March 2008 Archives

When a friend or a cousin you haven’t heard from for so long suddenly calls you at the office and invites you to a “business opportunity” meeting, do you: a) bump off your scheduled meeting in her favor? b) think of an excuse not to go? c) tell her to bug off? Our personal finance feature today from MoneySense says there are around two million Filipinos currently in the network marketing business, based on figures from the Direct Selling Association of the Philippines. There are several variants in this business – network marketing, direct selling, and multi-level marketing. Due to unscrupulous practices of many companies in this business, there is a lot of confusion on whether network marketing is a scam or not. I have personally seen several friends and acquaintances make good, legitimate money from this kind of business. But whatever you do, when talks of checks and commissions come in, don’t be led into thinking that network marketing can make everybody rich -- quickly. The truth is that network marketing is a good model for removing the middle man and distributing what he earns among consumers. But it is NOT for everybody. And the sad truth is that if you are not careful, you can fall for a lot of cons in this business. So, choose carefully. The article gives some tips for those who are considering of getting into network marketing. Here’s an excerpt:

1. Figure out if you fit the profile There are probably millions more who have tried their hand at the MLM business at one time or another. Not many succeed, usually dropping after a few months. It may be easy to join but it’s certainly difficult to stay for long. You need to have a certain mindset to succeed in network marketing. “ 2. Choose the right company Investigate the company. It should have a long and proven track record in the industry it operates. Companies like Avon, Triumph, Tupperware, and NuSkin have been in the industry for years and have been providing people with good products as well as good income for its distributors. 3. See if you like the products The most successful network marketers are those who truly believe in the products they are selling. It certainly makes it easy to persuade other people if you love to use the products yourself. 4. Make sure you earn not mainly from recruiting One, the company should have a product. Scams like FrancSwiss offer huge interest for your investment and yet they don’t have a product. Two, the product should be unique and is exclusively made by the company. If not, then most likely, the business is being run from joining fees.

Get all your accessories and put them in a pile. Think you could have spent all that money on more important things? Here’s a discovery that will give you your kikay fix but won’t put a dent in your wallet. For guys, pay attention. This is a sure way to serious pogi points from your sweetheart. For balikbayans, here’s where you get unique pasalubongs and trinkets that will not cost a fortune. Still in Quiapo, walk down Villalobos street from Plaza Miranda and look for a shop called Wellmanson on your right side. Hobbyists and jewelry-makers get their materials from this place. When you get in, make sure you have a shopping list or else our frugal tip will be suspect because believe me, you won’t be able to resist buying the eye candies in this store. (Headbands for P55.) Prices are a fraction of the cost compared to malls. Some kikay bracelets for everyday wear (no precious stones) that sell for P250 in Market! Market! stalls are sold there for P85. That’s the average price differential on their goods. (Bracelets for P85 and little rocking horse for P35. I saw some of these at Hobbes and Landes EDSA Shangrila with a P150 price tag) You can also opt to make your own accessories, as they sell everything from beads, South Sea Pearls and Swarovski pearls, stones, pendants, Mother of Pearl… the options will make your head spin. You can make an accessory today and give it away tomorrow and think nothing of it because you bought them at low, low prices. For accessories with precious stones like Swarovski crystals, I recommend the NBI mall, where I bought these nice designs. (The pink one cost P500 wholesale price and the pearl and silver one cost P800.) I discovered these places two years ago through my friend Janet Dorotheo, who started to make jewelry as a hobby but who is now receiving orders for them regularly. So yeah, you can even add to your stash of moolah by doing this as a sideline! It’s a good place for buying wedding favors too. I think of my periodical trips to Wellmanson to buy Christmas gifts, birthdays gifts, etc. as a stress-busting experience heh. I have a small stash of little trinkets at home just in case I need to give a gift and forgot to buy one (gasp). That way, I can still give something of good quality but don’t have to buy in the malls where the same items sell for three times the cost. Some out-of-the-way shopping places may be crowded and jologs to some, but they hold a lot of treasures that attract those who are trying to be money-smart. And it’s amazing how simple and inexpensive gifts can give big statements and warm the heart of even those who are used to receiving real diamonds. Planning, really, is the one of the secrets of frugality. P.S. I neither know the owners of these stores nor am I being paid to recommend them. I just like them, period.

