January 2008 Archives

(FAST GROWTH. NSCB Secretary General Dr. Romulo A. Virola tells the press that the economy expanded by 7.3% in 2007, the fastest growth in 31 years. In photo left to right: NSCB-ESO Director Raymundo J. Talento, Dr. Virola, Secretary of Socio-Economic Planning and Chair of the NSCB Board Mr. Augusto B. Santos and NEDA-NPPS OIC-Director Myrna B. Asuncion. Official photo from NSCB.) What do you know, while we were all worrying ourselves to depression, the economy grew 7.3% in 2007 – the fastest growth in 31 years. Read this breaking news from INQUIRER.net:

MANILA, Philippines -- (UPDATE 2) The economy expanded by a forecast-beating 7.3 percent in 2007, its fastest pace in 31 years, boosted by the services sector, the government said Thursday. "In an environment of benign inflation, low interest rates and a strong peso, the Philippine economy turned in its best performance in 31 years," said Romulo Virola, the secretary-general of the National Statistics Coordination Board. "On the demand side, increased consumer spending, investments in public and private construction, government spending and exports of non-factor services largely contributed to the remarkable performance of the economy." Following the strong performance last year, Economic Planning Secretary Augusto Santos said the government is maintaining its forecast that growth will slow to 6.3-7.0 percent in 2008 given the expected slowdown in the US, the biggest market for Philippine exports. "What we are saying is that if there is a recession in the US, then that will affect us, but the situation is closely being monitored," he told a media briefing. Santos said the world's largest economy is unlikely to slip into recession. "As we see it, there may in fact be no recession in the US given the stimulus package of the Bush administration.”

Here’s how our growth rates look since 2000: 2000 -- 4.38 2001 -- 1.76 2002 -- 4.45 2003 -- 4.93 2004 -- 6.38 2005 -- 4.87 2006 -- 5.45 2007 -- 7.3 Before the announcement, analysts were expecting a 50 basis point cut in the central bank’s policy rates. Now, they are saying it could be smaller at 25 basis points. We will know for sure in a few hours. A bigger cut would have been better for stocks, not so good for bonds, but investors can’t really complain with the 7.3% figure. Of course, economists will be reacting all over the place in the next few days. There were several significant upward revisions in the quarterly growth rates. The third quarter 2007 figure was revised upwards by 1.0 percent, there was a 1.7 percent rise in the second quarter and 2.5 percent revision in the first quarter. Economists in Ateneo de Manila and the University of the Philippines will have a field day commenting on how long it took the government to report on these revisions. Here's hoping our net worth grew as much, or more than 7.3% in 2007. Even better if our emotional and wellbeing balance sheets register high net worth. Have fun today and enjoy each moment!

Noet Ravalo is back, and in his latest column, revealed that he and his family “dissaved” over the holidays. Check out his column on the real point of saving for the future. Here’s an excerpt:

Over the holidays, my family and I dissaved. We took an unplanned family vacation to see relatives and friends we have not seen in over 10 years. My family thoroughly enjoyed it. We always stress the virtue of saving because what we save is the treasure that we bring to the future. But what we often forget is that saving, in practice, does not mean that we should stop spending. The point of saving is not only to accumulate but also to save for something. We cannot minimize for the sake of minimizing. Ibenizer Scrooge was a miser until the three ghosts put cause-and-effect in perspective. He had that privilege; some of us may come to that conclusion too late.

Think of this when, next time, your more good-looking and more popular younger brother visits you and you want to lecture him about saving for the future! Nyahaha. Seriously, I wouldn’t even dream of stopping to take annual vacations for the extra money it will add to the retirement kitty. We all must save for the future. As my previous blog post says “no one can afford NOT to save.” But it’s a balancing act between now and that distant year ahead. Having said that, here are some moments of frantic frugality I have observed in myself and some people around me. Perhaps you can add yours, in the interest of sharing and humor: 1. Clipping coupons from the newspaper. Do you also have those McDonalds coupons in your wallet? 2. Waiting for more than 30 minutes to withdraw from my bank’s ATM machine when another one close by doesn’t have a long line 3. Using a National Bookstore plastic bag – yep the red one – to cover a book (seriously, I saw someone do this) It may take awhile to remember those moments, but I’m sure you can come up with one or two. :)

(Photo from AFP) INQUIRER.net’s personal finance offering for the day has a quote that needs to be given the limelight as often as possible:

Some people reason out that with their meager income, they can’t afford to save. But the reality is, no one can afford not to save.

