Monday, April 29, 2013

Financial Checklist

I don't want to be mean, but I am, maybe... and judgmental even... And this may not be a very nice post. If you don't want to transgress, stop reading now, but if you want to keep reading, you may proceed at your own risk.  

I remember some months ago, my hubby was browsing his Facebook page and he was looking at some photos of a friend of his who is a what we call, "a rich man's daughter. " I've been introduced to this friend some time ago as well. According to my husband's story, he's known this friend for a long time and the way he would tell stories about her is that she is a free spirited, happy go lucky girl. Someone who can get any boy that she wants and buy anything her money could buy. 

Anyway, back to that conversation while my husband was browsing FB... he called me, and showed his friend's picture at a beautiful place abroad. He said, "This friend of mine! is FINANCIALLY SAFE!"  

Smiling, I just said, "Really? How safe?"

How could she be financially safe when all she does is spend money? I get what he meant, as you can see she is a business tycoon's daughter. But for reals, let's elaborate. On top of this post, is a picture I stole from an FB  group called Journey to Your Financial Independence. The reason why it's there is because, when I saw it posted, It reminded me of my husband's friend. "How financially safe is she really?" 

With her kind of attitude and lifestyle. It'll be easy to gauge how financially safe she is by doing a checklist based on the picture above; and according to my husband's story of her. One by one: (bottom ladder step first)

Step 1: Work and Earn --> Check, well yah maybe, AFAIK (as far as I know) she just resigned from her job, because she is pregnant now and she just got married.

Step 2: Make a budget --> "Budget? What budget???"

Step 3: Record Expenditures --> "Sky is the limit!"

Step 4: Have a Bank Account --> We'll she probably has, one that daddy has been chipping money in, and her hubby's too!

Step 5: Carry life insurance --> One that her office provides for her, while she was employed or maybe daddy is the insurance provider. So, check on this one!

Step 6: Own you home --> Well, getting there, since the girl just got married, they're going to get a housing loan one day, in the meantime, almost is the same as never.

Step 7: Make a Will  --> Daddy has a will! or did he already make it? In time, she's gonna be like the Hilton heiress, watch out world!

Step 8: Invest Carefully --> Her dad owns some hotels! (oops, I hope I will not be too obvious), businesses! and her mommy has too! that's investment enough. I've never really heard from my husband that she mentioned about some shares of stocks or something great, though maybe she may have.

Step 9: Pay bills promptly --> check-ish! (Don't forget the savvy cellphone should never loose credit calls, it raises her status quo).

Step 10: Share with others --> Check! Her money or not, when it comes to her friends, she is all out. No matter how much money she spends so long as she is admired, and people should be happy or at least pretend to be happy while with her.

Question, how financially safe is she really? You decide! Now that I'm about to finish this blog, I have to be sure to make my life in order and focus on my priorities. Otherwise it would be embarrassing if I will not have any progress because of the consequence of judging her, and loosing my own focus. Time for self measurement!

As for me, I just don't believe that a person is financially safe if they don't live according to the basic financial principle that the truly rich have. Money takes time to earn, yet very easy to spend and loose. It drives me nuts, to know that some people are as vain as can be without being punished for it. Or if they are, they're not recognizing it. Not that I want these people to be cursed. I felt pity more that admiration. Maybe, it's just the stingy personality in me that questions, "When will they ever learn?" Now, let  me get back to myself, thank you.

To the those whom we consider as YOLO (you only live once) Open your eyes! There are ways to learn, and we ought to start to learn. To save, budget and invest. It's the only sure way to be financially safe. 

Thursday, April 25, 2013

Stock Market - It is Gambling! It's not Gambling!

"Stock market?"
"Wait we're not allowed to get into stocks. It's gambling! Isn't it right?"
As an LDS living in the Philippines, this is what I usually hear when some of my fellow church members would hear about engagement in the stock market of another. 

When I first heard about the stock market it wasn't explained to me like it was explained in the first paragraph above. It was explained to me this way by my grandpa: When I buy shares of stocks of a company, I become part owner of that company. And that the company I am a part owner of, can give me dividends that will serve as profits. When the time comes, I may sell your shares of stocks and make more money. I can buy more stocks also to get more shares. That way I will be contributing investments to the company that I buy. I will allow the funds I contribute be taken care of by the company's bigger boss(Board of Directors etc...) and it's employees. The business runs without me having to be actually there. I become an investor!

