July 2008 Archives

Mutual funds are sold as the investment for the masses, allowing ordinary Filipinos with as little as P5,000 to get their feet wet in an instantly diversified portfolio of stocks, bonds, or both. It was a little bit of a surprise to find out that the average mutual fund investor as of June 30, 2008 has a placement of roughly P483,820 in mutual funds -- not your average Filipino, obviously. That’s an impressive little factoid. Based on official figures from the Investment Company Association of the Philippines (ICAP), this figure is lower than the average investment size of P580,843 in December 2007, which is again lower than P622,079 in June 30, 2007. Interviews with the chief executive officers of BPI Investment Management Inc., Philam Asset Management Inc., and Sunlife Financial, which account for more than 90.0 percent of the industry, show that assets under management are declining mostly because of the market downturn and not due to massive redemptions. Sure, there some investors took their money out, but in my article last Monday, “Investors calmer in face of investment storm,” mutual fund practitioners said investors were indeed less jittery and this was a welcome surprise to them in the face of the current market downturn. That’s because for the past six months, markets have gone haywire and mutual funds in the Philippines bled. If you look at the ranked year-to-date returns below, United Fund’s negative 10.0 percent return, while the smallest loss among the roster of stock funds, makes you wonder what it did to protect its portfolio from the depressed financial markets both here and abroad. (For some reason, United Fund does not act like a stock fund because it does not go up when the stock market grows and doesn’t also go down when the markets are down.) Fernando Jose Sison III, the ICAP chairman this year and one of the pioneers of the mutual fund industry, said that in BPI alone, the average mutual fund investment is around P1 million. Same with Sunlife. “We can conclude that such investors have already amassed sizeable funds that they are setting aside for a rainy day and are already knowledgeable about the stock market, bond market, and the capital markets in general,” Sison said. I reiterated to him an idea broached in this blog first by Oda last year for the industry to report performance not just by listing down yields. For next year’s annual awards, perhaps the ICAP could measure volatility, for example. The reason that’s important to investors is that while we understand the nature of the beast –-mutual funds give potentially higher returns but expose you to higher risks too –- and that it’s best treated as a long term investment, you wouldn’t want to be caught in a severe downswing on the year you need your funds. So you would like some measurement of how volatile a fund can be. At first, Sison was skeptical. He thought mutual fund investors would not appreciate such a figure because mutual funds already seem too complicated to ordinary investors. But he emailed and said he changed his mind, because of the average investment size of mutual fund investors. “It is in this light that I agree with your thinking that some sort of performance benchmark, other than a straightforward rate-of-return computation, would be useful and relevant to mutual fund investors,” Sison said. “This other performance benchmark could be a volatility indicator, as what you mentioned, or a reward-to-risk ratio, as what my employer organization (BPI) currently measures and monitors. Such additional performance benchmark, taken in relation to yield performance, will certainly add depth to an investor's analysis of his medium-term (3 years) or long-term (5 years and above) investment options. We observe that once an investor has opened a mutual fund account, he tends to keep it, add to it, and diversify into other types of mutual funds, thus, a medium- to long-term outlook is more of the general mindset of such investors,” he added. I certainly hope we will be seeing those figures in the papers, and in the ICAP awards next year. Meanwhile, see below how mutual funds have fared in the last six months. These are all year-to-date returns as of July 29, 2008, ranked in terms of yields. Stock Funds (Primarily invested in Peso securities) United Fund, Inc. -10.45% First Metro Save and Learn Equity Fund, Inc. -18.04% ATR KimEng Equity Opportunity Fund, Inc. -23.33% Sun Life Prosperity Phil. Equity Fund, Inc. -23.57% Philequity Fund, Inc. -24.61% Philequity PSE Index Fund Inc. -24.99% Philam Strategic Growth Fund, Inc. -25.89% Philippine Stock Index Fund Corp. -30.24% Balanced Funds (Primarily invested in Peso securities) First Metro Save and Learn Balanced Fund Inc. 1.01% First Galleon Family Fund, Inc. 0.31% Optima Balanced Fund, Inc. -16.24% Sun Life Prosperity Balanced Fund, Inc. -16.94% MFCP Kabuhayan Fund, Inc. -17.18% GSIS Mutual Fund, Inc. -22.17% Philam Fund, Inc. -23.03% (Primarily invested in foreign currency securities) Sun Life Prosperity Dollar Advantage Fund, Inc. -2.25% Bond Funds (Primarily invested in Peso securities) Cocolife Fixed Income Fund, Inc. 2.23% ALFM Peso Bond Fund, Inc. 1.66% Ekklesia Mutual Fund Inc. 0.34% First Metro Save and Learn Fixed Income Fund, Inc. -0.05% Philam Managed Income Fund 0.94% Sun Life Prosperity Bond Fund, Inc. -0.98% Legacy GS Fund, Inc. -0.98% Philam Bond Fund, Inc. -2.6% Sun Life Prosperity GS Fund, Inc. -4.56% Prudentialife Fixed Income Fund Inc. -5.27% (Primarily invested in foreign currency securities) ALFM Dollar Bond Fund, Inc. 1.81% AIG Global Bond Fund Phils.,Inc. 1.64% Grepalife Fixed Income Fund Corp. 1.07% Grepalife Dollar Bond Fund Corp. 0.92% Philequity Dollar Income Fund Inc. 0.56% ALFM Euro Bond Fund, Inc. 0.31% Philam Dollar Bond Fund, Inc. 0.07% MAA Privilege Dollar Fixed Income Fund, Inc. -1.34% Sun Life Prosperity Dollar Abundance Fund, Inc. -2.31% MAA Privilege Euro Fixed Income Fund, Inc. -4.45% Money Market Funds (Primarily invested in Peso securities) Sun Life Prosperity Money Market Fund, Inc. 1.21% Philequity Money Market Fund Inc. -0.36% Legacy TD Fund, Inc. -0.97% ATR KimEng Money Market Fund, Inc. -5.96% Source: ICAP

