Money Smarts

WHILE ON a recent trip to Japan, I heard a story about an OFW driver who nearly wasted away his earnings. He worked in Japan for close to 30 years, and at one point was earning an equivalent of P400,000 a month with overtime pay. He had a wife and child back home in the Philippines and was able to send his child to school. However, he was always out drinking at bars in expensive Tokyo while having several relationships with other women. "Puro good time," they say.

Well the guy wasn’t able to hold on to his job due to his drinking problem. His employer asked him to resign, and he was given an equivalent of P2 million as separation pay.

 

His Filipino friends could only shake their heads in disbelief at how he wasted away the opportunity to have a well-paying job, and how he was not able to save any money to make his life better. Last they heard, he was back home, bought himself a tricycle which he drives for a living, and is staying with his parents since he could not afford to buy a house of his own.

 

THE AMATEUR video taken at the UERM parking lot during the height of typhoon Ondoy showed what happens to cars when flood gets to them: they float and bump into each other, and become heavily damaged.

The flood was considered by insurance companies as an act of God, and those without coverage for it sadly could not claim for damages.

We asked Arthur L. Panganiban, EVP/COO of Gotuaco,Del Rosario Insurance Brokers, Inc., an all-Filipino professional insurance broking and consulting firm in the Philippines, what this is all about and here is what he said.

Q What are considered acts of God? A  An act of God is an act occasioned exclusively by forces of nature, uncontrolled and uninfluenced by human intervention and which is of such character that it could not have been prevented or escaped from  by any amount of foresight or prudence. This is due to natural causes such as earthquake, typhoon, floods, volcanic eruptions and the like. If it might have been avoided by human prudence and foresight, it cannot be considered an act of God.   

WITH THE country reeling from a triple whammy calamity (flooding in the National Capital Region, flooding in Laguna, and flooding in northern Luzon), the last thing we would like to be hit with are price increases.

After Typhoon Ondoy unleashed its devastating effect, it was really kind of big business to lower prices. The day after the great flood, MRT charged only a flat rate of P10 regardless of whether one’s destination was near or far. Pan de Manila lowered the price of its pan de sal during the days after the deluge. Kalinisan Steam Laundry offered free laundry services to typhoon victims. Even SM malls and other malls waived the overnight fee for cars left in their carpark overnight when shoppers were stranded during the flooding.

So price increases after Typhoons Ondoy and Pepeng have left the country really leave a bad taste in the mouth.

Two days before Ondoy came, my insurance broker gave me a quotation for comprehensive auto insurance. It had two options: with acts of God and without acts of God coverage. Paperwork was not finished that week, and so we dealt with it the week after. Well, what do you know, the insurance companies increased the premium prices for coverage of acts of God, such that the revised quotation now had two columns: Before Ondoy and After Ondoy, resulting in a P700 increase in premium in barely a week!

Now comes news that vegetable prices have hit the roof as a result of low supply due to the calamity up north. Potatoes at P200/kilo, anyone? Sitaw at P120 per kilo?! O my gulay!

HE may not be as famous (yet) as a rock star or top chef Cristeta Comerford (the Fil-Am chef at the White House), but Dr. Eli Remolona is at the top of his game. Currently the chief representative for Asia and the Pacific of the Bank for International Settlements (the central bank of central banks), Dr. Remolona is considered to be the most prominent Filipino economist in international monetary and financial policy circles. Based in Hong Kong, he deals with the 12 most important economies in the Asia-Pacific region.

For him, economics is a passion. He worked for the World Bank and the Federal Reserve Bank of New York, and taught at Columbia University, New York University, Stanford University, and the University of the Philippines. He finished his bachelor's degree in economics (honors program) at Ateneo de Manila University, his master's degree in economics at the University of Hawaii, and his doctoral degree in economics at Stanford.

He has authored a lot of papers on economic policies and international finance, including the famous Krugman Report, in which he wrote the chapter on monetary policy. For his outstanding achievement, Bank of the Philippine Islands awarded him last month the BPInoy Award for being an excellent example of how to "be Pinoy" even when working abroad. The other awardees were Comerford and painter Anita Magsaysay-Ho.

Having spent a good many years abroad, Dr. Remolona knows what challenges overseas Filipino workers face. "There is some discrimination in the world. You can't let it put you down. Deal with it. Move on. Do better," he said.

Money advice He also advised OFWs to open a bank account and send money home carefully so money will be spent wisely at home. "Be careful with money," he added. Money remittance is safer through banks rather than  through informal channels.