If this is any indication how many Filipinos in their forties or thereabouts are just starting to save, holy macaroni! ☺ The article's number one spot on Business Most-Read is particularly telling. But hey! I’m glad people are starting to realize saving for the future is one of those things in life we must NOT take for granted. Better late than later, and better late than never To read the article on Donna, who was smart enough to ask for help on how to start saving even at age 40, click here. Here’s an excerpt:

Question: I just turned 40 and realized that I don’t have much savings at all. I’m single, but have been supporting my mother all these years. My salary just goes to my expenses and my mother's. I don’t have any siblings and my father already passed away. How can I start saving and what’s the best strategy to do it? — Donna H.

Answer: It’s true what they say—life begins at 40. See, now that you’re 40, you’d like to turn over a new leaf and start saving. It’s never too late to start saving, Donna, although it’s better to do it as early as possible. That’s because time and compound interest will both work to make one’s savings grow even faster, snowballing into a nice sum in the future. All these time you have been spending your salary on yourself and your mother. To start saving, you have to have a different mindset: From now on, treat savings as an expense, one that should be on top of your list, even before you spend on necessities like food and transportation. This is what financial experts have been preaching for the longest time: Pay yourself first. That’s the savings you will tuck away every pay day for your future. And you have to do it as soon as you get your pay; otherwise, there may not be enough money left at the end of the month for you to save. So before you spend, save first. Why save? It’s to make sure you’ll have a fund to dip into should something critical happen in the future, such as a job loss or an illness. It’s also necessary to save so you will have enough for retirement. More tips in the article.

It was an ordinary Saturday for me last March 22, except for the mangled P500 bill I took out of the BDO automated teller machine. Nope, it definitely doesn’t look like something the girl at SM would take from a customer. After a dismayed sigh, I shrugged it off. A few moments after, I was already contemplating my wet market list and forgot about it. This morning, I saw the mangled bill again. I must admit I was tempted to forget about it but I could smell a MoneySmart moment, so off I went to the BDO branch near the ATM machine to ask if they can replace the bill. “I have a sort of weird request,” I told the lady in blue behind a desk. “This is one of the bills I got out of the ATM machine near this branch...” I let my voice trail into a sweet silence. She wasn’t really surprised, come to think of it. “Wait here, let me ask them if they got the other half,” she said. After a few minutes, she came back and told me they didn’t find the other half. She wants me to show her the ATM receipt. ATM receipt? It was probably lying down in my sorry excuse for a filing system, or rolled up with all the plastic bags that I came home with after my market day. “You can also ask your bank to give you a report that will prove that you withdrew from our ATM machine on that day,” she said. Errr.. sounds pretty complicated. I told the lady with a smile that perhaps I would come back. As I type this blog post however, I’m thinking what if that was my last money and I needed to buy medicine for an ailing baby? What if my son’s graduation depended on that money? Even if I had the receipt today, the faulty ATM would have already caused me grief over the weekend. Shouldn’t the bank be held accountable for that? The lady, in fact, added that they had a similar incident the previous week, showing that their machine was indeed faulty. Glad that it didn’t caused me much grief, though. Perhaps I should frame it to remind me that money is just money. Attitude towards it is the one that causes either grief or happiness.

We all get that itch periodically to chuck our day jobs and do something crazy and fun and risky with our lives. That “something crazy” can often be interpreted as going into entrepreneurship. Our personal finance article today gives good advice on a to-do list for people who have taken concrete steps to follow this entrepreneurial craving.