We’ve been talking about money, money, money and how we must make more and lose less. Why we should dig deep to know our money personality. Use that to create a strategy for saving more and saving smart. Count our change and use them. How we must agonize over how to grow our nest egg well enough to fund kids’ education and retirement. I don't know why but sometimes, being broke and happy sounds like a mystical, deserted, paradise beach where the wind and waves can sound as sweet as Pachelbel’s Canon in D. Pinoy Penman, who confessed to an addiction to eBay, says he is broke but happy.

It used to be that you bought big-ticket items like refrigerators the time-honored way, first by window-shopping (a kind of visual foreplay), then by canvassing prices, and then by saving up for long, arduous months before marching into the appliance center and plunking down cold cash with a triumphant sigh. There was no such thing as FedEx; you dragged the behemoth home in the back of a rented jeep, and slaughtered a pig or some other four-legged animal to celebrate the purchase of a lifetime. Today it’s all too quick and too easy. With eBay and PayPal, the world is your mall, and you can let your fingertips do the malling as you hop from “Computer Accessories” to “Vintage Watches” and “Japanese Erotica” (I’m talking theoretically, boys). But am I complaining? Heck, no! I’m convinced they invented the Internet to mate me with my $1,799 MacBook Air, bought online on credit. Ten years of practice on eBay either taught me everything, or taught me nothing. I’m broke, but I’m happy. How do you explain that?

How indeed? I think being broke but happy is an art. I find that those who profess to be broke but happy are most likely people who have automated regular savings, have little or no consumer debt, own properties somewhere, and extract happiness from every little thing they do or buy. They may not have oodles of cash, but they know they are not in want and they are pretty secure about their skills and their occupations. When push comes to shove, they have assets they can dispose. But they do enjoy the moment, live life to the fullest and never argue about money with their spouses. Being broke but happy is not possible for people who have been irresponsibly spending for years without guilt and are lazy to boot. It is different from being broke and just that, totally broke, with no means for escape. It sounds like a sweet spot to be in. But I know many of you would rather be rich and happy! Here’s hoping nobody slides to the other end of the spectrum –- being rich and miserable.

At the press briefing for the 2nd Philippine International Motor Show held last Tuesday, automotive manufacturers promised to tell car buyers what they really need to know to “get all that jazz with less gas” and what they need to do to squeeze more mileage for every liter of gas or diesel. Homer Maranan, executive director of The Chamber of Automotive Manufacturers of the Philippines (CAMPI) shared the following tips:

1. Buy smaller engine vehicles if your family is small
2. Go for diesel-powered cars. He says it is a misnomer to say that diesel is dirtier than gas (although some “insiders” swear by that.)
3. Avoid stop-and-go driving and sudden acceleration as much as possible as this uses more gas
4. Paying for proper and regular maintenance is more frugal in the long-term

Watch my video interview with Maranan with reporter Izah Morales. Elizabeth Lee, president of CAMPI, gave these tips:

1. Plan your errands
2. Pick the right size of car for your family
3. The more gears, the more fuel-efficiency in a car

Watch my video interview with Ms. Lee with reporter Izah Morales. With this in mind, let me pose a question to you. What if you were offered an almost two-year old, diesel-powered Toyota Fortuner with 5,000 kilometer mileage for P1.4 million, but to be paid on installment at P20,000 a month, with two years grace? That means you can drive home the macho wheels right this very minute, paying nothing to the owner and with only your face as collateral. You start paying at the end of the second year of happy driving and then go on paying every month until you pay the entire amount. Let me throw in a couple of details to make this really interesting. Your family is growing. Let’s say you have four kids and enjoy the occasional out-of-town trips. Right now, you have a small Honda car. Gas prices are rising weekly and you live in the city. This puzzle had several people stumped. With such payment terms, the deal can be too tempting. Yet as you all say here in MoneySmarts, anything that you don’t need, at whatever price is expensive. Right paetechie? Will you take it?

A reader once asked me if it is possible for a financial planner to grow her portfolio for her, but pay her for any losses if her money shrinks for any reason. It was a jaw-dropping email. People are attracted to the idea of having a financial planner, but the expectations have to be clear from the very beginning. This video should give you an idea what financial planners should and cannot do for you.

Couple Diego and Bianca have finished their one-year life experiment with Money Makeover and the main events of that story is published today in page B2 of the Philippine Daily Inquirer. They have decided to continue having a financial planner and asked Nannette Ferreria, wife of Augustus J.V. Ferreria, to take that role. (This is their personal choice.) In this video, the Ferrerias give a brief summary of what happened during the one-year experiment and how the couple should move forward. Enjoy.

