June 2008 Archives
“It was a freezing day in Tokyo. I was a skinny seven-year-old wearing my favorite pullover with an apple on it…We were outdoors and my sister and I were freezing, our teeth chattering, once in a while playing smoke rings and warming our hands in our pockets. My dad slowly approached us, sat down, smiled and softly said, “Just think it is not cold.” My younger sister and I just looked at each other with a puzzled look unable to comprehend how he could even say such a thing, when it was downright cold. I thought that maybe the cold had started to get to his brain. Perhaps sensing our skepticism, my dad persisted and said, “Relax, close your eyes and imagine. Think of the color green, imagine grass, think of the color yellow, imagine the sun, think of sunflower … imagine the colorful butterflies … imagine hearing the birds chirping … imagine the weather … it is summer, it is hot ...” Then, as if under a magic spell, I felt my body slowly stop shivering, my teeth stopped jittering. When I opened my eyes, I was actually still with my father, who was now smiling. Then he said: “See? It is all in the mind. Just believe.”Learn from the Lucio Tan art of war: It is all in the mind. When you are broke or trying to get out of a mountain of debt, learn how to discipline your mind into thinking sunny days will soon come. It can help you hang in there.
“Ten years later, my first year in the US to me was a turning point…On my second term, my friends started getting to me. Like some schoolmates, I started to cut classes, go to parties, shop, hang out. I knew I was not doing the right thing but why can’t my friends and schoolmates see anything wrong? How can they use their tuition funds, given to them by their parents, to buy cars and other things? I felt so lost. I felt so confused. One time, I came home from spring break… my dad was there. He was carrying a piece of paper. I was shocked to see that it was actually my grade report! Up to this day, I never asked how it got to him. Full of shame—I remember I didn’t want to look up. Instead of getting scolded, he used his gentle voice and asked: “How can your grades of As and Bs deteriorate to Cs and even Ds?” I was burning with guilt. I wished he just scolded or yelled at me. But no. He didn’t. He continued by saying: “I can buy you everything you want but I cannot buy you knowledge. The best I can do is to give you everything you need to acquire that knowledge. And that, I have given you. The rest is up to you.”The young man who started his billions with a scrap business has got to value education. This was foremost in my mind this morning when my I noticed my 13-year old daughter’s pea-sized enthusiasm for studying. Whether or not I like Lucio Tan, that little line “the rest is up to you” turned her inattention to self-awareness. Knowledge and education has got to be one of the biggest foundations of life, not just personal finance and financial literacy.
“Four years later, in 1991, I was fortunate enough to graduate from the University of San Francisco with a double degree in Math & Computer Science. Being a computer science graduate from the US in the ’90s, I could have actually commanded a handsome salary. True enough I had good job offers with great salaries from the best multinational companies. My dad who had just flown in at that time asked me which offer I had decided to take. I boastfully replied that as a computer science grad I was entitled to wait for the highest bid, which would surely come along. He paused and then wisely said, “Be humble. Don’t look at the money, but rather, look at what you really want to do and the amount of learning and growth you would get.” He further added, “In fact, you should pay tuition to the company for giving you the training you need.”Here, I’m a bit ambivalent. What if Vivienne wanted to be a scrap businesswoman? Would he support it because it’s her passion? What do you tell your children when its time to choose careers? Do you ask them to consider careers that are in demand and have the best pay? Or do you honest-to-goodness tell them to follow the desires of their hearts? My daughter’s career choices are wild, to say the least. Once, she said she dreamed of being a rock star. Yeah. Can you imagine a SHY rock star? Then she wanted to be a singing marine biologist. She changes her mind the way Frank the typhoon did. It’s well and good to follow your passion, but while young, include in choices a, b, c and d the careers that would at least pay the bills! Life according to Lucio Tan. Twisted, but interesting.