1. Assess how much savings you have. Since most business owners source most of their capital from their personal savings, we assume that you will do the same. Sit down and write how much savings you have. Look not just at your bank accounts, but holdings in mutual funds or unit investment trust funds, or even equities. Are these enough for your share in the starting capital of your business. If not, then you may be thinking that you will earn through the business anyway and will be able to put in additional capital. We caution you against this thinking, as the business may or may not grow as expected in the timeline projected. It would be better to ensure that you personally have enough in your savings to meet capital needs even before you start your business operations
2. Keep your day jobs — for now. Don’t expect to earn salary from your business from day one. It may take time for the business to prosper, and until then, you’ll have to make sure that you will have earnings to meet your living expenses. Otherwise, you’ll have to dip into your savings. Since you’re going into the business with partners, discuss who among you can take an active role in the day-to-day operations. That person may go into the business full-time now for a start-up salary (as long as she has back-up savings to meet her living expenses). Then as the business grows and expands, you may all see the need to focus on the business—that’s the time to let go of your day jobs.
3. Start small. While the business is still in the startup stage, keep your costs small. Consider having the office in a home to save on office rent. Hire only enough people you need. Instead of buying a new delivery or utility van, buy a good secondhand one, or use your personal vehicle. Outsource some jobs such as accounting to keep overhead costs low.
4. Do everything right from the start. Keep personal and business funds separate. Make sure you have all the required permits and paperwork before starting your business. Pay business licenses and taxes correctly and on time so as not to incur penalty. Otherwise, penalties and surcharges will eat into your business coffers.
5. Don’t neglect keeping your personal finances healthy. Continue saving from your salary. At least 10 percent of your gross pay is a good start-up point but higher is better. Aim to have an emergency fund covering at least six months’ worth of personal expenses. Should your business fail, then you have a fund to dip into until you are ready for your next move.
6. Expand only after much thought. It’s tempting to open another branch right away if the first one picks up well. Some also buy new equipment and other fixed assets during the first year even when the business cannot support such purchases yet. Before going into any expansion for the business, study your cash flow and the costs to be involved. Make an intelligent decision based on your financials.
7. Seek a mentor. It’s good to ask someone for business advice, preferably a successful entrepreneur, so you won’t make costly mistakes. Find a mentor you can trust and meet that person regularly. Joining business organizations will also be helpful to you in terms of learning from others and expanding your network.

From MoneySmarts: make sure setting up your own business is something that you REALLY want, and not an escape from office blahness. Good luck!

I bought my Canon G6 in SM’s Cyberzone in 2005. Since I was drooling over the EOS 350D at that time, I thought the G6 for P45,000 was already a money-smart compromise. It has video capability too, the rationalizing part of me said. When we took our new digital baby home, we took pictures of even the most ordinary things like doorknobs, light fixtures and fingernails ☺. My 10-year old kid, especially. It felt like a really good buy. Boy, was I dead wrong. I learned last week that this camera shop called 24K on Hidalgo sold the little rugrat for P17,000 that same year! Original. With warranties and all. I wanted to weep! Rod, the friendly attendant who was referred to me by Edwin Redrino, a really talented professional photographer, was actually concerned for me. “Don’t think about it anymore ma’am or you’ll really be depressed,” he said. Depressed is not even the right word for it! The cut from P45,000 to P17,000 can be quite painful, you know. Money lessons can be like that sometimes. Every professional photographer in Manila knows the nooks and crannies of this enclave in one of the busiest sections of the city. You can buy anything from extra battery packs, card readers, flash, tripods, those big light thingies (you can tell I’m not a pro can you? hehe) in Hidalgo for less than half of the price in malls. I wish I had listened to Red and Michelle Morelos earlier. A word of caution, though. Go with a friend or a group. Don’t wear jewelry and keep your bags small and inconspicuous. I have been in the area three times since I first discovered it a few weeks ago, and nothing has happened to me. Yet. (Knock on wood) But there have been reports of mugging taking place in broad daylight. Fire.in.the.gut and Paetechie have some very good tips on shopping in Hidalgo, store names and numbers. Philippine Photo Gallery has some nice pictures of shops in the area. Map below courtesy of Mapygon. Hidalgo is the street with a simple reactangle drawn on it. This week’s Frugality Week is all about shopping secrets. If you have tips to share, don’t hesitate to drop a line! Or blog about it and alert me via an email so I can link to your blog. Happy shopping!

(Photo from Agence France-Presse) No self-flagellation here in MoneySmarts this Holy Week break! Let’s list down all our favorite painless ways to increase savings. I’ll go first:

