November 2007 Archives

In this video, Kathleen B. Buenaobra (left) of the Philippine Stock Exchange shows Money Smarts readers how to interpret the figures on the electronic trading board that looms over the trading floor. Interest in the stock market is growing among retail investors put out by low interest on deposits.

Yup, we earned P200,000 just by showing up at the Philippine Stock Exchange trading gallery last Wednesday, November 28, 2007. Virtual money, that is! Despite all the warnings of higher risk, disclaimers and the current volatility in the stock market, 17 MoneySmart readers who trooped to the PSE yesterday wanted to give stock investing a try. So, we agreed on a little experiment, similar to what our Money Makeover couple did last month. We decided to each “play around” with P200,000 virtual money for one month. It works like this: we each decide how to allocate our money based on current stock market prices. We are choosing only a maximum of eight stocks that we want to trade. We will each come up with a buy and sell strategy and a stock picking strategy. We will decide when to buy and sell our stocks for one month. Whoever earns most at the end of the month gets a free lunch! You can join us. Even those who are overseas can join this game, and we will just eat your share of the lunch if you win hehe. So, go open an Excel worksheet and start stock picking! Here are some of our photos. (As you can see, we had people from all ages and different professions -- dentists, IT professionals, real estate agents, businessmen and new graduates! It was a truly wonderful experience to meet you, guys!) (One of the youngest in the group is Jose, a new graduate, who is determined to make his future earnings work for him. Alan, our real estate agent beside him, can be a mirror image of what Jose can become! The group is listening closely to the AVP presentation on how to get started in investing in stocks.) (These two blew my mind away. They are businessmen and they came all the way from Lipa, Batangas to join the tour! Thanks Ver and Joey!) Videos to follow, so don't switch channels. Errr. Just visit MoneySmarts again in a while :)

Don't forget, its the MoneySmart tour of the Philippine Stock Exchange trading gallery today. I will meet those who have confirmed at the lobby of the trading gallery. For those who cannot come, we will have pictures and videos for you :) . I have already received requests for more tours from overseas Filipinos who cannot join todays activity. No promises, dears, but I will definitely try to arrange more. PSE, here we come!

The urge to splurge and miserly behavior are on opposite sides of the spending habit spectrum, but it’s not too hard to imagine most of us swinging from one side to the other at any given time. That’s because everyone has weaknesses. I’m not very particular with electronic gadgets, for example, so I lived with a Nokia 3310 when everybody was taking snappy pictures with their latest model mobile phones. My friends told me that was super miserly behavior. Get me into a kitchen showroom, however, and I will be hard-pressed to don my frugal hat. I “NEED” everything that comes with a nice kitchen, although I don’t know how to cook well! I thought I was moneysmart and was in my safety zone until the kitchen showroom came along. Then boom, sorry spending plan for 2006! This article shares 10 tips to curb impulse spending that we can use to keep us in the right spot in the impulse spending-frugality spectrum. Rina L. says in the article that she needed help because she had to pass by malls every work day to come home from her office. As she buys gifts in preparation for Christmas, she can’t help but pick up items for herself that she really doesn’t need! Sounds familiar? :D (Photo courtesy of Michelle Morelos) Here’s an excerpt, but you can click here for the entire article:

1.  
   1. Recognize a “need” from a “want.”
   2. Avoid going to the mall if you don’t have to buy something you absolutely need
   3. Set a budget and stick to it.
   4. Avoid the sales unless absolutely necessary.
   5. Tally your actual expenses every month.
   6. When buying gifts, ask recipients for their wish list.
   7. Ask a friend or family member to keep you accountable.
   8. Make yourself busy with other activities. After work, go home straight then just relax by reading a book or watching TV.
   9. Plan your shopping. If you’re going to shop for groceries, make a list before going to the supermarket. Then stick to your list.
   10. Reward yourself but don’t splurge. If you have followed these tips after a month or two, reward yourself with something to make you feel good. It doesn’t have to be expensive (remember: you have a budget to follow!). It can be as simple as a trip to the spa or a movie date with a good friend.

(Photo courtesy of Michelle Morelos) Our recent discussion on where to put Christmas bonuses also made me realize several things. Striking a good balance between saving for the future and enjoying today is crucial to enjoying life. And that’s what being money smart is all about: enjoying life – not just having more money. It’s true what many of you said: this generation wants more of the things we don’t truly need so we dash here and there to make more money, in the process missing out on the things that really matter. Impulse spending is the sure way to get on that road. Maybe we can also avoid going in that direction not necessarily by making more but wanting less. Going back to basics. Watching less television (which makes you want to buy more things), and spending more time actually playing with our children. Going to the malls less, and instead having a real conversation with your teenager. Saying enough to redecorating and instead doing small arts and crafts with our toddler made of recycled trash lying around the house. Maybe we can get back our lives in the process, because judging from the things you were thankful for last Thanksgiving, family and friends are the things that matter to all of us, aren’t they? So What Chocnut snippets BDO expects the peso to rise further to P38 to a dollar in 2008, one of the most bullish projections that I have seen on the local currency. Maybe, Ayala Corp. has the same projection, that’s why its recently concluded bond float, which was oversubscribed by P1 billion, was denominated in pesos. Coupon rate was 6.825%. As usual, Ron Nathan will keep you chuckling at his jokes even as you digest his views on whether the US will go into recession. By the way, he thinks the Middle East countries are just bluffing when they said they would dump the dollar. This article on tax amnesty for estate taxes got the biggest hits from our readers since this morning. Does this mean many of you are struggling with estate taxes or just with paying taxes in general? :D I’m not sure if the BIR is serious this time that it’s not going to have another tax amnesty season anymore. Lastly, I saw a Mastercard ad in the papers today that encourages more use of credit cards when traveling. Be careful, because if you get erroneously charged while traveling, straightening things out can be very difficult. If you must swipe, stick to well-known establishments. Better safe than sorry. Stay impulse-spending free, guys!