***I wrote a full-length article on “Sneaky tips that take pain out of budgeting” for the Philippine Daily Inquirer and you can read it here. Yes, guys, I have been asked to send my personal finance articles over to the print version on a weekly basis. It’s the age of convergence, finally. Here’s an excerpt:
“If your heart does flip-flops over numbers, budgeting the traditional way will be easy: jot down every expense the moment you make it, figure out how much you really spend and where your money goes on a monthly basis, set a limit for each item and stay glued to your ideal budget. But the numbers game is not an easy one for most and not even rising oil and food prices can turn busy parents into budget freaks. Romelia Neri, an economist and a mother of three children, could hurdle sophisticated calculations but she finds it very hard to budget the conventional way. “They say budgeting is the foundation of good money management but I find it too time-consuming. I would rather read to my child,” Neri says. On the contrary, Neri’s sister who is also a mother has mastered the art of budgeting. “She records all her daily expenses at the end of the day in her Starbucks calendar book,” Neri says. Higher prices of gas, food and almost everything else are hitting Filipino homes hard this year. Budgeting could stretch incomes by helping Filipinos to avoid spending on things they don’t really need, like DVDs, restaurant meals and toys. The problem is that only very few take the time to make a budget, and fewer still stick to it. Budgeting sounds and feels painful; overdoing it can cause spending binges, says Pascual M. Garcia III, president of Philippine Savings Bank.”
**Roundup In the blogosphere, Benson Te asks whether global financial markets survive high oil prices and says that pinning your hopes on the recovery of oil seems specious. Speaking of stock markets, I will be at an Absolute Trader event tomorrow at the Philippine Stock Exchange where market participants will bang the table on whether the PSEi has reached bottom or not. Abangan. Parttimeinvestor says stocks are still the best bet against inflation, especially shares of companies that use oil efficiently. You’ll remember that in a previous post, experts have recommended shares in food companies, banks, energy, mining, utility and infrastructure stocks like telcos and water companies. DextersLab says SeaOil’s fuel prepaid card is a good example of the application of a hedge fund in business. Interesting! Jeff Gonzales has an analysis here of why it pays to have a long-term investment horizon. All in all, keep your minds sharp and believing, appreciate knowledge and education, include only smart options in the roster, budget well but don’t whip yourself in the process. Thanks for visiting MoneySmarts today. Until next time.
Based on the second quarter consumer survey of the Bangko Sentral ng Pilipinas (the Philippine central bank), the number of overseas Filipino-supported households that allotted part of their remittances for various types of financial investments more than doubled to 48.6 percent from 21.9 percent in the first quarter. One out of three households earmarked money for bank savings--also twice as big as the previous ratio. This percentage rose to 31.4 percent in the second quarter from 14 percent in the first quarter and 15.7 percent in the same quarter a year ago.Here are some of the other highlights of that article: 14.3% -- now set aside money to buy a house, up from 6.1% in the previous quarter and 2.5% a year ago. 3% -- of families now buy financial instruments, up from 1.8% in the previous quarter but lower than 4.5% in the same period last year. 5.1% -- families that are saving for a motor vehicle, up from 1.6% a quarter ago and 3.5% a year ago. The numbers are still very low. Who can tell when something is a trend or if they are just a string of numbers? Will the economist determine trends, or will the families themselves? Save more, spend less, stay grounded and focused. That’s the battlecry that would turn three months of growth in savings and financial consciousness into a trend. Good luck to us all.
I work at home a few feet away from my toddler, true. And it’s one of the best things that happened to me in my writing career -– to be working for a company whose out-of-the-box thinking allows mommies and daddies to wow the world with their writing and organization skills wherever they are, as long as they have a laptop or PC, Internet connection and a mind that’s capable of separating domestic and professional chores 24x7. That can be at the office, in an Internet café, at home or wherever they find themselves. But if you think this means shorter working hours, you are dead wrong. Still, a lot of parents I meet long for this arrangement. It’s not difficult to understand why but Noe said it best:
Be careful that you do not get confused with labels: consulting is often more time consuming than a regular 9-to-5 job. The upside is that you can do part of the work at home (addressing your concern with the children) while continuing to stimulate your mind.
