October 2007 Archives

We have talked about this often here in MoneySmarts: the pain suffered by OFWs who now can buy fewer pesos with their dollars. As you all know, the peso broke into the 43-per-dollar level yesterday for the first time in even years. The exchange rate is now closer to the yearend forecasts of Richardson, Vero, Clipper, Reinan, Melan and the rest :-) (Check out the result of our peso forecast game here and the original challenge here) We all know the peso will keep on climbing. This statement from the central bank, however, was very illuminating:

A stronger peso also affects OFW households that receive remittances denominated in US dollars, but OFWs in the Middle East and Asia are benefiting from the strengthening of the currencies in their host countries, Guinigundo said. Data suggest that 51 percent of all OFW money remittances coursed through banks come from the United States, but that may not be the real situation, Guinigundo said. He noted that most of the remittances go through banks in the US for clearing before transmittal to the Philippines and so banks in the Philippines report them as coming from the United States. A new BSP study on money remittances notes that overseas Filipinos’ decision to send money is being influenced by exchange rate movements. It also says “remitters are influenced by investment opportunities even more so than altruistic considerations.”

Click here to read the rest of the article: Two things: OFWs in the Middle East and Asia are benefiting from the strengthening of the currencies in their host countries, so the net effect of that along with the weakening of the dollar against the peso is…what? Second, do OFWs really send less money home when the economy is not doing so good? What do their families eat? How do they pay their bills? *scratching head in consternation* I would love to get my hands on that study. Forex-related articles in our archive: The crazy language of forex news articles How your peso forecasts stack up Join the peso forecast game! Is the dollar a doomed currency? GUEST POST: Cool tool for managing dollar earnings 4 warnings signs you’ve missed the forex lessons from the Asian crisis Silver lining for the stronger peso

We all want to live comfortably, if not with an affluent lifestyle. But not all of us think about how to exit this life in style. Just today, I learned how that requires quite a lot of money! A family estate at Loyola Memorial Plans, for example, now costs at least P5 million complete with an air conditioned family mausoleum. Five years ago, the same lot cost P3 million, quite a big jump in price. I think it was business columnist, author and public speaker Francis Kong who said one of his favorite investments is funeral lots! You know what they say about obstetricians and gynecologists – they are never out of business. At The Heritage Park in Fort Bonifacio, a family estate costs P3.4 million – and that’s the cash price. The same lot goes up to P3.7 million if you pay in installment. A stately funeral service will start with the cost of a casket. That will set you back P50,000 to P90,000. When you are grieving, the last thing you want to do is to have to deal with financial stuff. Our Take Charge of Your Money article today says:

Consider this: nice caskets alone cost P50,000 and up, depending on the type (wood or metal). A three-day wake in a funeral home may cost P6,000 and up. There’s also the cost of embalming, food and drinks for mourners during the wake, and the cost of burial and/or crematory services. And the memorial plot or columbary space costs another P50,000 at least. Clearly, a family can expect to spend at least P100,000 for a nice decent funeral for a family member today. And since inflation is part of life, expect this amount to go up in the future. On top of coping with the loss of a family member, a family has to bear the financial burden of meeting funeral expenses too. It is then wise to set aside some money for this purpose so the family will not be so burdened in the future.

Read the rest of the article here: http://business.inquirer.net/money/personalfinance/view_article.php?article_id=97638 How about a memorial lot for a pet? :-) (Source: PDI Photo)

 When I wrote about the Bangko Sentral’s plan to revive its proposal to float $1-billion in bonds for overseas Filipino workers, the reactions were a mix of skepticism and curiosity. Many did not trust the government, so lending money to this administration (which is, in effect, what you would be doing if you buy the bonds) did not make any sense. Others are concerned that the bonds are dollar-denominated, and with good reason because for the past year, the dollar has been losing value against every other currency of the world. Personal finance expert Alijeffty Gonzales, however, raised some points that should also be considered by many of us. First, it is an affordable instrument since retail treasury bonds are issued in various units starting with P5,000 for peso-denominated issuances to P100,000. Second, while the Philippines may not smell so rosy right now because of the political wrangling going on, to most of us a government security still carries sovereign risk and is, technically “risk free.” That’s because, if worse comes to worst, the government can print money to pay you when the time comes to collect from it – as opposed to just any other company in the Philippine capital market universe, even one that may have a triple A rating. All in all, based on the little information from the plan so far, the OFW bond appears to be a good instrument for diversifying one’s portfolio, Gonzales said. He, however, pointed out to me another important tipping point: denominating the bond in dollars. “For it to be denominated in dollars would present some concerns, however, as the common consensus now even among the OFW community is that the dollar might not be a "stronger" currency going forward. There could be some risk in terms of loss of parity versus the peso especially if this is five years or more,” he said. As with any investment decision, weighing the risks versus the advantages is very much a personal thing. As of now, it appears that despite the bullishness of the stock market, Filipino investors appear to have a predilection for bonds. Official figures from the Investment Company Association of the Philippines (ICAP) show that mutual funds have almost P53 billion in bonds as opposed to P13 billion in stock funds. For those who want to invest in retail treasury bonds, whether designed for OFWs or not, here are the how-tos from AsianBondsOnline:

1. Watch out for announcements published in newspapers when retail treasury bonds will be issued. Unlike Treasury bills and Treasury bonds, RTBs do not have a particular schedule.
2. Pay close attention to companies that are chosen by the government to be underwriters or agents of the bond flotation. These information are often announced in newspapers and in the underwriter’s website.
3. Check with the underwriter or the agent on their application requirements, procedures and details on fees. These things vary from institution to institution.
4. If you want to know more details about RTBs, you may want to check this website: http://asianbondsonline.adb.org/how_to_buy_bonds/nd_page.php?Stage_Number=1&ABI_Market_Name=PH&Step_Number=1

Remember that these steps are for those who want to buy RTBs at issuance. The steps and how-tos for trading are different. Will write about that in another post.