This email from a reader spoke of desperation:

I've seen your blog in Inquirer.net. And I am one of those people who is trying to fix my life. I'm an accountant, but seems like I am terrible in handling my finances. Last year was the worst year of my life. I incurred huge debt, credit cards & personal loans, due to wrong decisions that I made. I am now haunted by my creditors. I defaulted in payments, but I am starting now to pay them one by one. Since I incurred loans in different banks and credit card companies, they are charging me huge interest and some are already threatening to sue me in court. I'm willing to pay them all, but I can't give it in one payment. I want to go on with my life. I have a happy family and I don't want them to be affected with my problem. The only solution that I know is to get a single loan to repay all of my debt. But how? I already have a bad credit history. No bank would trust me again. – David (not his real name)

Chinkee Tan, author of “Till Debt Do Us Part” sent this reply: You are one of the few thousands of Filipinos who are in a credit card trap. I have also counseled a woman in the past who had over 1.2 million in credit card debt from 16 credit card companies. Allow me to share with you some practical things that helped my other clients to get out of debt. 1. Pay more than the minimum. Bite the bullet. Paying the minimum only prolongs the agony. Besides, it's precisely what the banks want you to do. The longer you take to repay the charges, the more interest they make, and the less cash you have in your pocket. Remember in paying off your debt, it is not in the amount that is more important it is in your willingness to pay. 2. Cash out your assets. Let us look at your list of assets. Maybe you own jewelries, property or anything of value that you can sell. Sometimes we are too emotionally attached to the stuff we have it is so hard to dispose and let go. Maybe the practical question to ask is "Are the jewelries and properties earning more interest than what the credit card company and creditors are charging?" If the answer is ‘no’, then it is time to make the hard decision and sell them because you will generate more when you sell rather than keep your dead assets. 3. Talk to your family and friends. Perhaps your family or friends could float you a loan. Unless they are your enemies it is time to be nice to them and be friends with them again. Best to keep things on the straight and narrow by using a written agreement. You should clearly establish the interest and repayment schedule in writing to avoid misunderstandings and hard feelings. 4. Renegotiate terms with creditors. This one, most people are not really aware of. This is where I am going to spill the beans. Let your creditors know your situation. Tell them that if you are unable to renegotiate terms, you'll have no other recourse but to declare bankruptcy. Ask for a new and lower repayment schedule; request a lower interest rate; and appeal to their desire to receive payment. Faced with the prospect that you may resort to such a drastic step, creditors will do what they can to protect themselves against a total loss. Believe me it works! 5. Seek legal advice. It is time to seek legal advice if the creditors are threatening to sue you or harassing you that they will go to your office and report you to your HR or superiors. Yes, we may make dumb decisions that led us to debt. But we are not criminals who are running away from the responsibility if we have plans to pay back what we owe. Talk to your lawyer and ask for legal options on how you can walk out of this. David, hope this helps. May God bless you and may you find solution to your situation. *Chinkee is one of the speakers in our Take Charge of Your Money personal finance seminar on August 2, 2008, 1:30-5:30 at the AIM Conference Center in Makati City. We only have 100 seats and they are filling up fast. If you are interested in joining (there's a P250 fee only until today. P300 starting on Monday), you may email register (at) iluvlearning (dot) com.

a) Naïve college freshie –- all of 16 years b) Cool college senior –- all of 20 years c) When she gets her first job – maybe 21? d) When she gets the ripe old age of 25 and beyond I tried, but wasn’t able to find any formal regulation against giving credit cards to young people. (Even at 25, I will still probably think of my daughter as young!). But as some of you who commented in this blog pointed out, the very young can easily burn that credit card and end up with bad credit at a very young age. It wasn’t too long ago when we all felt immortal… But we all know why misusing credit cards is a nightmare waiting to happen. Thoughts?

(Photo courtesy of Aladdin Cordero) Many of us choose schools for our children based on proximity to our houses. Bad idea. I wasted more than P10,000 after I enrolled my son in a “Montessori” school on Visayas Ave. But that’s not even my biggest regret. The school had horrible teaching staff, hidden fees and they forced 6-year-olds to do cursive writing and count up to one million –- in summer class before the actual school year. I checked with Education Secretary Jesli Lapuz and he said that was not the prescribed curriculum for this age group because they are not yet pedagogically prepared for such tasks. After three days, my son became depressed. Can you imagine a depressed 6-year-old child? After the second day, he told me he didn’t understand why he was shaking in school when the Grade One teacher forced him to finish the writing drills. I remember thinking then that I could kick myself for not investigating the school before enrolling him. But this is the least that can happen to you. The worst is to find that after finishing Grade Six, your child’s school operated without a government permit and any other school will not recognize all his grades. It can be traumatic, as some parents of a certain school in Quezon City found out. Parents are now suing the owners of the school, but even if they win, they still have to deal with having to find another school for their child. Karen Galarpe, my co-writer for Open For Business, informed me that the law requires schools to get a permit from Department of Education first before opening their schools. The Manual of Regulations for Private Schools Sec. 26 par. 2, also says, “It is unlawful for any institution to offer programs or courses of study without prior permit issued by DepED.” However, according to DepEd itself, “a considerable number of private schools, some of them operated by religious groups, do not have permits to operate.” The DepEd is tasked with inspecting schools and reviewing their curriculum, class programs, facilities, and qualifications of teaching and non-teaching personnel to ensure that children will get the quality education they deserve. Again, what happens when a school does not have a DepEd permit yet still operates? The children enrolled will receive no credit for their studies in that school. That’s like throwing a whole year’s tuition fees down the drain. To get credit for the year they studied in a non-recognized school, children will have to take the Philippine Validating Test administered by the National Education Testing and Research Center after getting endorsement from the DepEd. Only after they pass this test will the children receive credit for their studies. For schools offering college courses, it’s the Commission on Higher Education (CHED) which gives permits. Call or log on to the websites of DepEd [http://www.deped.gov.ph/] or CHED [http://www.ched.gov.ph/] to check if your child’s school has the necessary permit to operate. Better safe than sorry. (Thanks to Karen Galarpe for the technical information in this post.)