One mother I interviewed wondered why despite all the hard work and long hours, things don’t seem any better. You start the year thinking it will be better this year but before you realize it, you and your husband had been working five long years and are still in that same hard spot in between the utilities and the credit card bills? In the meantime, the children are growing with the house help and the only time you get to play with them, I mean really be in that moment with them is during school Family Days. Once a year. Are you one of those longing to give up your job to play with the children? Whether you want to be the rich supermom or the wealthy wonderdad, letting go of a career and embracing a life with lower income and less benefits is a move that can save families in many cases. Obviously, this move is not for all. Only you will really know if its for you -– no judgment here. But if you’re raring to jump into being housemom or housedad superhero-ish status, whether on a full-time basis or on a work-at-home scheme, make sure your expectations are not over the top. I will try to bring you back to earth a little bit, so you can prepare yourself.
In this age of streaming information, 24 hours is never enough to get things done. Double-income is “convenient” but in the process our children are thrust into a 24/7 double-income-but-not-enough-time environment.
- Plan ahead for the immediate drop in family income and how to meet the bills that are hard to downsize, like tuition, utilities, medical bills and debt obligations. Do a trial run. Try to live on single income for a while and save one parent’s income in a separate bank account. Don’t jump in on a whim or you might get a head shock.
- Do a tally sheet of company benefits you will be giving up and determine whether you can live without them. Retirement plans, health plans, car plans, salary loans and others are all part of the difficult process of weighing and deciding.
- Determine whether the parent who will be keeping her job is happy where she is and whether she has a good alternative plan if things turn bad at the office.
- How are you going to attack the tax issue? Consultants are subject to a 12.0 percent value-added tax or a 3.0 percent percentage tax. Other companies may be more creative. You will need to engage an accountant.
- If you are going to work at home, you will be paying for your own airconditioning, Internet connection, and incidental expenses like meetings outside the office. See if you can negotiate with your company to shoulder part of the cost.
- This is not a financial consideration but a crucial one: do you have the discipline? Some work-at-home parents are undone by the sounds of Playhouse Disney or Cartoon Network in the background. The kitchen, the refrigerator and all its delicious smells are perennial temptations. It takes a lot of discipline to work at home and separate yourself from domestic distractions. You will find that the pangs of guilt you felt leaving the house in the morning when you worked at the office will be repeated a dozen times in a day when you have to tell your kid you can’t play because your deadline is coming up.
Question: I am one of the thousands of people who live in Quezon City but work in Makati City. That means I drive some 20 kilometers to work every day, and that's just one way. I tried commuting but it's impossible during rush hour. With the price of gasoline going up, travel to and from work makes a huge dent in my budget. Is there any relief in sight for us? – Josephine P.We all will have to deal with the rising cost of gas, whether or not we are from Quezon City, Bulacan, Cavite, Cebu or Davao. The most terrible forecast I have heard so far is for a full tank to cost P30,000. That’s almost the take-home pay of senior call center agents. Full tank at P30,000? Goodbye car, hello MRT for many middle-class families. I see a lot of them in the MRT, even now. You can sense which MRT commuters used to bring a car to work. Pretty soon, Josephine’s “impossible” may turn to “no other choice.” I like the sneaky tricks to save on gas:
- Lighten up the trunk. More weight in your car trunk will make your car work harder, using up more gas.
- At the gas pump, don’t top off the tank. The excess gas may spill and will amount to waste. Just stop filling at the automatic level.
- When parking, choose a shady spot to prevent gas from evaporating under the heat.
- Fill up your tank in the morning or evening when the air is cooler. At midday, gas may expand due to the heat and you will end up getting a lesser amount of gas.
One oil company has seen an opportunity in this crisis. Seaoil is offering a price lock prepaid card at P1,070 for 20 liters, or P53.30 per liter. They are selling the card only from June 10 to 16.Good or bad deal?
My article entitled “Inflation, your nest egg’s silent assassin” came out in the Philippine Daily Inquirer (print version) yesterday. It has a link where you can download the retirement worksheet from Augustus J.V. Ferreria.
For those who are interested in learning about investing in the stock market, the Philippine Stock Exchange has a seminar called “Demystifying the Stock Market” on June 19, 2008, 6:00 to 10:00 PM, at the Trading Floor of the PSE Centre, Exchange Road, Ortigas Center, Pasig City. For more information please call the PSE Senior Specialist/Project Head at 6887537 or 9130054.
- Tweak our portfolio to enhance earnings. Johnny Noe Ravalo says this may still result to losses but doing nothing will guarantee those losses.
