Financial Wealth Calculator

Last night while browsing the website for The Church of Jesus Christ of latter-Day Saints, www.lds.org I went to check the page for provident living.

As I said before, or church is not just all about aleluiah! We are taught in terms of spiritual and temporal matters, and I was happy to find that there is  financial calculator on our church's website, in which I feel I ought to share.

This is for anyone who'd like to know how much they need to save, invest and paying off debt. I'm glad that there are help we can get in order for us to be financially self reliant. Here is the link:

http://providentliving.org/self-reliance/finances/financial-calculator?lang=eng

Check it out! With careful planning, you can map out your financial future with your family and be happy!

Mighty Change of Mind: A Personal Finance Paradigm Shift

This may be a late update but, I just want to jot down the success of our Saturday's activity, June 9, 2013:

 

Our guest speaker being Mr. Tom Tandog, an Associate Financial Planner and Senor Marketing Director for IMG - Wealth Academy. Part of the lecture was also conducted by Bong Sanchez, President for The Academy for Creating Enterprise, Angeles Stake Chapter. 

From there, we learn about how to change our mindset about money. Now, why is this important? It is because many people though that getting rich can only happen if you get to be lucky in terms of heirloom or hitting a lottery jackpot, other think its investing but they don't know how and where to invest their money. This often leads to being scammed. During the said event we were taught the right way of budgeting which leads to proper saving and investing of our money in legal entities that can guarantee us our return on investments. 

The program was also in line with the letter of the First Presidency for this year, regarding sound investments:

Everything in the announcement agenda has been covered during the seminar, including some introductions to legal publicly listed investments such as bonds, mutual funds, insurances and stocks. What a great way to be taught and refreshed on what were suppose to do in order to achieve self sufficiency and reliance the way our Father in Heaven wants us be. It's one of the ways to build Zion.

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.

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. 

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. ...as 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 colfinancial.com goodluck!

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:

15,000 

x    12 months

 180,000

x        10 years

 1,800,000

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).

 1,800,000

x    10% int. pa 

 180,000

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!