  You might get a surprise visit this month from someone who will make your eyes pop out, but it’s not gonna be Santa. This article from the Philippine Daily Inquirer entitled As bad loans are cleaned up, small borrowers suffer  tells of an increasing number of small borrowers who are getting visits from companies they have never heard of before, demanding payment for loans they thought were current. Such was the experience of Alex Maravilla, who bought a small home in Bacoor, Cavite through a 25-year home loan from National Home Mortgage and Finance Corp. His housing loan was sold by NHMFC along with other sour loans to Balikatan Housing Finance Inc., whose portfolio was managed by Bahay Financial Services (BFS). BFS is in a growing industry that believes it can make money by going after accounts that the banks have already written off. They will charge higher rates, of course, plus a host of other fees. From what I understand of how the industry works, the collection game can turn nasty. If the collection efforts do not succeed, BFS can still make money by selling foreclosed assets. Just how big is the issue? Daxim Lucas pointed out in his article close to P97 billion worth of loans have already been sold by banks to what the industry calls “vulture funds.” P100 billion more of soured loans is waiting in the wings. The story, however, has an interesting twist. Maravilla all the while thought his loan was current, as he was paying for his amortizations via automatic salary deduction and here lies the lesson. To make sure you won’t face the same fate, it makes sense to stay informed on the status of your loan. Whether you are paying for it yourself, or via salary deduction, always make sure you get an up-to-date listing of your payments from the bank or financial institution. Second, if you foresee that things are going to be tight for you financially, inform your banker – don’t hide from him. It’s expensive for banks to write off loans, so they would rather restructure than sell your account to the nearest vulture fund. Third, keep track of payment due dates. You wouldn’t believe how many credit records have been ruined by mere forgetfulness. Being sloppy can be a costly mistake. Fourth, be cautious about signing as loan co-makers or guarantors. You don’t want to be hounded by collectors for loans you didn’t make. It will look very harmless at the time you are signing, so watch out! So What Chocnut snippets Notwithstanding subprime credit fears, the expected China meltdown and local apprehensions, the stock market this year has been awash with cash. The Philippine Stock Exchange said firms raised P88.4 billion in the stock market through initial public offerings, sale of additional new shares, stock rights and private placements. This is a 57% increase over the Dec. 2006 level. In 2008, First Metro expects four companies to raise P34 billion through IPOs. This could include Cebu Pacific and three yet-unidentified firms (a conglomerate, a property company and a retailing firm). Bangko Sentral ng Pilipinas says the economy is healthy enough to withstand shocks from the subprime crisis. Cielito F. Habito wrote in his column why oil prices are rising, and he explained further what one commenter in this blog pointed out: why are oil prices still going up even with the peso appreciation?

Conspiracy or not, oil prices are on the rise and the effects on the economy will be significant. While the peso appreciation helps cushion the impact, the numbers tell the story: a peso rise from 56 to 43 per dollar is an appreciation of 23 percent, but an oil price rise of $60 to $100 per barrel is a rise of 66 percent. "Talong-talo pa rin." (We're still on the losing end).

Finally, there is P30 billion available for lending to Pag-ibig members next year. I still have to find out what the process is like and whether the loans are truly 6% per annum, but taking advantage of offers like this should be a no-brainer for money-smart persons :) Bottom-line: be smart when it comes to managing personal debt. Stay informed, be proactive and take advantage of good offers if you can’t avoid borrowing.

They tell me it’s hard to be grateful when you’re dead broke. As in zero moolah in your bank account and loads of debt. A good friend told me of a time he was sunk to the tune of millions and it was all he could do to face himself in the mirror in the morning. I wouldn’t presume to know better what people should feel in those times. But perhaps it would be a good idea to be grateful while I can. After all, it’s Thanksgiving in the US, one of the holidays there that I like and want to import here in the Philippines even if there’s a lot of skepticism about it. Get Rich Slowly has a neat video and post on why Thanksgiving can be good even without turkey circa 1951! Another reason is that I write about money every day and while I know I should be thankful for what those little coins and bills bring, it’s important to focus on the real reason why we want to fix our finances. Not for money’s sake or the things that go ka-ching, but for things like security, family, health, service to God and community, helping others and so on. Digerati said it well:

… money is a replaceable asset, a distant second to many other things that we all wish we could permanently have and forever keep, but which we only end up receiving in what seemingly feels like short, sporadic periods throughout our lives.

So, I’m grateful for: (Photo from AFP) - time. Time to heal, to make amends, to start over, to think of things celestial, to ponder on light and truth, to laugh aloud - little grubby fingers that grab you and children who hug you and make you feel you’re 10 feet tall at the end of a crazy busy day - last week’s momentary misunderstandings, because that means hubby and I are still together after 15 years - mom’s health and sense of humor - two home angels who have served my family for years and keep my kalamansi juice fresh - more than 20 articles waiting to be written, because that means I am doing what I love to do - friends who text “ei, musta? Wala lang.” - the feel of fresh sheets - blogging, which makes me jump up from bed every morning. (I kid you not) - email and the Internet, for making it possible to work at home **turns to you, and gives you my full attention** It’s your turn.