1. Take advantage of SM Advantage (and other store cards). They hardly cost any money and carrying them in your wallet won’t give you even a slight kink in your shoulder. The other week, I bought several grocery items and replacement parts for toilet flush and paid for them with my SM Advantage card. Not bad at all.
2. Don’t forget your rebates and freebies. I learned this the hard way. I forgot all about my expiring Mabuhay Miles and found out I was eligible for a free trip to a Visayas destination only when it was too late. Be careful, though. Rebates, rewards and freebies need to be managed carefully. For example, if Casa Armas is giving you 20% discount on a meal, don’t go just for the discount but go because you would have eaten out anyway. If you went out because “hey, we have a discount, cool!” you wouldn’t have enjoyed 20%, you would have spent 80% of the cost of the meal.
3. If you earn Mabuhay Miles or other airline mileage from credit cards, convert them right before they expire so that you can maximize their three-year life.
4. Pay your life insurance annually, rather than monthly or quarterly. It only takes discipline to set aside a certain amount monthly so that you can pay on the due date. Believe me, this works! My husband’s savings on his annual premium allowed us to pay for my insurance.
5. Use Skype for international phone calls.
6. Turn down offers to extend warranties on electronics. This came from reader Troy and when I checked with electronics experts, they confirmed that you don’t really need these offers.
7. Reward yourself with simple things. Sounds like a contradiction but when saving money becomes enjoyable, you’re more likely to do it more often. So, when the family decides to eat at home rather than go out to dinner, buy everyone a cone of dirty ice-cream for a treat. Painless!
8. Take advantage of Internet banking services. Why spend money on gas just to pay your bills? I know it took people more than 3 years to get used to the ATM but hopefully it won’t take us 10 years to get used to Internet banking.
9. Avoid missing due dates on credit card payments. Enough said. Painful memories for me hehe.
10. Stop smoking. Go Jeff, go! We’re cheering you on!
11. Make the extra effort to read reviews on digital gadgets you absolutely NEED to have. For gadgets you don’t need but want to have, (I’m like drooling over the MacBook Air right now) borrowing is just as good! ☺ Good ole friendly Google helps me make painful mistakes in buying gadgets.
12. Tip yourself is my favorite from Bankrate. When you have done something you are particularly proud of, give yourself a tip (say P20) and put the amount in your stash of cash in a cookie jar somewhere. Over time, it could buy you shares in a mutual fund.
13. Manage your phone usage. My friend absolutely refused to get a landline when she moved to a different house. After all, everyone in the family has a mobile phone. It drove me crazy for awhile but it works for them! Second example: my husband’s mobile phone is not used as much as my Blackberry, so I use his line to call up family members in other cities and my phone bills don’t go higher. No change in phone usage, but we avoided having to pay more.
14. I also like Digerati Life’s “pretend you haven’t paid down your debt even if you already have.” Makes sense because once you have already adjusted to making those monthly payments, there’s no pain in making that little go-around to “pay” the next month’s amount to yourself instead of to your debtor. A great mindtrick if I ever saw one.

Your turn!

People who are in debt are either in denial, overly anxious or somewhere in between. How do you tell if you are in debt trouble? Financial planner, author and banker Efren Ll. Cruz recommends keeping debt below 36 percent of gross monthly pay. (Watch a video of this interview here.) This is a rule of thumb of financial planners, he says. We all know there’s good debt and bad debt, but both of them must be kept low to keep us from “debt trouble.”

“If you have P100,000 gross monthly pay, 36 percent of that should only be the amount of debt you pay every month. If you exceed that, you are actually spending beyond your means,” Efren says.

But take note. That’s for total debt, which includes home mortgages and the like. When talking about consumer debt, meaning your credit card balances, the limit is lower.

“For consumer debt, financial planners are stricter. The limit for that is 20 percent,” Efren says.

Efren is the author of two books on personal finance, Pwede Na: Pinoy Guide to Personal Finance and Pwede Na: The Complete Pinoy Guide to Retirement and Estate Planning. In the interest of full public disclosure, allow me to mention that I co-edited both of his books. Efren also co-runs the Income-tacts.com website. Efren points out that the danger with consumer debt, especially credit card debt, is to be so mired in payment difficulty that card holders have already eaten up all their groceries while waiting nervously for the bill to arrive. That’s a really stressful way to live. It may sound scary, but there’s still hope. I have seen a lot of people get out of deep debt, but it will take discipline and commitment. Be safe today guys! Yesterday, I tried convincing a stranger to stop smoking and it felt great! ☺ I am not really sure if he will do it, but it was obvious he realized what a bad financial habit smoking was. MoneySmart moves can be dwarf or giant steps a day, but each one is a great move! Have a great day.

(Traders shout out their orders at the Hong Kong Financial Exchange. File photo from Agence Franc-Presse) There’s a never-ending oscillation between fear and greed in financial markets, and these days, if you believe the commodities markets, people are very, very scared. Faced with the plummeting dollar and skyrocketing oil prices, investors are scrambling for safe havens, which include gold and precious metals. GoldMoney.com founder James Turk, was quoted by Bloomberg as saying:

Gold is not only an inflation hedge, it's a catastrophe hedge. Gold is becoming increasingly important as the credit crunch continues to spiral out of control.

