January 2009 Archives

Admit it. Spending is more fun than saving. That’s why in these tough times, some techniques to trick ourselves into saving might come in handy. There’s a television segment that discusses this topic, but the tips are not that applicable to the Philippine setting. Those who are in the US, may however, want to watch it: For those who are living here in good old Pinas, here’s a list I compiled: 1. Sock away that P20 bill. Some advise saving loose change. I don’t. I carry just the right amount of loose change and surprise cashiers by paying the exact amount as much as I can. This allows me to get rid of those pesky 10-centavo and 5-centavo coins, and I don’t feel cheated when they try to shortchange me just because they don’t have enough change in their drawers ☺. But when I see a P20 bill, now that’s a different matter. I keep that for the money pot. I save more every week that way and I hardly miss it. 2. Commute when you feel the urge to take a cab and set aside that taxi fare. Makes you feel better even when you’re sweating inside the MRT or keeping your butt from falling off a jeepney seat! 3. Downgrade your post-paid plan and use the landline more. Then put the amount you saved in your money pot. 4. Raise cash by being a mini-entrepreneur on weekends, then save and forget all about those extra earnings. The important thing is earmarking those earnings for savings, not for some thing you want to buy. 5. Dedicate bonuses and any raise to savings. Granted, this year may not be a year for fat bonuses and pay increases. 2009 is a tough year, blah, blah, blah. But keep in mind that what goes down will go up and eventually, we’ll be seeing bonuses and pay increases once more. Instead of spending these before they come in, act like they are invisible. Well, ok, maybe set aside 5% or 10% as fun money, so that you don’t feel deprived. But then squirrel away the rest into your savings and forget they exist. 6. Automate your savings. You are tempted to spend what you think you have, so trick yourself into thinking your spending money is only a certain level by automating your savings. This is easy to do, as we have always said. Several banks have automatic deduction arrangements, where they take care of doing the dirty work for you. Take advantage of these arrangements. Do you have anything to add?

By Marjorie Gorospe INQUIRER.net This is an interesting piece from one of our reporters: When I was still taking entrepreneurship and statistics classes, I yawned a lot. I was never a huge fan of numbers and finance terms. Now, experts say they can teach these subjects and still put fun in the classroom. GE Money Bank Philippines and Let's Go Foundation in collaboration with local experts come up with a financial education program called Women Entrepreneurship Program, and part of this program is FUNANCE. Funance was developed by Maurino Bolante, a professor from the Asian Institute of Management. The idea is to use an interactive classroom activity approach to make learning easier for both teachers and students. Using videos and online materials, Funance has modules on the basics of Balance Sheet and Income Statement, a case study entitled "Pasta At Iba Pa" where students are inspired to explore business ideas and a module that helps students make decisions on cash flow and cash management in a form of a board game. Schools that want to use the module may have the all the materials for free. Too bad, this was formulated just after I survived the boring hours of my entrepreneurship class. I could have been one of those students rolling the dice on the Funance board game, finding the right definition of a concept with my classmates or pretending to be a tycoon--enjoying yet learning the lessons.

For many of us, financial lessons for our kids involve loosey-goosey lectures on wants and needs and “money doesn’t grow on trees” kind of things. Perhaps some parents go to the extent of opening up a savings account and explaining the magic of compound interest. Perhaps. From time to time, though, someone like 12-year-old Anton Fausto comes along, making you realize how easy it can be to underestimate what children can learn. We were at the set of Shoptalk at ABS-CBN News Channel (ANC) last Monday where host Pia Hontiveros interviewed four kids about saving money at a young age. Each one had an amazing perspective on money: Melvin Esteban’s eight-year-old niece Maxine, Randell Tiongson’s 17-year old daughter Ysabella, my 13-year-old Alix Danielle and Anton. “So Anton, how do you save money? Do you have a savings account? How much money do you have?” asked Pia. “My assets are in the six-digit figure,” he said matter-of-factly, almost surprised that we all looked so surprised. Truth is, my jaw dropped. It wasn't the amount, although that in itself is a huge figure. It was more of how he said it. Pia laughingly said after the show that she was floored, too. “I have never used that word before!” said a very amused Pia. My guess is he absorbs these things at home. His dad, BDO chief investment officer and senior vice-president Marvin Fausto, used to head the bank’s trust department. Now he’s in charge of investment planning for the bank. Anton explained that he has a “small account” and a “big account,” just two of the financial tools he uses. The big account of course grows his money faster with a higher interest. He also buys stocks, based on recommendations from Dad. He doesn’t make money all the time on these stock purchases, he said, but he shrugged off these losses. Wise. Mistakes from time to time are part of money lessons, too. These days, Anton is saving up for a laptop. He still has a long way to go: the laptop costs P50,000, I think, and he has P3,000 so far. But the process is a real-life lesson on goal setting, discipline, hard work, and frugality. I bet he will learn more from it than some of his subjects in school. All four kids save from their allowances, and distinguish from wants versus needs. They save for what they want instead of ask Mommy and Daddy to buy items for them. It was very interesting when Pia asked them about wanting what others in their peers have, like PSPs, Ipods, etc. They don't deny wanting those eye candies and having the desire to "keep up with the Joneses" just like many of us do. But they said they step down when Mommy and Daddy makes them see why these things are not wise purchases. Eight-year-old Maxine, niece of registered financial planner and resident Intsik-na-Ilocano-pa expert of Generali Pilipinas, has a great perspective on money. She wants to save P1 million for her yaya. It was obviously not a scripted goal; the kid showed maturity beyond her age. “Can you distinguish between a want and a need?” Pia asked her. “A want is something we can live without, while a need is something that we really should have like food, clothing, and other stuff like that,” Maxine replied. Sometimes, those who of us who are already adults still don't get that! Ysabella (also called Billie), is a 17-year-old college student. She’s the daughter of Randell Tiongson, president of Personal Finance Advisers Ltd., and moderator of successful forum Income-Tacts.com. When she last bought a mobile phone, she paid for 80 percent of the entire cost. Both Billie and my daughter Alix Danielle shared why they set aside 10 percent of all their allowance to pay tithing. “It’s just a small amount, really, when you think that everything that we have comes from Him,” says Billie. When I give my daughter allowance, I make sure I have several 10-peso coins and 5-peso coins to make it easy to set aside for her savings and tithing before she goes to school. That’s just one of the things I learned from many of you guys in MoneySmarts and it has worked really well. I have a feeling our kids will do much better than us. I breathe a sigh of relief and hope. PS. Shoptalk airs shows on personal finance Mondays, 3-4 p.m.