Mzkukuro wants to trade stocks. Many of you have emailed me about this also. Why don’t we meet up this November and I can arrange for someone to give you all a tour of the Philippine Stock Exchange trading gallery, the same tour I arranged for Bianca and Diego? Any takers? I need at least 10 participants and it’s a go. We will videotape everything for our readers overseas. :-)

Guess which toys my two-year old son played with the most? This Leapfrog overpriced invention that sings the alphabet for him while mom looks on? Or a stack of recycled yogurt cups that he can demolish over and over again with mom shouting like a banshee? Children have got to be the biggest investments we will ever make in our lifetime. The World Bank says we need P40,000 per child per month to live well, and that was in the early 1990s. But they are definitely worth it! What will parents go through to pay the price for a smile and a tight hug? We are all prepared to go through rat race hell to buy the best education in the best schools in the world. Sometimes, though, we don’t really need to buy expensive stuff to make them happy. I’ve got a big stack of yogurt cups to remind me of that.

(This post was written by Bianca, a MoneySmarts reader who was chosen among a long list of candidates to be part of our Money Makeover. In Money Makeover, we match financial planners with reader-volunteers and chronicle their one-year journey to their financial goals. Generali Pilipinas' senior executive vice-president Augustus J.V. Ferreria has agreed to coach couple Bianca and Diego for 12 months pro-bono. In Money Makeover, we aim to show readers that finding financial freedom is really possible. Read previous Money Makeover articles here.) I do not do math. Addition It started simple enough.  Joe wanted us to list all of our expenses every day forever.  He did not warn us that our hearts could suffer anxiety attacks because, for one, we were confronted by the fact that our expenses overshot our income by some P30,000 every month.  He also provided no explanation as to how we could have survived all this time – but our zero-balance savings, credit card debts, frequent lifeline calls to mom and dad could possibly provide a clue. It is a stressful exercise trying to figure out where our money went every day because with it comes the understanding that it went to excesses of the flesh and vanities. Want and need are becoming very delineated concepts at this time (but concepts all the same). Subtraction Joe had us make a list of our monthly expenses.  He then took out his scissors and cut away the expenses, which exceeded our monthly income. This included my gym membership (to which I signed up for one year minimum!), auto repairs (we have 7 and 14 year old cars!), clothing, movie trips, restaurant trips (the stuff life is made of) and altruistic pursuits (read: gifts). Joe said that if we wanted them, then we would have to reduce our spending for the items above the scissor line.  It would mean no aircon nights, commuting, and probably the househelp has to go. Despite the pain, one important thing I learned from this exercise is that I should pay myself first.  That is, from the collective salary my husband and I receive every month, we should take 10 percent of it (the Japanese do 60 percent!) and put it away.  The key word is away – it should be where it is not in any danger of being spent.  It could be in a simple savings account, a high yielding deposit account or a time deposit account.  At the end of the year, Joe said we should have a definite plan on what to do with this money.  Joe does not believe that we should be misers.  Money, after all, is there to improve life.  (I breathe a sigh of relief here.) Division Joe divided our expenses between my husband and myself and assigned us specific bills to pay.  I found this extremely hard at the beginning because my husband usually surrenders (yes, it is the right word) all of his salary to me and I pay everything.  Doing it Joe’s way made me feel like I was losing control. Moreover (stress ball in hand), I have to remind my husband every time to pay his share of the bills, and he hates to be reminded (but needs to be reminded). We are still works in progress on this one. Multiplication This is the fun part. Joe introduced us to the magic of stocks so that we can multiply our income a hundred-fold – well, that is the goal. He gave me P1 million in virtual money to invest in the stock market for 30 days. The exercise had me looking at the waxing and the waning of the 10 stocks that I chose every day (okay, there were misses).  But in a day, I made P9,000, and then my profits were up to P30,000 in two weeks!  I sold all my stocks and narrowed down my choices to just five. At the end of the month, I found that I had an extra P170,000 in virtual money. I was in a world of infinite possibilities!  Oh, to what good use that P170,000 would have gone to! Through Salve and Joe, we found ourselves in the place where it all happens - the grand arena of the Philippine Stock Exchange.  Leo Quinitio and Jay Penaflor of the PSE’s Market Education Department, Capital Markets Development Division were there to guide us and answer our every question.  There, all of it came to life!  The board blinked at us, numbers turning sometimes green, sometimes red.  Traders were on the phone and on the computer, talking incessantly. The bell that signals the beginning and the end of trading was on one side, silent, bearing witness to the money that is being made and being lost. Leo and Jay say that the PSE also has an online stock game that everyone can play (see www.pse.com.ph).  Like in Joe’s exercise, investors are given P1 million in virtual money to invest. In this one, though, the program even calculates the broker’s fees and the taxes so the feel is more real.  Leo and Jay also tell us that PSE offers securities courses to the Filipino investor, beginners and experts alike.  We hope to be part of it very soon.  Money and math.  Interesting, heady, nerve-wracking, daunting, extremely satisfying.  In our own way, in our own time (well, hopefully by May 2008), we hope to have understood more, made more, put more meaning into our lives because we give more and worry less, and to finally put those two words – money smarts – down to pat.

  Our Take Charge of Your Money feature today helps a young investor to build a good portfolio. His question was:

I want to begin investing for my future, and wonder if there is a recommended portfolio? How much should I set aside for short-term needs, medium-term requirements and long-term goals? I just turned 25, am single and can set aside between P10,000 to P20,000 monthly. - Paolo C.