- Mon Tejero, head for research and portfolio strategy of Citicorp Financial Services, recommends equities which are traditionally viewed as one of the best hedges to inflation because businesses can pass on rising costs to consumers. Real estate, infrastructure assets and commodities such as gold, oil and agriculture can also protect you from inflation.
- Alijeffty Gonzales, president of ACG Advisors, recommends going short-term to take advantage of higher interest rates and avoiding medium- to long-term bonds. If buying stocks, he recommends picking inflation-proof stocks like food companies and banks. Jeff, however, says overall, inflation should have been factored in the financial plan and should not be a big worry for savers.
- Augustus J.V. Ferreria, senior executive vice-president of Generali Pilipinas, believes that cutting back on spending and saving more will protect people from inflation more than chasing after higher returns.A worksheet created by Maiko Diaz de Revera of Generali shows that even a person with P100 million in the bank earning 6.0 percent interest and faced with 10.0 percent inflation will lose all of his money on the 14th year if he spends all of his interest income year after year.Even if he moves his money to an investment instrument that would give him 12.0 percent, all other things remaining the same, he would still lose his money by the 12th year. Things get interesting when we assume that this guy decides to save 10.0 percent of his interest income. Even if his P100 million earns only 6.0 percent per annum, he would be able to stretches his retirement fund by two years. Raising that savings rate to 40.0 percent can extends the fund by eight more years.
I go by the following: 1. Research and compare -- Farecast.com tracks fares on given periods. I also use Quikbook.com, Kayak.com, and other travel search engines. Check hotel or airline websites for deals and promotions. For hotels, call the local hotel, and compare with the online price and the price given via their 1-800 (central office) — yes, these rates may be different. For US business travels, I use Hotwire.com and Priceline.com (sometimes Hotels.com) — I get the best rates from them including car rentals. 2. Travel during off-peak season and book off-peak days (Tuesday to Thursday), it depends on the type of hotel. Some hotels geared for business travelers/conferences actually charge premium during midweek. 3. Reserve as early as you can. 4. Add-on services -- factor in free breakfast and other freebies into the rates and always ask if there will be additional charges (e.g., parking, Internet access) 5. Avail of packages that may include trave/hotel/food -- for Disney, check out Mousesavers.com 6. Ask for a discount and inquire about promos -- discounts are given, just ask. 7. Friends/relatives -- some people who own timeshares may be willing to let you use theirs at a discount. I have older friends who own three timeshares but have used them once in the last three years. A couple owns one luxury collection-type hotel and two RCIs that that their only son does not want to inherit because 1) he does not want to also inherit the monthly maintenance fees 2) it will be another 5 years before his kids are at the age when they can appreciate it and 3) he noted RCI hotels are more “dated” and he can get better ones 4) the additional expense attributed to staying at a luxury hotel cannot yet be covered by his pre-retirement income. 8. Affiliations/memberships -- for every affiliation, always inquire about members perks (deals/promotions). The association handling my retirement fund invests in some luxury collection hotels although only a few members who check the annual reports are aware of it. As a perk, members who ask get rooms for $99-$125/night. Friends and relatives can also avail of the rates (two rooms at a time), but members must be there at check in to brandish IDs. I ordered dessert in one of the hotels, and when it arrived, the presentation was worthy of a Pritzker, alas, the edible portion was also the size of a stamp. Because in my youth, I had been preconditioned to seeing mega-bigao of bibingka, my big mouth overrode my little brain, and blurted,”This is it?” much to my embarrassment. Minutes later, the server arrived, saying, “Compliments of the chef,” and gently laid a large plate of their premium dessert arranged in Stonehenge fashion with subtle splashes of color. The experience is all about the impeccable service. You get what you pay for, but sometimes, if you do it right, you also get lucky and get more than you pay for. For those whose version of 5-star hotel is staying with relatives abroad for a vacation, please make your presence light (i.e., look after your needs). There is nothing more exasperating for a host than to come home tired from work to cook for you, drive for you, and then look for your toddler’s missing shoes. It’s hard enough living without help so that hosts juggle their schedule, rooms, and budget to accommodate guests. Most Filipino hosts are trained to be hospitable, but guests must be sensitive to the host’s needs. Do not overstay.