By Aya Laraya, RFP* With the global financial crisis hitting everyone and so many people losing their shirts, a lot of people are beginning to lose heart and quitting the whole financial planning mindset.  And as lousy as it can be to talk investing when you have just lost your life's savings, you will only be able to recover from things like this if you develop a sound and coherent plan. How?  By being the one who actually decides where your money goes.  What do I mean by this? Consider the following: First, ask yourself, how did you arrive at the decision to purchase your last investment?  (Let's say a pre-need educational plan.)  Did you decide on your own or was it recommended to you? Did you consider other options before deciding on the pre-need plan? (Like stocks, mutual funds, etc.)  What factors made you decide to take that option over the others?  (Risk? Accessibility? Rate of Return? Cost?) Second, who decided on which provider to buy from?  Did you research who the industry leaders were?  Or was it based on word-of-mouth?  Or on the fact that your friend or relative worked for said provider? Third, who decided on the amount you would invest?  The worst thing that you can do here is to allow an agent to decide how much of a certain product you "need".  Keep in mind that a great number of them work on commission and that the more you invest, the greater they earn.  Consequently, their objectivity in this matter would be somewhat suspect. Ok, so much for the questions.  How about some suggestions? The ideal decision process would be as follows: First, decide what you want to accomplish.  At this point, it can still be something vague like "Provide for my child's education" or "I want to retire at 55". Second, quantify that target.  You have to get an idea as to how much you will need to hit your target.  Talk to your desired school to get an idea of how much their tuition fees increase annually and use a calculator or Excel to project that figure to the time when you expect your child to need it. Third, (this is actually interchangeable with the second step), examine your current finances to determine how much you can truly afford to invest. Ideally, you should make a projection for the period during which you expect to make the payments to truly see if you can pay them all.  Very many people fail in this step and end up defaulting on payments. Fourth, using the figures from steps two and three, determine what investments can achieve the desired rate of return.  This is the most technical step in the process and you may want to get outside help. However, the key point here is that you have to be the one to decide which investment vehicle to ride in. Fifth, examine the different companies that sell these investment instruments. Find out who the industry leaders and laggards are. Make it a point to visit their head offices to see how they do business. Is their office all flash but filled with unresponsive people? Do they try to hard-sell you the minute you walk in? How easy is the office to get to? What is the process for you to get your money back?  (In my experience, making that initial investment is the easiest thing in the world. It's when you want to get your money back that you suddenly have to fill-up so many forms and jump through so many hoops.) Sixth, get proposals from at least three firms.  Make sure that the terms come from you so that it will be easier to compare options. Think of this step as like going to the pharmacy with a prescription. For example: I have P50,000 right now, what blue-chip stocks would be good to buy?  I don't want oil, mining or other speculatives. Or: I can pay P4,000 a month for the next five years. What plans can your company offer me? In both cases, the control lies with you. You already know what you want and it simply becomes a matter of whether they can provide it or not.  If it’s the latter, then just walk away. Lastly, always monitor the company you invested with. If the past year has taught us anything, it’s that even century-old institutions can be wiped out and that it’s the individual investor who pays the price. Ask for financial statements on at least an annual basis. If you invest in a managed fund that dabbles in stocks, make sure you check their portfolio regularly. Simply put, NEVER assume that investing is a fire-and-forget process.  The hard truth is that you can never relax because, at the of the day, everyone is looking after their own interests so you better make sure you protect yourself. *Registered Financial Planner

Here’s my roundup, which should have been uploaded last Saturday. Sorry for the delay. By now, you probably know that job losses and news of more firms shutting down intensified last week, and we might not like it, but you’ll see more of the same in the coming months. There’s no use cursing the gods. Better use your time wisely by thinking of ways to keep your jobs, and if that’s not possible, prepare using the mantra we have been repeating over and over again. Save more; spend less. Build up your emergency fund. Postpone major expenses if possible. One more thing: financial tension is most often the cause for marital troubles. So keep your job, but if not, remember to keep your spouse! The sum of all our marriages is more than the paychecks . Personal Finance There was a slew of great personal finance tips on INQUIRER.net last week, geared to help us during these trying times. In When banks, pre-need firms fold, Alvin Tabañag, author of “12 Steps To Build Wealth On Any Income,” says there’s real fear out there now among Filipinos because of the closure of rural banks and preneed companies. This article has a practical guide for those who were affected by the closures. In Protect education funds from crisis, BDO chief investment officer and senior vice-president Marvin Fausto points out that one of the most common investing mistakes people made last year is forgetting to take out your money from UITFs and mutual funds if you needed the money in three to five years. He says that in 2006, people doubled their money in these investment vehicles and got dazzled by the returns and thought they would last forever. In BSP: don’t keep money under the mattress, deputy governor Nesting Espenilla says one of the warning signs your deposits are not safe in a bank is when “agents” solicit your deposits and they are offering “too good to be true” interest on your money. Greed factor, huh? We know what bank he is talking about. In fact, the House of Representatives will be asking the owner of Rural Bank of Paranaque, the mayor of Sto. Domingo town in the Albay province, to face lawmakers and explain what happened to his bank. Enrile is now saying Congress needs to do something about the problem of preneed companies because regulation is not very tight. I think, however, that tighter central bank regulation will be more effective. It’s a good sign that banking practices guidelines are now being tightened, but it’s kinda reactive, I know.

Under BSP Circular 640, banks offering deposit interest rates 50 percent higher than the comparable market rate will be considered as engaging in unsafe and unsound banking practice. Unauthorized acceptance and solicitation of deposits outside bank premises and branches will also be considered as cause for alarm.”