(Putting personal finances in the public eye does not scare Filipinos anymore. Photo from  AFP) Used to be that Filipinos would rather reveal their most embarrassing bloopers to friends rather than talk about how much they are making or how much debt they have. Not anymore. Pinoys are talking about their deep, dark money secrets in blogs, their investment portfolio and strategies, revealing their net worth and their biggest financial dreams, the lessons they learn along the way as they journey on to financial independence – and sometimes even their mistakes (laudable, really. After all, who doesn’t make mistakes?) I usually go looking for these blogs once a week and take a peek at what people are feeling and saying. Aside from real life interviews that I do on a regular basis, these blogs give me a chance to get the Filipino pulse. The bloggers I like don’t pretend to know everything. But they are very opinionated. I do not agree with everything they write, but hey, diversity makes life interesting. I read them because they tell their stories well. Here are some examples: The Money Tree…my ABCs of Personal Finance. Carefully chosen topics, good narrative, nice tables. The latest entry, however, was a month ago. Pinoy Piso, wake up! Tales of the absolute trader is written by Tarantrader who is wild about technical analysis. He’s very opinionated. Warning, his blog is technical, but you’ll find some interesting posts like the one on choosing a stock broker. I just discovered “The Girl With The Pearl Ngipin” lately. She’s a newbie in financial planning living in New Zealand. It’s interesting to me how she will handle the wild ride to her first P50 million :) . Let’s cheer her on! Most of you know Digerati Life. She’s a Filipina living in Silicon Valley. Her blog posts will be helpful to Filipinos in the US, and even those who are making their own way here. Moolah Matters  is an example of how the young urban professional in Manila thinks, acts and decides. She’s the only one in the group that I know personally and I only met her recently. Maybe it’s the anonymity in blogging that allows them to talk about what used to be a taboo subject. Maybe it’s the drive to do better with finances, maybe it’s the chance to talk to like-minded people. Whatever the reason, this shows there’s a shift in the Filipino psyche when it comes to money.

If you haven’t received your Christmas bonus yet, you probably will in the next weeks. You’ll probably be getting anywhere from P50,000 to P100,000. How are you going to spend it? Do you have a good tip on where to put that kind of money? We gotta plan, or else even P100,000 can vanish without a trace.

  (Some things you just can't shake off like the rising peso and climbing oil prices. The sooner Filipinos accept that, the better. Photo from AFP) Sometimes, the most effective solutions to complex problems are the simplest. Like transparency, for instance. One of the simplest ways to reduce corruption is to require government offices to regularly report audited figures on the unit cost of everything they spend public money on. As you all know, information is a currency recognized in all countries and it levels the playing field like nothing else can. While doing research on fund transfers for an article I was writing, I was so frustrated to find so many banks holding on to remittance charges, breakdown of costs and delivery time as if these were state secrets. Some even said these were proprietary information. Duh. The Bangko Sentral ng Pilipinas’ move to compel banks to make these data available to anyone is a good move, but I hope no one shoots me for asking, “What took so long?” I mean, no one had to revise a law or hire a rocket scientist for something as simple as a policy on transparency, right? Better now than later. This policy should heighten the competition even more, especially as new technology is being developed all the time to make remittances very affordable. An Indian company for example, aurionPro, has claimed it can bring down banks’ cost for each transaction to as low as $1 for real-time delivery, regardless of where the money is coming from. Their technology will even allow an OFW to be serviced from his home or office (the park nearby, if necessary) through a handheld device that a bank staff can bring to him. Mind-boggling isn’t it? Naturally, banks will have to add a few more dollars to that cost, but hey, a dollar for real-time money transfer whether you’re in HongKong or North America ain’t bad. Discussion on the peso-dollar exchange rate is deepening, as the Senate orders a probe on its appreciation and former labor secretary Patricia Sto. Tomas and now DBP chairman backs a proposal to create a special exchange rate for OFW remittances over a specific period. As this developed, Energy Secretary Angelo Reyes went over to the Senate today and became an instant sensation when he announced he would look into possible price fixing among oil companies. Here you are worried that gas prices will hit P50 by yearend, only to be told that there could be collusion among oil companies to bring the prices even higher? I understand why he became an instant hit with transport groups and some senators, but unfortunately, the good secretary cannot hide the fact that oil prices are going up everywhere. No amount of price-fixing busting will bring oil prices down in this country. We all have to deal with the rising oil prices one way or another. Just like the peso-dollar rate. There are some things you just can’t shake off. I know these are tough, but the sooner we all accept that, the better.