Paolo must be earning well. But that’s not what floored me. It’s the fact that he is willing to set aside P10,000 to P20,000 regularly. One of the most important lessons I learned during a mentoring session with Augustus “Joe” Ferreria, the financial planner working with 30-something couple Bianca and Diego is the importance of regularity. One night in the couple’s dining room, we were huddled over the makings of their spending program displayed on the screen of Joe’s laptop. Joe was getting them to mentally and wholeheartedly commit to themselves to save an amount every month that does not set their teeth on edge. He told them to write a post-dated check for themselves for 12 months and offered to deposit it for them on a specific date in their newly minted checking account in one of the top five universal banks that he helped them open. The commitment was not to let a single check bounce. “But, Joe, we have more than P100,000 coming in from the sale of one of our properties. If I deposit that amount this month, we won’t have a problem anymore with our savings program for the whole year,” Bianca says. To their surprise, Joe shakes his head. “What we are trying to do here is develop a savings habit. I would be much happier with your monthly savings than a one-time deposit,” Joe says. A good savings habit is also the best foundation for a good investment attitude. With a 6-month buffer fund in your bank account and the regularity of more savings, you’re all set in building a good investment portfolio. Now, how to get down to the brass tacks. All experts say an investment portfolio design is as personal as a toothbrush – you can’t use somebody else’s but there are general guidelines on how it should look like. Generally, an ideal portfolio has investments that react differently to developments in the economy, protecting you from sudden shocks and ensuring a good inflow for the long term.

We thus recommend that you begin by scheduling a financial check-up to assess your goals as well as determine your risk appetite.  The session will help you identify your goals (short term, medium term, and long term), how willing you are to take on risks, your time horizon, and more. Only after assessing all these can you start on your investment portfolio.  Some banks offer financial check-ups for free.

Once done, you must also do the following steps, says Citibank’s financial planning experts:

1. Identify clearly your financial goals.
2. Find out how much money you need to finance your goals. 
3. Calculate how much you need to save and invest each month to meet your goals. 
4. Save for an emergency fund. 
5. Ask yourself how willing you are to take on risks. 
6. Practice “asset allocation.” 
7. Review your portfolio over time and change tactics if necessary.

Click here to read the entire article: When talking about personal finance, most people want to be told what to do, down to the last detail. Don’t be like most people. Read as much as you can to educate yourself, talk to a professional financial planner, and make your own decisions. Good luck :-) .

  Doris Dumlao wrote an interesting story today in the Philippine Daily Inquirer:

MANILA, Philippines--THE GOVERNMENT has revived plans to offer as much as $1 billion in retail treasury bonds to overseas Filipino workers as proposed by the Bangko Sentral ng Pilipinas (the Philippine central bank) to harness large remittance flows for productive investments. BSP Managing Director Ma. Cyd Amador said the BSP and the Bureau of the Treasury have resumed discussions on the proposed OFW bonds. "It looks like they (Treasury officials) are more open this time around," Amador said. She said the BSP and the Overseas Workers Welfare Administration were considering holding overseas roadshows on financial literacy, focusing on countries that host big Filipino communities.

Click here to read the rest of the article. Most interesting points:

1. Government has now realized the importance of teaching Filipinos, especially OFWs, about financial literacy. Enough about politics, let’s learn how to keep our heads above the water by learning how to save and invest.
2. Can investing in bonds really help OFWs reintegrate into the economy? Alone, it can’t, but together with a well-thought out plan (and lesser corruption and better business environment), maybe. With the dollar continuing to weaken, some economists say that more Filipinos will be coming back home. What will they come home to? A manufacturing sector that is hollowing out as more companies rely on automation and technology rather than hiring people, thus no employment opportunities. Entrepreneurship and investing wisely will increasingly be a popular option.
3. Bangko Sentral expects remittances to slow down significantly next year (as in 5% from 15%) and its study shows OFWs send less home when the economy is not doing so great.

For those who are interested in buying OFW bonds, better read this article by Noet Ravalo. It’s a bit dated (he wrote it in 2003 for then INQ7.net) but you will still learn a lot from the principles he explained: The danger of getting too complacent with bonds Here’s an excerpt:

Many people have the impression that investing in bonds is fairly straightforward and that bonds are a no-brainer no-risk investment. The truth is anytime you buy in or unload before maturity, there are enough pitfalls to cause serious financial ruin. Bonds are long-term debts issued either by a country or by a corporation. There is no absolute definition to the qualifier "long-term" but we associate bonds as those with maturities longer than one year. Anything shorter than a year's maturity is referred to as a "bill". This is why you hear terms like Treasury bills (T-bills) and Treasury bonds (T-bonds). The terminology though can be extra confusing in the Philippines. Instead of a corporate bond, for example, tax considerations have instead coined the phrase Long-Term Commercial Paper (LTCP). As a long-term debt, bondholders receive a periodic payment called "coupon". These coupons are paid to the bondholder every six months. If you plan to hold a particular bond from the time it is issued, to its maturity date, the return you get can be summarized by the coupon. But very few hold a long-term instrument for its full term. Normally, investors buy and sell during the life of the bond and this trading activity leads us to the issue of price fluctuation. 

Happy investing!

What are the chances you would be a victim of a bomb blast? I’m pretty sure the 89 persons wounded by the blast or the families of the eight who died had that farthest from their minds as they spent the afternoon going about their ways. Always be prepared because anything can happen. Protection comes first before investing. I can’t help but thank God I didn’t have a meeting in that area today, nor opted to buy my tickets from Philippine Airlines whose new sales office is now near the area. It’s unfortunate and very shocking to see so many people wounded and hurt. MLQ3 has a round up of bloggers who witnessed the bombing. Here are some photos from AFP. Rescuers sift through the wreckage and debris. The police believes some people are still trapped inside.