In Money mistakes seniors make, those who are nearing retirement are advised to take advantage of retirement funds and how a better strategy can preserve their money as the day of reckoning approaches. We’re all feeling the squeeze. Most of us who have kasam-bahays at home are probably feeling it more. In Johnny Noe Ravalo’s article “Saving program for kasam-bahays” he draws out an interesting strategy to help people who help us, and I’m personally putting this to practice this year in our home. Instead of giving them their pay increases this year every month, I am putting everything in lump sum in a deposit account that they control. That way, they become part of the formal banking system and familiarize themselves with how it works. They can increase their saving every month, and even use it to remit back home to the province. LBC rates for money transfer are much, much steeper than banks’. With all these issues in investing, this news came as a pleasant surprise: Public high schools to teach investing, assuming of course that the material used is of good quality. Economy As we said earlier, job losses are escalating, but the figures and estimates need a closer look. In Export drops affects 34,000 jobs, Labor Secretary Marianito Roque says the export sector’s slowdown will affect 34,000 jobs nationwide.

Based on the survey done by [the labor department], we have a total of 15,000 displaced workers nationwide and another 19,000 who were subjected to reduced working hours,” Roque said. He said 13,000 workers lost jobs in the provinces of Cavite, Laguna, Batangas, Quezon and Rizal, with Laguna accounting for 5,000 of the total.

He adds that Hundreds are losing jobs daily

Just for today, it was reported to us that 458 people nationwide could lose their jobs," Roque said.

...and other experts like Benjamin Diokno warn of more layoffs. We know that the biggest news last week was that of Intel closing shop. Sad, sad story there. However, industry estimates show that there are around 160,000 jobs to be created in BPOs in 09. Don’t forget the KPOs (knowledge process outsourcing). Citibank has said it would expand KPO operations in RP significantly this year. All in all, there will be losses, yes. But some companies will also be hiring, and there’s the silver lining. Investing Do you believe in feng shui? Honestly, I don’t, but for those who do, they are saying calmer markets are in store for 2009, but don’t expect a bull run yet. The Gotianuns have formally signed the deal to acquire Philam finance units, as a strategy to turn East West Bank into a major player in the industry.

East West Bank signed an agreement to buy AIG Philam Savings Bank, Philam Auto Finance (formerly Primus Finance and Leasing Inc.) and PFL Holdings Inc. The value of the deal was not disclosed. Industry sources earlier said it was “a little over P2 billion.” The transaction will create an entity with combined assets of P63 billion and make East West Bank, erstwhile a niche player, the sixth-biggest credit card issuer in the country. It will also double East West Bank’s auto loan receivables to about P8 billion and make it the sixth-largest in the auto loans market.

Another management change that will affect preneed planholders is that of Pacific Plans. Investment banker Noel Oñate has stepped in as a white knight and is promising that the company’s obligations to its 300,000 planholders amounting to $47 million or P2.3 billion will all be met. Good news? We will see. Have a great week ahead.

One of the reasons I fell in love with our little home is the balcony near the master’s bedroom. I am so much of a garden-sky-fresh air person. Plants, birds, quiet moments under the night or early morning sky relax and reinvigorate my soul. I have little sketches in my mind of how my little patch of heaven would look after I adorn it with orchids, little bonsai trees, lots of plants, perhaps those little water fountains that delightfully makes you feel you are in a fairy tale forest. Hmm. Visions of a little garden set where I can relax and perhaps type a blog post or two. Where I can unwind with the kids. It has been three months since we moved in. My terrace is still bare. There’s a quiet scream occasionally inside my head: you have money in the bank. Why not buy what you want? Then I quell the urge. That’s my emergency fund, and it’s still not enough. I need six months’ worth. Only when I have that stashed away will I consider setting aside some for the terrace. It’s empowering. Even deeply satisfying to know that now I can master those little voices inside me. I used to believe I was the worst spender in the world! Living on less when you can, postponing a purchase when you can, because you are trying to reach a certain financial goal, is a great way to feel good as a person. For now, I find other ways to relax. The little wild birds near my bedroom still chirp to my hearts’ desire and their songs are free.

When you’ve been socking away money religiously to pay for an education or pension plan, sacrificing personal comfort and doing away with little treats in the process, and you find that dream of security snatched away by a corporate failure, you don’t just hurt. You are likely to lose belief in the system. You are likely to blame everyone you can think of—the government, the agent, the company. You may even lose belief in yourself and in the very basic principle of preparing well for the future. I have learned to live with my investment mistakes, but it hasn’t been a walk in the park. I have decided that there’s nothing else to do but learn from it and start over. If I had known some of the things I know now, I would have handled the situation in a more mature way. I would have been more empowered and less freaked out! So, here’s a quick guide for those who find themselves victimized by failures of pre-need plans:

1. Once the closure of a pre-need company you have invested in is made public, make sure that you go to the website of the Securities and Exchange Commission regularly to stay on top of any announcements. Do I need to emphasize that you should constantly check the business pages of INQUIRER.net?
2. Check your documents and make sure they are in order. Getting your money back will depend in large part on whether your documents are intact. You will need to secure the copy of the plan contract, the certificate of full payment if you have already paid in full. If you haven’t, you need to make sure that the official receipts of your payments are still with you.
3. In the case of planholders of Legacy Consolidated Plans, Inc., Scholarship Plan Phils. Inc., and All Asia Plans Corp., you need to file on or before March 31, 2009 a sworn complaint. This will increase your chances of getting back your money, so do this as soon as possible.
4. You also need to present your updated and complete mailing address and contact numbers. Go to the Non-traditional Securities and Instruments Department of the SEC. In Ortigas, the landline is 584-6058 and the head of the department is Director Jose Aquino.
5. What can you expect? Once the courts have approved the dissolution of the company, the SEC will appoint a liquidator and it is with this company that you will claim what is due you under your policy contract.

In the case of Pryce Plans, the SEC said it has not been closed and should still be servicing clients. However, it is no longer allowed to sell new pre-need plans. Those who need assistance in having their plans serviced by the company may course their requests through the following address: 15th Floor Pryce Center 1179 Chino Roces Ave., Cor Bagtikan, Makati City Or get in touch with Jenette Ramos (584-6058) of the SEC. On the College Assurance Plan (CAP) closure, the company is currently under rehabilitation and the courts have appointed a receiver for the firm. I have also learned that it has serviced some claims last year. You may not be able to get the returns from your policies as described in the original contract, especially the open-ended ones, but at least get your money back. So better shake the dust off those policy contracts, guys.