Hot money, hot Pinoy seafarers (were you thinking of hot Pinoy hunks? Tsk tsk), hot business opportunities in medical tourism – everything’s hot today except the weather. We are expecting another typhoon…sigh. It’s always like that before or after my birthday. EVER since I was born 21 years ago. (Did you just do a double take?) The Philippines attracted $274 million net “hot money” last October, the Philippine Daily Inquirer reported today. That’s quite a huge jump from $35.8 million in September, and totally deserves a blog post. In this post,  I wrote that hot money refers to short-term investments by foreign investors in local stocks, bonds and money market instruments. While they influence the local financial market, we need to remember that they are very speculative and can leave our shores at the touch of a button. The long-term growth of our stock and bond markets, in fact, will depend on whether domestic investors (that’s you, me and our OFW friends and relatives abroad) will begin to invest in the domestic market. Policy-makers hope a wider base of domestic investors will not be as jumpy as foreigners. The dual citizenship act passed three years ago has made this possible for Filipinos who have American passports. The Bureau of Immigration says nearly 43,000 Filipinos have reacquired Filipino citizenship so they could invest in assets like real estate and businesses.  The government is saying they are making it easier for those who want to get dual citizenship status. Back to hot money, Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. says we can thank the recent rate cut, higher growth forecasts for the Philippines by the International Monetary Fund and easing concerns about the US economy and good third quarter corporate results for the surge of money that came in last month. Could it also be that foreign investors are looking for other alternatives to the US and European markets, which are knee-deep in subprime problems? Could the Philippines be benefiting from that trend? Markets took another dive earlier this month due to fresh fears on the subprime issue, making it only prudent to consider how this drama will play out in the lives of ordinary Filipinos. I find the article of Michael Lim, a professor and investment banker by profession, in this page very clear to understand and explains adequately the roots of the subprime mortgage problem and what it means for the Philippine economy. Markets continue to be “shaken but not stirred” was the analysis from Sunlife’s top investment guy, Michael Manuel. Former socioeconomic planning secretary Cielito F. Habito said in an interview with MoneySmarts last Friday it can bring storm clouds but he didn’t seem overly concerned. The local banking sector is not that exposed to collateralized debt obligations, so a systemic crisis is out of the question. The US economy is largely expected to go under a recession, but that’s not news either. As I was just wrapping up this blog post, I received the monthly Market Call issue from the First Metro Investment Corp. and UA&P Capital Markets Research Center, which pointed out that despite the scare from Citigroup and Merill Lynch that Philippine sovereign bonds remained stable (they call them ROPs in stuffy business circles). It said any weakness in the stock market this month would be a buying opportunity. The biggest threat most experts still see is how remittances will be affected by the US recession. When money gets tight in their US homes, will they send less money to their Philippine recipients? By the way, this picture below is a Mercedes customised with fake diamonds shown during the Los Angeles Auto Show last November 14 (Photo from AFP). Doesn't feel very recession-like, this photo. As I went around asking experts’ opinions, one thing and one thing only became clear: people are guessing and they don't have a choice. In fact, Habito says there is no way of really knowing. No one knows how deep this thing will go. There is no systematic way of measuring how many Filipinos in the US are suffering from the slump in home values and whether they are still sending money to the Philippines. No one knows…and that’s not because everyone is stupid. (Voice drops to a low whisper). There is no way to know. (Nuninuninu). Doesn’t that scare you? So, what do we do? Should we keep all our money in cash? Or gold, or silver and other “recession” commodities that will hold value better in the long run? In a conversation I had with Reyna Elena last week, I saw first-hand how resilient Filipinos are. We may rant and rave at the latest depressing trends, we may complain about how the dollar is faring and how OFWs from the US are paying more in dollars to send the same amount of money home. Imagine how we will cope if gas prices go up to P50 by the end of the year? Good thing the appreciating peso has tempered the rise of gasoline prices here but of course, that doesn’t lessen the pain for OFWs very much. We may think the Philippines is one of the dirtiest, most bureau-crazy place we have ever lived in. But we still smile through the smog and live through the turmoil. US recession and all, many are still happily hoping to be a nurse somewhere isteyt-side. At the same time, retirees are busily preparing to come home for a taste of the balmy islands (ignoring all news from Malacanang). You can't deny it, the Philippines is beautiful. Something tells me we’ll live through these new storm clouds too.  PS. It’s easy now to know which articles in INQUIRER.net get the most hits. Click on the MOST READ icon and you will see the top ten stories in each channel. The article “Early retirement windfall whittles away in time deposit” was on the list for one whole week! Time deposits have their uses like keeping your money safe and liquid and easy to withdraw. They are also one of the cheapest sources of cash for banks, so very few banks offer other deposit instruments. But truth is, they are just savings instruments, not investments.

To everyone who wants to join the MoneySmarts tour of the Philippine Stock Exchange trading gallery and learn the basics of stock investing, mark the date. November 28, 2007. Wednesday. Exactly 9 am to 10.30 am at the Tektite Tower in Ortigas. Please email me one more time if you are planning on going [lightdream (at) gmail (dot) com], so I can have an official headcount. See you there!

I only have admiration for people who try to educate themselves on financial planning or how to manage their money. When I wrote about Mariannet early this week, I was amazed at those who responded – many of you have come from similar (or even worse) but have managed to lift yourselves by your bootstraps and are, in fact, doing well! One of you who commented on that post was right: you are a testament that poverty does not have to be a widespread problem. The answer lies within each of us. In fact, Dr. Noet Ravalo’s column yesterday talked of real-life stories of two drivers who were from the similar backgrounds, but have very different strategies on saving money.

Let me take the case of Bert (not his real name). He is a driver at a government agency and takes home roughly P10,000 a month, including overtime. To beat the morning rush from the Las Piñas area, he takes the FX (airconditioned public transportation) in the morning although he takes the jeepney (not airconditioned) at night. He is married with four children, the youngest being eight years old and the eldest is already in high school. Bert has a small loan with a government financial institution, which he faithfully pays on time. Bert’s wife takes care of their modest rented unit.

I have known Bert since he was single, working as a security detail in a government office. I vividly remember our chat over a decade ago: he kept on saying to me, “Gusto ko sanang matuto nagmaneho para naman maka asenso ng konti.” You could see it in his eyes that the ever-present smile was the facade to some dogged determination to move ahead. With the help of friends who literally lent their vehicle, Bert learned to drive through the busy streets of Las Piñas.