(Photo from Agence France-Presse) Two of my girl friends and I went on a different kind of bonding trip recently. Off went our strappy sandals and on came our boots and sturdy walking shoes to check out fruits and vegetables in the Balintawak market in Quezon City. Both Jenny Angoluan and Analy Pinaroc are busy moms with husbands and children who love vegetables and fruits, and with prices skyrocketing, the three of us thought it would be fun to see how the prices differ. Jenny’s husband waited two hours in the car for us, but loved the veggies. Here’s the price list. Feast your eyes! Tomatoes (1 kilo) – P25 Kalamansi (1 kilo, big size) - P20 Carrots (1 kilo) – P30 Potatoes (1 kilo) – P28 String beans (per super fat bunch) – P10 Lettuce (1 big head) – P15 Saba (biggest size) – P1.80 per piece Coconut (biggest size) – P15 Squash (medium size) – P20 per piece Pechay (1 kilo) – P20 Broccoli (per kilo) – P40 Pineapple (medium size) – P15 It felt like extreme frugality, honestly. But the savings were great. Buying veggies and fruits there from 10 to 11 in the evening could be a twice a month event for vegetables that don’t go stale easily like squash, okra etc. Go with your best mommy friends and choose the most patient daddy. Be prepared to feel like a rabbit in the next couple of days.

Time flies by so fast. MoneySmarts quietly turned one last summer. To make the celebration really special, we are giving loyal readers first crack at limited seats for an interactive personal finance seminar. Together with Citibank, which is celebrating its 100th Take Charge Of Your Money column for INQUIRER.net, and MoneySense magazine, we hope that this personal finance seminar will bring our discussions to a new level. The promotions for this seminar is officially going to start Monday next week, but MoneySmarts readers who want to be there can email register (at) iluvlearning (dot) com beginning today. We are only offering 100 seats. For a nominal fee of P250 (Just to make sure that you will come. Fee on Monday next week will go up to P300), you will get powerhouse speakers like bestselling author Francis Kong, Dr. Queena Lee-Chua, Chinkee Tan and Ramon Tejero. Here are the other details: What: Personal Finance Seminar When: August 2, 2008 Time: 1:30 p.m. to 5 p.m. Where: AIM Conference Center in Legazpi Village Who: Speakers include Dr. Queena Lee-Chua on rising inflation and how it can affect savings and setting financial goals, Chinkee Tan, author of “Till Debt Do Us Part” to talk about overspending and how to get out of a debt trap and how to manage credit wisely, Ramon Tejero, head of research and portfolio strategy for Citibank’s insurance and investments arm in the Philippines, will walk participants through the step-by-step preparation of a financial plan (so you won’t come home with only dreams of financial independence in your head) and bestselling author Francis Kong, who will teach how these can all be made possible. Partners in mounting the seminar: MoneySmarts, Citibank, Money Sense magazine and organizer Learning Curve. Email now and celebrate with me. ☺ See you there!

If you’re mired in runaway consumer debt and don’t know how to pick yourself up, here’s something that should give some measure of comfort: you’re not alone. There are more than five million credit cards out there with P116 billion charged to them based on end-December 2007 figures from the Bangko Sentral ng Pilipinas, the Philippine central bank, and P16.5 billion have fallen past due. Assuming Filipinos are an android population with identical spending habits, we have an average of P23,219.60 charged to our credit cards. Are you below, or higher than the average? Now, these are just credit cards. Filipinos owe P81.8 billion in auto loans and P4.4 billion of the amount turned past due in December 2007. In the Philippine setting, that’s probably just half of what is owed to five-six lenders, personal loans with banks, family members and friends. See, you’re not alone :-) The question is: is it possible to repair a bad credit record? That’s tricky, but not totally impossible, as I said in my article in the Philippine Daily Inquirer “Five steps to fix a bad credit record.” Here's a summary

1. Admit your mistakes. Hiding from creditors has never done anyone any good.
2. Pay your debts. Ask for better terms, but understand that you will have to pay interest. We can’t really expect the bank to bend over backwards for us alone, can’t we?
3. Save regularly in the same bank. The regularity over time will help you tell your turnaround story convincingly. Some banks allow you to borrow against that deposit, too.
4. When you pay your loan fully, ask the bank to give you a certification.
5. Live within your means.

I once got a phone call from a friend who said since her record is bad anyway, there’s no use paying for a car loan that has turned sour. That’s digging yourself deeper. Maybe bankers are a little bit boring and unforgiving, but some of them are actually not that bad. It can’t hurt to talk to one if you really are having a problem with paying your debt. Call them first; don’t wait for them to call you. P.S. If you are a glutton for punishment and want to see my face and hear my voice after reading this blog, catch me later on Mornings@ANC. I will be guesting again on their program “Money Matters.” I think the program will start at 9am.

(Photo from Agence France-Presse) The other day, I felt like crawling inside a cave and hiding for the rest of my life. Oh, for at least 10 minutes. This news story that originated in San Francisco in the US the other day that said a basic flaw in the Internet could allow hackers to take over the web triggered all sorts of warning signals in my brain.