Where did all my money go? Isn’t that a question we all ask ourselves from time to time? Well, here’s a common answer: look in your closet. Are you looking? Seven pairs of shoes all with straps and high heels but in different colors, matching handbags, shirts, blouses, designer jeans, and signature dresses. Then you see all those baubles peeking out from the jewelry box – trinkets for the ears, neck and wrists. Women are not the only ones guilty, too. Male fashionistas can spend more – what with expensive watches, shirts and designer clothes. Rex Mendoza, a financial planner whose day job is the chief marketer of Ayala Land, once told me in an interview about a young lady executive who was consulting him for financial advice. “Do you have any savings or investments?” Rex asks. The lady opens a big walk-in closet containing tens of thousands worth of clothes, shoes and accessories. “Here they are!” lady asks. “Investing” in clothes and jewelry is sort of an oxymoron – unless you’re a movie star. (Yet even some movie stars I know don’t think anything of wearing something from an ukay-ukay store!) The price tag can be as hefty as P25,000 to P50,000 for a good suit these days, or a simple black evening gown. A set of cuff links and buttons alone at Bergamo costs P5,000 and this is not the most expensive brand in Rustans. For those whose tastes are for runway-worthy dresses, I remember seeing a dress at a televised New York fashion show last year that cost more than a spiffy Honda. We all don’t go consciously looking for a dress or a suit that will blow away all our earnings for a year, but we do shop for clothes and to a certain extent accept fashion’s follies. The persistent question is: do we control these follies or do we let it control us? Money experts have different approaches. Pascual M. Garcia III, president of Philippine Savings Bank, said you could splurge on anything you want (including invitation-only haute couture, I suppose) as long you have skimmed over the top of your earnings already and set aside your savings for the month. “That’s my approach. I will tell you to do whatever you want with your money – buy your latte, jewelry or whatever – as long as your savings are safe. Just take it off the top, or else it will be painful and you won’t save as diligently as you should,” he told MoneySmarts in an interview. Filipino author, entrepreneur and public speaker Francis Kong does not believe in buying cheap and poor quality clothes that will do more to ruin self-confidence than increase savings. But he doesn’t espouse dipping into the college fund, either, to run after a hard-to-find and limited edition handbag that can set you back five years in your savings plan. Shopping smartly and earning from your fashionista urges can also be options. GMA7’s Chynna Ortaleza shows in this article how to be a tightwad fashionista and a businesswoman as well, by designing your own trinkets and accessories. Fashionistas on a budget can also benefit from this latest shopping tip. Find items from Mango, Terranova, Calliope, Gas, Benetton, Nike, Florsheim, Naturalizer and Bossini, among others at discounts of 50-75 percent all year round at Starmills outlet store in San Fernando, Pampanga. But as I said in a previous post, "cheap" doesn't necessarily equate to "good buy." They create artificial needs. So be careful when shopping in an outlet store. Those huge discounts can ferret away your self control :-) . The peso’s appreciation may have something to do with these lower prices. Quality imported items are cheaper and fashion fanatics will be able to get their fix at a lesser cost. Hopefully, soon, the cost-value ratio of being fashionable will look less unreasonable, given that threads, buttons, zippers and fabric can be had for only a trifling. Happy shopping.

This just out on Forbes’ Rich List in the Philippines:

Factory worker's son joins Philippine billionaires Agence France-Presse Last updated 03:36pm (Mla time) 10/18/2007 MANILA, Philippines -- Andrew Tan, the son of a poor immigrant factory worker from China, has reportedly become the newest addition in more than a decade to the ranks of billionaires in the Philippines. After restructuring his holding company Alliance Global, Tan's net worth more than doubled to $1.1 billion from $480 million, Forbes Asia magazine said in its 2007 Philippine Rich List published Thursday. Tan made his fortune from three major businesses: property, alcohol and fast-food restaurants. His wealth propelled him to fourth on Forbes Asia's ranking of the 40 richest people in the Philippines. Property and telecommunications tycoon Jaime Zobel de Ayala and family jumped from third to first place with a net worth of $2 two billion. Shopping mall king Henry Sy was second with a net worth of $1.7 billion and tobacco, alcohol and airline tycoon Lucio Tan came in third with $1.6 billion.

Read the rest of the article here: http://business.inquirer.net/money/breakingnews/view_article.php?article_id=95252 President Gloria Arroyo chats with Megaworld corporation president Andrew Tan. Photo  credit: AFP.

How many electronic gadgets do you have in your bag? At home? On your desk at the office? In your car? Not counting of course the electronic thingamajigs that are part of your car? The way we “consume” technology dictates that we find a way to get the best deals on gadgets. Time was when we scramble to get bargains overseas to shave off high import costs. So my eyes widened a little bit when Augustus J.V. Ferreria, executive vice-president of Generali Pilipinas and a financial planning educator gave this tip: stop buying gadgets overseas. He has a point. Several, in fact. It’s complicated, not to mention expensive, to return an item in case it’s defective. You’ll also find yourself in a bind if the gadget conks out a few weeks after, and you don’t have an international warranty. Sometimes, even if the manufacturer has local dealers who provide services here, it has to ship the gadgets abroad for fixing. I found out that Joe was right, the hard way. It all began when I was covering a press conference a few months ago. As I was taking out my good old trusty recorder – almost a friend who has witnessed all my interviews for many years now – these young reporters whipped out their digital recorders. I felt like an ageing journalist as I wryly looked at my beloved recorder! So, when my mom who was coming home from Canada asked me what I wanted as pasalubong, I asked for an MP3 or MP4 player that has the capability to record interviews on a microchip instead of on a tape. Creative’s Zen gadget was a fraction of the size of my recorder, and at 4 gigabytes, it only cost more or less $100. The more important consideration, I thought, was that I could now preserve my recorded interviews. I had already lost that one-on-one interview with Nobel Prize winner Mohammad Yunus to mold and mildew. Unfortunately, Zen’s Media Explorer program proved to be useless and I wanted to exchange the gadget for a Samsung, even at a higher price. “No problem,” the store in Canada said in reply to an email. They have a very nice return policy, but boohoo for me, the shipping charges are prohibitive. It would be much cheaper to buy a new one here. Money myth buster tip on buying gadgets abroad: CONFIRMED.

Noet Ravalo answered a reader’s question on pre-need plans today in INQUIRER.net:

I have heard so much about pre-need plans — some good but a lot more of what I hear seem scary — and would like to know more without hearing a sales pitch. I have a very young family and I was wondering if it is time to consider an educational plan for the kids and perhaps a memorial plan for my wife and myself. If you think they useful, what should I look out for? — Ronald

Pre-need plans, especially for education, pension and funeral expenses, are financial planning instruments in “tingi”. They break down the costs of children’s education, retirement and funeral expenses. Buying in sachets, of course, is always more expensive than buying in bulk. Recently, pre-need plans in general have suffered from a tarnished image because of the failure of companies like College Assurance Plans, among others, to deliver on their promises. Comments from my previous posts on pre-need plans show that there are a lot of victims who are hurting. Read this post on Pryce Plans and my article on College Assurance Plans here. I got swarmed with comments showing that the public is divided on whether all pre-need plans are worthless. From firsthand experiences showed in that post, however, it is clear that if you plan to buy one, better be extremely careful on which company you buy it from. Noet wrote a very useful buyer’s guide without the sales pitch :-) to help us avoid the usual mistakes.