Al is a driver just like Bert. Prior to coming to Manila in 1996, his work experience was limited to driving a pick up truck through sugar fields and, according to him, overtaking only carabaos. While he has now been working for the same family for over 10 years, you can just imagine what it was like for him (and his passengers!) driving through EDSA (Manila’s main highway) back then. Al was so new to the city that he opted to take the flight of stairs to carry the bags of his boss rather than be trapped inside that steel contraption he has never ridden before (aka the elevator). Yes, the flight of stairs, 15 floors worth of stairs.

Al now has a take home pay of roughly P14,000 a month. Aside from being a paying member of the Social Security System, Al has two weeks of paid vacation in December, over and above his 13th month. Al is also married, has a son who is about seven years old and an “adopted daughter” who is two years old. Al’s wife is also a full-time homemaker.

Al, unfortunately, has no savings. When the children get sick or there are other needs, Al will ask his boss for an advance. The boss has repeatedly talked to Al about his lack of saving, not just for himself but also for the needs of the children. While Al always says he has learned his lesson, the reality is that nothing is left of his salary. He comes to work in brand new shades, new gloves (ones used by bike racers), trinkets here and there and even a new P6,000 bike. But Al never ever bothers to buy new clothes, doesn’t give you a semblance of a “professional” look and is just as happy to live the “OK na ‘yan” lifestyle. If you ask Al why he bought the shades (instead of say replace his VERY tattered undershirt) his quick answer is “eh sale kasi eh (because it’s on sale).”

Both Bert and Al are gainfully employed, in the same line of work and started under similar circumstances. But Bert is striving while Al is plodding along. Bert has a lower income and a bigger income but he has enough discipline to be granted a bank loan. Al on the other hand is going nowhere and that doesn’t even bother him.

Read the entire article here. Noet poined out that Bert might be starting small, but if he goes on doing what he is doing, eventually he will learn about mutual funds, stock markets, bonds and maybe even warrants, investing in the real estate and he will do well. The question the whole discussion begs to be asked is: after you know the technicals, what now? Isn’t it true that many of us have known the technicalities of investing for years and still haven’t gone past the saving stage into the investment stage? Let me again quote Noet:

Mariannet’s story is a real tragedy. But Al is as much a tragedy and he doesn’t even want to recognize it (shades and biker’s gloves and all). People always talk about “doing the math” to manage ones personal finances but Al is living proof that consideration of the technical details is patently presumptuous. It presumes that the person has foresight and it presumes that the person has a desire to make his tomorrow “better” than his present.

It all goes back to foresight. May we all get a big dose of it today. (Relatives and sympathizers carry the casket of Mariannet Amper from the family's tattered shanty house, seen in the background, in Davao city in southern Philippine island of Mindanao, 10 November 2007 to a nearby public cemetery during her burial. Struggling to survive in life of poverty Mariannet,11 hanged herself to death 02 November 2007 leaving a letter and diary depicting a life in rampant poverty. The case put a human face to poverty blighting the Southeast Asian nation, where nearly 14 percent of the 87 million population live on less than a dollar a day even as the government says the economy is on a roll. AFP PHOTO)

The Philippine Daily Inquirer’s top story in the business section today says “BOP surplus seen topping $7-B mark”. Balance of payments (always with an S) is an economic jargon that simply refers to a record of all international transactions between one economy and the rest of the world in a particular period. Doris Dumlao, in her article, further explains:

Any transaction which gives rise to a payment by a Philippine resident like importation or debt servicing is a deficit item in the BOP while any which gives rise to a receipt like borrowing, exporting or overseas Filipino worker remittance is a surplus item.

Just by looking at the simple definitions, you can imagine that the list of transactions that the BOP captures is very extensive. So why do you need to read about the BOP? It is closely related with how the peso is doing in relation to other currencies, especially the dollar. When the BOP is in surplus, or seen to be in surplus, there are more dollars coming in and that usually makes the peso appreciate against the dollar. The opposite is true when the BOP is in deficit. Next year, as the article says, the BOP is seen to breach the $7-billion mark and mostly due to remittances from overseas Filipino workers. As with every economic indicator from the Philippines, however, read news articles on the BOP with caution. The Philippines has a huge ‘errors and omissions’ in its BOP accounts. That means the BOP does not record large amounts of international transactions, which may include trade misinvoicing or smuggling or capital flight. A study from the Ateneo de Manila University’s economics department written by Edsel L. Beja, Jr. released earlier this year placed the unrecorded transactions from 1990 to 2005 at $192 billion. That’s nothing to sneeze at and shows “a weakening capacity in the governance of international transactions.” That includes your remittance money. Good or bad? (A fork lift maneuvers containers before loading it into a ship at Manila's international container terminal. Transactions such as this eventually get recorded in the country's balance of payments. Photo credit:AFP)

While looking at Moolanomy’s blog the other day, I stumbled on an intriguing post that illustrates why it’s hard to break that P1-million net worth mark. It’s not just the persistence and focus needed to make your first million. Moolanomy correctly points out that it’s also mathematically challenging.

“If a person invests $15,000 per year starting at age 25 and the investment gains on average 10% a year, he can get to $1 million mark by 45. The first million took 20 years! But if you keep going down the table, it only takes… 6 more years to get to $2 million at 51 4 more years to get to $3 million at 55 3 more years to get to $4 million at 58 2 more years to get to $5 million at 60 2 more years to get to $6 million at 62 2 more years to get to $7 million at 64 1 more years to get to $8 million at 65

This confirms what one of the readers of this blog said in a comment on my post on The Science and Art of Making Your First Million. He said:

“Making your first million is the hardest because you’re starting from scratch. The next million is less hard. The succeeding millions are easier because you have a bigger base. Money begets money. I made my first million at 25 in real estate during the real estate boom in early ’90s. I had to bet all my savings and borrow money to do that. Now I earn the same amount in interest alone. Business is the fastest way to make money. It is also the fastest way to lose money if you fail. Don’t worry it’s okay to fail but don’t lose it all.”