I realize that there are different successful strokes for different folks when it comes to savings. I am not anal with tracking expenses (just like All Financial Matters and he said it so nicely hehe) so jotting down each expense in a worksheet doesn’t work for me also. For others, that’s the only way they can save regularly. The single most important tip I have heard so far on saving wisely is automating your savings. I was interviewing a newly wed couple last weekend and their eyes just lit up when I told them about automating savings. It’s no big surprise why people like this tip. Budgeting is such a painful experience. Shopping on the other hand is bliss! So, the best way to save is not to let that money pass through your fingers. Automate your savings, and spend what remains the way you want to spend it! Simple, quick and easy. How do you automate your savings? Let me count the ways.

1. Set up a separate bank account (passbook only) and write yourself a check for 12 months to the tune of whatever amount of savings you target monthly. Every payday works too. Treat this check as your most important “billing” for the month, second to tithes.2. Set up a separate bank account and program your payroll account to transfer a set amount to that separate bank account regularly, monthly. My checking account with Philippine Savings Bank has this feature. Many other banks already have this service also. If your bank doesn’t, maybe it’s time to switch! 3. Some mutual funds, unit investment trust funds, and variable unit-linked products also allow payroll deductions. This is another option.

For this to work, however, credit card debt and other high interest debt should be at a minimum. No use saving when you’re paying high interest on consumer debt. Say this with me: no one can afford NOT to save. Saving automatically will allow you to enjoy what you have. Shop, spend, eat with gusto, because you have already taken care of saving for tomorrow. Compare that with trying to track each little expense and scraping savings from the bottom. Nope, not for me. I like my steak eaten with a smile ☺

Our article from MoneySense today talks about borrowing money from credit cooperatives. Here’s an excerpt:

You join voluntarily. There are five kinds of coops: credit promotes thriftiness and creates funds to grant productivity loans; consumer procures for and distributes commodities to member and non-members; producer undertakes agricultural or industrial joint production; service engages in medical and/or dental care, hospitalization, transportation, insurance, housing, labor, electric and light power, communication, among other services; and multipurpose, combines two or more of the business activities of different coop types. Your share is limited. As per coop principles reformulated in 1966 in Vienna, by the 23rd Congress of the International Cooperative Alliance, a member’s share is limited to prevent domination of the coop’s affairs by affluent members. You share in the surplus or savings. The coop is designed to distribute surplus equally, again, so no member will gain at the expense of another. Surplus, upon agreement, are used to develop the coop’s business interest and provide common services to members. This will also help a coop avoid bad debts to stabilize its operations and assure its growth. You can get training. It trains members to avoid lack of understanding of the principles, aims, and purposes of the coop; improper credit use (borrowers in rural areas are known to spend borrowed money for fiestas or luxuries). It also educates those who are interested in the principles and techniques of a coop. You can get loans – and help an organization grow. A coop is touted to be founded for a noble purpose – even Jose Rizal, while exiled in Dapitan, established a community school and a coop store. Proponents of cooperatives hope to attract members with loans, as well as the mental and emotional rewards of supporting a helping organization’s existence or preventing its failure.

Let me add two points: Know the management. The Philippines is a cemetery of many failed cooperatives. Most of the failures were caused by fraud. People running away with other people’s money. But that’s true also of banks and other financial companies, right? And even for banks and investment companies, knowing the management is still recommended. Participate. If possible, participate in management. If not, be active in decision-making. Stay updated. Joining a cooperative means you want to be part of that community. That’s the only way these things can work. Good luck guys! Have a great day ahead.