Major software and hardware makers worked in secret for months to create a software "patch" released on Tuesday to repair the problem, which is in the way computers are routed to web page addresses. "It's a very fundamental issue with how the entire addressing scheme of the Internet works," Securosis analyst Rich Mogul said in a media conference call. "You'd have the Internet, but it wouldn't be the Internet you expect. (Hackers) would control everything."

If hackers take over the Internet, does that mean they can access our bank accounts, brokerage accounts, and credit cards? Email, Flickr, Friendster, Facebook, Multiply and the like compromised sound pale in comparison to the first set of examples, but I doubt if anyone would be happy to see a nude photo in their Friendster profile and freak out his bosses or business partners. As if an answer to my burning question, an email popped up in my screen. A friend’s Friendster account was hacked, each link from it now leading to a website full of porn. I would hate for that to happen to me. In this day and age of digital social networking, who is to say what’s sacred and what’s not? Drexx Laggui, principal consultant at Laggui and Associates, a company that customizes security applications (sorry, my bad) provides professional services like computer forensics and Internet penetration testing for companies here and across Asia, tried to explain to a technology dummy (me!) why I should be careful online but not let my fears paralyze me. I suspect that that the Filipino wiz kid in Silicon Valley before the Y2K scare found that conversation vexing, you know trying to explain DNS and TCP/IP to a layman. Drexx: That issue has been around since 2000…The Internet TCP/IP was designed only to transport short messages so that the military can do multiple nuclear strikes around the world. It was meant to be simple. It was not designed to be used for e-commerce. Now it’s complicated and flashy, and there’s a downside to that. Openness is the bane of security. Me: But what does that mean? Are we all vulnerable? Drexx: The programmers, the businessmen, the people –- they all want to be on the web. They want it flashy and fast. The problem is that security comes as an afterthought. Only when something really bad happens, then we take it seriously. It’s not just the underlying protocol that is the problem. It’s the whole thing. Me: That makes me want to crawl inside a cave and hide. Does that mean we shouldn’t transact online, that we shouldn’t bank online? Drexx: Security is never a 100 percent thing. When you walk in Makati, you feel safe. You shop in Landmark and you think you will not get mugged because of all the guards that you see. And yet there was an explosion in Glorietta.” Me: Uh-huh. (Visions of flying debris made me crouch lower inside my cave). Drexx: But you see people still go back to Glorietta. People work there. They have things to sell and you have things to buy. It’s always a trade-off between needs and security. Do not be paralyzed by your fears, but be careful about how you transact. At which point, I wanted to fly off the canyon but didn’t. It’s true; he’s right. Since Adam and Eve, there has been opposition in all things. As Drexx said, the Internet is just another frontier in this game. But that doesn’t mean we all should stop living. The basic rules still apply. There is a lot of risk out there, so transact only with companies you trust. Don’t bite the worm dangled by phishers or those people who send emails and ask you to key in your account number and PIN in your bank’s look-alike website. Clicking links in questionable emails is just like keeping your house’s front door open at night. Plus, do you really think Senator Loi Ejercito will share her loot? Don’t reply to any email that says you won a huge amount of money, not even if they say you won five million yen! (Do you actually know how much that’s worth?) Some spam emails seem harmless, until you realize they are trying to harvest your email addresses and then wham! You get the mother load from phishers. Drexx recommends looking for entities that offer money-back guarantees and refunds. (Hmm, Amazon-lovers out there. Do we know if they offer money-back guarantees?). We don’t want to be the idiot that went down because of misplaced trust. Thanks, Drexx.

Ask me for horror stories about maids, yayas and house help and I could go on for hours –- all based on experience. But from time to time, many of us come across genuine beings that sacrifice personal comfort to give service that would beat the best hotels. They would provide companionship and even understanding of our idiosyncrasies, break a fight or wipe a tear from our children’s faces when we can’t be there for them, or even shield us from hateful neighbors. I have known exemplary house help who put their lives on voluntary suspension to take care of their employers’ meals, homes and children. They do not date, ending up single for the rest of their lives. They don’t nurture friendships since security is a very valid issue especially in Metro Manila. They see their families only once a year, even occasionally missing that visit to a far-off home when the need arises. When we travel abroad or leave the country for good, admit it. They are one of the first we miss the most: no more beds that get made up in the morning, almost as if by magic. It is but fair to treat human kindness with the same. And truth be told, there are horror employer stories that would make children-exploiting Nike executives blush. Uncomfortable beds, rooms with no privacy, more than 14-hour working days for pay that’s good for five, zero benefits but a lot of curses. Years ago, I interviewed a senior airline executive. She was based in the Middle East. She candidly shared that she used to be a domestic helper in one of the countries there. Her employers were Muslim Arabs who saw her potential. They sent her to school. They encouraged her to aim for the stars. Her emails to me indicate that she is a very well educated woman who is a deep thinker. She would make a very good writer.

“Salve, maids and employers deep inside them are the same. It just so happened that one of them is born under better circumstances. It could have been entirely possible that I was born the employer and she was the maid,” I remember her telling me in an email.