IT USED to be that bonds were out of the reach of the small Pinoy investor. But that all changed when retail bonds were offered by both the government and the corporate world. Offering a higher interest rate than time deposits, retail bonds are quite popular given their minimum investment requirement. For retail treasury bonds (RTBs) offered by the national government, investors can invest with a minimum placement of P5,000 and in multiples of P5,000 thereafter. Retail corporate bonds vary in amount, depending on the issuer. Currently, the government is offering RTBs maturing in 2012 (3-year RTB), 2014 (5-year RTB), and 2016 (7-year RTB). The offering period started last September 15 and ends on September 22. Interest rates are as follows: 5.25percent for the 3-year RTB 6.25percent for the 5-year RTB 7 percent for the 7-year RTB Although the interest rates are lower than that of RTBs offered last year, the current batch to be issued on September 24 is enjoying good patronage. Interest will be subject to 20 percent withholding tax. Here are the reasons why someone should consider investing in RTBs, according to Ed Francisco, head of BDO Capital: 1. It's risk free. 2. The rate is much higher than leaving it in bank deposits. 3. You get automatic credit of interest every quarter to your bank account. 4. You are credited at maturity. 5. Should you need money before the RTB matures, you can sell it. There will be a ready market. 6. Some banks will allow you to borrow against your RTBs. 7. You can choose from various tenors, e.g., 3, 5 and 7 years. Since RTBs get “sold out” fast, those intending to invest should go to these banks and financial institutions before the offer period ends: BDO, BPI Capital, Development Bank of the Philippines, First Metro Development Corporation, Landbank, Metrobank, and RCBC. RTBs suit the conservative or beginning investor, but longtime investors with more experience also consider RTBs to diversify their portfolios.

By Karen Galarpe PRETTY SOON, you might want to think twice about sending that text message. On a committee level, a bill in Congress has been approved that will impose a 5-centavo tax on every text message, picture, audio and video file sent. See story here. The bill is not a law yet, but with the government standing to raise P20- to P36-billion a year from such a tax, it may look like the bill will be made into law, unless consumers make themselves heard. Now the question is: Will this tax raise the cost of text messaging to cellphone users? Lawmakers are still debating on it, with some quarters believing that it should be passed on to consumers, since it is an indirect tax. Others say telco providers can well pay for the tax themselves. If consumers will pay for the tax, that may lessen the amount of text messages sent every day in this texting nation. That hopefully means less scam messages from people who want free cellphone load. But we Filipinos love to connect, don't we, and may not mind texting away at P1.05 per text message. Are you in favor of the government taxing your text messages? Please share your thoughts.

SORRY TO start off your week with a couple of sad stories, but these stories beg to be told. Mind you, they are true stories, which happened here in Manila recently. Story 1 A widow in her sunset years has a small house and lot in her name. That is her only asset and it was given to her by her late husband. The widow entrusted the land title to her daughter for safekeeping, who kept it in her own home she shared with her husband. The husband has a good accounting practice and put up a small restaurant-bar. Over the years, the business did not prosper as expected. One day the widow received a document from the bank saying that her house and lot will be foreclosed. Without her knowledge, her son-in-law used the land title and forged her signature to get a loan from the bank. His wife did not know about it too. In the end, the widow had to vacate her own house. She then spent her remaining years renting a small home with her daughter, who by then had separated from her husband. She died penniless. Story 2 A young single mom in her 20s borrowed money from several relatives, saying she needed money for her son's tuition and other expenses. Concerned relatives extended help. At a family get-together, someone remarked that she saw the young woman at a mall the other day with a handsome man, and they were shopping. Then someone said she and her boyfriend are frequent casino visitors. One concerned relative brought up the matter to the young woman's own mother, who was shocked to hear the news. Confronted, the young woman owned up to the debts to other relatives, which ran up to six figures so far. Worse, the guilty young woman confessed that she is neck deep in debt, and that she doesn't know how to pay for the bank loan, which was secured by the family's land title. It turned out she forged the necessary signatures and was able to secure the loan without her parents' knowledge. The parents have started paying off their daughter's loans to relatives, and hope they will be able to pay off the bank loan. The mother has been crying and couldn't believe this has happened. Do you know where your documents are? These include land titles, certificates of time deposit and other forms of investment, and the like. If you don't know where they are, don't stop looking until you find them. Sometimes they can get into the wrong hands... right in your own home.

IT IS no secret that a lot of marital conflict is due to the way money is handled in the family. Sad, but true. At the recent “Money Sense Live! Family Finance 101” seminar organized by Learning Curve, Heinz Bulos, editor-in-chief of Money Sense magazine, says the reasons why couples fight over money include: *  having different money personalities *  valuing money in different ways *  both parties wanting to take charge or one is clueless or not interested *  both parties still live as if they're single *  having difficulty trusting *  being irresponsible Having different backgrounds may be the root cause of money fights, but the real root cause when you look into it is the lack of unity. Ambie Bulos, wife of Heinz, and a trainer, shares that couples should start thinking of themselves as “one unit.” She quotes Genesis 2:24 in the Bible, which says: “For this reason a man will leave his father and mother and be united to his wife, and they will become one flesh.” Thus, being of “one flesh” is being “one unit.” There are 4 C's to making money problems a thing of the past in marriage, according to Ambie: 1. Communicate. Understand where you're coming from. Share your dreams and goals. Ambie even recommends having a planning session every year just between husband and wife where money goals and plans will be discussed. Communicate regularly and openly. 2. Create. Plan together for the future. Divide money tasks. Whoever is good at handling money should be in charge. Merge your finances—this is for married couples only. Ambie warns singles not to go into having a joint account with a girlfriend or boyfriend. She also recommends that married couples have a joint account. Without it, wives may have a false sense of security, not knowing the state of the family's finances, or husbands may feel that they work and work and spend for everything, not knowing where the money goes. 3. Commit. Stick to your plan. Share sacrifices equally and enjoy privileges together. 4. Compromise. Sometimes things cannot be resolved. Agree to disagree. Find ways to compromise, such as giving each other an allowance which may be spent as one wants. Should conflict escalate and show no sign of being resolved, get professional help. In closing, Ambie says, “Money is not worth fighting about. Love one another. Think as one.”