Inspiring, right? As I was looking through MoneySmarts’ archives, I realize Pinoy Investor is only in his thirties. Unfortunately, he doesn’t want to be interviewed :) For average Filipinos, making the first million by 25 may not be as easy though. But what if we make some simple assumptions. Say, regular savings of P2,000 a month starting at age 20 when most of us start working? The table looks like this: It will take 16 years to make your first million! But it gets easier after that… 6 more years to make the second million 4 more years to make the third million 3 more years to make the fourth 2 more years to make the fifth 2 more years to make the sixth 1 more year to make the seventh …then you’ll be making one million a year after the eighth. Consider that this illustration is only for a P2,000 savings per month on a 10% return per annum. Come on guys, we all can do better than that! :)

I love to browse bookstores, even when I have already busted my book budget. The other day, I saw this Suze Orman’s The Road to Wealth at Fully Booked near my place. It cost more than 2,000 pesos, if I remember correctly. I left the bookstore with a smug look on my face. A few years ago, I bought that book for a steal at 359 pesos in one of the best-kept secrets of book addicts in Metro Manila: National Bookstore main branch in Cubao, Quezon City. It’s the top floor that hides the biggest bargains! Happy shopping.

I met Madam Auring today. I could not believe it was her beyond the gossamer curtains.  What is this famous (or dare I say infamous) madame doing, encamped, in the crowded walkway of Ever Gotesco Commonwealth? Behind her was a stall selling shirt for kids – 3 for 100 (your name in textile glue – for free).  And what am I doing here?  Should I entrust my future to a P250 session – unlimited questions – with a madame known more for her beauty enhancement procedures and penchant for younger men than her magical prowess? Joe said we should, so I did.  I held out my hand and then came a barrage of hula. At Max’s, after the show, Joe exclaimed, “And that is the point of the exercise.”  He explains that everything in this money game is hula – where you put your money, what stocks would give the highest yield, what is stable, what is sure – is hula.  Nothing is sure. One has to rely on his gut, on luck, on his God, on the rise and fall of the sun’s rays, on change, on the ephemeral-ness of everything. The future is a gossamer sheet, like the one separating the world and Madame.  What is beyond is visible but hazy, one is never sure about it, or if it will still be there when the sheet is parted.  Joe says that nothing beats learning the game, knowing how it is played – on your own – and reading, reading, reading, forming your own opinions, winning some, losing some, recovering, daring.  And so we dare (or try). Post Script from MoneySmarts: The first three months of the Money Makeover exercise for Diego and Bianca were spent on ferreting out the couple’s money personalities, understanding their goals, recognizing their spending urges, shining a light on their real monthly expenses and making sense of their net worth. By that time, financial planner Augustus J.V. Ferreria, had spent more than 20 hours with the couple. He said it was time to teach them about investing. He was mysterious about it all. It would be fun to find out what Madam Auring sees in our future, he said with a laugh. I was not a fan of tarot cards, so I went to Ever Gotesco with a big crease on my forehead. But hey, I enjoyed it. Madam Auring was one of a kind :D . Behind the showbiz exterior and the gaudy curtains seemed to be a kind woman, surprisingly. “Now, you will never forget the day of your first lesson from me on investing,” Joe said after the whole tarot card caper. So, that was it. An emotional bookmark of sorts. As Bianca said in her guest post above, the whole point is to understand that it takes some kind of genius in intelligent and informed guessing to make it big in the stock market. The whole thing drove home the point that it can be fun, too. Now Diego and Bianca are raring to begin real investing in stocks. Joe has one more pleasant surprise though. “I will ask them to also trade P100,000 of my own personal money. This way, it becomes even more interesting. Now, we will also see if I am a good teacher.” Abangan… (In Money Makeover, we matched volunteers with financial planners who will coach them for one year so they can reach their financial goals. Through this series, MoneySmarts hopes to show how a good financial plan can change the course of people’s lives. People don’t need another Sermon on the Mount on financial planning. They need to see how financial planning can be done well. By the way, Diego and Bianca are aliases to protect the couple’s identities. Click here to read earlier Money Makeover articles.)