Sadly enough, many Filipinos mistreat their maids. The high-profile case of Marichu Suarez Baoanan vs Ambassador Lauro Baja Jr. and his family is a tale that’s told again and again, in many different variations and it doesn’t happen only in wealthy families. Haven’t you seen maids used as a status symbol, but watched closely when they eat? In the kitchen of a very close acquaintance, I marveled how three maids were not allowed to eat on the same kinds of plate the family use nor eat the same food as the rest of the household. The leftovers that are almost spoiled are the only ones good enough for them – and they are rationed at that. Whenever they are seen sitting or resting, the employer thinks of something that they can do so that they are “maximized”. I can’t say this strongly enough: there is nothing respectable about people who abuse their house help. If proper treatment for humane reasons is not possible, at least for security. At the end of the day, they are the ones who cook the food and who watch the children when we are gone. At some point, we need to think about what the house help stand to gain from years of service. Even the ones that occasionally make our heads spin with their antics or texting habits deserve a Social Security System number and employer contribution, fair salary, health benefits and 13th month pay (or at least a Christmas bonus). I know of at least one insurance policy that’s easy enough on the pocket (premium was around P1500 per annum for accident and health) for employers to buy for their house help. Perhaps as an incentive for the ones who are loyal, honest and true, employers can teach them how to save and prepare for their own future. Such a gift of time and patience can only be good for the entire household.

Could it be true? DZMM said this morning the number of cars that ply the EDSA route is down by 10 percent. Could it be that the age of carpooling and mass rail transit has finally arrived? With a P60 per liter price looming over everyone’s heads, Filipinos will be spending so much more on transportation, food and other necessities, leaving less money for everything else including big and new cars. I dare predict that there will come a time when only men will be driving alone on EDSA during rush hour! (You know how men hate car pools. At least the men I know who hate what they call "small talk"). It's nice too if Filipinos are cutting down on gimmick days, but hopefully not totally. I'm not too sure about the happiness index of hermits. A Philippine Daily Inquirer editorial the other day pointed out that the rising oil and food prices have one unintended but good consequence: people are living simpler lives. It's a good reason to rejoice. Have you noticed how we have more stuff, but are less happy? Gone are the days when people fix and sew and literally patch broken things up. In general, we make the cashier ring more often with toys but still can’t find the time to be our children's favorite playmate. I am very much troubled that in this day and age of email, mobile phones and instant messenger, there are too many ways to connect but very little time to do it. And when we do, the connections end up shallow and truncated in text-speak. Live simpler lives. I like that the sound of that. Go back to the basics. Spend less; connect more. Eat simpler and healthier food, instead of snorting down steak after slices of steak. Stay home more and binge less. Wear less makeup but reach out more. Do we really need 30 pairs of shoes and 300 different kinds of tops to look good? Do the children really need that much food when eating out? There are many ways to live simpler lives without changing the quality of our lives. Lynette Luna, an INQUIRER.net editor, told me early this morning in the office if I wanted a slice of buttered toast -- fresh from her kitchen in Marikina, Rizal. She was beaming as she offered me breakfast.

“I have learned that it is important to be creative with meals. After all, we do the marketing and cooking for the house. Why not kill two birds with one stone,” Lynette said.

Lynette is my favorite political analyst but she could beat any personal finance writer in her practicality. “We may not think that P50 per day is big, but multiply that by 5 and then by 4 and you have P1,000,” she said. That’s P12,000 per year in savings just by bringing lunch to the office. Add to that merienda or snacks, and you can end up with a sizable amount of money for gifts, new pairs of school shoes or books. Besides, you and I both know P50 for lunch in Makati is extremely low for a respectable meal. Sure, the buttered toast has to come from somewhere, but the way prices of restaurant meals in Makati City are behaving, home-cooked meals are still way cheaper. How can we live simpler, but fuller lives? We have to ask ourselves that from time to time…and here’s hoping that the question pops up during crunch times when we’re touching that nth snazzy outfit and other eye candies at the malls and not after we have swiped the credit card ☺. How do you intend to live a simpler, but fuller life?

Savings account: P5,000 Checking account: P5,000 Time deposit: P10,000 Special deposit account: P100,000 Foreign currency deposit account: $1,000 Mutual fund: P5,000 Unit investment trust fund: P5,000 Treasury Bills and Bonds (through banks): P100,000 Account with a stock brokerage firm: P50,000 (but I just learned that at least one has no minimum investment at all) Priority banking accounts: $50,000 (you will have access to different investment instruments at higher interest and the services of wealth managers or financial planners) For first-time investors, read this guide: Investment 101 for the first time investor (Check this spot again from time to time for more updates. The usual disclaimer applies: this is not a solicitation to buy etc. etc. and each instrument is attached to its own kind of risk).