In reaction to my previous post, “Tales of woe from Legacy scam victim,” some of you asked whether Letty’s “lucky” that her pre-need plan has been converted to a time deposit because the Philippine Deposit Insurance Corp. (PDIC) will now be required to pay her back. I wish, for Letty’s sake and many others who were caught in the same crazy scam that that will be true. Unfortunately, based on my interviews with sources at the PDIC, it will not be that simple. PDIC is, even as I write, going through the bank’s records with a fine-toothed comb to make sure it pays only “clean” accounts—meaning those that were deposited in good faith, with sufficient documentation (i.e. signature cards), adjusted for all interest due or deducted with loan payments due to the bank. That’s the mandate of the PDIC: pay only real depositors and make sure precious taxpayers’ money is not paid out to fictitious accounts or even to accounts that are the result of fraud. Agents that converted pre-need plans to time deposits, while most likely only following instructions from the owners of the bank, were in fact defrauding the bank. Thus, the possibility for a payout on converted time deposits is slim, my source says. It really doesn’t look too good for planholders of Legacy. ☹ However, depositors in this situation should still try to claim at least their initial deposit. Maybe Letty can get her P25,000, but not the rest of the checks due for payment in five consecutive years. She will lose nothing by going to the bank and presenting documentation of her placements. Here’s a guide for depositors of closed banks and the most common errors claimants make:

1. Bring proper identification. You would think this would be obvious but PDIC says one of the top reasons depositors’ claims could not be processed is the lack of proper identification. Some bring ATM cards, credit cards, or membership cards in clubs. These will not be accepted. You need to bring any two of the following government-issued IDs that are not easily tampered with: SSS/GSIS ID, PRC License, Driver’s License, Senior Citizens ID, Passport, Company ID/School ID, TIN/Philhealth ID, Voter’s ID/Affidavit. If you are filing the claim in behalf of someone else, you need to bring the same thing, plus a special power of attorney. If the owner of the account is abroad, the Philipine Consul where he lives must authenticate the SPA.
2. Bring sufficient evidence of your deposits.  These include savings passbooks, certificate of time deposit, ATM card, unused checks and bank statement, and any other document you might have. The PDIC will be double-checking the consistency of the signature you use in your documents and the one in the bank’s records.
3. You need to fill up three copies of the claim form from the PDIC and sign the “Signature of Depositor/Claimant over Printed Name” under the “To be accomplished by the Depositor/Claimant” portion in the Claim Form. Again, what the PDIC will be putting under the microscope is the integrity of the signature, making sure none are forged.
4. If you are filing in person, you need to go to either the branch of the closed bank where you deposited your money or another site designated by the PDIC, or the PDIC Claims Counter located at PDIC Ayala Extension Office, SSS Building, corner V.A. Rufino St., (formerly Herrera St.), Makati City.
5. You can also process your claim via mail through this address: The Assistant Vice President, Claims Processing Deparment Philippine Deposit Insurance Corporation 2228 Chino Roces Avenue 1231 Makati City, Philippines

You might be surprised, but some do get their money within an hour or so. The entire process will depend on whether your documents are complete and in order, and on the status of the documents within the closed bank. It is not unheard of for bank employees to be in collusion with depositors in “splitting” accounts when they realize the bank is about to be closed. Who’s the loser? Bona fide depositors claiming for deposit insurance as the presence of split and fictitious accounts makes everyone jump through hoops to get their money. Claimants are normally classified into three: “clean”, “document-deficient” and “for further verification”. Only claimants with clean documentation will be paid within an hour or at least the same day. If you belong to the second category, you may be asked to present more documents to prove you are the real owner of the account. If you belong to the third, claim agents will interview you and this is where the actual depositor needs to appear personally. What if your account exceeds the insured amount of P250,000? Strictly speaking, you may still claim for the excess but this means you have to wait until the PDIC has filed with the liquidation court, has already disposed of the bank’s assets, is ready to distribute these assets, and there is enough to go around starting with preferred creditors like the government to ordinary depositors—yes that’s you. Considering that the bank would not go under if it had enough assets for everyone in the first place, then I would say, yes the law says this is possible, but don’t count on it. My source says in the case of the Rural Bank of Paranaque and other banks under the Legacy group that were closed, the verification of documents and claim time is so much longer. They have started payouts for small depositors first (those who have P120,000 and below) last December 22. Those who have more than that will have to wait until mid-February. Claim forms are not yet available, she says. The PDIC website is well-stocked with information. To follow up with the PDIC:

1. Call the claims Processing Department at 841-4604 up to 4607. Try inquiring also at the PDIC Depositors Assistance Bureau at (02) 8414630 or (02) 841-4631. I have dialed these numbers and found that PDIC staff are generally very accommodating and professional.
2. Write to: The Assistant Vice President, Claims Processing Deparment, Philippine Deposit Insurance Corporation, 2228 Chino Roces Avenue 1231 Makati City, Philippines
3. Inquire in person at the PDIC Ayala Extension Office, 6th Floor, SSS Building, V.A. Rufino St. (formerly Herrera St.) cor. Ayala Avenue, Makati City, Philippines,
4. Make sure you have the following information ready at all times: name of the closed bank, name of the depositor; and claim number which is found on the upper right hand corner of the claim stub.

Sample computations of how much you will get can be found here.  Here’s hoping you would never need this information in the future! ☺

There’s no place good enough for scam artists but the darkest, foulest, living hell where cretins that go bump in the night are more sinister than the exorcist and the predator combined. Leticia Catalan, a reader, emailed me she now will put money under the mattress rather than trust anyone to grow her money.

When my daughter was a few months old, I bought this Educational Plan from Scholarship Plan of the Philippines from the Legacy Group of Co. I will get my investment once my child reaches college. For my P25,000 in 14 years I would have P125,000.  The agent was a friend. I cannot exactly recall the reasons why the agent converted our policy to a time deposit with the Rural Bank of Paranaque.  But I remember the agent asking me for the insurance policy. When she returned it to me she exchanged it with five time deposit certificates. Kind of stupid of me, right?