(Photo courtesy of Movietome.com) This week has been quite crazy on the financial front. We saw another global stock market rout last Tuesday after an intra-meeting Fed rate cut that sparked renewed fears of a US recession. At least 24 hours after, we saw global markets recover, and at weeks end yesterday, several, almost unbelievable news. On Wednesday, we had HSBC’s visiting economist Fred Neumann saying he was not even changing his economic forecast for the Philippines despite all the talk about an impending US recession. Early on Friday, Moodys Investor Service upgraded the outlook for the Philippines to positive from stable. A few hours after, the Government Service Insurance System signed an investment agreement with two global investment banks to invest $1 billion of its funds overseas--initially. All these while markets were still cautiously recovering from the sell-offs on Tuesday. Here’s something that can help non-financial people understand sovereign credit ratings. When Moodys, Standard and Poors and Fitch Ratings announce something, the market is all ears. In the late 1990s, they were severely criticized for failing to spot the debt excesses of Asia’s economies. When that criticism fizzled out, markets went right back at tracking what credit rating agencies had to say. What these firms do in a nutshell is analyze the financials of countries and corporations that issue bonds. They give out ratings that are widely assumed to be independent and objective. These debt ratings influence returns on bond investments directly, and equities investments indirectly. I saw analysts from these firms descend on government officials like Men In Black, and we financial beat reporters shadowed them like little mice. One government official told me then that credit rating agencies charge quite a hefty sum of money to analyze and give out ratings. Here are the ratings and what they mean, in English: Aaa/AAA – debt that belong in this category are the crème of the crop. They are considered to have the highest credit quality, meaning there is almost no chance they won’t be able to pay their debt. For investors holding instruments with this rating, that means your money is very safe. Aa/AA – “Double A” debt is still considered to be very safe investments, but with modest risk that may change from time to time because of economic conditions. A/A – At this level, there’s already some risk associated with ability to pay but at very low levels. Baa/BBB – Already a little bit risky and speculative, but considered still suitable for institutional investors. Risk of not being paid is higher when the economy goes under stress. Ba/BBB – Risky and speculative. Overall quality may move up and down frequently. B/B – there is real risk that obligations will not be paid. Investors have to watch debt in this category closely, because the quality fluctuates widely. Caa/CCC – bonds are in poor standing. Some are in default. Others are in danger of default. Ca/CC – highly speculative, often in default. That means, you as bondholder, wouldn’t get paid if the borrower defaults on its obligations. C/C – with almost no chance of ever getting a better rating. Sometimes, you see ratings like Ba1 or Ba2. Ratings agencies use numerical “modifiers” to further refine its ratings. Also remember not to confuse credit upgrade with an upgrade in outlook. Moody’s decision yesterday, for example, was to upgrade the outlook from stable to positive, which means there is a possibility Moody’s would upgrade the country’s credit rating within 12 months if the economy shows further improvement. A dose of financial market irony: The Philippines is considered three notches below investment grade or a very speculative investment in global markets. In Philippine markets, government bonds are considered the safest. :) Why would institutional investors buy Philippine government bonds, then? Debt instruments below investment grade offer higher returns compared with bonds with A-class credit ratings. When you hear bankers saying “investors ask for a higher premium because of the higher risk,” that merely means “you have to pay me more interest because I’m not even sure if you can pay me back!” Here's a summary of credit ratings from different ratings issuers, courtesy of The Bond Market Association (now the Securities Industry and Financial Markets Association and Blaha.com.

(It's going to take smart planning, skillful balancing, focus and a steady temperament to weather the global financial crisis now worrying investors all over the globe. Photo from AFP.) Back in grade school, “recess” was something you wait for and it involved chocolates, crunchy snacks and your favorite drink. These days, you grind your teeth and develop a crease on your forehead when you think about it. Recession, I mean. How do we go about recession-proofing our finances? Here are a few tips I have gleaned from business chatter today in media: Diversify. Now, more than ever, is the time to consider diversifying investment instruments (and even business opportunities) in both asset classes (bonds, currencies, stocks, funds, properties, commodities) and markets (Philippines, Asian markets, Europe, Middle East etc.) Agustin Davalos, Citibank Philippines’ retail bank director, told me in a recent interview that allowing investors to put their money in other markets is a major development that would tremendously improve opportunities for individual investors. The Philippine government is in fact preparing to do the same thing. In the article “Arroyo moves to keep up economic growth” http://newsinfo.inquirer.net/inquirerheadlines/nation/view/20080123-114161/Arroyo-moves-to-keep-up-economic-growth, the government says it is turning to China and looking at India, to ensure it has no overdependence on the US economy. It is true the investment universe in the Philippines is really quite small. Even among mutual fund companies, the options aren’t really very many. So be on the lookout for more ways to diversify. Go ask your banker. Drill your agents. If you are working abroad, consider investment instruments there. Diversify. Avoid debt. During crisis periods, the first ones who get stung are those who are heavily in debt. If it can’t be avoided, then at least reduce consumer debt. Be a wise spender. Important, important, important. Enough said. Brace for turbulence. In the face of a storm at sea, you either throw your fist in the air or prepare for turbulence. Businessmen in this article said there is little the public can d to ward off the effects of a possible recession in the US. Billionaire investor George Soros calls this market crisis the worst in 60 years! So, if you can fix your finances so you can wait out the storm, that may do you a lot better than worrying about it! There’s a song that parents of teenagers may know: “We’re all in this together!” So shrug it off, get an ice cream cone and enjoy it while its current price lasts!