When there’s uncertainty, people like to have something they can touch, see and hold. Back when paper money was still a new concept, people stacked up on physical gold bars whenever there were uncertainties in the horizon. In this day and age of investment sophistication, people still run to gold when they feel things go bump in the middle of economic nightmares, but they now do this in various ways -- buying gold jewelry, gold bouillon, gold mutual funds, gold exchange traded funds, mining companies that produce gold, gold coins or gold futures. As with any type of investment, each option has advantages and disadvantages, says Investopedia.com. Buying gold jewelry, bouillon and gold coins are perhaps more easily understandable than the other options in the pack. Gold mutual funds and gold exchange traded funds are not available in the Philippines and we don’t have a commodities exchange in the country that will allow Filipino investors to ride the boom in commodities. That leaves the stock market as the only exchange where Filipinos can get a slice of the action in gold, as well as the rising price of oil. When investors want to profit from the commodities boom, the most logical way to do it locally would be to buy shares of stocks in companies that produce gold and other precious metals, or produce and sell oil. It sounds simple, but there are many ingredients in this plan. Investors need to choose a well-managed and well-positioned company that’s not overpriced (read: cheap). Aside from that, and perhaps more importantly, would be to analyze the overall market sentiment. Case in point: Philex Mining Corp., one of the most profitable gold mining companies in the country. Despite the skyrocketing price of gold, it ended Friday at P7 from more than P9 in end-February. “Investors locally can take a position in gold or oil by buying locally listed stocks that deals with gold or oil, but an added consideration will be the overall stock market sentiment,” said Alijeffty Gonzales, president of ACG Advisors and Management Limited Co. Jeff also raises the question of why gold prices are now at high levels to determine whether this kind of investment has legs. If the spike is because of the dropping dollar and inflation, which is the consensus, he says a reversal is likely when the dollar strengthens. Meanwhile, big-time investors continue to ride the boom in commodities by trading in futures exchanges overseas like the Singapore International Monetary Exchange (SIMEX) for oil and the Hong Kong Financial Exchange for gold. For a full list of exchanges, click here. Let me stress the phrase “big-time.” Jeff says using leverage in trading tremendously magnifies both the profit AND losses that can be made. Besides, minimum investments are in the thousands of dollars, fees are steep, demand on time is huge and investors who play this game should be highly liquid to maximize price movements. “I used to trade these things and out of 10 people, nine lost money,” Jeff said. But if the losses could be scary, the gains could also be fantastic. Jeff tells of a client who had a buy order for gold when it was still at $800 per ounce. Imagine his profit at current levels. “We don’t have capital controls now so anybody with money can open a private account in Hong Kong or Singapore, and these accounts can give them access to markets all over the world,” Jeff said. Some retail brokers in Singapore for example may entertain investments of around $10,000 to $15,000. Fees will depend on the volume of trade, ranging from one-fourth of one percent or 25 basis points (traders call them bips) to 2.0 percent. “Some people here are already doing that. It’s costly to set up, though” he said. If you want to study futures, be careful which websites you read. There are a lot of forex, gold and other trading scams out there. Start with Investopedia.com, Commodity News Center’s Introduction to Futures Trading, and articles on the industry regulator’s website, the National Futures Association, which can be found here. Clearly, trading gold and oil in futures exchanges is not for everyone. For a country with huge mining potentials, though, it can illustrate how cogs on the wheels of financial markets work, and why the “haves” are richer than the rest of us. As for me, I’m happy with my few pieces of gold jewelry, content that I know some things about futures, and consider my little family all the gold that I need in this world. :-) Happy weekend!

*Squirming in my seat* I have a confession to make. More than 10 years ago, my husband and I won P20,000 when the lotto ticket we bought had five (I think) winning numbers. We received only P19,000 because we didn’t want to go through the whole process of having to claim the winnings, but since then I haven’t seen P19,000 disappear so quickly! We haven’t bought any ticket since that day, believing that statistical probability will be against another win. But hey, the jackpot has gone up to P158 million! That can fund the retirement and set up a business. Imagine how many kikay shoes I can buy with that kind of money. Probably, the worst thing that can happen to me is win! :-D How DOES one write about personal finance after buying a lotto ticket? Hehe. But a lot of Filipinos are falling in line in lotto stations all over the country, hoping that lightning will strike and tomorrow they will wake up a millionaire. It’s not uncommon for some to use money for the children’s school project to buy a lottery ticket. Click here for a video by our multimedia reporter Erika Tapalla on why Filipinos buy lottery tickets. This guy is resigned to the fact that life may require having to depend on luck. What do you think of lotto?