Do you have the discipline for saving a minimum portion of your income? Having an “obligation” in the form of monthly pre-need payments is at least a disciplined manner of saving. On the other hand, not having such monthly obligation may give you better leeway to offset unexpected expenses (i.e., medical) so you don’t feel unnecessarily constrained. Do you have the capacity to evaluate financial opportunities as they come along so you can try to beat the returns of a pre-need plan? If not, then you really are back to letting others handle what is necessary for you to cover a future expense. This is not a choice; it simply is the basic reality. If you have the income stream, the fortitude for saving, the technical skills for investment decisions, you still have to hurdle what is perhaps the biggest constraint faced by anyone: do you have the time to do this or is your family best served by letting others manage it for you?

If you’d rather hand over your money to someone else and get someone else’s services to help you prepare for your financial needs, then you start asking the following questions:

1. Is the company sound?
2. Does it give good service to its customers? (When grieving for someone or in shock, the least you want to do is untangle customer service issues)
3. Can you meet the monthly payments so that your overall investment will not be forfeited?

I know the feeling of being deluged by all the financial mumbo-jumbo when choosing a pre-need product. Sometimes, you just want to get it over with. Besides, you tell yourself you are buying it from a friend anyway. Snap out of it and remember that it’s your hard-earned money. Postponing the decision so you can take a better look at the figures and get more information about a company is ALWAYS a good decision. An informed buyer makes fewer mistakes. More links to related news articles: Retirement plans versus mutual funds How to choose an educational plan Many Filipino families are unprepared for the rising costs of education. Photo credit: AFP.

Insurance for children are cheap, sure but in this case, “cheap” doesn’t equate to “good buy.” The reason is simple. Children don’t need insurance. Our personal finance feature for today says:

Children do not need life insurance. You are not dependent on your child for your income. If your child passes away, you can still continue to work and earn, and life will still go on for you.

Read the entire article here. Use that extra cash instead to increase your coverage. What’s important is for PARENTS to get the right coverage. I daresay most Filipinos are underinsured. We get a little bit of comfort in that insurance policy tucked inside our filing system at home. (Hmm. Wait. Where is that policy? Our loved ones should know where it is kept or better yet should have a certified true copy.) But insurance coverage should be revisited from time to time especially upon the birth of a new child. Next question would be: how much insurance do you need? There are many rules of thumb, some of which are, to me, extremely ridiculous, like the one that says it should be enough to pay out up to 10 years worth of your income. You’d be living like the dead now to pay your insurance company so that your beneficiaries can live like royalty when you die. I like Noet’s way – computing backwards. Find out how much spouse and kids need to bury me (ouch) and sustain a comfortable lifestyle for two to three years. Since he’s the one that pays for our every whim, the pressure to get a high coverage is not really that big. Hehe. Still, even housewives need to buy insurance because childcare and homecare is costly. But buying insurance for kids? No thanks.

From MoneySense magazine:

Buy term, invest the difference? Buy when you’re young Jerry Miraflor, Cocolife first vice president, gives this warning about this strategy: “I’d say, ‘be very careful’. There are a lot of very big ‘ifs’ for that statement to work. You must be young enough and healthy enough to qualify for term insurance.” Once you hit middle age, premiums for term insurance can be expensive. Have the discipline Saying “invest the difference” is easy; actually doing it regularly is another matter altogether. Invest smartly Jerry says, “You’ve got [to have] the expertise and the time to manage and generally oversee your investments. I’d venture to say that 90% of the general public does not have that expertise.” Of course, you can invest in mutual funds and trust funds that are managed by professional investment managers. You can even automate the process of setting aside money to invest. Nevertheless, you still shouldn’t neglect insurance, adds Jerry. Read the rest of the article here.

In a previous post, I warned people to make sure they INVEST the difference as opposed to “buy term and SPEND the difference.” That’s a sure recipe for disaster. Imagine realizing during your twilight years that when you thought you were being smart, you actually spent all that you were supposed to invest! Some people believe that variable life insurance policies are a good way to “buy term and invest the difference.” If you take this route, avoid making the very common mistake of not reading the fine print. I know that listening to insurance agents’ presentations can feel like the long and winding road to Baguio and it can either be jargon-laden or vague to the point of abstraction. Stay focused and ask questions, especially these questions: Exactly when will your money be invested and what percentage will be invested? Will you be taxed when you take out your capital gains at some point? Will the policy charge annual management fees the way mutual fund companies do? Most people assume that they become instant, smart investors on the day they pay their first premiums. That’s the reason why they buy variable life insurance, after all! The problem is, few companies that peddle these instruments slide your money into the investment chute on the first year. More likely, all your premiums go into the insurance portion and more than 10 percent into agents’ commissions. Most variable life insurance policies start shifting your money into investments only in the second or third year, and in small chunks at a time. This means if the market will do well this year, don’t expect to get any windfall just yet. This also means it will take quite some time to benefit from capital gains. So stay focused, ask the right questions and read the fine print before you sign on the dotted line. If only staying focused on insurance agents' presentations were as easy as staying focused on this butanding, huh? I know, I know. The photo is really not related to my topic but I just wanted to share again this beautiful photo from PDI on butandings in Palawan, haha.