As I grew up I began to attend a company seminars that teaches more about stocks and other financial stuff. I began to realize that I want to study more and invest more stocks for my future and children's future. Very excited, I went to my dad and told him about the idea. He laughed and said that I can't join the stock market because it's gambling. 

Though it may seem like it, I don't mean to put my dad in a bad light here, he's been a good dad to me. His idea of things sometimes is more dominated by fear than by really trying to understand the all the logic behind it. Just my thought...
Anyway, let's get back to the topic. Is stock market really gambling or not? My answer is, it depends! 

First off, let's make this simple. Investing is the word used by businessman and entrepreneurs when they are trying to build a company that they'd want to stand through time. So when a person invest, that simply means that it has to be long term and not a fly by night activity, or a one time event. There is home work to be done, such as proper company research, and forecast about a company's projects etc... 

Let's define gambling. Gambler is the word we use for people who are just trying to make their bets through luck. This usually happens in a casino or when we... say, buy a lottery ticket.You go into a casino, to try your luck, you can either win or not, the same thing with lottery. Though you don't know if the numbers you pick will win, you still try your luck, and speculate on choosing what numbers might win. In short, if you are just speculating, then you are gambling.

Now, wanna get into stocks? Let's place some guidelines: 

1. When we want to invest in the stock market, we make sure we do our homework. Also, we must remember that businesses needs to take time to grow.

2. Time and not timing is our ally there. If we withdraw too soon then that is our loss. If you want to invest and consider yourself an investor, make it long term.

3. Sometimes, some investors forget the real essence of investing into the stock market. They would get into the stock market today and then tomorrow they sell their shares, and never come back, and consider themselves investors already. They made one trade and then never again, and then they'd tell you that stock market is gambling! 

4. If investing is our goal, we do not buy businesses that we do not understand. This way we can keep constant investment to companies that we can benefit from for a long time. 

Just because it's high yield and doesn't mean it's gambling. Simple as that! Otherwise, go gamble and good luck with that!

Wednesday, April 24, 2013

Questions to Ask Your Fiance Before Settling Down

There is no divorce in the Philippine law, but couples do fight about money and also one of the reason for a couples separation (legal or illegal). 

Getting engaged is such an exciting time in a couple's lives. Besides planning for their wedding reception, where to live, how many kids or in-law visits; couples should importantly discuss a very personal topic before getting hitched. That is the topic of "finances." 

Look to the left, with the statistics like that in America, we can say that there is a greater need for financial planning between engaged couples to lessen heartaches and quarrels in their married life in the future.

An article my friend sent on my email talks about this issue which inspired this blog. Lauren Gadkowski, a financial planner in Covington was quoted saying: "Talking about money doesn't mean you are going to fight about money. But if you don't talk about money, then that's where the problems begin."

The author of the article, Jeff Opdyke, said that there are 9 important questions that a a couple should ask one another before getting married. I will place them below and write my simplified insights:

1. What are your financial assets and liabilities? --> This may seem a big question, but to couples who are practicing an all honesty relationship, this should be easy to answer. It always helps to disclose everything about your financial status. It's OK to say you have none when you really have none because a person with aspirations and goals will one day have more assets than he has liabilities.

2. How do you use debt? --> Ah... now here, there are a lot of young people that I know of who has more credit card debt than educational loan. Knowing such things about your partner will help you gauge if your are marrying a person with the right priority or not.

3. What is your money history? --> Are you marrying someone who comes from a family of spenders or savers? Determining this before marriage will really help you know what certain money adjustments you will have to make when you are already married.

4. Do we need a pre nup? --> Trust issue is the main issue in a pre nup. Some people think getting a prenuptial agreement between both parties is an insult. Jokingly, I would consider pre nups like a term insurance policy. If something goes wrong in a marriage and both parties would consider separating, then one or both of them would benefit from the pre nup's protection.

5. What are your financial aspirations? --> Short term plan, medium term plan, and the long term plan. How much money would you want to have in your bank account in the next five years? Would you want to retire comfortably or you can't retire at all because your lifestyle can't afford it?

6. What are your career expectations? --> You will know from your partner whether there will only be a single income earner in your family or both of you will have to participate in bringing more income at home.

7. How do you propose we divide financial duties? --> Discuss with your partner what your strength's are, both of you can decide who will handle and budget the money that comes into your family and where to allocate it. In my case, my husband gives me all of his salary, I in turn give him his allowance. The caution he provides me is this: "You have all my money, but if you make any debt that is not in our plan, do not take it out of our joint account! Whatever your debt is, it's yours to pay."...Understood Sir!