(Good old days for the dollar! This was taken November 27, 2003. File photo from Agence France-Presse) For the longest time, the dollar has been the darling currency of the world. In an earlier post, I asked if it was a doomed currency, but as a good friend pointed out, if it is really the end of the road for the greenback, why do its hiccups still affect world markets? More and more, however, other currencies are starting to shine. So here’s a quick tip for overseas Filipino workers struggling with the weakening dollar: get paid in the local currency. Of course, this will only work if you are not working or living in the United States. (Duh). Several of my friends, for example, work for Canadian companies. Instead of getting paid in the US dollar, which was the currency of choice for the longest time, they decided to get paid in the Canadian dollar. It proved to be a good plan as the US dollar slid continuously the whole year. The information to look for are Peso Cross Rates. The best source of that information is the Bangko Sentral ng Pilipinas website. I was quite surprised how a simple strategy like this, if possible in the companies that you work for, can help with managing cash flows for overseas Filipino workers. A simple analysis of the peso cross rates shows that if you simply compare the exchange rates in January 2007 with the monthly average exchange rate in February 2008, you will see that you would have lost almost P8 per US dollar but less than P3 for every other currency included in the central bank’s table, except for the Pound Sterling. I asked Citibank retail bank director Agustin Davalos weeks ago and he said this was possibly the simplest, easiest thing to do to lessen the impact of the dollar’s depreciation. If you want to get more technical about preserving your exchange rate advantage, there is currency hedging. Johnny Noe Ravalo wrote about this more extensively in his previous column. The biggest concerns among OFWs and businessmen about the currency hedging mechanism are the steep fees, so if you are planning to do it, make sure the contract price is worth it. Diagrams to help you figure out how it works below: You can read his full column here. Hope this helps! Always remember to stay on the right side of the road and keep smiling. Relaxing your facial muscles costs less than botox ☺

From the lips of a five-year old, “Mom and Dad, I need money…” may sound endearing especially when spoken with certain flair. But from a teenager onwards, these words are more often met with a falsetto voice. ☺ We all know self-reliance is best for everyone’s peace of mind, right? But because situations are not the same and there are times asking for financial assistance may not be avoided, our personal finance feature today gives tips on how to borrow money from relatives the proper way. The question from our reader was:

My wife and I have been dreaming of building our home and now seems to be a good time. However, we are a bit short and we are considering borrowing money from my parents. They have helped us before for some emergency needs. We were thinking that if we borrowed from them, we would not only save on interest, but we can also pay back anytime without fears of incurring penalties. What do you think? – Gerry N.

Some tips for Gerry and others in similar situations from the article follow: Consider first if relatives, especially if you are thinking of borrowing from your parents, can afford to lend to you. Remember that they need to prepare for their own retirement and health care expenses will be looming in the horizon. Citibank’s feature article says,

“If they haven’t built up their retirement funds, then this should be their priority, rather than helping you. They may not have many years left to earn as you do, thus they should be setting aside money now for their retirement. Otherwise, when they are old and grey, they may depend on you for their day-to-day expenses—and this may in turn cause other issues, such as low self-esteem on their part and resentment on your family’s part.

Be aware of whether they will have to withdraw money from an interest-earning account so that they could lend some money. That means they will be losing interest earnings and this can affect their retirement fund. Managing debt includes managing emotions. Borrowing and lending money is a highly emotional experience. Don’t even ask about the collection stage! Since close family ties are such a big chunk of our cultural upbringing, borrowing from relatives is very common. Overseas Filipino workers are especially vulnerable and the situation can become very tricky. Most people I talk to lend out of “hiya” (nakakahiyang tanggihan) or out of “awa” (pity) so the proper procedures of putting the loan amount and loan terms on paper are thrown out the window. It’s better, really, for the person who is borrowing to do the following:

1. Be professional and write a document detailing the amount of the loan, interest if any, collateral if any and terms of payment.
2. Keeping the amount as small as possible.
3. Informing siblings if you are borrowing from your parents.
4. Being prompt in paying or at least in informing the person who lent the money if there will be delays.

Blood should be thicker than water, which is precisely the reason why family members who borrow should treat loans from relatives as formal and as important as those we get from a bank.