(Investing can feel like going through a maze. Photo: AFP) There was a “stock market bloodbath” earlier today at the Philippine Stock Exchange as Philippine equities tracked heavy losses across financial markets all over the world on fears – again – of a US recession. For sure, business newspapers tomorrow morning will be rife with discussion on how investors are facing their worst losses in recent months and how US President George Bush’s $140 billion economic stimulus package was ignored by the world. As I sat quietly in my home-office to digest the news after a rather busy day, and watched a leaf from my Narra tree waft lazily to the ground, the thought hit me that it hardly feels “bloodbath-ic” in here. The world looks the same as it did yesterday and the day before. It certainly still feels like 2008 hasn’t arrived yet. Then I got a harried text message from a friend who last year invested in an equity-laced investment instrument. “I’ve lost so much money! Should I withdraw my investment?” Tough question. What’s the answer? Ahh…the intricacies of investing. Will she stand to lose more by keeping her money where it is now? Or should she cut her losses by selling tomorrow? It’s a very personal question. One that I feel only she can answer. One that will depend on many factors: is this money budgeted for long-term investment like five years or a short-term game? Can she ride the market out? One thing professional investors always keep repeating: buy low and sell high. Right now, if she sells, logic will say she’ll be selling really low. But if you are a retiree like these people in Investors despair as Asian markets stumble, do you really have time to wait for the market to bounce back? Perhaps the more fitting question is, why in the world are you in equities if you are a retiree? I don’t have the same length of memory of financial markets than many of you out there. But I’ve seen my share of financial bloodbaths through the years. They come and they go, that much I can tell you. They do leave scars, and in that way define the changes in investment strategies of all investors. But one investment strategy remain guaranteed to make you a loser – follow the herd that make knee-jerk reactions and you’re guaranteed to lose your shirt. The best advice I’ve heard so far is to stay calm, stay focused, and whatever investment decision you make – take out the money or keep it there in the hopes of recovery later on – make it because you have made a position on what’s likely to happen in the next six months. If you make a mistake, consider the losses your tuition for learning about financial markets. After all, its just money. There are more important things in life than those little blue bills, right? So go home, have a lovely evening with your loved ones, and get a good night’s rest. All the better to face another potentially crazy day tomorrow!

Within the industry of pooled investment funds, there’s competition between mutual funds and unit investment trust funds (UITFs) for investors’ money. UITFs have one very big advantage. Banks have access to deposit accounts. Depositors often get calls from a bank branch officer and offers to invest in a UITF. Problem is, back in 2005 when UITFs were first offered, very few of those bank officers knew what they were offering. “Hello ma’am. I notice that you have such and such amount in your deposit account with us. Would you like to put this in an investment instrument that gives such and such return?” was a common opening line among bank officers. That was scary because one, it fed into depositors’ common mentality to chase after returns. Two, nothing on the script discussed the risks inherent in investments like UITFs. Even bankers admit this, and that is why there’s some comfort in knowing that the Bangko Sentral ng Pilipinas has tightened the rules for selling UITFs. In the Philippine Daily Inquirer, Michelle Remo’s story BSP tightens rules on sale of investment instruments says this move aims to improve transparency for potential buyers.

The BSP in a statement said that the amended rules for UITFs are consistent with international best practices for investor protection. According to one of the new rules, trust entities of banks are required to disclose risks involved in investing in UITFs, complete details of product features and the formula for computing net asset value of the investment. These details should be written in specific documents required by the BSP, including the risk-disclosure statement, which must be given to clients together with other UITF marketing materials.

A note to prospective clients: go through these risk-disclosure statements and be prepared for some heavy reading. These documents are not designed to be read as quickly as a restaurant’s menu because these guys will be playing safe. Very few people understand these disclosure statements so don’t be shy to ask the agent or the banker, even if you need to ask them to repeat what they say. Watch closely to see if the agent or banker himself understands the product inside and out – and if he doesn’t, simply don’t invest. I found it very interesting to read Kamote-Kyu’s post on gambling in mutual funds. (I’m sure you know by now mutual funds are different from UITFs ☺ ). He says he invested last year just when the stock market was approaching its all-time high and lost P30,000.

I actually tried investing and lost Php 30,ooo as of today. Its now 3 months old. What i did not know when i put the investment was that the Philippine stock market is reaching its record high (in June 2007)! Which only means i will only realize gain when the stock market will reach a new record high. Tsk tsk. Gambling.