How do you measure happiness? Let me count the ways… Satisfaction, contentment, spiritual connection, wellness, and closeness to family and friends are just some of the emotions we usually relate to being happy. I keep asking myself whether I’m happy, probably a sign of getting old. How about you? Have you asked yourself that question lately? The National Statistical Coordination Board (NSCB) has tried to remove the guesswork in determining when Filipinos are most happy. The Happiness Index unveiled last Wednesday shows we are most happy when our family life is going well, when we are not sick, when spiritual connections are not rusty, when we have good relationships with friends and, in fifth place, when we have income and financial security. Politics, unsurprisingly, is last on the list. The other items near the bottom are cultural activities, community and volunteer work, sex life, government, and leisure and sports. Nice, catchy list. At first blush, it gives some sense of comfort from the NBN headlines of days past. You can interpret it to mean Filipinos still value family more than bribes -- sort of like a reminder that we are still a nation with the right values in place and, hopefully, those who are hopelessly blinded by the lucre of money are just aberrations in the Filipino genome. Then again, I catch myself thinking that has such an overly optimistic ring to it. The other day, I passed a child who should have been clutching a workbook at school, but was instead all wet from the sudden rain as she studiously looks for passersby who would give her a few pesos in exchange for the use of her umbrella across the street. I wonder, too, if she’s happy. What if she really is? I was kept awake thinking about an uber-rich matriarch who constantly complains that life is so difficult, even with her beautiful properties and financially secure life. Her suffering from her quarreling children weigh her down so much more than her knee and bone problems. It tugs at my heart how she wistfully asks “How do I find happiness before I die?” Happiness is such a nebulous concept, with many facets related to many things in life. Certainly, while a list can help us identify the road to a happier existence, never think that it can be had without balancing family and jobs, health and volunteer work at church, or financial needs with the need to stay with spouse and children. For sure, the test for true family cohesiveness is how to survive with dignity and unity when there’s meager fare on the table, because the wolves in humans always come out first when fighting for survival. But we wouldn’t have to go through that trauma if we can plan our finances smartly. We could take care of our sick only when we have savings. We can’t lift others up from poverty when we are also doing poorly. Have you ever experienced the pangs of wanting to help a friend but can’t, because you are also wanting? The top four items on the happiness index mirror what’s exactly on my list with slightly different rank: family, spirituality, friends, health and finances. Of all five, money is the one link that creates an enabling environment for the others. It’s certainly not the most important, because you can be happy without it, but it can be the glue that helps keep everything together more easily. Simple happiness. PDI Photo.

How difficult is it to get personal information from the owners of 5 million Philippine-issued credit cards currently out there? It just takes a name, a credit card number, the bank's name, an ID with a signature and anyone can have a shopping spree charged to your sanity. It’s not just the Internet that made this all too easy for anyone with a fraudster’s gene in his system. The urge to have everything at the snap of the finger has made a lot of us too lazy, too lax and too careless with our personal information. And don’t think that you’re free of high tech scammers just because we are in the backwaters of the Philippines. The best hackers were born here :-/ Sometimes, even those that are uber careful get victimized. I know a finance professional who almost fell off his seat when he got a call from his credit card company confirming several hundred thousands of purchases in SM Bicutan. He doesn’t even know how to get there. Good thing the credit card company flagged the transaction and called him immediately. The scammer in the gasoline station must have made an extra swipe and got all his credit card information, transferred them into a new credit card and presto – the gas boy's wallet just got bigger. Our personal finance story today says forewarned is forearmed. But what if the deed has been done. Who pays the bill now? YOU. Especially if the identity theft was your fault. I know, I know. That’s a top of the line “ouch” so be extra careful. Here’s a tip: you’ll increase your chances of a reversal of charges if you show that you were careful with your credit card information, that you reported it immediately, and that you were diligent in getting a police report pronto. Insist that the bank make a full investigation. It's still possible to reverse charges. This is why my personal bias is for a credit card company that has the capability to flag fraudulent transactions immediately. Be careful because not all credit card companies do that. Since I’m online most of my waking hours, I also make it a habit to carefully check my credit card accounts to see if there are any transactions that look alien to me. It also follows therefore, that I keep all my charge slips so that I can compare them with the charges on my credit card bill. I live with an information security expert and he says while there are anti-spam solutions and firewalls out there to protect people from identity theft, there is no better defense than the right attitude about guarding personal information. I mean, you can buttress your computer with all these programs and guard your credit card inside Alcatraz, but if someone calls pretending to be from Visa or Mastercard investigating credit card theft, and you give your credit card number – you won’t be able to blame anyone but yourself. So be paranoid. And be safe. :-) Interesting moments: A man dressed as an ancient Chinese official drags a credit card "slave", or a consumer in credit card debt, as they take part in a demonstration calling for the government to pass a law to help people oweing money to banks, 02 June 2007, in Taipei. The group claims there are more than 600,000 credit cards slaves in Taiwan, suffering from credit card high interest rates and high repayments.

Dan Magallanes, CEO of Headhunter Manila, says your salary should be four times your age. Meaning if you are 30 years old, you should be getting P120,000 monthly – at least. Bink, blink, blink. I make a mental roll call of my acquaintances and close friend and find that I can pull out only 10 percent of the names in my roster that meet this rough rule of thumb. CEOs, senior management in a multinational firm or entrepreneurs who have already made it big in their chosen businesses are what their calling cards say. What does that mean? If we are not getting this kind of pay scale, we should get a career consultant to fix our sagging careers, Magallanes says. I admit that the previous sentence is laced with a bit of jaded flippancy, but the headhunter makes an impassioned case on why paying a career consultant a hefty fee is worth it, even when our salaries are languishing.

I have observed that most of our executives and professionals at any point in their career would rather buy a high-end mobile phone or an expensive designer bag than pay a career consultant for their stagnant or sagging career. They tend to forget that they have to live on a parallel lifestyle based on their position in the company and of course their take-home pay. If you are bent on having a good career, you have to focus on how you will attain it at a certain paradigm. It is not wanting but not doing anything.