What Letty is holding now are five checks with a face value of P25,000, to mature in five consecutive years, starting 2011. Her daughter will need to get into college next school year. She says many of her colleagues are also victims of the Legacy group of companies. (Read the story here about the pre-need company's closure.) Let me make some simple guesses here. The owners of the Legacy group of companies sell educational plans. Last year, they told the Securities and Exchange Commission that “inhospitable” market conditions have put the company in trouble and that they want to cease operations. While this is going on, they ask their pre-need agents to convert their clients’ contracts into time deposits in rural banks, which they also own. Then they abandon these bank also, and get the government to pay insured deposits—liabilities which they incurred in the first place. What is so wrong with this picture? Defraud your clients. Defraud the government. Defraud taxpayers. These people are trying to get into everyone’s pockets. How can they sleep well at night? A year ago, I remember getting an email from a friend saying another friend was being offered by a company called Legacy Consolidated Plans, Inc. a double-your-money-scheme in three years, which translates to 33% per annum and they are paying every three months through post-dated checks. The story is that they can pay their clients through earnings from their “credit card financing business.” Some readers thought that wasn’t too bad, saying a lot of rural banks offer that kind of return. Yet again, time-tested scam tests are proven wise. If it’s too good to be true, it ain’t true. Unfortunately, in Letty’s case, it wasn’t greed that drove her to save money this way. It was a need to provide for her daughter’s college education, something that we all can relate to. I’m sure by now, Letty realizes that “a friend’s” word is not enough; due diligence is absolutely necessary when it’s your kid’s education fund you are talking about. I should know. My CAP story is still fresh in my mind. Where’s that special place for scam artists???

Get Rich Slowly gave me food for thought again today. In his most recent post, he said:

“True wealth has nothing to do with money.”

That made me stop and think. I know that’s true. I know that in the end, we won’t bring any of our mutual funds, savings, time deposits, stocks and bonds to the next world. That’s silly, right? I know that what really matters is family, faith, friends, service to others—and these are things that don’t have a peso or dollar sign before them. I know that. And then I looked at things that I have that make me happy. A comfortable home. Gadgets and other stuff. Closets and closets of clothes, bags, shoes, and more clothes. Make-up. Kikay stuff. Toys for the kids. I challenged myself, and asked myself if I truly believed what I have been writing here many times. That true wealth doesn’t have anything to do with money. Sometimes, you think you believe in something and then your behavior says otherwise. Like when you get really upset and yell at the kids because they ruined something—say your Macbook or Ipod. Which is more important? Which is the basis of your true wealth? Hmm. May God grant me a conviction of this liberating belief deep enough to flood my every waking moment. It makes me feel so wonderfully free.

Sometimes, I wonder when the global financial crunch will no longer be in the headlines…or when a day will pass when we won’t talk about it…or when it won’t be a constant worry anymore. Just yesterday, I heard that Accenture met with its employees and told 1,000 of them they don’t have to come to work anymore. Just like that. At least two people I personally know were also laid off last week by their company. You know this would be happening this year. But it doesn’t get more real than when the ax falls on people you know. Heaven forbid one of you gets laid off. During these times, I can’t overemphasize the need for an emergency fund at least three to six months of monthly expenses. That’s the buffer fund you only touch when your source of income has dried up. Ideally, you should have a separate way of paying for health emergencies, whether a medical insurance or health card from an HMO. While you keep pouring your juice into an emergency fund regularly, you hope that you would never need to use it! Here’s a roundup of our personal finance offerings this week: Investment guide for 2009 lays down guideposts that experts say no one can afford to ignore this year. If you’re tired figuring out the difference between VULS, UITFs and mutual funds, check out this article. Yes, there’s good debt and bad debt and it’s important that you know the difference. From around the web: Frugal Pinoy started this year with a soul searching on her biggest money mistakes. That’s a good exercise for all of us—so we don’t repeat bloopers! I just discovered Condo Ko’s blog, and his article “Saving for dummies written by stupid” rings true for me. It is SO easy to buy a house you can’t afford because buying that parcel of land or a condominium is mostly an emotional exercise. Economy: So far, there’s good news and bad news about the economy coming out every week. One of the best good news is that at least as of October, expat Filipinos’ remittances continued to grow 10.5%. This is one of the things that will truly determine whether the Philippines can remain strong when all around it, economies are already wobbly. Hold on to your seats. Socioeconomic Planning Secretary Ralph Recto expects the economy to grow 4.7% this year, not as good as 2006, but that figure indicates g-r-o-w-t-h nonetheless. I found it interesting that a government survey showed that one in 10 Filipinos work in the informal sector. These are your multi-level marketers and other forms of “raketers” with income that slip through the cracks of number crunchers in the government. If this is true, and everybody knows it is, then economic growth reported as gross domestic product is really understated, isn’t it? Money supply is also still up 14.6% in November. That means there is no credit crunch in the Philippines. That’s supported by the reported growth in bank lending, at 21.3 percent to P1.93 trillion in November from P1.6 trillion a year earlier. No less than Standard & Poors, one of the world’s top credit rating agencies, says the Philippine is in good shape to weather the crisis. Oh and watch this closely: Finance Secretary Gary Teves wants an increase in sin taxes, which he thinks will bring in at least P30 billion. That’s an area only the brave dare to go. You know which tycoon you’ll be up against when you try raising taxes on products such as cigarettes and liqour. I have always believed Gary is made of strong stuff. In this issue, he will really prove his mettle. But all is not well. Farm growth slowed to 3.9% in 08, and as all of you know, the farming sector still employs majority of the Philippine’s labor force. Based on Bangko Sentral ng Pilipinas figures, funds pulled out $1.4B in 2008. Those who were in the market last year all felt that jar their bones deeply. The World Bank has barred seven firms from bidding for its projects and three are Philippine firms. No surprise there, really, but just a major embarrassment lang naman. Investing: One news item is particularly disturbing fo those who follow personal finance topics: Pre-need firms turn to SEC for help. They are saying the global financial crisis is causing many pre-need companies to lose their footing. For the sake of planholders, I hope they don’t. I hate ending on a sour note, but there you go, friends. Happy weekend.