...you're upset. Nuff said. Personal Finance Round-up Tasha really got money-smart last week by being so self-aware in her shopping and taking her goals to pay off all debts this year seriously. Personal finance voyeurs out there will love her blog as well as Geek and Money's. It's strangely interesting to watch his mid-year personal finance checkpoint (check, check, ooops gotta do better on that...) and what he expects for the coming year. If you want to know why it's important to compute your net worth and you want to know how other people are doing it, check out his blog. Frugal Pinoy reveals that he's into gadgets and makes a great case against buying a newly released gadget. All of you who are itching for the iPhone should only read it if you want to be free of the itching... ArtGamolo's entry today explains how to leverage debt, meaning borrow money to invest. Tricky. I have seen some people do it and get burned, and I've seen others who got richer. Ready To Be Rich's spied on me and learned that my refrigerator is more than 10 years old and I'm planning on buying a new one :-). One of those things that escaped me is replacing that trusty old White Westinghouse. I'll definitely try that tip on inserting a paper bill along the edge and seeing if I can easily pull it out once the door is closed. Oh and yeah, he says the ones that make ice and dispenses them through that little window consumes more power. More tips in his blog, To Aspiring Entrepreneur who is still bleeding from this falling market... I feel for you, buddy. "When will it (stock market) reach the bottom?" he asks. I wrote about people who just want to stop the bleeding in my article today in the Philippine Daily Inquirer, Stock market getting you down? An article from CNNMoney today "Bear market freak out" pretty much said the same thing as my article: that people often buy high and sell low, instead of buy low and sell high. Back to Aspiring Entrepreneur, he has a spreadsheet on all his mutual fund and UITFs. It was interesting to see which of his four equity funds wasn't in negative territory. Won't ruin the surprise for you. Next time your mutual fund company calls for a stock holder's meeting, please attend. Very few do! And that's such a pity because that's the one time you can bully your fund managers. (Kidding!) Don't be obnoxious at the meeting of course, but at least ask them how much of the company's own funds are invested with the pool of funds you're invested in, too. This MarketWatch article says that should at least provide some comfort. Till next PF roundup.

What is this thing called inflation? The man on the street cares less for the word than for the price of galunggong on his table, but they are one and the same. Simply put, inflation measures price increases –- and whether you live in Forbes Park or on Gov. Forbes Ave. (pronounced For-bes), it’s a worry. But how does it compare with other problems Filipinos are facing? What weighs heavier on your mind? a) Inflation or oil prices b) Inflation or corruption c) Inflation or the poor quality of education d) Inflation or lack of jobs e) Inflation or national poverty f) Inflation or your waist line Roundup At 11.4% in June, inflation is now at the highest point in 14 years. Bangko Sentral ng Pilipinas, the central bank of the Philippines, had to spend precious dollars to defend the peso early on Friday when the news on inflation caused the local currency to slide to a new 10-month low of P45.70 against the US dollar. It doesn’t help that oil hit another record high north of $145 this week. Central bank governor Amando Tetangco Jr. tried to temper the public's reaction to inflation. Next year, it will all be better, he says. Maybe it will, but with around half of the population on subsistence mode, the months between now and next year will matter a lot to the average Filipino family. Shares have been tumbling the whole week in reaction to the inflation jitters, both locally and in other markets across the globe. Asian stocks are set for the worst first half record in 16 years. These days, nerves of steel are needed for those who are still invested in stocks. Companies, like SMC Packaging, are rethinking IPO plans; others are rethinking business strategies. Jollibee is planning to expand cheap fast-food brand Manong Pepe. Expect more public discussion and marketing strategies revolving around biting the bullet, surviving tough times and hunkering down. As can be expected, overall business sentiment continues to be sour. First Metro Investment Corp. and the University of Asia & the Pacific expect the economy to grow 4.0 percent in the second quarter. A Reuters poll showed that economists expect a 5.1 percent GDP in the second half, much lower than 7.3 percent in the same period last year. Financial instruments Borrowing in foreign currencies is a growing trend, as the peso’s two-year upswing made it more attractive than borrowing in the peso. There was a 42% increase in FCDU (foreign currency deposit unit) lending in the first quarter, the central bank said. If the peso depreciation keeps up, paying off these loans will not be as easy as borrowers think it would be. Experts have repeatedly warned of the risks of cross-currency transactions and this is one of those. Personal Finance Whether we are talking about inflation, record-high oil prices or slowing economic growth, the personal finance strategies are the same: save more, spend less, be money-smart, and keep your job. Oh, and don’t forget to relax and be patient. This is not yet the Great Depression.

Runaway debt wearing you down? Don’t know what to do? Having a hard time finding a sympathetic listener? Pour it all out and pop me an email at lightdream (at) gmail (dot) com with your story or comment on this post. Let’s see if we can get bankers and experts to answer your burning questions. There, there. Now that’s off your chest, keep watching this space for advice from the experts on how to handle debt. Hope to hear from you soon!

You all love Warren Buffett, right? Would you pay $2.1 million to have lunch with the oracle of Omaha like this Chinese investment manager who decided to pick up the tab by taking part in a high-stakes online charity auction? Zhao Danyang, 36, will have lunch with the US billionaire at a Smith and Wollensky steakhouse restaurant in New York. He can bring seven friends to enjoy Buffett’s company for, oh, maybe two hours. Three hours max... maybe. That’s serious pogi points if you like to project a certain image. Now if you just want to be generous and donating millions of dollars to charity is your kind of thing, why not get a lunch with Buffett into the bargain? Generosity is a curious thing. On the one hand, the world needs more of it. An interesting list of random acts of money kindness in this article have made life a lot more livable for quite a number of people. I have also said in a previous post that we can’t always expect people to pull themselves up by their bootstraps and that there will be times we will be called to give till it hurts -- and we should. On the other hand, (and I type this with a mountain of misgivings) sometimes we are too generous for our own good. A friend said she was looking at her credit card bill for June and found that she paid almost P6,500 for restaurant meals. The funny thing is, she could have pared that down to P1,500 if she wasn’t as generous in footing the bill. After all, her lunch mates –- colleagues and friends -- were not exactly welfare cases. At a Money Makeover dinner with Augustus J.V. Ferreria last December, Bianca* was quick on the draw when the bill came. Oh, the kind-hearted sermon that one brought about! Joe advised all of us to develop the habit of dividing the bill when we dine out with friends and colleagues. There are many other ways we can be too generous for our own good. In the same vein, there are also many ways people can be ridiculously stingy! Oh boy, I’m sure you know the type. From a scale of one to ten, ten being the most stupidly generous and one being terribly stingy, where do you stand?