IF YOU'RE due to renew your driver's license soon (which means your birthday is coming up—Happy birthday!), make sure you won't be charged an unnecessary late renewal fee. Carmen Dulguime went to the Land Transportation Office branch at the Ayala MRT last week, a few days before her birthday. After undergoing the drug test, she went to the cashier and was surprised to be charged an additional P75 as late renewal fee. She asked the cashier when she should have renewed her license. The cashier replied, “60 days po.” So she paid, but called the LTO the next day. Application for the renewal of driver's licenses, they said, is now allowed 60 days before the expiration. Carmen explained her case. The LTO realized that she was charged the late renewal fee by mistake. Reason: a computer glitch since the LTO computer system was being upgraded. Carmen's birthday was read by the old computer as January 1, 1980 even if her real birthday was indicated in her old driver's license. Too bad, the LTO cannot refund the P75. Carmen says, “The LTO's explanation is this: The money had already been in the 'kaha' and they cannot get it back anymore (huwaaaat? Can I help?). They said I can try going back to the cashier at Ayala MRT branch and ask her to give me back my P75 from her own pocket (huwaaat? again).” To LTO's credit, Ms. Dolores Basco of LTO called up Carmen personally, apologized, and said she alerted the various LTO branches so similar incidents will not happen again. But still, the matter of the P75 remaining in the kaha leaves many of us scratching our heads. If it will not be returned to Carmen, where will it go? How many Carmens have become victims of the glitch? Tsk tsk.

By Karen Galarpe IT seemed like a scene from a scary movie: P30,000 per sem tuition now will become-- P111,000 per sem in 17 years at 8 percent increase per annum P152,000 per sem in 17 years at 10 percent increase per annum P206,000 per sem in 17 years at 12 percent increase per annum As Registered Financial Planner Alvin Tabanag continued on with his Powerpoint presentation at the recent Money Sense Live! Family Finance 101 seminar, the audience looked at him in disbelief when he said it may take P1 million to P2 million to get a child through college 15 years from now. That may be peanuts for the millionaires out there, but for the rest of us, that is a tall order. A very tall one. Clearly then, we must all save for our children's education, and the earlier we do so, the better. Just how to do that? Tabanag, personal money management coach, author of Kaya Mo Pinoy! 12 Steps to Build Wealth on Any Income, and founder of Pinoy Smart Savers, counts the ways: 1.Pay as you go. It's crossing the bridge when you get there. “A bad strategy since there is no guarantee that the parent will still be gainfully employed or earning income at that time,” said Tabanag. This may also lead to huge debts if that's the case. 2.Get an educational plan. Now educational plans are viewed with utmost suspicion since the industry is having problems. However, Tabanag said the industry is recovering. What really pulled the industry under was the sale of traditional educational plans since the 80s which promised payment of tuition fees in the future no matter what the cost may be. The unanticipated deregulation of tuition fees, the 1997 Asian financial crisis, and the lax enforcement and monitoring of government agencies adversely affected the trust fund earnings of the preneed companies offering traditional educational plans, and the rest, shall we say, is history. “The preneed industry, while troubled right now, will get better,” explained Tabanag, citing the recent SEC order requiring preneed companies to increase their trust fund deposits up to 70 percent. He further said saving for a child's education through a preneed education plan may be attractive to some because it is ideal for those on a tight budget, fits nicely to our “gives” mentality, is easy to understand, and forces us to save. Here are Tabanag's tips for those considering getting an educational plan: a. Buy only from big, reputable companies. b. Read the terms and conditions carefully. c.Compare rates of return. d.Buy the plan you can afford. 3.Save and invest on your own. Another strategy is do-it-yourself: Invest for the purpose of getting higher potential earnings. There is a risk involved, and this strategy requires discipline and regular monitoring. However, there is a wide array of investment choices available which can help you meet your goal. Examples of investment choices are long-term deposit accounts, government securities, stocks, and mutual funds or unit investment trust funds. 4.Use the mixed funding strategy. This simply means employing a combination of any 2 or all approaches. Whatever way you choose, start saving now.