If credit cards were horses, I would be crucified by animal lovers the way I’ve been repeating again and again that credit card bills should be paid in full every month. Banks don’t like me very much when I say this, and in fact a friend who is also a banker told me (very nicely but with a hint of acid hehe) that she would like to turn over my account on a silver platter to a competing bank.

Don’t get me wrong. I love my credit cards. I get free tickets to Butuan and Boracay every other year. I get cash rebates too. I manage my cash flows more easily and I don’t rush to payment centers anymore when Meralco says it’s time to pay up. If I could pay parking fees at the mall with my credit card, I would. But as much as I love those shiny plastic things, I hate paying interest more.

Think of this, if you have a P30,000 balance in your credit card and this has been going on for a year, you could have saved at least P12,600 just by paying interest the balance in full. And just to keep it simple, that computation is on straight interest, not even compounded interest. Imagine how many pairs of shoes you can buy with that! (Greedy laughter)

(We can’t be too careful in protecting our homes from “intruders”. File photo from Agence France Presse)

It was funny on television. You know, the one that showed a helper blowing the scam artist’s cover with her employer’s IDD caller ID? But in real life, it didn’t make me laugh.

I never thought it would happen to me, but it did a few years ago. Then yesterday, a friend sent an email to tell me the Dugo Dugo Gang is still alive and that she had been victimized that day. I thought, they are still alive??? And how in the world do they manage to victimize so many people when their modus operandi is very well-known!

We both thought it would happen to someone we knew, but never to us. In my case, it happened several years ago. Someone called the house while I was away, pretending to be my husband. He said he was in a car accident, injuring a young kid and that he lost several teeth that is why he couldn’t speak well. Then he instructed the maid to get jewelry and cash from “the drawer” and bring these to a particular street corner in Caloocan or else the kid’s parents would ask the police to put him in jail. (Nice little detail to add some pressure huh?) He also asked her not to let me know where she was going because I have a heart problem. Oh, and he added that because our youngest son was sick that morning, the maid should bring him along. The last detail just made me freeze all over.

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A reader, Peter, alerted me that SM City North Edsa has a recycle drive going on. Check out how to turn your trash into cash! Ahh…errr…don’t come anymore if you’re from Cavite unless you have a big truck of trash hehe.

BY MALAYA LARAYA

I recently conducted a half-day seminar on financial planning for some professionals and it was a rather enlightening experience on the mindsets of people when it comes to financial planning. As always there was an open forum at the end and quite a number of questions were asked – some were the usual and some were rather unusual. So for those of you who may have had some of these questions in mind but didn’t know who or what to ask; here is a small FAQ on financial planning.

What is the best investment? This is definitely the most common question that has been asked and the short answer is this : There is none. More specifically, there is simply no investment tool that is the best for all people all of the time. There are instead, instruments that are best suited to each individual’s particular needs, plans and current financial condition. Simply put, what is good for your friend, spouse, relative, lover, workmate, neighbour or child may not necessarily be good for you due to the undeniable fact that you and your friend, spouse, relative, lover, workmate, neighbor or child are two different individuals. Consequently, the two of you will have different sets of wants and needs at different times and will therefore need different solutions. Therefore, be very wary of anyone who tries to sell you a panacea for all of your investment needs as it simply does not yet exist.

Where can I get information about (x)? Despite the fact that we are very much in the online age, very many people still do not know where to get even the most basic information about financial products. From equities to managed funds to pre-need plans; people seem to be at a loss as to where to go. Here are some websites that you can visit as well as what you can expect to read.
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My 2-year old son was hospitalized again last week and it got me thinking about whether it makes good sense to get a health card.

When my husband and I decided to enroll the entire family into his company’s health program, we did it mostly for our peace of mind and not based on some proof from an Excel worksheet that it will eventually pay off. Unless you know how often your children are going to get sick, I don’t see any way of finding out exactly if the P1,500 per month expense for all our health cards will be worth it.

Based on simple computations for 2007, it appears that getting a health card worked for us – at least for last year. Consider the figures:

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…is that there is none.

At least, that’s what Johnny Noet Ravalo says in his latest column “What kind of investor are you?”

Your investment strategy will be driven by how much resources you can invest (i.e., what you have), how much you want to attain (i,e., what you need) and how much time you are willing to allot (i.e., your investment horizon).

No matter how the investment gurus package their own secret method, all that has been said of investing invariably goes back to these three items. Think of going on a trip: you want to go somewhere from where you are right now and you ask yourself what travel arrangements can be made.

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What do you do with your broken down refrigerators, air conditioning systems, electric fans, television sets and other appliances around the house?

Do people still get them fixed or is it too much of a bother?

My 10-year old television set, for example, finally broke down and I asked a neighborhood electrician to come to my home to fix it. I paid P1,500 and after a few weeks, it broke down again! I asked another electrician to fix it and he billed me P300 and it worked for one more year.

