“Want is the path to the Dark Side. Want leads to spending. Spending leads to debt. Debt leads to suffering.”
“It’s not want that’s the problem, but the habit of constantly satisfying one’s wants.”
– Get Rich Slowly’s cousin’s rebuttal
Personal finance word of the week: LEVERAGE
For companies, to leverage is to borrow money to finance operations. A highly leveraged firm, for example, uses more debt than equity from shareholders. If it is leveraged P50 to P1, it has P50 borrowed for every P1 it has in cash. When considering a stock to buy, look at how leveraged it is because that indicates the kinds of risks it is taking.
For investors, to be highly leveraged is to use financial instruments like options and futures so that the, say, P1 million you plan to invest will effectively be P100 million. This, however, means that if the market moves against you, your losses will be magnified. Yes, you could lose your shirt, as bankers say.
Individuals that are highly leveraged are in deep debt. There are good debts and bad debts. A mortgage is generally considered good debt because it has the lowest interest rate that you can find out there in the market. Some experts, though, are now wary of this principle because of the housing bubble roots of the present crisis and it goes without saying that if you have the money, then buy in cash or if your income can take the pressure, go for the shorter-term loan. Another way out of this scenario is to raise your equity portion as much as you can.
Bad debts are normally consumer loans that are left unpaid to gather interest. Stay away from them!
That’s enough nerdish moment for the day. Enjoy your weekend and smile despite the traffic! Cheerfulness can lessen the pain from being deeply leveraged. 
…gross domestic product grew 4.6% in the third quarter despite all the pessimism, talks of gloom and doom and actual recession in more advanced economies of the US, Japan and European countries.
The figure is in the upper end of the government projection of 4.0% to 4.6%. Still, this is quite a drop from the 31-year peak of 7.2% in 2007. The fourth quarter, although seasonally a good quarter for the economy because of Christmas spending and stuff, might be gloomier if people keep postponing their spending to wait for prices to go lower (like that LCD television that was at P120,000 early this year but is now at P100,000, zero percent interest for 24 months.
So, maybe I should change my tune a little bit and say: hey guys, if you have the money, go shopping to save the economy! Hehe.
***
…some analysts actually believe the bear market is over, stock prices have bottomed out, but that this does not mean the bull is ready to charge. So, as my editor-in-chief JV Rufino asked when I told him about the news, what do you call a market that is neither a bull nor a bear?
***
…if you have investments in the stock market, you belong to less than half of one percent of the total population of the Philippines that are into equities! Citiseconline.com only had 6,000 customers in 2007 and only 15% of them traded at least eight times in a month.
***
…I am starting to believe I am jinxed!
Well, the good news is that a few minutes (yes, minutes) after I blogged about BPI’s online banking service, someone from the bank called me up at home (should I be scared or impressed? honestly, I’m more impressed than worried) and tried to help me with my problems. A few days after, he called me again as promised and told me the account linked to my online banking facility was inactive, hence the error messages. (the phone banker sounded as puzzled as I was by the explanation of their IT guys). I took note of the instructions he gave and resolved to follow them religiously.
Finally, yesterday, I was ready to look at my account. Lo and behold, I forgot my password and got locked out! (that was totally my fault). So, I called up the 89-100 hotline today and what message did I get? “Ma’am, we are having a problem with our system so can you please call us again in an hour?”
Strangely, I am not really upset. But I think I am so totally jinxed.
***
…when you call an OFW abroad through their phone with roaming capabilities, he pays through the nose just to receive your call and you pay IDD rates on your phone. Ouch!
If you have Globe’s family sim pack, the best way to maximize the entire package is for the OFW to buy another sim with Globe’s telco partner in that country. You can send him a text message for P1, he can reply using text. The two sims used by relatives here can benefit from “unli text plans” but to call home, he should use his co-branded sim.
OneAyala privilege card, by the way, was relaunched today with more benefits! It’s a discount card that’s also an ATM through which Filipino expats abroad (I like the sound of that more than OFW) can use to remit money to the Philippines. Check out some of the noteworthy discounts below (others I did not include were blah):
When the stock market is raging like a bull, any monkey can make money trading stocks. It is when the market is tanking when, as they say, you can separate the men from the boys.