8. Will we operate from one checkbook or three? --> If you operate in one checkbook, all your saving and expenditures will be coming in and out of one source. If you have three, you can set aside a joint account considered as an emergency fund while each of the spouses will have a separate account for each of their discretionary purchases.

9. Do you have a basic understanding of money? --> People that are in love are always on a dreamy state. But getting in the bonds of matrimony will make you wake up. One day or the next you will live a a world which will either make you sad all the way through or happy for eternity. If you have an understanding how certain financial vehicles work, like insurances, checking accounts, and credit card, you have an advantage. Storms of life will come, whether that be an accident, illness or disability. Will your attitude and knowledge about money help in creating happy family relationships in spite of all these, or would it ruin it? 

There is a notion that says, "Love will conquer all, even the smallest indifference." Though this statement may be true; I say, "There are only four things that can happen if you don't discuss important matters such as finances in your engaged bliss. You can, a.) talk about it when you already are stuck for good anyway, there's still room for improvement; b.) complain how bad your spouse is in managing your finances throughout your marriage; c.) get a divorce or annulment; or d.) suffer in silence throughout your marriage."

Whatever your decision is, remember that in relationships money is not important but saving it can secure your future. I say "best of luck!" to our financial decisions in life; And if you're already getting married soon and reading this, "best wishes!" 

Monday, April 22, 2013

Wonderful World of Legit Investments

When I was young I love to watch The Wonderful World of Disney, now that I'm older, I'm more interest to learn the "Wonderful World of Legit Investments."

After posting my new blog yesterday. I got an email from a friend inquiring from me about investing in the stock market. I gave her a brief description about what it is and a simple 'how to start.'

Her inquiries made me decided to blog about the different kinds of investments where we can put our hard earned money in. Again, I am not talking about scams, or MLM. Speaking of scam, it is still a sad thing to remember the victims of Aman Futures Group in the Visayas and Mindanao area of the Philippines. Some families used up all their hard earned savings to put in an investment only to loose them all! Some of them even loaned some money thinking they will make more only to get them into debt that is very hard to come out of. 

Following Sunday after the news, the LDS church in the Philippines received a letter coming from our area authorities. We are encouraged to bank on our financial learning so that we will not be a victim of fraudulent financial activities, and that (quote) "Consideration should also be given to investing wisely with responsible and established financial institutions." Also, we need to know how much risk we can handle when it comes to money. Are we afraid of losing to much money (Conservative) or are we OK to lose a lot of money so long as our gains are more than what we've lost (Aggressive).

Investment is a passive kind of income. It's is how you can make your money work for you; But we need to make sure we are investing our money in a legitimate company before we break our piggy bank and avoid  being sorry at the end. 

The following are the different kinds of investments that are brought by a responsible and established financial institution:

Bonds (Low Risk)
If you are not a high risk person, investing in bonds is for you. Bonds are securities founded on debt. Purchasing a bond is like lending your money to a company or the government. They will in turn promise to pay you the interest for however much you lent them and then pay you back all the money you lent them.

However, one who invest in bonds cannot exactly say that there is safety nor stability in it. It is because the risk is very low, and therefore the Rate of Return is also low.

Stocks (High Risk)
Purchasing Stocks makes you a part owner of a certain company listed in the stock market. It has it's perks of entitlement. As a stock holder, or a shareholder , you'll have the opportunity to vote at meetings for the shareholders and receive profits that the company might have (dividends).

While bonds can produce steady income stream, stocks is the opposite. It is volatile. Though it can  provide high returns, it can put an investor at a high risk of loosing some or all of his invested money. The fluctuation of value in the stock prices are very rapid and there are two ways to earn. 1. Is if the stock you bough increased in value 2. we mentioned earlier, through a dividend. (Some companies don't pay any dividends at all).

Mutual Funds (Medium Risk)
If your risk appetite is set to medium, mutual funds will be beneficial for you. This is a collection of stocks and bonds. Buying a mutual fund, means that you with the other mutual fund investors are pooling money that will let you pay a professional to manage or select the securities for you.

Depending on the mutual fund company, they may pick securities that are mainly focused on certain financial vehicles whether it be large or small stocks, government or company bonds. These certain bonds may be coming from our country's industry, or abroad.