I can’t help but compare Philamlife to a lady in the prime of her life who has no choice but to get married to the richest guy around. On one hand, you can’t blame her if she takes her time to choose—and extract the most from the deal. On the other, suitors are sure to throw in the towel if the requirements are too stringent and the price too steep, considering the situation. Granted, it’s not her chastity that is in question. Her mother is the one who has been too intimate with the underbelly of finance. Still, she needs to raise funds for mummy and fast. So far, Sunlife Financial has dropped out of the race. So has Government Service Insurance System. Philam was called "arrogant" because of all her posturing. Those that remain are: Henry Sy’s SM Investments Corp., (SMIC), Rizal Commercial Banking Corp., Metropolitan Bank & Trust Corp. (AXA), Europe’s third-biggest insurer Assicurazioni Generali SpA, and Canada’s Manulife Financial Corp. If you are one of Philam’s one billion 1.7 million policyholders, who would you like her to marry?

My daughter is so not a baby anymore. She’s taller than I am, wears shoes that are two sizes bigger than mine, raids my closets and wears a lot of the girl stuff she fancies there, and loves teenager music. I don’t mind that, but what mother would not worry about (whispers) the boy stuff? Lately, I’ve been worried about how to get her through college. Most financial projections assume an 8% tuition fee inflation for college education. If she gets into the University of the Philippines, that means we would need at least P300,000 for tuition for a 4-year course. Add around 80% of that for other expenses like books, clothes, allowance and I roughly expect half a million for a 4-year UP education that starts three years from now. As you can expect, the figures can get really scary if you’re thinking of an Ateneo or a De La Salle University education. That can easily mean at least P1.5 to P2 million per child. And that’s a conservative estimate. When she was a baby, we bought and fully paid for a College Assurance Plan contract. Yep, that’s an investment blunder I have, as the Filipinos say, charged to experience. So, three years ago, my husband and I also invested in a life insurance policy with guaranteed cash value to help us with the tuition expenses, but I know what we will be getting will not be enough to get her through college. What we need to do is to ramp up our savings and make whatever we set aside grow more aggressively. With the markets as it is now, though, the options are not too great. I only have three years so I have to stick to guaranteed investments. I heard some banks are offering 7.5% annual return guaranteed, but I still have to check whether that’s true. And you won’t see me going for any guaranteed investment with abnormally high returns, no matter how attractive, in a bank with financial background that's not easy to verify and whose capital adequacy ratio is questionable. My mutual fund returns are not too great, but I have kept a long-term view on that. I’m expecting that money to fund my second child’s college education around eight years from now. For the first child, what would be your suggestions? More importantly, how are you preparing for your children’s college education?

In with the new, out with the old--so goes the saying for the New Year. It is also this time of the year when I keep the pack rat in me at bay (at least, I try to) and figure out what financial documents to retain and which things to feed to the shredder. It’s not the most exciting item in my to-do list. I hate those paper cuts. Plus, I have a problem with letting go…weird as that may sound when we’re just talking about piles of paper! So, I walked over to our accounting department and picked their brains. Here’s what I came up with:

• Keep your tax records for three years, at the minimum. This is required by the Bureau of Internal Revenue, but I personally recommend keeping all tax records since you started working.
• Credit card records should be kept for at least a year but keep the ones that record major purchases like appliances, along with receipts.
• Bank statements are good for a year, too. Records of deposits and bank transfers should always be crosschecked with statements and then shredded.
• Keep insurance records well, make duplicates and send copies to beneficiaries. Make sure your spouse knows where they are.
• Investment records like mutual fund statements, brokerage reports, and other documents should be kept in separate folders and well-labeled, just in case something happens to you and your spouse or other beneficiaries need to see them. This is a common problem especially among old retirees who have forgotten their investments and have not kept their records well.
• Loan documents should be well preserved, together with payment records. Needless to say, you’re better off keeping them forever.
• Do keep current warranties and throw away those that are no longer current. But I recommend keeping a directory of the contact numbers of repair shops.
• Shred all ATM receipts and other financial documents. You never know where they can end up if you just toss them in the trash. I don’t think the dumpster divers have crossed over from the US to the Philippines, but better safe than sorry.

It has been more than a week after the crazy rush of Christmas past. That’s ample time to figure out the lessons that can be gleaned from under the Christmas tree. Which gifts have you truly found enjoyable and useful? Which ones were a waste of money and time? Did the price tag matter? Come on…honestly? I found myself thinking about these questions as I took down the tree and wondered about my Christmas spending and plans to begin saving for the 2009 holidays. Here are some realizations that surprised me (or maybe they shouldn’t have??):

1. Children end up spending as much time with small, inexpensive little toys as with expensive ones. The miniature little toy guns went sleeping on the same favored spot as the walking, expensive Iron Man action figure. Long after the shiny remote control cars lost their luster, broken little mobile phone toys are still tucked into tiny pockets when they go to the neighborhood park! Could it be that when we buy toys as gifts, they are actually for the child in us, that’s why we end up overspending?
2. Recycling gifts, when done properly, can save you a lot of money. Some still find it distasteful and perhaps that’s because of the way it’s done. For one, at least remove the original tag or something that has your name engraved on it, for goodness sake, and don’t give away something you’ve used—even once. That doesn’t hold true, though, for electronics like giving a used laptop to a relative who can’t afford to buy a new one, or big items like a second-hand refrigerator. (Give me a second hand car anytime!) Second, I spend a lot of time matching the gift with the right person. At least, find someone who will not give the item to someone else (what if it finds its way to the original giver!).
3. Gifts that show careful thought, time and effort are the ones that really bring pleasure to the receiver. My husband’s surprise Ipod Touch gift was a sure hit with me because now I can read Bloomberg and New York Times wherever I am (you know how mommies always get stuck waiting for the doctor, waiting for an appointment, waiting for the children to finish THEIR appointments etc.) It’s my latest prized possession! But the gift could also be a trip, an experience, a scrapbook page, something you made yourself—and they don’t have to have a high price tag. (Have you heard that the Brangelina family members don’t give store-bought gifts to each other?)
4. It’s of course nice to feel remembered during the Christmas holidays, but I find that giving expensive gifts outside the family circle is totally overrated. Having to give gifts just because you are reciprocating or to join the bandwagon is absolutely NOT a good reason to get into debt. So, if the bank account shows there’s no room for gifts, then that’s that and just put a big smile on your face and real warmth in the verbal greeting. You’re not about to cross someone off your friend list just because you didn’t get anything last Christmas, are you?