I was listening to Citiseconline.com president Conrado Bate’s presentation at the CFA Society Prestige Night last week, and found it interesting that the company considers these six stocks their GEMSS.
I didn’t get the meaning of the acronym, but based on my notes, the company considers these companies as leaders in their industry, can report stable earnings in good and bad times and grow when the economy is growing, have management that are transparent, churn out superior products and services and have strong balance sheets.
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Successfully calling the bottom in any crisis will give any “expert” bragging rights, but I wince whenever I see someone trying to make a prediction. After all, if there is anything we have learned lately, it’s that nothing is what it seems, and the best game plan is just like what your mother used to tell you in grade school: better be prepared.
(What is it with quotable experts and the inability to say, “I don’t have a clue?”)
Still, just like on that lengthy vacation drive when the kids start asking “Are we there yet?”, there are road signs that can indicate when we are already in the last leg of the trip.
A Pulse Asia survey released today says 70 percent of Filipinos feel they are “worse off now” than three years ago and most expect that things are going to get even worse.
Pulse Asia’s survey didn’t indicate why the respondents feel this growing pessimism: are they losing their jobs, eating less, suffering a loss of income, etc? Just that the quality of life is going downhill.
I don’t see these yet in the people that I interview. Aside from the voluntary reduction in spending to prepare for the hard times ahead, like choosing to eat at home instead of having dinners in restaurants, or going potluck when organizing parties, and reducing gift budgets for Christmas, I haven’t seen any mass layoffs yet and the malls are still packed with people carrying all sorts of purchases. At least, so far.
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Whether you’re a newbie to personal finance, or someone who is already well on your way to saving and investing, computing your net worth is a worthwhile exercise. Experts suggest doing it at least once a year most preferably with your spouse (and even with children, but make sure they understand that these are information meant to be kept within the family).
What is that so-called net worth? It is a snapshot of where you are on the road to financial freedom. It has the potential of delighting you, or depressing you, depending on your current state of affairs. But remember that it is just that—a snapshot—and the way it will look a year from now will depend on how determined you are to improve your finances.
It is a very, very personal document, and as these things go, you can either fudge it to make yourself feel better, or populate it only with brutally honest figures. It goes without saying the latter is better! 
I have been researching for three weeks now on the nature of members’ benefits from state pension funds Government Service Insurance System and the Social Security System. As you know, the times call for a more determined look into financial help people can tap in times of need, and state pension funds were created especially for that.
I was expecting the article to unfold as a helpful “what to do” story on how to tap benefits more aggressively; an educational foray if you will on benefits that are there anyway for the average worker.
A friend alerted me over the weekend, however, on a very disturbing matter. Many employees in the National Economic Development Authority (NEDA) who had applied for loans from the GSIS have been paying interest and principal far longer than the terms required under their loan. The reason? Computer records do not match. Their personal records of salary deductions to pay their loans do not match that of the GSIS. Some borrowers have been paying for more than 20 months for a loan that would have been paid in full for 12!
We received this email yesterday from a reader based in Purono Park, Queensland, Australia:
These people better be smiling when they say things like that. They must be joking. As if we don’t have enough clowns in government. Our relatives in the Philippines are losing their jobs, so we have to send money to help them. Can’t they offer solutions instead of false reassurances? Will they please stop treating us like idiots?
He was reacting to the Philippine Daily Inquirer article “Slowdown, not recession” where cabinet officials explained that the Philippines is likely to show a slowdown in economic growth next year, and not a recession as most top businessmen who took the Makati Business Club survey believe.
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So, we make money mistakes. Big deal. What matters is what we do to recover and learn from them.
One MoneySmart reader, I will call him Danny, made a credit card mistake in the past enough to put him on banks’ negative list. The misdeed technically was his brother’s, who used his credit card to buy a computer and promised to pay him monthly.
You probably guessed what came next. His brother failed to pay, and the P18,000 debt ballooned to P30,000 within a year. Danny paid everything by 2004, but by that time, his name was already hot listed.
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