If you feel you are the person who does not have the time to learn about the stock market, go with mutual funds. This way you can let the real experts take charge instead of you having to face the risk of losing everything you've got.  

Now that you have the idea, the responsibility is in your hands. While different kinds of investments do have their own risk factor, we need to determine our appetite for risk. This way, we can avoid the pitfalls of being pushed to limits more than we can handle. Hope this blog will help you make sound decisions about where to invest your hard earned money.

Why We Need to Invest

April 22, 2013, PSE rejoiced with the new all time high of the Philippines index on the stock market. Seven minutes prior to market closing, the index went up to 2.35% to 7,120.48. 

Disclaimer: I am not a fund manager but I am happy with that news. Why? because it simply means that more and more people are making themselves equipped in financial literacy and have started their way to their own financial independence by investing. One of them is yours truly. Of course, the old timers too who have been around a long time, these foreign and local investors have been blessed by their winning stocks today.
Now on to my blog... All of us can be investors too! It is a myth to say that only the rich can be investors and can join the stock market bandwagon.There are broker companies nowadays that offers as low as Php 5,000.00 to invest in the stock market; But why do we really need to invest?

I'll tell you why... We need to invest so we can combat "inflation." If we are aware, every month news on tv, internet and the newspapers would announce the current inflation rate but most Filipinos don't even seem to bother, all you'll hear is the complaint about the rise in commodities. You might ask, well what is inflation anyway, and why is it important?

Saving in a bank will give you only 1.0% while you need to beat the 3.4% inflation as illustrated in the chart above

According to investopedia, inflation is a sustained increase in the commodities  year by year over time. It has been a common knowledge whether we like it or not.We can always complain to the government about that but actually the government can do nothing about it. That being said, there are three options we can do:

a. You can lessen your spending.
b. Raise the amount of  your salary or  
c. Invest your money in a legit financial vehicle.

If you ask me, "A" is possible. "B" could be possible, if your boss is feeling generous  or you can go overtime at work (unpleasant) but "C" is the best way to go! 

In order to beat inflation, we need to earn that absolute minimum of however much the inflation rate from year to year. What is the best investment vehicle to invest in you may ask? It depends on your risk appetite. I only choose stocks because stocks earns at least 3% a day, and can even give you as much as 50% if you know where to get it. Does that make sense?

Before I end my blog for today. I would like to congratulate our PSE and investors who have been smart enough to start already! Quoting from Aya Laraya, RFP and fund manager from colfinancial (formerly citiseconline), he said: "No matter how much you save, if you're not beating inflation it's useless." So, get to learning more and start now!

***First step to investing is to find a broker, and I don't know if I will be breaking the rules of blogging or what not but, if you'd like to learn more and start investing in the stock market, you can check out the website for goodluck!

Saturday, April 20, 2013

Financially Stupid

Nope, I'm not trying to be judgmental, but if you think I am after reading the first few paragraphs, then it is either you whose judging me wrongly or I may have to repent later after writing this blog. But first, let me tell you a true story.

After one of the Financial Literacy Seminar he was teaching, a certain attendee went to approach the speaker, he is a CEO and Marketing Directors of a prestigious financial institution. The man said to him, "Sir, you gave a great lecture however, I want to attest to you that my wife is an asset and not a liability. Look at her, she is very pretty."

Mr. CEO just smiled and said,  "My friend, the definition of assets are people or things that helps put more money into your pocket."

"Tell me, does your wife help you put more money or savings into your bank account or does she spends most of them?"

"Well," the man said, "She buys a lot of nice expensive things, like make-ups and stylish clothing using my money."

"Then my friend," said Mr. CEO, "You have to talk with your wife and discuss how you will turn around your finances, because according to your story she doesn't sound like an asset to me."


On the next seminar schedule, the same man approached Mr. CEO again and said; "Sir, thank you for your advise. My wife now is truly an asset. We've spoken and she now started to be frugal. Also, she manages to save some of the money to our bank account every time I give her money from my salary." 

--The End--

End of the story now on to my blog. In one of the talk show videos I keep watching on you tube there is this episode I came across with, on which the main topic is the stupidity of women when it comes to finances. The guest of the show a financial expert said this about women; "Many Women are Peso smart but Million foolish." 

We'll, I believe that not all women are financially stupid, but most are... and men too! I didn't get to finish watching the whole episode but I have my own presumptions I have my own presumptions and here are just a few:

1. Women know where the latest mall bargain is but they don't know which companies of the stock market are on sale. 

Men, may or may not know where the mall sales are or they wouldn't even care; but they also don't know when the stock market is cheap or they don't even care about the stock market, period.