We gamble when we don’t know what we are going into. Sometimes we can make money, but more often than not, we get stung! I think Kamote-Kyu could have avoided this mistake if the agent explained the investment to him more fully. Hey, Kamote-Kyu, I’m glad you’ve recovered some of your investments and don't worry, everybody makes mistakes. It is through these "learning bumps" that the investment warriors learn. Lastly, let's learn never to invest based on “hiya”, “kakilala naman” and never fail to read the prospectus because it’s too complicated. Have a great, money-smarts day ahead! And do take a moment to extract joy in whatever you do. Real, simple joy is something money can’t buy!

Check out my article on the Philippine results of an 11-country Citibank survey on financial intelligence. The results were very revealing, and quantified in figures what we all suspected. Here’s the link: 8 out of 10 Filipinos worry about bleak retirement--survey And here’s an excerpt:

MANILA, Philippines – Eight out of ten working, middle class Filipinos believe they face a bleak retirement and more than half expect to be supported by their children in their old age, results of a Citibank survey showed. The Philippines is one of the 11 countries where Citibank decided to conduct a survey called Citi Fin-Q to measure financial intelligence among consumers. The Philippines is the third country to come out with the survey results after Indonesia and Australia. The rest of the results will be released in March. Citibank interviewed 400 respondents living in the Philippines who either had a bank account or a credit card. Respondents earned P30,000 per month on the average and two-thirds of them were below 40 years old. They were asked to answer questions on their outlook for their financial future, their approaches to budgeting and saving and whether they have a formal financial plan, among others. The survey revealed that only 36 percent of working, middle class Filipinos save regularly every month while 51 percent “save when they can”. Nine out of 10 attempt to follow a budget, but only 33 percent stick to it.

Another article on the same subject from Doris Dumlao of Philippine Daily Inquirer can be found here: Filipinos have low financial IQ--says bank Both articles are in the ten most-read stories in the INQUIRER.net’s business section. I hope that means Filipinos are paying attention. Feel free to forward these articles to your friends, colleagues and family using the “Send as an email” feature from INQUIRER.net. If you want to blog about these articles, please feel free but please follow the rules of propriety and add links to both the article and this blog post to give due credit to this publication. While I was going through my notes, I found these other snippets of information that may be useful but were not included in the articles: • 77% seem to be optimistic about their future, but few seem financially secure. • More than 6 out of 10 are not confident their savings will enable them to meet their financial commitments • 2 out of 5 have job security concerns • Filipinos are generally pragmatic and appreciate the value of savings. But minority or 36% save as a habit • Learning to manage cash flow is a concern • 40% cannot pay credit card balances in full thus financial protection and independence are dire needs that are set aside • only 32% have enough insurance. Insurance to meet health needs and protect income in time of emergencies are lacking • retirement planning is poor. 17% have no idea how much they will need to retire and 28% have not started planning at all. Only 16% have a retirement plan • as much as 53% feel they have average or poor overall level of understanding a out money management and finances • less than 10% leverage on the benefit of expert guidance from finance professionals who can teach them proper planning • individuals who understand proper financial planning are better in their approach towards expense management and saving and are more satisfied with their quality of life. What do you think is your financial score?

For many Filipinos, stocks, bonds and mutual funds sound too complicated. Bank deposits are still the darlings of saving and “investing” and lately, they have been getting a facelift. Yesterday, they were marketed directly to Filipinos working overseas. Long-term negotiable certificates of deposit, bankers call this product. Trust bankers and investment managers to come up with a mouthful of a name! MoneySense says if you want an easy way to remember, break it down per term. LT is for long-term, N is for negotiable and CD is for certificate of deposit. In other words, it’s a hybrid product. See that wasn’t so hard, says MoneySense. Right on! Landbank of the Philippines will be issuing LTNCDs to OFWs as part of its mandate to offer improved investment products to overseas workers seeking to lessen the impact of the appreciation of the peso on their income. In the Philippine Daily Inquirer’s business banner story today, Development Bank of the Philippines and HSBC have also been mentioned as the two other banks that will be joining it in this initiative. (Landbank and DBP are government banks; HSBC looked a little bit out of place). Landbank’s LTNCDs will be launched at the end of January. Here's a quick rundown of what this product is, here are some figures and snippets you should remember: 250,000 – maximum coverage from the PDIC (by virtue of its being a deposit product) 5 years – usual maturity 7% to 9.73% – interest of existing LTNCDs from different banks (those who have issued before are Banco de Oro, AIG Philam Savings Bank, Citibank and Bank of the Philippine Islands) 100,000 – minimum investment Tax exemption, PDIC guarantee and liquidity feature – main advantages of this hybrid product. Government prefers that investors hold it until maturity for five years and encourages that by giving tax exemption. It has a liquidity feature by virtue of its bond features, meaning it can be sold in the market if you suddenly find yourself in need of cash. Banks and investment houses or brokerages – are where you can buy LTNCDs Helpful links: BDO BPI Citibank AIG Philam Savings BSP circular on LTNCDs LTNCDS: banks get creative in attracting deposits

