Thursday, May 23, 2013

Emergency Funds and Invest-able Funds

It's school time once again, and many parents are spending for their children's education. I've just finished watching the late night news and I saw that the schools are getting ready for the upcoming school opening. With this also comes the stores and kiosk that are selling books and school supplies at an affordable cost. Parents are trying to look for wallet friendly buys for their kids. 

That is a good thing. With the economy that is going on about our country, it is important to be economical and practical. Though many of us would say that it's important to save on the stuff that we buy. It is also important to consider saving the money that is left of us after all the important expenditures.

Though, tuition, books and school supplies are important things to buy this season. It is also important that we realize to turn the rest of the money we used to buy into two different kinds of Funds we need in our lives. That is to put money into our Emergency Fund, and Invest-able Funds.

What is the difference between the two funds? Here let me explain:

Emergency Fund - This is the money that you put aside to be used for emergency purposes. This is your "I'm in need" piggy bank. Ideally it should contain an amount of your three to six month salary. Why? Financial experts suggest this so that if something inevitable happens, i.e. loosing a job, it is a known information that the usual time frame for a person to be able to find or get a new job would be in about three months. 

Where should we put our emergency funds you may ask? Well, you can make a bank account savings for it. Piggy bank is fine only when you don't intend to earn from your savings, but always try to remember the adage that, 'a penny saved is a penny earned.' The bank will only give you 1% interest (current bank interest rates nowadays) but at least your money can grow from there. Also remember to circulate your funds in your bank. Some banks charge fees for dormant accounts. So this means, even if you have already reached your goal amount for your emergency fund you keep putting in more money for some cash on hand for future purposes. 

Invest-able Funds - These are funds that is a portion of your money you decide to put away for investment. If you feel that you are a person who is not into business. You don't have to pressure knowing how to build one of your own, although it would a  brilliant idea. In order to secure your future, you can at least learn how to make money work for you instead of working so hard for it. We'll you'll work a little hard for it at first of course, but once your emergency fund is set you can make more money by investing them in financial vehicles that can provide you better returns for your hard earned money. This way, you'll have less worry when you get older. 

Both emergency and invest-able funds have it's own social and psychological cost. It is because it will require you to have a lot of discipline in yourself in order for you to save and invest money. Notice how our generation is hand cuffed to consumerism. This is the main reason why people who can't afford to buy the things they want are drowned in consumer debt. Sometimes it's the covetousness in us. 

As was mentioned in the scripture, I can also relate that disciplining ourselves to save and invest our money needs some 'bridling of our passions.' If being a shopaholic is your passion then, let saving be your passion now. No need to covet our neighbor's lovely things. You'll thank yourself one day for being able to satisfy the demands of delayed gratification. 

Saturday, May 18, 2013

After College and Office, Now What?

If I look at my resume, I would see that in the span of 11 years, I have been through different Employers and I could say, I would only stay at a workplace from maybe 3 to 6 months. I would say the longest I've been in a company would have to be around 1 year and 6 months at Convergy's. I just don't have the grit to stay in an office.

Sometimes, I feel that being in a office makes me feel really stupid. It's crazy, but it's the way I am. Sometimes or a lot of times colleagues  make me feel like, I don't know what I'm doing. At first I thought something is wrong with me. Well of course as un-perfect as I am. But one thing I know is that, amazingly I still survive after leaving the corporate slavery world. This is I guess, because  I never really stop doing something every time I'm out of job, or just resigned. I just have to be doing something else.

I remember when I was working at the ICT group, I got suspended from work for some stupid reason. It wasn't because I failed to try to do well. Who wouldn't want to do well for their office job just to stay afloat as an employee? It felt devastating during that time. Instead of wallowing at home, the timing was just right for me then to attend a one week Academy for Creating Enterprise Training. I belong to the executive batch which made my office suspension a lot easier to deal with. While at ACE, I learned a lot about Entrepreneurship. The last day of our class was our ACE graduation. Who wouldn't feel so special about this? I just turned my misery into a happy occasion.

Now that I work  from home as a self employed individual and a mom. I like it better. Funny as it may seem but I even have extra blessings in my pocket than I did when I was working for someone else's company. I also like the fact that I was able to do other things. Something always comes up and I was never content. I got more time for myself learning the things I really want to learn about.

Something that I've been learning a lot lately dwells more on the topic of personal finance and investments.

My journey to this so called financial independence started back in 2008 while I was working at Convergy's. It was in response to a friend's invitation to attend a lecture about The Law of Building Wealth and Decreasing Responsibility. I like their concept, so I did join with them in the International Marketing Group. To cut the story short, I am not an active participant to the IMG group. But because I do believe in the concept to strongly. I apply the principles I learned. I took my husband one time with me to attend to two of their lecture series in Makati.

My progress with IMG was slow on the business side. Living now in Pampanga, I am grateful to have bumped into a small business opportunity which helped a lot in my Entrepreneurial path. I am learning a lot working working on the business than working for a business. It is not always easy but I can sense that I'm growing more this way than the other way. 