I woke up to an ache in my chest as I read the morning paper. Mariannet, the 12-year old child who hanged herself last Nov. 2, was my daughter’s age. She is one of 11 million Filipinos who share a strange kinship with one billion more across the globe who live on less than a dollar a day. Her diary says she killed herself because she lost hope her family will ever get out poverty. Her wish list found in her diary was short: a bicycle, a school bag and jobs for her parents. "Gusto ko po sana magkaroon ng bagong sapatos at bag at hanapbuhay para sa nanay at tatay ko. Wala kasing hanapbuhay ang tatay at nagpa-extra extra lamang ang aking nanay sa paglalaba," she said in her "Wish Ko Lang" letter. [I wish for new shoes, a bag and jobs for my mother and father. My dad does not have a job and my mom just gets laundry jobs.] This morning, as my daughter asked for her baon to go to school, I carefully looked at the P100 bill and kissed her goodbye. She gave me a warm hug and my heart constricted. I saw Mariannet instead, pleading to her father for P100 she needed for her school project. A hundred pesos seems like a very small amount. My daughter will probably spend most of it on lunch at the school cafeteria and candies, not aware it could save someone’s life. A few column inches away from the story on Mariannet, the Philippine Daily Inquirer banner story reads: Senate probes cash gifts. It talks of bundles of cash stuffed in envelopes and brown bags given to politicians one fine day in Malacañang. Right there, we can see that Mariannet was right smack in the middle of the crux of life’s problems here in our country and around the world. Right there, we can raise our fists at government and say where is your heart? Releasing a P1-billion hunger fund is not the real solution! But Lingayen-Dagupan Archbishop Oscar V. Cruz has a better answer. He says when an 11-year old child hangs herself because of poverty, somehow we are all to blame. The community is to blame. The society is to blame. A few months ago, the Asian Development Bank released a study that showed in figures how the rich are getting richer and the poor are getting poorer. The middle class is vanishing, it said. A separate article I was writing made it clear that the emerging middle class in this country are, unfortunately, not in this country but working abroad as professionals, seamen, teachers, nurses, caregivers and household workers. Those in Manila who could buy what they want, send their children to school, save for the future, dabble a little bit in stocks or bonds may feel alienated from the problem of the vanishing middle class. They may say, so what? I have hope. I have money. I am preparing myself for the future. Unfortunately, rising poverty will affect us all. The more Mariannets there are, the less Filipinos there will be who can buy the products and services you are selling. Who can afford to go to school. Who can be skilled workers in our technology hubs. Who can become retail investors that will buoy up our capital and bond markets. As two songs go, the circle of life ensures that we are all in this together. It makes sense for everyone’s financial future to wipe out poverty -- even the ruling elite’s financial future. Even politicians’ financial future. As you prepare this day to make more money, save more and invest more, please do two things: look around you for someone like Mariannet and do something about it. Then continue to make your dreams for financial independence come true so you can help more like her.

(Source: PDEx brochure) Last month, reader Ricardo Pitogo asked this question in MoneySmarts, in reaction to my first post on the OFW bonds:

I read your article on the planned OFW bonds. But I am more interested in learning to trade bonds. I read the article of Dr. Noet Ravalo in the PDI on bonds. May I know if the Bond Trading Platform has already been put up by the Bankers Association of the Philippines? If so, how can I contact it? Lastly, do you happen to know if the Treasury Department of the Bangko Sentral ng Pilipinas can be a venue to buy and sell bonds? Thank you very much for your kind attention. – Ricardo M. Pitogo

Dr. Noet Ravalo answered him in his article today. Here’s an excerpt:

The trading platform that is currently operational is the one used by dealers to transact government securities in the “spot market”. For now, the participants are the larger institutions and the object of trade are Philippine treasuries. The PDS infrastructure follows the international best practice of Delivery-versus-Payment (DVP), which literally means that adequate balances of securities (for the seller) and cash (for the buyer) must be both available before the transaction goes through. While this may seem to be an obvious requirement for a “spot securities market”, it may interest you that in the old design, the seller would only know at the end of the trading day if the buyer had sufficient cash to pay for the securities.

That last part, to me as a retail investor, didn’t sound so good. But Noet continues.

All transactions must be reported to a central system within a few minutes of trade. That is not going to happen in a vacuum and this needs to be addressed just as we need to address the needs of the investor who happens to be based in Ilocos, Palawan or Bacolod. The ideal is for the investing public to have equal information about the latest market price for each traded instrument. This would introduce price transparency and eliminate “privileged information” if and where it exists.

And I snip again..

Not only can individual investors now really participate in an organized market where prices are transparent and accessible, we can actually move beyond the “spot transactions”. We can consider for example a more active play in the money market (repos, securities borrowings) to augment our returns and in forward transactions to hedge our needs. Hopefully soon, corporate bonds may likewise flourish so that issuers don’t have to risk a foreign currency exposure and that local liquidity can be used for local fixed capital formation.

For those who are raring to trade bonds, December 19 is the critical date. That is the day when the rules will be fully enforced and you can begin trading bonds through your well-chosen brokers. Good luck! Oh and Ricardo, here are PDEx’ contact details: Main Line: +632-884-5000 PDEx Tel: +632-884-5005 to 06 Fax: +632-884-5098 to 99 Email: pdex@pds.com.ph Office Address: 37/F, Tower 1, The Enterprise Center 6766 Ayala Avenue corner Paseo de Roxas Makati City Or you can just shoot questions through MoneySmarts. Read the full article here.

Oh you better watch out, you better not swipe, you better not flaunt your shiny new card. Christmas spending is coming to town. Ok, ok, so I’m not the best songwriter in town. :p But the fact is, most of us do have hangovers come January -- the kind that make it so hard to go to the bank to pay our credit card bills when Jingle bells no longer chime. The spendmaster in me talks like a well-meaning conscience: Oh come on, it’s Christmas! What else do you work hard for? The children need the memories, the magic, the gifts, and the ambiance! You can always pay for all the expenses next year. (Voice becoming shrill and high-pitched towards the end of the argument.) (Photo credit: AFP) Oh, that warm, fuzzy feeling that Christmas brings. I am a wild Christmas child myself. When November rolls by, I still feel like a child anticipating the magic of the season. That’s why, I know I need control to avoid Christmas consumerism. I’ve been “starting over in January” every year for the last 10 years. I know that won’t be much fun if I find myself still starting over in January of my 50th year. So here are 15 tips for a pocket-friendly Christmas that are guaranteed to make our holidays (and the months after) merrier.

