know already that I am whipping out my phone because I am putting it on an expense tracker. However, I found that these have made me more conscious of the things I spend on.

After an audit, I ended up being more generous with spending for gifts and treating out friends because I realized I spent more things for selfish reasons!

I used to have problems trying to pinpoint my expenses (especially on the credit card and ATM). Now, it’s a lot easier for me to contest expenses and fix my cash bucket holes are.

Set up your emergency fund

As early as you can, set up your emergency fund by setting up a separate bank account. This is cash you should put away in case of emergencies.

A soul searching trip to South Korea is not an emergency.

A BMW is not an emergency.

Emergencies include home repairs, major car fixes, calamities, market crises, and medical expenses.

Is a pregnancy an emergency?

Not likely. You have known for at least six months that a baby is on the way.

The pandemic we all know now as COVID-19. It breaks my heart to see a lot of my friends on FB regret not setting an emergency fund before the enforced lockdown happened.

The textbook figure for an emergency fund is 3 to 6 months of salary, depending on how good you are at avoiding emergencies.

Personally, I put my savings and investments in money markets and high-interest rates (Read Best Digital Banks in the Philippines)

Read More: Investing and Earning during a Crisis

STEP 5: Invest & Diversify (x)

Step 5 is also known as “The Fun Part”.

Every time I post about it on my personal social media or on my stories, I get a lot of interest and questions.

Stocks, bonds, funds, money markets, real estate, traditional businesses, cryptocurrency–these are some of the investments one can make. They all have different risk profiles, from very low risk (bonds) to very high, speculative decisions (crypto)

But before we get into that, we need to invest in the most important thing, first thing: yourself!

Invest in Yourself

Invest in intrinsic assets. Keep your mind nimble and productive by adopting an unwavering curiosity.

Invest in skills that will enhance your earning potential and improve your lifestyle. Invest in educations, read a lot of books. Do you know that a CEO reads an average of 60 books per year?

Even after college graduation, learning never stops. Even when you get a job or run a successful business, learning should never cease. Acquire skills that will help you be better at what you do career-wise. This can include learning how to code, how to speak a language or how to do accounting.

Some skills are necessary. Effective sales skills are a must; as are many soft skills: communication and empathy. No matter what industry you are in, you could argue that you are an IT engineer and deal with coding and computers only. But the higher you climb the corporate ladder, the less you will deal with hardware, and the more you will need to do people management. Unless you want to be a rank-and-file worker forever.

One of the least talked about intrinsic assets that is also the most important is the ability to handle failure.

Rejection is a part of life; and believe it or not, the most successful people have had the most rejections in their life! They just learn to recover swiftly from it, and make their painful experiences their best teachers.

The difference between successful and unsuccessful people is their ability to handle failure with grace and to pick themselves up immediately.

Multiple Revenue Streams

Most people only have 2 or 3 income streams, but the wealthy have at least 4 or more income streams.

Here are the 8 types of income streams:

  1. Earned Income – earned from jobs
  2. Profit Income – from buying and selling at a higher value
  3. Capital Gains – income earned from assets increasing in value
  4. Rental Income – earned from renting properties
  5. Interest Income – earned from lending money
  6. Dividend Income – earned from owning stocks
  7. Residual Income – earned after work is done
  8. Royalty Income – earned from intellectual property or when people use your idea

To become financially wealthy, you need to expand and increase your revenue streams. Work towards expanding your income streams to ensure financial independence.

Read more: What are the 8 income streams of millionaires and Examples

Investment Vehicles

Once again, depending on your risk appetite (low, medium, high or madman), here are just some investment vehicles you can invest in:

  • Bonds
  • Stocks
  • Mutual Funds
  • IUTF Funds
  • Forex Trading
  • Real Estate
  • Bitcoin and Cryptocurrency

Read More: Investing and Earning during a Crisis

Start your Investing Journey at


Bonds are essentially debt, and you are the lender. Bonds are issued by governments and corporations when they want to raise money. Bonds are typically seen as low-risk investments. You can get this investment product over-the-counter. You will be paid interest after the end of the period.

Returns are at an average of 3% to 8%. You can regularly check on this page at World Government Bonds for updates.


Stocks on the other hand are stakes of ownership in a company that are given in exchange for cash. On the stock market, you purchasing shares of publicly listed companies.

Stocks are considered moderate to high risk.

Read: Philippine Stocks or Mutual Funds: A Newbie’s Guide

Mutual Funds

When you invest in mutual funds, you are getting a collective investment that pools the money from a large number of investors to purchase a number of securities in stocks, bonds, and other money vehicles.

Read: Philippine Stocks or Mutual Funds: A Newbie’s Guide

3 Important Concepts on Investing

1 – Risk and Return

Risk and return are directly proportional. If they promise a risk-free, high return investment scheme, if it sounds too good to be true, it probably is. Be wary of get rich quick schemes.

Here are investments plotted according to risk / return:

2 – Time Value

Start investing immediately when you can. The greatest financial asset and ally is TIME. It is never ‘too early’ to invest–Warren Buffett started investing at 11 years old. The younger you start investing, the better it is for you. Time is your strongest asset because of the concept of ‘compound interest’.

Do not day trade–people rarely profit from day trading, and it doesn’t make for a lucrative full-time living. Don’t touch your investments for at least a decade. Invest in the long position–buy and hold.

3 – Cost Averaging

Cost averaging is an investment strategy to reduce the impact of market volatility by spreading out your investments incrementally.

Allocate a portion of your income (10% to 30%) and auto-debit them to your account every month.

This is the guide I have so far on finance, business, and life! I am constantly adding information here, updating them frequently, to make sure the advice here is correct and up-to-date.

If you have any other advice and tips, please feel free to share your tips on the comment section or contact us. We would love to get some feedback!

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