Building lasting wealth requires more than just picking the right stocks or chasing the next big investment opportunity. According to Marvin Cabatana, a Registered Financial Planner, the true key to financial success lies in laying a solid foundation before diving into high-risk, high-reward investments.
As told to Financial Adviser PH, Marvin emphasizes that “before you start investing in growth funds or high-return vehicles, it’s crucial to secure your financial foundation.” He stresses that having a predictable cash flow, emergency funds, manageable debts, and appropriate insurance coverage are the pillars that support long-term wealth creation.
Marvin, who teaches his own children about the importance of financial planning, starts with the basics. He notes, “Our first priority is predictable cash flow. Without it, you’re just gambling with your finances.” Building a reliable income stream through stable employment or side businesses ensures that wealth-building efforts are sustainable and not dependent on market swings.
The next critical piece is emergency funds. Marvin explains, “Life is unpredictable, and having a financial cushion to weather unexpected events, like job loss or health issues, prevents you from derailing your long-term goals.” He recommends setting aside at least three to six months of living expenses in a liquid, easily accessible account.
Alongside cash flow and emergency savings, Marvin highlights the importance of managing debts. “Having manageable debt is essential for financial stability,” he says. High-interest consumer debt can quickly erode wealth, making it harder to invest effectively.
Insurance also plays a vital role. “Life and health insurance are essential protections that ensure your family doesn’t face financial hardship in the event of an emergency,” Marvin adds. These safeguards keep you on track when life throws curveballs.
Only after securing these foundations does Marvin encourage investing for growth. “Once the groundwork is in place, you can confidently invest in stocks or growth funds, knowing that you have the stability to ride out market volatility.”
By focusing on these fundamental areas first, Marvin teaches that wealth-building becomes a structured, disciplined process rather than a risky gamble.