I can put a whole new meaning to being frugal, sometimes. And I’m proud of it. Unfortunately, the golden dust of stinginess can wear off so quickly because the next minute, I can be the worst spendthrift on the planet. Have you ever been bitten by these financial mood swings? Here’s an example. I love my more than 10-year old Esprit wristwatch. I bought it with money I earned from my first award as a journalist back in 1997 (and I mention that here only to explain its sentimental value). In a moment of extreme klutzness, it fell from a super-high tower rack and it stopped working. The face was a mess of broken glass. In a normal situation, I would have loved shopping for a replacement. This time, however, I was moping about in the mall, not excited to buy a new one. I kept telling myself that it’s more than 10 years old, for heaven’s sake. I deserve to buy one with a spiffy new design or a classic Omega-like look, you know? I got it back for P500, including an P80 tip for the guy who fixed and cleaned it. The sturdy Swiss parts saved me P10,000, but that means I’m still wearing what I wore as a cub reporter. Turn back the reels to the previous scene. Hubby and I decide to buy some beach shorts from Landmark department store. Most expensive pair of beach wear I ever saw at P4,500. Before we knew it, I had decided that he also “needed” two new shirts, I “needed” new clothes, the kids “needed” new shuttlecocks and Speedo goggles. Err… and this example is pretty tame. One moment, extra stingy I could put Ilocanos to shame. Next, total spendthrift. Solution: self-awareness. Mindless impulse spending starts when self-awareness ends. Who likes to feel deprived, after all? Who likes to be the country mouse in the big city? Who would choose to keep P30,000 untouched when it’s a bonus from a job well done? A little pandering to the latest fashion trends won’t hurt! I will pay that credit card bill next month, honest! (Yeah, right). Ideally, every time we open our wallets we should be thinking, not feeling. But that’s easier said than done. That’s why consistency in frugality is difficult to achieve and we’re often caught between money mood swings that raid our bank accounts and our peace of mind. Tempering money mood swings is a worthy goal, however. In the beginning, we might need tricks to bear down on feelings of deprivation, like taking one small bite of chocolate instead of mindlessly digging into a whole bag of Kisses chocolate. If the mood swings are volatile, keep trying. Let’s use incentives and remember to give ourselves time in the hopes that soon, just the mere fact that we have been consistent is all that we need to feel satisfied.

(This piece is written by Bianca, one of the readers of MoneySmarts who has been chosen for the one-year Money Makeover challenge by INQUIRER.net. Bianca’s real identity is confidential, so that MoneySmarts can share her family’s financials and the lessons she has learned with the rest of the world. Read more about Money Makeover here.) I am faced with the possibility of death. I never felt I needed life insurance, always resisted it, reasoned that under the mass law's hierarchy of needs of Filipinos, it was way below –- after all, I had other more important bills to pay, I had properties under my name that I can pass on, and I never really cared much for the pestering of insurance agents who only saw me as their next paycheck. Okay, I did have it at one point, a P750,000 investment, which I lost because I did not give a damn. I was young and immortal. Now, ten years after, I began to see it in a new light. I had undergone psychological-financial overhaul courtesy of Joe and Salve, and realized that, yes, I might actually need it. The tipping point, however, was a seminar on estate and trust that I attended. I learned that insurance is a great tool to transfer wealth –- there was no income or estate tax payable (provided the beneficiary is irrevocable), it was better than a transfer via a donation or a sale, or setting up a corporation to hold property, better than other very complex methods to hide and transfer wealth which would entail the assistance of lawyers and accountants, and yes, paying their fees. I realized too that I was not getting any younger and should consider these things seriously. So I did. I talked to Joe’s wife, Nannette, who advised me regarding premiums and how much I can afford annually and other particulars. We did the math, filed my application, and I underwent the whole battery of medical examinations – fasted for blood sugar testing, got tested for HIV, gave blood sample, urine sample, had my chest x-rayed and poked, answered a whole series of questions about my health, my habits, my lifestyle. Turned out, somewhere along the way, I did something to my body, and it betrayed me. Okay, it is not so serious, or at least the optimist in me would like to think so. My liver gave an unusual reading and I am what they call in insurance parlance as “high risk”. The good thing is that I am insurable – but there is a big however – I needed to pay a higher premium (or opt to have a lower coverage). Unbelieving, I had myself tested again (it is allowed). Same results. So I paid the higher premium, quaking in my boots because of what I have (which is undetermined as of this time) or could have if I would continue speeding toward the highway of no exercise, social drinking and chocolates. I re-enrolled in a gym, ate my fruits and my vegetables, did my research, saw the doctor, and assured myself that it is not yet too late and that my fate is still in my hands and God’s who is merciful and kind. Lessons? Get insurance as early as you can, take care of your health, prepare. Because no matter how we shove our mortality aside, forgetting it, disbelieving it, thinking it unimportant, it will one day catch up with us. You, me, us – we are all on our way there. I think, though, that this “getting there” is actually a good thing. :-) "No matter how we shove our mortality aside, forgetting it, disbelieving it, thinking it unimportant, it will one day catch up with us," -- Bianca, for MoneySmarts Money Makeover. (Photo courtesy of Fe Herradura)