On a side note, the Brodett story might be fodder for tabloids or soap operas, but they show an ugly side to family finance that is unfortunately too common in society. How do you deal with family disagreements over money? Or inheritance, for that matter?

Long before 2008 drew to a close, people have started writing off 2009 with words such as “worse than 2008”, “depressing”, “bumpy ride” etc. Is it then still possible to get out of 2009 with a good investment return or is that out of the question and should we all just try to make as little mistake as possible and aim for a boring year of preserving gains? Specifically, if you are a 20 to 30-something singleton, what do you plan to do this year about your investments? The conventional wisdom for this age group is not to be afraid to take on some risks because there’s plenty of time to recover, but then again, a few are beginning to think about quite the opposite: why take on risks when you have plenty of time to grow your money? If you’re a 30 to 40-something with a family to take care of, how do you intend to take care of your funds this year? If you have been investing in mutual funds for the last 10 years and were counting on returns in 2008 or 2009 to fund a child’s education, that’s a major headache. If you’re in the home stretch at 50 to 60-something, how are you planning to cope in a depressing year? I can’t even begin to imagine how it must be for you. In general, do you think the death of stocks and financial markets are written in the stars, or do you think this market still have legs to run? What’s your investment strategy for 2009?

“How do you teach children the difference between wants and needs?” a viewer texted ABS-CBN’s Shoptalk yesterday after host Pia Hontiveros and I spent the better part of an hour talking about financial literacy for kids. The studio lights felt warm on my face and the ticking clock made me mumble a couple of excuses for an answer. My daughter and best critic who was watching assured me I did good, but in the harsh reality of 24-hours-after, I am now mortified at how I missed the opportunity to dissect a very important personal finance dilemma for parents. Forget teaching most adults about wants versus needs. Most of us are hopeless. But children? The spending habits we instill in a child will make more impact on his financial life than any investment he may make in his future. I can’t even begin to explain how critical it is for a child to have a clear grasp of this concept. How? I search inward at my own parenting efforts. Have I been a good example? Have I taken the time to at least discuss the seeming lack of difference between a need and a want at the exact moment the wanna-have-it gremlins are making such a ruckus in his mind? That when he is an adult, he would be torn between bigger things than a Timezone caper or a drum set? That eventually, his decisions now will define him as a person later on? In hindsight, here are the things that I think I should have told that viewer and that I aim to do more often in the future:

1. Teach him to delay the purchase and take time to think together. An infant needs instant gratification. When he cries for a feeding or because he hates the feeling of a soiled diaper, or when he wants a cuddle, I believe parents should give it to him immediately. A child, on the other hand, has to start learning the survival skill of thinking first if his desires need to be instantly gratified or not. While foremost a money lesson, this will also later on develop in him the crucial values of sacrifice and giving way to a greater good. So, take time outs. One day or two days will make a huge difference in extracting him from the pressure of the spending situation and teaching him to think about whether something is a want or a need.
2. Consider options and learn the art of being a thinking spender. A child is best taught when things are visual. List down possible options. With P5,000 given by relatives last Christmas, what are the things that he can buy? Allow him to visualize and compare prices. Let him think about what is more practical.
3. Let him think about long-term goals. Would it be better to save the P5,000 and make it grow so he can buy something he really needs? Try to teach him about compound interest and see if he wants to grow the P5,000 by investing it in a time deposit or a mutual fund.
4. Bring him to the grocery and show him how substituting works. Take advantage when the kids want to help with the grocery! At a certain age, they just want to leave that chore to mom. But while they still want to push the cart, incorporate a lesson on how substituting items can bring down the grocery bill. Come to think of it, there have been several times when the kids have saved me a couple of hundred pesos in the grocery.
5. Give him rewards when he saves instead of spends. Double his savings or give him treats. Appreciate his efforts when he asks for an opportunity to earn money to “feed” his mobile phone instead of just asking for “load”. When they feel good about doing something, they stick with it longer.

Re-reading my list, I realize kids are not the ones who will benefit from it. Do you have any you want to add? The other guests in the show were Pioneer Life senior vice-president Rolly Robles and Blue Cow chief operating officer Nanjo Berba. They talked about an interesting financial literacy course for children both companies have designed to create savers out of the younger generation. Pioneer Life and Blue Cow have also developed a comic book called Private Iris that uses the Nancy Drew/Hardy Boys-type plots to teach young ones about saving and investing. Watch a video of an interview by INQUIRER.net multimedia specialist Erika Tapalla with writer Jaime Bautista. I thought it was interesting that a financial services company is giving back to the community via education. It’s a good marketing move as well as this actually enlarges the market for life insurance and other financial services.

We have seen it before, and perhaps too often for comfort. I’m talking about temporary amnesia after borrowing from a friend or family member.

Once or twice I have been an offender (eating out with friends and the scramble for change leaves you in, say, P250 debt you plan to pay once you get to an ATM, that sort of thing), and several times, I have been a victim. It has come to a point that my friends and I make sure to give even a P5-change as soon as possible when paying for whatever, just so we wouldn’t forget. Feels good.

I am posting below an article from Mike G. Rivera (with her and the subject’s permission) to illustrate what temporary financial amnesia, so convenient for some, can do to others’ financial wellbeing. Mike is doing all he can so that others will be cured of their, uhh, temporary amnesia. So if you’re a UP Diliman student or know of someone who still owes money, give her or him a shake, will ya?
 

Paying It Back For Mang Milton
By Mike G. Rivera

Meet Meliton Zamora, a retired University of the Philippines janitor and my hero.