Two years ago, I opened an account with COL Financial formerly citiseconline. They are now the country's largest online brokerage for stocks trading and investment. So far, I have positive experiences with them. It took me a year to attend their investor seminars. 

The First one I attended was a seminar entitled Investing in the Stock Market Today, conducted by Mr. Aya Laraya, RFP and an Investment Advocate. He is also the host for the show Pesos and Sense The lecture was an eye opener. It's amazing how he can simply explain what stocks are and how to invest in it. Too bad I didn't have my camera that time, I didn't even know he'll be the speaker so I didn't get the chance to have a picture with him.

After attending the lecture with Aya Laraya. I booked for another one the following month. The Fundamental Analysis by Charles William Ang, Research Analyst of COL Financial. I wasn't really happy about my attendance on this one because I slept late the night before going to the seminar, so I was feeling sleepy the entire time. I stayed anyways, the entire time trying to stay awake. I don't want to waste my travel time from Pampanga to Manila. I least I was able to hear lectures about the Fair Value and Book Value of a company and why it is an important consideration when picking stocks. Luckily, I brought my camera that time so I was able to take a picture of him while he was discussing. (I placed his photo with the other two below, I hope this is OK)

The last one I attended was the Primer to Technical Analysis, conducted by Juanis Barredo, VP for Sales and Chief Technical Analyst of COL. I really enjoyed this one! We were taught how to read the charts that will help us decide when to buy, hold or sell the stocks we own and are eyeing on. As he (Juanis) promised, I was even sent yesterday an email of the whole module!

And just last night, I cannot sleep. So I opened my laptop and checked on my dropbox folder. There are e-book files I was able to open, I went to look for a good read. I found this college book looking item. It was entitled. Financial Management Principles and Applications, by Keown, Petty, Martin and Scott, Jr. It was really late when I decided I have to stop doing what I'm doing and head to bed.

After I get to finish this book, who knows what I'll be doing next? Always, I'm at a start!

Tuesday, May 14, 2013

What's going on Pinoys?

It's been a while I haven't blogged. I guess my excuse is just being busy about being busy. Anyway, a lot of things has happened in the course of the few days. One of the hot topics all over the place is the recent Election 2013 for the Philippines. This is where the people of the republic have the power and are privileged to choose the leaders that will help run this beloved country of ours. 

But just watching and keeping up with the news since last night. It is somewhat devastating. Months before the 2013 Philippine election I've already seen all sorts of endorsements everywhere. From wall posts, to jingle campaigns, and online on social media.

Being a person who likes to look into the social media and the internet for all sorts of stuffs. I can see who among the senatorial candidate is the most disliked, for a lot reason. Now that the election is over and the counting of votes is on the process. Looking at my Facebook page, I can see clearly the disgust of my thinking class friends. It goes from wall post, after wall post, after wall post. People that are running for office are making their ranks in the polls according to the news.

Many are devastated that after all their campaign to inform the public to vote wisely and choose a candidate that suits best in the public office; it seems that it wasn't heard by the majority of the people at all! Could it be that some of our fellowmen intentionally wanted them there? or could it be that once again their votes were bought. It is not a wonder anymore why the Philippines is one of the most corrupt country, in Asia. It is a sad thing. 

It has always been a long time warning:

Hwag ipaglibili ang boto!
Think and Vote wisely!

I was happy that before the said election yesterday, It was pronounced over and over again. On tv, on the radio, newspapers, and in social media. It has been shared, twitted, and re-twitted over and over again. In many different ways,  Coming from the country's leaders, celebrity endorsers, by our friends and even our next of kin. But what happens after? Galit nanaman ang thinking class and those who were able to receive money out of it are just getting their days food and, the next days... who knows they may be back to poverty again. Above all this, we still wonder why the economy is bad. Why are we all still in poverty? Sickening isn't it? 

Amidst all these, I still feel hope. It's because there is still the thinking public. It's not a matter who is rich and isn't anymore. I'm grateful for those who were on the look out for their fellowmen. It doesn't take an election candidate to do that. In their own way, sharing such important information about individuals who did run for office played a big part as to who should and  shouldn't be in the public office. It's just sad that those we don't want there are soon to be secured in their place.

I just hope that in the next coming elections, three years more and so on, will be different. Unless we make changes amongst ourselves, then we can truly say that we don't deserve who and what we did and didn't vote for. It's time we put our hearts and principles to where our mouths are. 