He cites several cases to drive home the point. Here’s one: a 38-year-old who graduated from a “not-so-known college in the southern part of the country” gets half-a-million per month on top of dizzying perks, besting nine other candidates from top universities. He even got a sign-on bonus of $50,000. He had no MBA and does not intend to get one. Raising your eyebrows yet? Here’s another one: Magallanes says he plucked this 28-year-old communications officer who graduated from an up-town college in the south from an international NGO and placed him in a blue-chip company for three times his salary in the NGO. This blue-chip company was bought by another giant, so Magallanes advices him to get a job somewhere else. Three months of searching ends up a dud and guy gets nervous. Magallanes tells him to be an entrepreneur. On his first month, he earned his salary for the first quarter of the following year. I would love to meet this guy and get him to coach MoneySmarts readers next year. In a country where UP, La Salle, Ateneo and UA&P lords it over all the others, a guy who says he does not look for MBAs from top universities has something important to say to Filipinos. But here’s the most controversial part in his article:

“The best career is in the Philippines nowadays. Blue-chip companies are coming our way. This is the place to become successful. The most comfortable life is here. You leave the country because you feel you cannot make it here. If you cannot make it here, you cannot make it anywhere.”

True or false? Read the entire article here.

Movements in currency markets -- whether of the peso versus the dollar, dollar versus the euro, yen, or other currencies -- have tremendous impact in our lives. From debt servicing to import costs and, closer to home, the value of 8 million Filipino workers’ earnings as well as other dollar earners like call centers. As a result, millions of eyes follow each little blip and hiccup in the forex markets every day. Much as financial journalists would like to meet the daily challenge of making each article understandable to grade six students, sometimes that task becomes extremely difficult due to limitations of time, space and, well, ability. As a result, reading currency news can be so confusing. So here are small tips for beginners who want to understand forex articles, and more to the point, turn this understanding to better money management. Words like weaker, lower, softer,and depreciated indicates you will be getting more for every dollar, while stronger, higher, firmer, appreciated should make dollar earners quite disappointed. When it comes to verbs, you have to give journalists a little bit of leeway. I mean, imagine how the article will read if you can’t use colorful verbs to describe what happens to currencies during trading hours. A falling peso means the peso’s value drops against the dollar. When that happens, you need more pesos to buy one dollar, but then your dollar can buy more pesos. Common words that replace fell are dropped, tumbled, went on a downward trend, things that make both OFWs and exporters happy. Words like rose, lifted, edged up, recovered lost gains, improved, on an upward trend, eased, however, will do quite the opposite. Some other phrases I found on recent news articles on the exchange rate: The peso is expected to extend its gains against the dollar. Interpretation: Get ready to send more dollars in the coming weeks because the amount you normally remit will not be enough to pay rent and buy groceries. The euro is expected to outperform the dollar. Interpretation: Buy more euros. Market is mixed. Interpretation: Currency brokers can’t make up their minds. Honestly, players in financial markets surprise me often with how creative they can be with language. Seriously. “Unwinding of excessive short dollar positions?” A friend's reaction: Ano raw? Right interpretation: Currency dealers are buying dollars again. Short on the dollar means they have lessened their dollar hoard and invested in other currencies. (Rolling eyeballs here...) Journalists can be so full of jargon, sometimes. If you want to know more about how to manage foreign exchange risks, here are some of my previous posts: Is the dollar a doomed currency? GUEST POST: Cool tool for managing dollar earnings 4 warnings signs you’ve missed the forex lessons from the Asian crisis Silver lining for the stronger peso Finally, can you remember when you last saw a P2-bill?

The peso has been hugging the headlines lately since our little peso-dollar forecast game, so I thought I'd show how your fearless forecasts stacked up with institutional players in the foreign exchange market.  Some financial investment analysts initially thought the equities, bonds and forex markets will go haywire over the ZTE hearings. What do you know, trading hardly skipped a beat! Stock analysts said the whole thing was just entertainment for them. Where are the tantrums, the excuses to sell, the overreactions and highly dramatic one liners that market players normally reserve for times like these? Is this a sign the local markets are finally maturing? I await with bated breath for more signs. At least, it eliminated volatility and made our guessing game easier. We had 28 bloggers who gave their fearless forecast for the peso-dollar yearend exchange rates! Here they are: 41.56 Gnoysa 42.5 Lailani 42.72 ReyBoy 43 Froshie1 43.21 Answer 43.25 Pats 43.41 Melan 43.5 Reinan 43.5 Clipper 43.5 PBF 43.5 Vero 43.75 Richardson 44 Peddler 44.31 Haidee 44.4 Clarence 44.44 Hachiko 45.45 Warren 45.5 Mike 45.5 Magda Resontoc 46 Archie Parreno 46.17 Peter 47.38 Ian For those who gave a range, can I use the “highest” point of your forecast, meaning the figure at the left? Let me know. 40-42  Ron 46-47  Val 43.50-45 Sherwin 38-40   Sputnik 41.75 to 42 Honey Bunny 42-44 Rolly Here is how your forecast stack up with “forex experts” : Who knows, you’re much better at reading the forex markets! Stick around so you’ll find out who hit the jackpot by yearend. Remember, this is only for fun. We don’t really believe in forecasts, right? :-)