Back in September, we had a peso forecasting game that elicited more or less 56 entries from MoneySmart readers and made many of us giddy with excitement . It’s time to reveal the winner! The peso ended the year at 41.40. So the reader who gets the prize is Gnoysa, who predicted that the peso would be at P41.56 by yearend 2007. Please email me a mailing address where I can send the book “Why We Want You To Be Rich” by Donald Trump and Robert Kiyosaki. I’m also throwing in a free one-year subscription to MoneySense, the Philippines only personal finance magazine. Congratulations Gnoysa! Don’t forget to send me an email at lightdream (at) gmail (dot) com.

Willy Arcilla is the image of the consummate Filipino executive OFW. He speaks with a neutral accent-slash-zero twang, is always in a suit (at least during the last couple of times I saw him in a public event), attentive all the time, and hands out his calling cards in that endearing Asian way (holding the lower left and right corners with forefinger and index finger). I first met him at a press conference raving about Vietnam’s economic miracle. Here was yet another Filipino who had the skills this country needed, but loved another country other than his own, I thought. I was wrong. Willy is one of the growing number of Filipinos who have gone against the tide of migration at a time thousands move out on a daily basis. And as regional manager of executive search firm ZMG Ward Howell, he is now helping other professional OFWs find well paying and challenging jobs right here in the country. He wrote this in an article he submitted to the Inquirer about the true value of the OFW:

The value of OFWs is not $12 billion per year, which translates to a paltry $100 per month assuming a combined 10 million OFWs & émigrés. Rather, the REAL economic value of our OFWs is reflected in the National Income Accounts of their host countries, not to mention tax revenues they pay diligently. This holds true whether they render services in medical health in North America or in architecture and construction in the Middle East; whether they pilot the world’s jetliners or ocean-going vessels; and whether they are investment bankers in Singapore or care for the children of investment bankers in Hong Kong. Arguably, the real economic value of OFWs and émigrés is vastly more substantial than the monthly remittance of $100. Imagine therefore if the country can benefit directly from OFW contributions to their host nations. The value of our GDP must be easily double if not nearing triple our official records. These 10 million are obviously among the best and the brightest Filipinos for them to compete globally – all of whom have come to realize that they can fetch higher compensation for their world-class skills and talent that go unrewarded locally. Those who claim that local companies cannot afford to pay higher salaries must remember the consolidated net income of the country’s top 1,000 corporations reached P500B in 2005 alone – not to mention the cumulative earnings in the years before and the average 25% growth for the past 2 years. By attrition therefore, the country has been left with 2nd-tier talent, which, coupled with the deterioration in the quality of education that produces unqualified and unemployable college graduates, is resulting in a loss of competitiveness. It may not be presumptuous to say that OFWs and émigrés may also possess stronger values in terms of work ethic and competitiveness, discipline and perseverance, integrity and accountability – by virtue of the demands of working in a foreign land amidst an increasingly competitive global marketplace – and therefore, we have not only been suffering a serious brain drain, but perhaps more worrisome is a Values Vacuum. As a result, what we have been left with is a nation of consumers because our productive workers drive the wheels of industry of their host countries (instead of ours), remitting enough only for their families’ domestic consumption. Therefore, while most developing countries are enhancing the intellectual capital of their people like high-tech India (not just call center agents); achieving surpluses in food production and becoming a global agricultural powerhouse like Vietnam; or strengthening their manufacturing muscle like China, the “superfactory” of the world, the Philippines has become the “supermarket of the planet”, content with buying virtually everything from the world in shop-till-you-drop mall sales or amusing ourselves with being the world’s leading cellphone texters.

When I met blogger Reyna Elena late last year, she told me how she longed to come back home. She missed the camaraderie here, the sounds of Manila, the lifestyle, the food and definitely the proximity to family. But her plans to come back for good have not materialized because of lack of opportunities here. The problem of reintegration is very real, and very much a personal financial concern. But Willy, a headhunter by profession, insists that the jobs here are waiting and companies have the capacity to pay comparable rates. Does this mean it's time to come home? The government's incentive system encourages Filipinos to seek opportunities abroad, but from what Willy is saying, it seems there may be merit in,at the very least, considering coming home. I have never been an OFW because I chose to raise my children here. I can’t say that I know how it feels or that I know what OFWs should do. But the message from people like Willy is, that certainly, it may be time to let the Philippines enjoy the true value of the world-class OFW, right here in our very own shores.