This is so not good. Long and short of the bad news is, 3.8 million Filipinos or 700,000 million (sorry, my bad) families slipped below the poverty line in 2006. You know that creeping feeling that the poor is poorer and the rich is richer? That bitter taste in your morning pancake when you think about how economic growth is not trickling down to the poor? Here are the hard figures that prove it. We now have a total of 4.7 million Filipino families who are hungry and can barely get by, as opposed to 4.0 million when the survey was last done in 2003. Government is blaming rising oil prices, calamities and low wages. There is, of course, nothing wrong with the rich getting richer. You and I and our neighbor in curlers every morning would like to be in that group. But every time stragglers get farther behind, those who are in the getting there group, as Noet calls the middle class, get hurt too. There will be less people who can afford the things or services you sell, there will be more people to support in terms of taxes needed for social services, there will be less persons who can invest in bonds, equities and what-have-yous and therefore the market that you invest in will not grow as much as you would want it to. The more people slip below the poverty line, the more hunger, sickness, depression, frustration and crime. Some of you may think that’s like saying those who don’t have money are responsible for all the crime in the country. On the contrary, there was a time in my life when our family slipped below the poverty line and I would be the first to tell you that wealth is a state of mind. But accept it, when you can’t even earn $1 a day, no state of mind can comfort a stomach that had gone without food for two days or a parent whose son is begging to be fed. My friend came back from an assignment in the province the other week and she shared with me how she felt when she had to watch a family of six eating half of a sardine and blackened rice for lunch. The family reserved half of the sardine for dinner. She still can’t eat well until now. As I said in a previous post, we’re all in this together and we all have to find a way to help more families climb over that poverty line. The job is bigger than the government and it certainly is bigger than the Zobels and Cojuangcos of the Philippines. If we don’t do anything now, we’re all busted. To those who are reading and not watching idly by the sidelines, my heartfelt gratitude and admiration. Share what you do and perhaps we might get more creative and more determined, to help 4.7 million families and make the Philippines a zero-poverty country.

Banks are marketing special deposit account products more aggressively these days. With the low returns from time deposits and fixed-income instruments, people are looking for more alternatives and I actually witnessed this in a bank branch the other day. The Philippine Daily Inquirer’s Doris Dumlao reports today that as of February 8, SDAs have sucked in P546 billion of the money in the banking system. Read her article here. Here are some useful figures to remember from this article: P546.35 billion – money placed in SDAs as of Feb. 8, which is more than double the P233.65 billion absorbed by the BSP from the banking system via its overnight borrowing facility as of the same date. 6% to 6.5% -- the range of yields of SDAs with varying maturity that make them more attractive than any other fixed-income instruments. Mutual funds with access to SDAs—those affiliated with banks—outperformed other fixed-income securities-based mutual funds in 2007. 5.88% -- yields of 10-year Treasury bonds auctioned by the National Government last January. 8.06% -- average yield of 10-year T-bonds issued in 2006 11.69% -- average yield of 10-year T-bonds issued in 2005 Looking at these figures, it seems the current state of the economy is good for banks. These are very cheap funds that they can lend at high rates. Maybe, it would be a good idea to watch out how bank stocks will do this year.

Fitzgerald Aclan, one of the most experienced technical chartists in the country and the chairman of Absolute Traders, says the key levels to watch for at in  is 3,400 for the Philippine Stock Exchange Index (PSEi) and 13,200 for the Dow Jones Industrial Index. Fitz also believes that the PSEi’s ideal support level is at 2,900 to 3,000. The PSEi on Monday closed at 3,079.99 and the DJIA ended at 12,266.39. Here’s a So What Chocnut moment. Think of a “support level” as a sticky point that stocks find hard – historically -- to bust through on their way down. It’s the historical bottom that investors look for as a signal to buy. Two things can happen to it: it can be confirmed when investors buy stocks at that level (at which point prices start going up, right?) or wiped out if investors still don’t buy at that level and stock prices continue to go down. Fitz says that while prices are inclined to trend lower in the coming weeks, he predicts that there will be buying opportunities this year. In fact, he advises investors to take advantage of these declines to enter the market.

“If you look at the historical movement of the Phisix, if you take out the coup d’etat and the financial crisis, the market has probably declined about 25 percent from the highs. We are pretty much there in terms of the absolute level so we remain confident. In fact, we take advantage of those declines to enter the market. Again, this could be a once-in-three-years buying opportunity,” Fitz says.

It seems too rosy when you consider that over at CNN, MarketWatch and Fortune, the headlines are all about rethinking investments, sell strategies and a depressing analysis that stocks will never be the same again. If Fitz had not accurately called market bottoms several times in the past, I would have been more pessimistic. As it is, I’m starting to believe the technical chartists know a lot of things the rest of us mortals don’t.