2. A hair re-bond session that charges a fee of not less that Php 1,000.00 is not so much to pay for, not knowing that 1,000.00 at 12% interest will turn into 1Million in 24 years.

What is a car loan when he can show off a brand new Porsche to his friends and dates.

3. They'd rather date a handsome guy who likes to spend his money more than he earns them, instead of dating the one who has potentials.

Men, would date a pretty girl instead of dating the smart ones who can make sense about money. 

After all is said and done, both of them are living in financial disaster!
In reality, most men and women of all sizes and shapes, many are still lacking in Financial Literacy. People still make unnecessary purchases and get scammed in wrong investments, which just proves that in this day and age; People are financially stupid. According to an anecdote I've once read, there are two kinds of people.

"The One who is rich, and The Other who wants people to think that he is rich. "

The other use to love fancy-schmancy things. To die for shoes and apparels,  Expensive perfumes, cool phones and gadgets and other branded items. In short, 'the must-haves that they don't really have to have.' They are lured into the world of consumerism. They feel they don't want to do anything with savings and financial investments since they feel that it's (1) only for the experts, (2) they just simply don't care about their financial future. 

I'm not saying that buying nice things are bad stuff. To be honest I like those kind of stuff too. I would love to have those if only they are given to me as gifts, I would appreciate it. Otherwise, I will have to make a way to afford it, otherwise... I can do without it for now.

If we try to secure our financial future by living frugally at our present status. We can rest assured that we can be comfortable in our old age. In short we can delay our instant gratification for a long term return of our investment. 

Others would contest, why study Financial literacy when "money is the root of all evil."? If that's the case, I who wrote this blog should have been cursed now? and if not now then maybe later in my life.

My take on it though, is this; We are stewards of God's creation, and as children of God, we can try to be abundant as much as we can in order for us to help build Lord's Kingdom on the earth. Money is Not the root of all evil. Take note that in 1 Timothy 6:10 the exact words were, "For the love of money, is the root of all evil." see the difference?

There is a need for a change of mindset if we'd lime to build a strong financial foundation. Discipline also, instead of spending money on useless stuff, we can still consider the difference our money makes as investible funds.

So, instead of upgrading your cellphone every month.Why not invest them on assets that can generate you more income in the future. There is a cost of course. It may affect our lifestyle a bit, and social life a bit but trust me, you'll survive without what you thought you can't live without. 

The question of so many of us then is this; Is it possible that people can really study and get into, Stocks, Bonds, Mutual funds and or UITF's to improve their financial status in life?

Why, yes! and if you ask why... then why not?

Tuesday, April 16, 2013

Compounding Interest - A World Wonder

This is a blog about how money doubles and no, I don't mean scams. It was Albert Einstein's fault. He said it alright, Compounding Interest is the world's 8th wonder! Now, it's our turn to find out why he said that.

Look at his picture and his quote to the left again. We'll, it's obvious isn't it? If you understand the rule of money and it's benefits, the next best thing you would want is to make it work for you and not against you.

By this, you will know that compounding interest really has power. The good thing about making money work through compound interest is that, money never gets tired, or takes a leave of absence. Therefore keeps the business going without you having to work too hard. Make money work hard for you! After all, money will never get sick like you do.

Question:  So what is the formula for doubling our money?

"A voler sapere ogni quantita a tanto per 100 l'anno, in quanti anni sarà tornata doppia tra utile e capitale, tieni per regola 72, a mente, il quale sempre partirai per l'interesse, e quello che ne viene, in tanti anni sarà raddoppiato. Esempio: Quando l'interesse è a 6 per 100 l'anno, dico che si parta 72 per 6; ne vien 12, e in 12 anni sarà raddoppiato il capitale."                                                                                                                                  -Luca Pacioli

English please (roughly)...

"In wanting to know of any capital, at a given yearly percentage, in how many years it will double adding the interest to the capital, keep as a rule [the number] 72 in mind, which you will always divide by the interest, and what results, in that many years it will be doubled. Example: When the interest is 6 percent per year, I say that one divides 72 by 6; 12 results, and in 12 years the capital will be doubled." -Luca Pacioli

Ladies and gents, here comes the Rule of 72! 