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(Cool piggy bank. File photo from Agence France-Presse)

9 weeks: the average Filipino’s rainy-day fund

Saving money, Financial Planning

I have a friend who loves rainy days. She loves the sound of raindrops on her car, her windowpanes, the street – just about everything! I too find the rain very “senti”, uber-relaxing and it puts me in “emote mode” hehe. Helps me to put words on paper too.

But rainy days of the financial kind, that’s another thing. I can’t imagine anyone liking them. They strike suddenly and ruthlessly – and you don’t know long they will last.

Remember the recent study by Citibank that revealed Filipinos have low financial IQ? There’s another revelation in that survey that says average middle-class Filipinos have on the average nine weeks’ worthy of rainy-day funds.

On the one hand, I found it quite comforting that average, middle class Filipinos have a rainy-day fund at all! On the other hand, that fund won’t see us through those dark and depressing days.

As you all know, the prescribed amount is three to six months worth of living expenses. The baseline is not your salary or earnings from business, but living expenses. Here’s a thought: do you know how much you spend monthly? If all you have is a vague figure, get your pen and start jotting down monthly expenses.

I have previously written that putting your money in mutual funds, bonds or equities is foolish if you don’t have an emergency fund first. You don’t want to be caught needing cash when the market’s down!

Our personal finance feature for today from Citibank says:

Nine weeks. That may not be enough to get back on one’s feet. Thus, there is a need for an emergency fund that should cover anywhere from three months’ to six months’ worth of expenses. This will help you tide over the tough times until you get back on track. Besides, borrowing money to cover emergencies will cost you more.

Should you save for three months’ or six months’ worth of expenses? Some financial experts advise only three months’ worth of expenses in the emergency fund if you are employed. If you are self-employed, they say you’ll need six months’ worth of expenses.

But of course, the more you save, the better. You do not know when bad things may happen and for how long they will last. Save at least six months’ worth of your expenses — living expenses, bills, saving for a child’s education, and the like.

As to your big challenge: How to save for an emergency fund when there doesn’t seem to be enough funds in the first place.

Here are some tips:

1. Stick to your goal. If you say to yourself that you will start an emergency fund, be committed to do all it takes to fulfill that goal.
2. Review your obligations. You mentioned that you have “so many other obligations.” Study your list and find an expense you can cut down. For example, if you haven’t been going to the gym at least three times a week, then you may be better off canceling your gym membership. The savings you will get from canceling the monthly dues can be channeled to your emergency fund. You can find another exercise alternative that won’t cost you money, such as walking in the park.
3. Before spending anything for the month, save first. Once you get your paycheck, set aside some money for your emergency fund. Start with at least 10 percent, and increase it as you free up more obligations. Making saving a priority will be beneficial for your financial future.
4. Open a separate account for your emergency fund. This will help you to avoid dipping into your emergency fund for living expenses.
5. If you have a sideline income or receive a windfall (example: bonus or prize money from a contest), use this to pay off your debts, then put the rest in your emergency fund.
6. Cut down on expenses that you can do without. These may include weekly trips to an expensive coffee shop, or going for designer clothes. Just think: if your family is in need or has an emergency, you wouldn’t even think of these things. But you will rack your brains thinking of how to meet the family emergency with your meager funds. Thus, prioritize the emergency fund.

If you or anyone you know is struggling to set up an emergency fund, how’s this for motivation. Forget the three to six months rule of thumb for the moment. Just start saving any amount upwards of P1,000 this payday and move on from there. Start with small steps and give yourself a pat in the back afterwards. Consistency is what matters most. You’ll find it easier as you go along.

Good luck!

For the past three years, I’ve been paying P126 per week for each kind of newspaper delivered to my doorstep. That’s P6,552 per year, P13,104 yearly on two newspaper subscriptions. Aside from that, I buy Forbes, Fortune and The Economist from the newsstand when I like the cover.

Lately, I realized that I can save more than 40 percent by subscribing directly from these companies instead of buying from the neighborhood delivery boy (in my case delivery lola) or getting my copy while waiting for my turn at the cashier in the grocery or the bookstore. Even better, I can save 100 percent by reading articles online via their websites or subscribing to their RSS.

I work for an online media publication so that was, of course, a duh moment! My rationalization was that the adverts are news for me too, so I did need the hardcopy of the newspaper. Plus, I wanted my 13-year old daughter to talk intelligently about GDP, inflation and what’s going on with San Miguel Corp. as well as the newest stuff from Pugad Baboy without having to spend too much unmonitored time on the Internet.
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When it comes to investing, or even financial planning in general, people want to be told exactly what to do. We ask where to invest our money and how much, which bank to approach for advice, which stock to buy and which book to read.

At INQUIRER.net, I get an average of 50 questions every week from Filipinos in Hawaii to Ireland, Qatar to Singapore asking for advice regarding their personal finances. I consider it a great privilege to be trusted with the information they give.

At the end of the day, however, I am hoping that our panel of experts are teaching the broad strokes and sound principles that would help readers make their own decisions in the future, not just the specific tips and strategies our readers crave.
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