For forty-five years, he swept floors, cleaned up trash, watered plants and did odd jobs at the University. I met him when I was active with the UP Repertory Company, a theater group based (then) at the third floor lobby of the Arts & Sciences (AS) building. He would sweep and mop the hallway floors in silence, venturing only a nod and a smile whenever I passed him.

Back then, for me he was just one of those characters whom you got acquainted with and left behind as soon as you earned your degree and left the university for some big job in the real world. Someone whose name would probably ring a bell but whose face you'd have a hard time picturing. But for many UP students like me who were hard up and had a difficult time paying their tuition fees, Mang Mel was a hero who gave them the opportunity to finish university and get a big job in the real world.

The year was 1993 and I was on my last semester as a Clothing Technology student. My parents had been down on their luck and were struggling to pay for my tuition fee. I had been categorized as Bracket 9 in the recently implemented Socialized Tuiton and Financial Assistance Program (STFAP). My father had lost his job and to supplement my allowance, I worked part time as a Guest Relations Officer at Sam's Diner (back when the term GRO didn't have shady undertones) and took some odd jobs as a Production Assistant, movie extra and wardrobe mistress.

To be eligible for graduation, I had to enroll in my last three courses and pay my tuition fee. Since my parents didn't have enough money for my matriculation, I applied for a student loan hoping that my one of my Home Economics (HE) professors would take pity on me and sign on as a guarantor for the student loan. But those whom I approached either refused or were not eligible as guarantors. After two unsuccessful weeks of looking for a guarantor, my prospects looked dim, my future dark. And so, there I was, a downtrodden twenty year old with a foggy future, crying in the AS lobby. I only had twenty four hours left to look for a guarantor.

Mang Mel, with a mop in hand, approached me and asked me why I was crying. I told him I had no guarantor for my student loan and will probably not be able to enroll this semester. I had no hopes that he would be able to help me. After all, he was just a janitor. He borrowed my loan application papers and said softly,

"Puwede ako pumirma. Empleyado ako ng UP. (I can sign. I am a UP employee.)" He borrowed my pen and signed his name. With his simple act of faith, Mang Mel not only saved my day, he also saved my future.

I paid my student loan the summer after that fateful day with Mang Milton and it has been 15 years since then. I am not filthy rich but I do have a good job in the real world that allows me to support my family and eat three meals a day. A few weeks ago, a friend and UP
Professor, Daki, told me that Mang Mel recently recorded an album which he sells to supplement his meager retirement pay, I asked another friend, Blaise, who's taking his Master's degree at UP to find out how we could contact Mang Mel. My gesture of gratitude for Mang Mel's altruism has been long overdue. As fate would have it, my friend saw Mang Mel coming out of the shrubbery from behind the UP library, carrying firewood. He got Mang Mel's address and promised him that we would come over to buy his album.

Together with Blaise and my husband Augie, I went to pay Mang Mel a visit last Sunday. Unfortunately, he was out doing a little sideline gardening for a UP professor in Tandang Sora. We were welcomed into their home by his daughter Kit. As she pointed out to a laminated photo of Mang Mel on the wall, she proudly told us that her father did retire with recognition from the University. However, she sadly related to us that many of the students whose loans Mang Mel guaranteed neglected to settle their student loans.

After forty-five years of service to the
University, Mang Mel was only attributed 171 days of work for his retirement pay because all the unpaid student loans were deducted from his full retirement pay of about 675 days. This seems to me a cruel repayment for his kindness.

This is a cybercall to anyone who did not get to pay their student loans that were guaranteed by Mang Mel. Anytime would be a good time to show Mang Mel your gratitude.

Mang Mel is not asking for a dole out, though I know he will be thankful for any assistance you can give. So I ask those of you who also benefited from Mang Meliton's goodness or for those who simply wish to share your blessings, please do visit Mang Mel and buy his CD
(P350 only) at No. 16-A, Block 1, Pook Ricarte, U.P. Campus, Diliman, Quezon City (behind UP International House) or contact his daughter Kit V. Zamora at 0916-4058104.

Also found here.

Editor’s Note: Mang Mel has clarified that there were three unpaid loans. These and the hospitalization of his grandchild at the UP infirmary were deducted from his last bonus and retirement fund.

This time last year, I had three New Year resolutions: pay off all consumer debt in four months, increase emergency fund to six months worth of income by December and work smarter to accomplish more in less time. All done within the time frame I specified. Then things happened within the year that turned everything wonky again. Dang. What I learned, however, is that some reasons for taking two steps backward and one step forward in personal finance may not always be bad. Like buying a house that the family loves and enjoys and getting into mortgage debt because of it. For some it can be getting married, having a baby, a child going to college, sacrificing income from work to give more attention to a wayward teenage son, saving a marriage by going on a cruise… Life happens. Money is just a means to enjoy life. The key is balance. And a good disposition. My life goals for 2009:

1. Never miss payments on credit card and mortgage loan. Last year, I had two late payments on my credit card just because I misread my statement, and boy did that really tick me off! I hate paying credit card interest, and I hate paying late payment fees even more.
2. Pay off low-interest consumer debt in six months.
3. Rebuild emergency fund to six months worth of income. This will take around a year of careful saving and even more careful spending.
4. Boost education funds for the children by carefully investing money to take advantage of the upside from this terribly depressing market. The market has got to improve some time, right?
5. Lose weight. Just five pounds will make me happy.

Strategies:

1. Focus. A lot of people don't believe in New Year resolutions. It's a hyped way to sure failure, some believe. I'm from the camp that says trying is better than doing nothing. One strategy, however, to try and succeed is to focus. Goals are of better use when they are remembered and taken seriously.
2. Use teamwork. For married people like me, reaching goals is a LOT easier when you have the whole family focused on it as well. It's going to be hard to stick to a spending plan when you're walking through a mall and someone is aching for a PSP and you really, really, really want to give him what he wants. (Ha! You know who you are!) We are all weaklings when it comes to people we love, so we need others to control US!
3. Think of your goals everyday. Fifteen minutes is not that long, but it can do wonders for your mindset for the rest of the day. Visualize it. Believe that you can achieve it.
4. Be flexible. Failures do not have to be setbacks. Allow yourself to be upset for 15 minutes, then charge ahead again!

How about you?