Believe it or not, there’s always some hapless individual who floats on cloud nine during his vacation, then comes home not only to dirty laundry but also to huge credit card bills and finance charges. That mad rush to “get away from everything” can cost you quite a lot if you’re not careful – and make it easy to forget how dreamy that vacation was. Here are some banking traveling tips from our personal finance feature today: Credit card vs. debit card If you pay off your entire balance each month, use your credit card because many cards pay rewards points for usage. Who knows, your next vacation could be courtesy of your rewards. Warning though, make sure you have the discipline to charge only what you can afford to pay or all hell will break loose. Me, I’m really counting on my air miles to get some relief from transport fare this Christmas. It’s true that air miles are expensive. You’ll have to spend a fortune to, say, get a free seat to Singapore. And it’s not even totally free, because you have to pay taxes, which are nothing to sneeze at. But hey, I can’t get a free seat just by ranting. Oh and here’s another tip: If you don’t mind the extra trip to Subic or Clark where budget airlines pick up passengers, you just might reduce that air ticket by half! (Passengers wait in line on the tarmac to board an Air Asia Airbus A320 at the Low-Cost Carrier Terminal at the Kuala Lumpur International Airport in Sepang. The chairs are plastic, the facilities are few and some passengers are grumbling, but budget airlines are hailing new no-frills terminals in Singapore and Malaysia as a cost-saving success.) ATM hunt While you have the time now, search for your bank's ATM locations in the place where you're going. Make a list too, of affiliated ATMs in the area so you'll be ready in any case. You might be tempted to skim over this tip. Don’t! ATM charges when overseas can be really high. It’s fun, however, to see your peso ATM card cough out a Malaysian ringgit :-) . Travel cheques or cash? By bringing travel cheques, you won't have to carry bulky cash. Also, you can get the travel cheques replaced should you lose them or they get stolen. I remember when a relative came home dejected. He lost $10,000 in cash while traveling to the US. Huwat? How could you bring that much cash? I shake my head. My mind cannot comprehend it. Can you? Bills payment Check your calendar and see if there's a bill (for utility, insurance, or other service) that will be due when you're away. Online banking deserves some gratitude here, guys. They have quietly made our lives so much more convenient at an age when we are always scrambling to run errands, running to fix emergencies, fixing problems to make more problems – generally running on a gerbil wheel of commercialism ostensibly to make more out of life. Ahh…don’t make me start writing about the increasing shrillness of our lives. Sometimes I hate technology for doing that to humans, but being able to pay bills in advance through online banking, now there’s a reason to do a virtual kowtow to the gods of the microchips! Ongoing promotions Some credit cards and banks offer promos to their clients. These range from discounts at hotels, restaurants, and car rental companies. Public confession: my wallet’s huge because I keep coupons in them just in case there’s an opportunity to get a freebie! It’s not that I’m a beancounter. I just love the feeling of outsmarting banks. Most of them swear that no one will actually use those coupons, you know. Security tips Just to be safe, photocopy the front and back of the following before you leave: · ATM card · Credit card · ID   Leave a copy each at home, and bring another set with you. In case you lose your ATM card, credit card, and ID, you will be able to report pertinent info to authorities right away. And don't forget to write down the hotline for your bank or credit card company. Happy moneysmarts vacation, everyone!

A career in financial advisory services appears to be a hot move these days. I used to be a bit unenthusiastic about this because of how lopsided income distribution is in this country. Read: there’s too many poor people for every Lance Gokongwei or Jaime Augusto Zobel de Ayala. I even asked a couple of bank staff who have to comply with HSBC’s quota for wealth management services, if it’s hard to find people who have at least P3.6 million ($80,000) to play with. “You would be surprised,” they said, looking at each other quite conspiratorially, I thought. Hmm. In various interviews, industry leaders are saying while the Philippines still has to play a catch-up game with China, Taiwan or South Korea, banks are definitely growing their wealth management services in the Philippines. HSBC’s Martin Cook is the guy that caused 25% to 26% growth in the bank’s personal financial services portfolio in the last few years. He is retiring, and this portfolio will now be handled by Suresh Nanoo. In a briefing, Nicholas Winsor, head of HSBC’s personal financial services in the Asia-Pacific said the bank is always on the lookout for smart and driven financial advisors. “It’s definitely a good career,” he said. I quoted him in this article I wrote for INQUIRER.net, where he said most of HSBC’s financial advisors are well-trained and well-paid, from all walks of life, often from the best universities and often wealthy in their own right. Citibank’s Citigold was the first bank to offer this service in the Philippines. In this fast-paced world, being the first is not really a guarantee that you are better than your competitor. But this claim from Judith Go, wealth management director for Citigold, if true, is of some interest. “When the unit investment trust fund market experienced some volatility, we were the least hit among all industry players, as our Citigold clients were prepared for such an eventuality and knew that the market correction will not affect their long-term gains,” Go said. There are also horror stories, of course. Stories of unmet expectations, poor customer service, and advice that caused losses on the part of investors. That’s true for wealth management services, and that’s true for all other kinds of services. What’s important for financial planner wannabes, says Mark Yu, president of the CFA Society in the Philippines, is integrity. “In the CFA program, if you don’t pass ethics, you fail right away,” he said. MoneySense’s latest article featured on Inquirer.net lists some tips for financial planner wannabes. Get a certification, the article says. For me, the most important part is integrity and ethics, followed by knowledge of the whole gamut of personal financial services, experience, an ability to work with different kinds of people, an intimate understanding of the psychology behind money and continuous education. After all, while this industry is full of number-crunching, its really not the figures per so that is important but how to influence the mind behind those figures. Yu believes the financial advisory services is still in its infancy here in the Philippines, but he feels it will grow. “Right now, there’s only about 10% being invested in managed funds. Whereas in other countries, its about half. We have about P2 to P3 trillion in time deposits. You need a greater portion of that to shift towards these funds before you really get more of the financial advisors as a profession coming in,” Yu said. So, how would you like to be a pioneer?

That’s easy. Get your Harry Potter books autographed by J.K. Rowling and sell them on e-bay. I’m not kidding! Check out this link. J.K. Rowling, your kung-fu is supreme among all writers. The Harry Potter series has turned more kids into readers than any other book series, in a world where libraries have turned into museums. Photo Caption: After purchasing the book shortly after it became available at midnight, Jennifer and Jessica of Manassas Virginia made their way to the Lincoln Memorial in Washington, DC to read it. AFP Photo. Now, how do we turn them into readers of books like Great Expectations. Hmmm. Photo Caption: J.K. Rowling presents her novel "Harry Potter and the Deathly Hallows" which went on sale at midnight of 20 July 2007 at the National History museum in London. Worldwide anticipation and hype surrounded the publication of "Harry Potter and the Deathly Hallows," the seventh and final book in author J.K. Rowling's fantasy series. And to think she was a writer living in penury, much like JRR Tolkien who wrote his manuscripts on brown paper bags. Nah, I'm not really a fan. A huge aspect of personal finance is career planning. We can’t escape the fact that most of us will spend most of our productive life trying to earn money through an 8-5 job. How do you strengthen that cash flow so that it can finance your day-to-day needs as well as future ones? Maybe we can't all turn our cash flow into a surging tsunami the way she did, but it's certainly an effort that should be included in every person's financial plan.