It was Luca Pacioli who gets the credit for discovering such a wonder. An Italian mathematician, he presented the rule as a lecture in his Summa de Arethmetica in 1494.

In this formula, 72 is the constant when trying to figure out when your money will be doubling, divide it by the percentage, you will get the year(s) result. This is how our money begets money.

Here is a simple table for an example of this rule:

Now here... the current interest rate of Savings Account in the Philippines is 0.1%. When I was in grade school, a Junior Savings Account interest is 5%, notice how it's lowered over the years. The average current inflation rate is 3.4% and commodity prices still keeps rising every month and year. How can we keep up if our salary stays the same and our savings earns only 0.1% on interest?

Here, here... If you are given the opportunity to invest in a financial vehicle that can give you at least 4% and at most 50% which would you choose? The 0.1%? or the one that gives higher?

We'll lets depend it on your appetite for risk. Something to think about.

Monday, April 15, 2013

The Law of Building Wealth and Decreasing Responsibility

During a lunch break of the marriage counseling and family planning seminar that we were attending. My fiance and I got to talking about the movie we've just seen the night before. The movie was Wall Street - Money Never Sleeps, which stars Michael Douglas and Shia LaBeouf. 

Though the movie is about the stock market, I recall mentioning to my fiance a concept that I learned a few years back about savings and investment (courtesy of IMG). I remember saying "as we increase our savings, it will bring down our financial responsibility in the future." He looked at me with amazement at what I had just said, or at least I want to believe that he was amazed at how smart I am, thanks to my mentors.

Kidding aside, we kept talking while heading back to the seminar class. I thought to myself "this is good that I'm marrying a man who has hopes and plans for the future and sooner or later, these plans will need to be executed after we're married."

A year after our marriage, and a baby. My husband and I with our baby went to attend a Personal Financial Strategy Seminar in Makati. This was the seminar that I use to go to when I was single. Now that I'm married, I decided I want my husband to come with me, and see where I'm coming from with regards to finances. This way, we can build our dreams together in providing for ourselves, our family and our old age with the same understanding.

On our way home from the seminar, my husband told me that the X-curve was one of the greatest concept he has ever met. I agree! From the first time I've heard of it until this time, I still so agree! Even financial experts believe that it is the most powerful Temporal Concept in the world.

What is the X-curve anyway. Here let me share it with you:

That's it bye! Nah, kidding again! We'll that is just the representation of what an X- curve would look like when you are looking at it from a distant. Unlike any other graphs that either trends upwards or downward, this graph's shape is X. The sense of it will come as it is being laid out one by one. So, let's dissect the graph to find out how this concept came about.

In the story of our life, every human being who has ever lived on the earth, whether they like it or not have responsibilities. That is represented by the X-axis on the graph. 

As much as we can, we all try to make a living to provide for our family and our self. No matter how large or small, we earn money with the time we are given on the earth. Theoretically by the age of 21 (according to Philippine Education), a man or a woman must already have finished a degree in college and will already have been able to find a job that pays. So, lets assume he/she started earning early at 20 years old, Y-axis will represent wealth over time, Point 0, starts at 20 years old.

As we indicate what your responsibilities are on the left side of the X-axis, the question you have to ask next is how much? If you don't have a plan, you won't really care, but let's say you are a goal oriented human being; and would want to provide the best for your family, wouldn't you ever wonder, if you could ever reach your temporal goal? How will you go about starting it, when bills to pay are never ending and the cost of commodities are high?   

Let's calculate. This is how we were taught. In order to find out how much our financial responsibility is, you need to know your income figures. This is the formula:

Annual Income x 10 years = Financial Responsibility 

Let's say you are earning Php 15,000 a month. That makes it:

x    12 months
x        10 years

Php 1.8Million, That is how much your responsibility is. Whether you think that it's a lot or not at all, do not judge yet. You will find out later why it's that so. Now, let's proceed.

There goes the question! Presented there, is the first risk that your family will have to face if ever YOU as the breadwinner will pass away (knock on wood) too soon. Will you leave them with debt and more financial problems or will you leave them a fortune of Php 1.8Million plus interest? 

As we age, our primary temporal goal should be to fill that savings into our bucket of wealth in order to lessen our responsibility. How do we do that? Remember my previous blog about the rat race cycle. We need to break that habit. 
So we turn this:

Income - Tithes and Offerings - Bills - Lifestyle = Savings or none at all 

 into this:

Income - Tithes and Offerings - Savings - Bills = Lifestyle

See the difference? Now remember:

Here we go: Php 1.8M responsibility, 
If you save Php 450,000  your remaining responsibility  Php 1,350,000.              
Raise your savings up to Php 1,350,000 you will have Php 450,000 left to save.
Continue saving up until you're savings becomes Php 1,800,000. How much is your responsibility? That's right! ZERO!