Monday, May 6, 2013

Awesome Heber J. Grant Story

Heber J. Grant

President Grant tells the following experience in his own words regarding how the Lord blesses us when we keep his commandments and rely on his divine help.
“‘I remember as a young man I had $50.00 in my pocket on one occasion which I intended to deposit in the bank. When I went on Thursday morning to fast meeting—the fast meeting used to be held on Thursdays instead of Sundays—and the bishop made an appeal for a donation, I walked up and handed him the $50.00. He took five of it and put it in the drawer and gave the $45.00 back to me and said that was my full share.
“‘I said, “Bishop Woolley, by what right do you rob me of putting the Lord in my debt? Didn’t you preach here today that the Lord rewards fourfold? My mother is a widow, and she needs $200.00.”
“‘He said, “My boy, do you believe that if I take this other $45.00, you will get your $200.00 quicker?”
“‘I said: “Certainly.”
“‘Well, he took it.
“‘While walking from fast meeting to the place where I worked, an idea popped into my head. I sent a telegram to a man asking him how many bonds of a certain kind he would buy at a specified price within forty-eight hours. … He wired back that he wanted as many as I could get. My profit on that transaction was $218.50.
“‘The next day I walked down to the bishop and said: “Bishop, I made $218.50 after paying that $50.00 donation the other day and so I owe $21.85 in tithing. I will have to dig up the difference between $21.85 and $18.50. The Lord did not quite give me the tithing in addition to a four to one increase”’” (Presidents of the Church [Religion 345 student manual], pp. 176–77).
Notes from the blogger:
Our Relief Society lesson last Sunday was about Temporal and Spiritual Self Reliance, I believe this story is one perfect example.

Wednesday, May 1, 2013

Invest What you Can Afford Using an Hourglass

The other week, I promised a friend that I will blog about how to do money cost averaging. So here it is now! 

If we've ever heard of the term buy low sell high, traders do this strategy with their stocks. But one can never really tell the timing of the highs and lows of stocks prices. This is the reason why it has become so risky, to the point that you could loose money. 

While it is true, there is a way to invest in the stock market without losing too much. That is investing for a longer time period. You have to make sure your investment hourglass is working for you and not against you.We call it the money cost averaging strategy.

How does money cost averaging differ from trading? Well, in money cost averaging, you invest a fixed amount of money whether the prices go up and down. This is the way to make the most of your investment hourglass, no matter what age, or experience you may have about stocks.

I'm going to make an illustration. Refer to the three graphs below. Which do you think makes more profit from among them?

Investment A is on top left, Investment B on top right and Investment C below the two.
If you look at the graph above, it would seem that Investment A earns more profits because the trend of the market prices goes up. But we will dissect each graph and see how much each investment really profits; whether the market is trending up, or down, or not so much movement like the graph on investment B.

Here are the formula(s):

To calculate the shares = Investment Amount 
                                           Price Per Share

Lets start with Investment A:

Let's assume that Mr. Investor invests Php 1,000 every month with his investment trending up in prices, month by month.

     Month 1: 1,000/5       = 200 shares
     Month 2: 1,000/12.50 =   80 shares     
     Month 3: 1,000/15     =   66 shares
     Month 4: 1,000/20     =   50 shares
     Month 5: 1,000/25     =   40 shares
     Total shares:                436 shares in 5 months

If Mr. Investor will have accumulated 436 shares in five months. If he decides to sell his investments from  month 1 to Month 5 with shares at valued at Php 25/share. His gross income would be Php 10,900.

How much profit did he make?

           Php 10,900 - gross income from his shares
        -  Php   5,000 - investment amount from Month 1-5
           Php   5,900 - profit from his shares!

Investment B:

Assuming that Mr. Investor invests Php 1,000 every month with his investment that doesn't fluctuate too much in prices.

     Month 1: 1,000/15     =   66 shares
     Month 2: 1,000/10     = 100 shares     
     Month 3: 1,000/18     =   55 shares
     Month 4: 1,000/15     =   66 shares
     Month 5: 1,000/20     =   50 shares
     Total shares:                337 shares in 5 months

337 shares in five months. If he decides to sell his investments from  month 1 to Month 5 with shares at valued at Php 20/share. His gross income would be Php 6,740.

For the profit;

           Php   6,740 - gross income from his shares

        -  Php   5,000 - investment amount from Month 1-5
           Php   1,740 - profit from his shares

Lets see what investment C has to offer:

Assuming that Mr. Investor invests Php 1,000 every month with his investment that doesn't fluctuate too much in prices.

     Month 1: 1,000/12.50 =   80 shares
     Month 2: 1,000/10     = 100 shares    
     Month 3: 1,000/5       = 200 shares
     Month 4: 1,000/8       = 125 shares
     Month 5: 1,000/20     =   40 shares
     Total shares:                545 shares in 5 months

If he decides to sell his investments from  month 1 to Month 5 with shares at valued at Php 25/share. His gross income would be Php 13,625.

For the profit;

           Php 13,625 - gross income from his shares
        -  Php   5,000 - investment amount from Month 1-5
           Php   8,625 - profit from his shares!

That's more than the profit gained by Investment A and B!

The reason why stock prices go up and down every day has certain factors. It could either be politics, economy,business performance of the company, and events that happens around the world.

No matter what happens to the stock prices, just buy anyway. All you have to do is just to select which company you want o invest in (make sure it's a good reputable one), and decide how much you want to invest and how often at an interval basis. The trick is to have a medium term to long term investment hourglass (5, 10, 20 years). This way, you can invest in the stock market even if you don't have all the time in the world to monitor it, and still make profit, whether the prices go up or down.