1. Set a budget. Before going to the malls and bazaars, sit down first and determine how much money you can afford to spend. 
2. Make a gift list. Create three lists: family, friends and work contacts (officemates, clients, suppliers). See which ones you would like to give a gift to, and which ones can benefit from a simple yet sincere Christmas card. 
3. Determine an amount for gifts. From your budget, set aside a total amount for gifts. Don’t go overboard.
4. Set aside money for celebration. Kris kringle, exchange gifts, potluck parties, and Noche Buena costs have to be budgeted too. 
5. Consider giving group gifts. For instance, instead of giving small gifts to the accounting personnel you always transact with, give a whole bilao of pancit they can have for merienda. 
6. Go homemade. Give gifts a personal touch by making them yourself. You can do scrapbooks, photo mosaics, and other craft items. Or whip up something yummy in your kitchen, like cookies, paté, and cakes. 
7. Try shopping online. You will save time, effort, and parking fees if you do your shopping online. 
8. Hit the bazaars early. Good unique finds that are affordable can be had at village bazaars and tiangges. 
9. Buy supplies in bulk. Gift wrapping paper, scotch tape, ribbons, boxes, and gift cards can all be bought in bulk at one time. You’ll get a better price too. 
10. Choose affordable party venues. 
11. Look out for sales. 
12. Pay your bills on time. In the rush of the season, people tend to overlook their bills. Pay them on time to avoid interest charges and late payment fees.
13. Keep it simple. From gifts to celebrations, you don’t have to overspend to impress. 
14. Give to others. Make time to give to those who cannot give back, such as people affected by the recent typhoon, children in orphanages, or senior citizens in homes for the aged. 
15. Plan for next year’s Christmas. To avoid the financial stress, start saving for Christmas expenses in January. If you save a little amount every month for Christmas, you’ll be stress-free next holiday season.

Read the article here.

Warning: the first few paragraphs of MoneySense’s personal finance feature today may read like the diary of a rich, spoiled brat:

When Mardie and I married in 1999, we were better off financially than other newly-weds. We already had a townhouse (my parents helped with the down payment), acquired through a loan from the Government Service Insurance System. I was working then as a lawyer at the Securities and Exchange Commission; Mardie just finished a contract with a foreign firm and started a consultancy business. We weren’t concerned about other things as I was pretty much relying on my parents for support. Being the youngest and only girl in a brood of six, I had lived a stress-free life especially about money. My dad was and still is a great provider. Growing up, there were plenty of extras and luxuries (I had a credit card when I was a teenager in the 80s), so at a young age, I was used to buying stuff without thinking of how to pay for them. I actually did not give up my dad’s credit card until a few years after I got married. I knew I could always count on my parents to foot some of the bills and pitch in whenever we had money emergencies. Deep down, I felt that my husband was uncomfortable with this set-up, but he seemed to accept it, and was never resentful.

I winced a little bit when I read the account for the first time, convinced that I was hopelessly and permanently biased against little rich snobs, probably because at one point in my so-called life I wanted to be one (laughs at myself). But then, the latter part of the story taught me how wrong I was to write-off this girl so quickly.

After a great deal of worrying, crying and fighting, I came to the realization that we both made the problem and what we need to do is fix it. The turning point started when I stopped blaming myself. Mardie and I talked things over and sought advice from trusted friends. The first thing they told us was to forgive ourselves for whatever mistakes we did financially. Then for a couple of months, we wrote down each and every expense. We were surprised to discover that despite being thrifty, we were still incurring unnecessary expenses. We set financial goals, and drew up a more realistic budget that we could stick to.  We learned to be thankful for what we have. We are dealing with the problem and we are succeeding. We are now more mindful of our spending (one trick is to convert the amount to pesos). With the rate we are going, we will be debt-free in 2009. Our “aggressive savings” enabled us to take a trip to Europe last April. The trip was not just about seeing new sights but reaching new heights in our relationship as well; it was a testament that nothing is impossible once you set your heart to it. It’s true what they say: if you plan it, visualize it, then it will happen.

As we have learned from Bianca in Money Makeover, we are our past and many times, that gets in they way of reaching our financial goals. But that does not have to be an immovable weakness – we CAN change and we must try. Irene Isidro-Torres certainly had the courage and the heart to do so. Irene also opened my eyes to the wisdom of the ancients, which tell us not to spoil our children. By giving in to their every whim, we can, in fact, ruin their future. Consider Irene’s revealing narrative:

Before we knew it, we were running quite a balance on our credit card. And there’s no Daddy this time to dutifully deal with my purchases. In retrospect, we accumulated debts mainly because Mardie couldn’t say not to the things I wanted and bought stuff we didn’t need or couldn’t afford.

Money and responsibility go together. While this is best taught while young, no one’s too old to learn this lesson. Blogher.org has an article written by Nordette Adams entitled Spoiled Brat: has your child been called that? She says her son damaged his first cellphone and she resisted the urge to immediately replace it. Since then, his son has been more careful with his mobile phone. I followed the links in that article and stumbled upon an excellent post by Karen in her blog who said this is one way of raising a spoiled kid:

“In our society where both parents are often working, we are constantly beset with guilt: guilt that we often leave our children to caregivers or grandparents, guilt that we are not there to witness their milestones in life, guilt that there are times when we are not there for them. So how do we compensate? We shower them with expensive gifts, treat them to any toy of their choice, we give in to just about anything they ask for, after all we owe them.”

Sadly, I do that too. Sometimes, I’m wise about it and all, but there are times when I just can’t resist, you know what I mean? So, I open the floor to parents out there reading this blog who want to share stories and defining moments on avoiding that most challenging urge to spoil children. How do you do it, guys?