Guys, we have a Frugal Week hangover =). Here is another post on more frugal living tips, courtesy of our editorial partner MoneySense, the first and only personal finance magazine in the country. As I said in a previous post, there are expensive things that help save money in the long-term. A good education, books, health care, vacations (even simple ones when money is tight) should be in our budget even if they are expensive. Our article from MoneySense this week written by Ruth Floresca adds some more to the list:

Efficient home water filtration system Is your household one of many who still depends on water refilling stations for your drinking water needs despite having a good supply of running water? Consider installing a water filtration system. It may seem costly at the onset, but you’ll see how much you’ll be spared on water expenses later. Visit different stores and look at different brands. Compute how much you are spending in a month for drinking water. Then calculate the expenses for changing your filter and its other components. These may vary from every six months to as long as every five years. You’ll be surprised at the final figures. Rechargeable batteries and charger From toys and flashlights to “high-drain” devices like digital cameras or portable DVD players, it must be hard nowadays to find a house without gadgets that need batteries. If you’re using a lot of battery-dependent equipment, you must have already spent a fortune on batteries alone! Invest on Nickel-Metal Hydride (NiMH) rechargeable batteries that have a higher capacity than the old-style Nickel Cadmium. Lithium-ion rechargeable batteries, although they’re more expensive, are also great buys because of their excellent shelf life. You’ll also help save the environment for not throwing out disposable batteries anymore. Basic tools and a tool box Not having even a handy screwdriver, hammer, pliers, or adjustable wrench at home may cost you money. Imagine calling and waiting for a plumber to come and fix a leaking pipe that could have been easily fixed earlier given the right tools. Result: you pay for labor and will have a higher water bill. Compact fluorescent and LED lights Sure CFL bulbs cost more than regular light bulbs, but they use up about two-thirds less electricity while producing the same amount of illumination. Also, CFLs are guaranteed to last for 8,000 hours as compared to incandescent bulbs’ shorter 500 to 2,000 hours life span. On the other hand, light-emitting diodes (LEDs) can save energy especially when used for holiday lighting. To illustrate, a typical strand of 50 traditional light bulbs uses 300 watts. With a strand of 50 LED lights, only 4 watts is used. LEDs are also very durable and don’t break easily. And because most energy saving bulbs like CFLs and LEDs generate less heat, they last much longer. LEDs’ life span extends up to 100,000 hours. Items you regularly use that are on sale Get a return on your money by shopping for the best deals! Anything you normally buy and habitually use that goes on sale is worth purchasing. Just make sure that you really are going to use all of it and that it would not wind up in the trash due to expiration. Non-food items on sale are your best bets although food items can also save you money as long as you are attentive to expiration dates and the items’ condition during the sale. Check for damaged packaging and/or color quality especially if buying meats and cold storage food products. Cuts of meat without or with less bones Look at the cost per serving rather than the cost per gram. If a cut of meat is cheap, but you throw away a lot of bones and fats, then you're paying more per serving than you might realize.

Read the entire article here. If you are looking for an efficient water filtration system, don’t buy the cheap ones in appliance stores that merely filter water. I bought one for P15,000 and after a year of using it, I couldn’t find new filters anymore. :-( There went my investment. An intelligent system is a good buy, but make sure you compare prices and features and get access to after-sales support including replacement parts. On rechargeable batteries and charger, they are good buys but they don’t last forever especially if you don’t follow charging instructions properly. I suggest you buy only one brand! Mixing up the chargers with different brands of batteries doesn’t work. To maximize, use them for things that are used constantly like clocks as against toys that are used only once in a while. On learning how to be a fix-it guy (hello omski!), this is definitely a must. (Mental note: find out how to use a wrench! Getting a good plumber, carpenter, etc. is so difficult. Any tips?) Be intelligent in buying light bulbs and lighting fixtures. The government is in the process of phasing out incandescent light bulbs by 2010. Compact flourescent ones are better, but this company claims it has an even better alternative. Megaman Philippines sells European light bulbs and lighting fixtures that don’t get hot even after hours of use. I have some of them, they’re for real ☺ Buying things on sale as a frugal living strategy is a bit tricky, because people can get too caught up with the sale season and end up buying too many things they don’t need. So get into it only if you have a strategy and the discipline to buy only things that you need! Buying meat without or with less bones is an interesting tip and sounds very practical. Will try this out this week. But let me also add that you can also opt to buy ONLY bones for soup and dishes that need soup stock. Bouillon cubes have too much salt and are not healthy. Have a great day, everyone!