(Photo from Agence France-Presse) Malacanang has just confirmed plans to cut tariff on oil and petroleum product imports to 2% from 3%, hoping this will cushion the blow from rising oil prices overseas. Tariff, by the way, is in layman terms simply a tax on imported products. (Err, I don’t understand why they have to invent another word for “tax” heh) Wiki explains that it is the simplest and easiest way to collect taxes since it has to be paid so the product can land on shore. Chopping off a one-percentage-point means around 35% reduction in tariff. President Gloria Macapagal Arroyo says she is hoping this will help “every Filipino family.” Boy, do we all need that relief. We’re all feeling the pinch, wherever we are in the world. Oil has hit $100 a few days ago, just as many price watchers feared and everyone – from the balut vendor to the bigwigs at San Miguel Corp. – will have to think of a way to deal with it. Reuters came out with an interesting article that showed how a Beijing cab driver to a vendor selling food wrapped in banana leaves in Jakarta will suffer even more if oil climbs higher to beyond $100. But I’m sure it’s obvious to everyone that while a tariff cut of one-percentage point from 3% to 2% will “ease the pain somewhat” (words of Dr. Victor Abola of the UA&P) and "give some relief" for all of us (Nandy Aldaba, head of the Ateneo Economics Department), it is not going to be enough. Abola explained that a one-percentage point cut normally results in a 50 centavo drop in pump prices. For our household, at least, that’s only around P20 savings on gas weekly. There are other spillover effects, of course, like (hopefully) lower price of liquefied petroleum gas, which is now at more than P600 per cylinder, the type used by households. Lower pump prices, especially for diesel, can stave off suffering of those who drive and ride jeepneys, tricycles, buses, taxis, and reduce the cost of doing business. Whether or not these savings will result in lower prices not just of food but all the other goods and services we buy on a regular basis – and when – is another matter. In the meantime, oil may continue to rise to the teeth-gritting consternation of everyone on the planet except the oil barons of oil-rich countries. It is more and more evident that households will have to look at other direct ways to avoid getting hurt by rising oil prices instead of just looking for a tariff cut. Or even moving back to a regulated oil sector. (THAT is really silly). At least, our spending is something we can control. Maybe if we think hard enough, we can figure out at least five ways to lessen our household’s demand for oil and petroleum products. Let me see: 1. Eat more vegetables and fruits that don’t need too much cooking. More healthy too. Seriously. Boiling beef can take at least 30 minutes even in a pressure cooker and that consumes a lot of LPG. Stay away from easy-cook noodles and canned goods, though. Getting a hit in our kidneys through bad eating habits is a serious personal finance slip-up. Kidney problems are expensive! 2. Commute if possible. Walk if possible. Thank goodness for the MRT, I can schedule meetings on off-peak hours in a mall near a train station and save the environment too. Sounds very motherhood-ish but it really does work, at least for me. 3. Use a bicycle for short distances on streets that are not too busy. Hmm. OK, so I can think of only three. Come on, add some more. ☺

Filipinos are still on a home-buying spree, even as the US housing sector still reels from the effects of the subprime mortgage mess. Thanks to money flowing in from Filipinos working overseas, the real estate sector in the Philippines seems to be set for another big year in 2008. It’s good money flowing in for good reasons. At least, Filipinos are putting their money in something that will last and even appreciate in value, as opposed to appliances, cars and latest mobile phone models. Hello iPod? (Read this article on what families of OFWs do with money wired to them regularly.) But although buying a home can be pretty straightforward (ok a bit challenging too), buying home insurance can feel like going through a maze. This article from our personal finance section says there are three MUST-ASK questions when buying home insurance (excerpt below): 1. What do I need to cover? Basic coverage includes fire and lightning plus third party liability. There are also add-ons like earthquake, floods, typhoons, riots, strikes etc., says Redentor Ramos, assistant manager at Paramount Insurance. I learned in another interview that these add-ons are cheap, and it makes good sense to consider them, but to choose carefully too. “If you don’t think your house will get hit by a crashing plane or it’s highly unlikely rioters will cause damage to your house, then exclude coverage for these. Some insurers offer accident, hospitalization, and personal liability insurance. If you already have those from separate policies, you don’t have to include them,” says the article. 2. How much is the value? Make sure you exclude the value of your land, since you only need to insure your house and the property inside! Including land is silly (land does not get burned or damaged by flood – unless you’re dealing with lahar, of course) and bloats the premium. Another tip is to reassess the value when you renew your policy so you don’t get under- or over-insured. 3. How much will I receive if I file a claim? Make sure the policy states that your insurer will pay the replacement value and not the actual cash value which is often less than the amount it would take to replace damaged property. Generali Pilipinas has come out with a Home Replacement Value simulator as part of its corporate social responsibility program to help Filipinos compute the replacement value of their houses. Sharon B. Maranan, senior executive vice-president and chief operating officer, said during the firm’s yearend media briefing that miscalculations in the replacement value is the most common error made by Filipinos who buy home insurance, based on the study they made. Try out the calculator through this website: I would have liked to see less jargon, but the simplicity of this calculator made up for the jargon :). There was no key to a new house under my tree this year. Perhaps next year. But by then, I know a little bit about getting the right home insurance for my dream house! May the universe also respond to all your desires in 2008.