Presenting, the 2nd risk in this theory. What if you Live too long? This is where another important aspect of finance comes in. Introducing the role of investment.

Let's assume you have saved up up to Php 1.8Million and you decided to invest that in a financial vehicle that will give you 10% interest per annum(per year).

x    10% int. pa 

Earlier, we calculated that you, earning Php 15,000 a month will bring you Php 180,000 a year of income. In this scenario, Php 1.8Million at 10% pa is Php 180,000.  Now, wouldn't it be nice, if you are earning Php 180,000 per year from your investment, never having to work anymore? That my friend is called Income Replacement. You should by then be Living On Interest (LOI).  

The perks of living on interest are shown in the diagram graph below.

If you follow this concept in execution you there will come a time where you wouldn't have to worry about your family and your old age! Because of your hard work, and smart move, you can definitely say that you did the best that you can for your family... and yourself. 

The question now is, where are we in the X-curve? Are we prepared for risk 1? How about risk 2? Hope you learn something!

Saturday, April 13, 2013

Temporal Foundation

Two months ago I was having a visit with an old friend that I have not seen in a long time. While we were in this catching up conversation, she mentioned that she had a hard time managing their finances. I was wondering how can it be? Her husband works overseas and she said, that he sends her remittances on top of her earnings as a grade school teacher.

I asked her a question only a close friend would ask, and she answered my question as open as she would usually do. How much money does her husband send her? I will not mention how much she disclosed but if you ask me, they are making more than enough for a family of four. It made me wonder even more. How come? She could have saved up a lot from what they were earning but she said after receiving the remittance, money's all gone by the time the next remittance came. 

I thought it would be a great opportunity for me to share with her the importance of financial education. After I told her about it she said, "with my busy schedule, I don't think I have the time to attend lectures like that, like you do." Though it's not my first time to hear that kind of excuse, I felt like a missionary who has just been rejected by trying to share the gospel and nobody wants to hear.

It saddens me that people in general wants to find out how to become financially independent but does not have the time to learn to be one. It also saddens me that people who are close to me including family members and close friends would not want to know the steps of how to build a Strong Financial Foundation.

Earlier today my family went to church on a Saturday session of our churches' general conference. Bishop Dean M Davies spoke about building our lives upon a safe and sure foundation. It was a wonderful talk. He explained and quoted to us the words of the Nephite prophet named Helaman, who taught that we must build the foundation of our lives on a sure foundation even in Jesus the Christ. 

He went on explaining about how our modern temples are built. That these places of worship was given such attention by those who are building them, getting the best of experts, that can do thorough testing of the grounds where these buildings are built. Most temples are anchored strongly to the earth with steel and concrete, making these places of worship sturdy enough to stand the test of time and other calamities that may arise. 

As much as his talk was referring more about our spiritual well being, we can also relate it to our temporal well being. In all honesty we need money to be able to provide for our needs, although we might hear someone say, "I don't need money." We all know it's not true. Even a church building will need a lot of money and funding in order to be built.

What my friend doesn't know is, that there is a way that she can be able to manage her finances. The problem I think is, she doesn't see it's importance... yet, and I bet she would only if she'll take time for it. All it takes is a little planning and lots of execution. That way, we can not only care for our family's spiritual but also their temporal well being, and ours too!

According to experts, people are living a life that we can call a "rat race." This is why no matter how big... or small the money that gets into their pockets they are still financially struggling. Many will wonder where their money went, and when financial calamity comes into their life, they would confess "I was never prepared for this."

Take note though that what I'm about to say next is not a church doctrine, but insights that I learned from financial experts to answer the question, how does one build a strong financial foundation? Here are the six ways to build this financial strategy and here they are:

 Increase cashflow - this means you can get a job, so long as it's a legit paying job.Add an extra job, there's nothing wrong with that. Get the feel of how your family is doing. Are you living from paycheck to paycheck? if so then you are not making a way to increase your cashflow. If you feel that your time will not allow you to get another job, then that's the time to leave below your means, not within. Remember you are trying to increase your cashflow by making sure you still have money in your savings before the next paycheck comes.