It’s fashionable to mock New Year resolutions because they often end up as 7-day wonders or even less. We’re so used to multi-tasking at the risk of focusing on nothing that I do get why focusing on two or three things that matter most can be met with such pessimism. But I rather like making a list of goals and checking it twice (a day). In the first page of my 3-year journal (yes, I still keep one and it’s not digital!), it says “the palest ink is better than the brightest memory.” That’s an ancient Chinese proverb that I hope I won’t forget in the next 10 years. We all need every chance we can get to think more deeply about what we want, what we should focus our energies on, and a chance to start all over again. New beginnings… So here are some ideas for New Year resolutions for money-smart geeks. Do jump in if you have other suggestions, because deepening the discussion can only do us more good! 1. Pay off debt. Every centavo of it. In four months. I did this in 2006 but made new low-interest debt last year. Although this goal means the whole family gotta adjust our lifestyle in the next four months, we decided to allocate 40% of our combined family income to retire this debt and then we’re home free! Wahoo! My lazy other self is telling me it’s not worth the trouble – after all its just 9% per annum or 0.75% per month. Why make the family go through such belt-tightening when we can just pay everything off in a year? Answer is, it’s better for peace of mind and investment planning. No use saving for retirement and investing if you are paying interest. Goal-making tip: Keep goals specific and add a timeframe. 2. Increase emergency fund to six months’ worth of income by December 2008. This is a smash-hit for most couples and not just for those who are starting to take the wheel of financial planning. Again, experts have always said this comes first before investing because emergency needs for cash make you vulnerable to losses. Imagine being forced to take out your money from the stock market on the day equities make a high dive. Ouch. Double ouch once you see that two days after, the PSEi makes a triple rebound. With forecasts that 2008 will be a roller coaster ride, it makes good sense to protect ourselves with a fat emergency fund. Goal-making tip: Focus on must-do, rather than nice-to-do things. Conserve your energy. 3. Work smarter (not harder) to accomplish more in less time. Lavishing more attention on family keeps me more productive at work! Last year marked many milestones in my writing. It was so much busier than previous years. There were a lot of opportunities and I wanted to take them all! Greedy lil me discovered that I can’t do all the “save the country-help the community” things that I want even if I try as hard as I can. I just gotta learn how to say “No” or else, my work-life balance will go out of whack – something that a lot of the people I interview complain about. We don’t want to feel like a gerbil on a giant wheel of work forgetting why we do the things we do in the first place. Work and family should invigorate and inspire, not sap our energy and make us not want to wake up in the morning. Work smarter! Goal-making tip: Keep the list short. Review daily and assess at the end of the year. Our personal finance article “Starting the new year right” has more suggestions on personal finance resolutions for 2008. I also found Get Rich Slowly’s post on financial goals very helpful, especially the one on losing weight! The Digerati Life makes specific goals about blogging. I should figure out my own goals for MoneySmarts but I guess I'm still so new at this that I just want to enjoy writing. All Financial Matters’ goals remind me that life and money are very much related. Flexo who blogs in Consumerism Commentary makes specific goals when it comes to increasing his net income, paying down his student loans and even contributing to charity. These are what I call goals that are meant to last longer than the brightest ink. Good luck on your goals everybody. I hope your savings and investments strategies this year are as quietly successful and nimble as that of the rat’s. P.S. Share your resolutions here so that I can remind you about them the whole year through! :)