Manage Debt - If you have a debt analyze how long it will take you to pay for it. Make a strategy. This doesn't mean you run away from your debtors. Meet with him or her so you can discuss your payment plan. Above this, the most effective way to not worry about debt is to stay out of it.

Create Emergency Fund - Think about this, If you lost your job tomorrow what will happen to you and your family? How about in emergency crisis like sickness, accidents or deaths? How will you fund for that? The ideal amount of an emergency fund is 3-6 months of your monthly income.

Ensure Proper Protection - If you or a family members get sick, disabled or die, do you have an insurance that will take care of it? Take note the most important beneficiary of your insurance is you. There are all kinds of insurance out there. Car insurance, house insurance, business insurance etc... it's OK to get this kinds of insurances but make sure before you do that you are insured too!

Long Term Asset Accumulation - Assets are things that put more money into your pocket. Examples are real properties, stocks, bonds and mutual funds. I'll blog more on this later.

Preserve Your Estate - While living on the earth right now, we teach our kids good values and send them to school to gain discipline and be contributors to the society. We must also aim to leave them tangible legacy that will not only benefit our children but also the generations after them. There is a need to know the legalities of preserving the piece of land that we so worked hard to buy. There is a need to be educated in this area.

There you have it! The six steps to building a solid financial foundation. As a conclusion, I want to clarify that I am not yet rich but these are the things I learned from the men I look up to. People who have already been there and has shared with me this time tested and proven idea. I said "not yet," because I with my family am on my way, we all could try couldn't we?

Friday, April 12, 2013

School for the Arts

It's been over a year since I last posted a blog on here. Yesterday, I spent my time rehabilitating this blog as you can see I made some improvements on it. Finally I now have a definite objective of the blogs I would like to be posting here. Took me a year to figure things out. 

So, I decided yesterday to jump start my blog again today. I was excited to write about so many things. This time I'll just have to start with one blog, then maybe next time another and next time another one. And hey! blogging isn't such a bad idea for a keepsake.

This morning my husband was browsing his facebook page and he was able to click and view this interesting talk by Sir Ken Robinson on Ted Channel. The video was titled "Do schools kill creativity?" I posted the video below so you'll know what I'm talking about.

While listening to him talk, suddenly it dawned on me. While I am a person who so values academic education, (like everybody else) but looking back in my younger years,  I actually hated going to school! Except when I get into my English class for the reason that I like prose, as I love reading short stories and poetry.

As I we continue listening to Sir. Robinson's talk, I finally came to realize the importance of what wasn't considered important in the education realm of the previous decade. That is "creativity."

The next thing that came into my mind was my high school. I graduated in Iloilo National High School for my secondary education. As you know, INHS as we call it in acronym, has different programs within the school. They have a Special Science Class, the School of the Future Program where the very intelligent students are being grouped and classed altogether (they are only a few in numbers), and the "just regular classes" - the program I belong in. These are the programs that we can say, belongs to the academic level. The ones that Sir Robinson is talking about. Schooling with high ranking subjects like science, languages and mathematics while considered important, they cater to industrialism. 
Iloilo National High School

Besides the academic programs mentioned, INHS was also able to provide a school program that most of us back then would think as, "is of less importance." I'm talking about the School for the Arts. 

The curriculum of the students enrolled in this program is focused more towards the various fields of arts, theater, creative writing, dance and music. Sounds enjoyable if you love arts and dancing but is being less valued by the majority because of the thought, that education geared towards industrialism is more important than the ones that is geared towards nurturing a student's creativity.

In this day and age, there are more opportunities for what was once lame. I remember when I was young and when my parents from work would caught me and my brother playing computer games for hours. We'd get reprimanded that we are doing useless stuff, they'd turn off the video game and make us do household chores. The other day I was watching the Today Show and there on tv was a kid named Nick D'Aloisio being interviewed for selling an app he created to yahoo for $30M dollars. I can only imagine the time this kid spent in from of the computer. He just became an entrepreneur and is not even required to pay taxes yet!

Nick D'Aloisio
My point in writing this blog is this... there are different kinds of smart. Now that I'm a mom, and a wife I'll have to work hard in nurturing the creative capacities of my children and support them. I'll have to be aware on what my kids are good at. I'll still send them to school, and let them have the extra curricular activities as they please, as much as our family budget can afford. I'll have to let them make a mistakes of their own. Hopefully I won't smother them too much, so they will grow up to be accomplished human beings.