Stephanie (not her real name) looked a bit like a lost little girl, no different from her eight-year old daughter who transferred to my son’s school. Turns out that it was her first time to attend a school activity. She has been at sea on cruise ships for the last 15 years, going home only once a year – one of 230,000 sea-based Filipinos working abroad.

We had a lengthy and very interesting discussion about what it was like at sea for the past 15 years, starting from when she was a fresh graduate of Hotel and Restaurant Management from a reputable school here in Metro Manila, up until she decided to get pregnant (but not get married) and now that she is waiting for her call to join the crew of another cruise ship.

Stephanie’s story amazed me, although it was not the first time I had heard of the challenges and experiences of Filipino sea-based workers. She told me how Filipinos earn anywhere from $2,000 to $4,000 a month, bulk of which come from tips from passengers. She also described how Filipinos burn their money buying clothes, bags, laptops that they never get to use, mobile phones and other techie gadgets from different ports even when these could also be bought in the country at the same price or even cheaper.
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With ten short days to go before Landbank of the Philippines ends the offering period for its long-term negotiable certificates of deposit, confused overseas Filipino workers are still at a loss on how to access the offering.

At the heart of the problem are Landbank’s feeble presence overseas and a ticklish issue on documentary requirements. You will find many examples of those concerns from MoneySmart readers in my previous posts on the LTNCDs here and here.

Joey Sale, a senior analyst at Landbank, said the bank has held meetings on these issues Monday afternoon, conscious of the difficulties the OFWs are facing.

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State-owned Landbank of the Philippines’s sweet deal for OFWs launched yesterday is described in this article.

An annual interest of 7.0% and a maturity of 5.5 years is not bad for anyone’s portfolio. Experts always tout diversification and to do that properly, the risky part should not overshadow the secure and boring part. How to cut the cake exactly depends on personal risk appetites, of course.

It is a fact of life that stocks are sexy and deposits and bonds are boring. ☺ Most of the times, boring is good.
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(Photo from Agence France-Presse)

Worsening poverty plus rising food prices, and what have you got? More and more households are definitely going to the poor house if this keeps up. There are indicators everywhere that high prices aren’t likely to go back down anytime in the future. I remember what Rico Hizon said during a recent interview: We are importing inflation from the US and China. Everywhere in Asia, prices are going up.

Here are some tips from a MoneySense article on how to make sure you’re not badly affected:

Watch out for the warning signs:

1. Uncontrolled spending and/or use of credit cards
2. Having loans you are having difficulty to pay
3. Not making and using a budget
4. Living a lifestyle you can’t afford
5. Lack of savings

To me, number five would go to number one. An inadequate buffer fund, absence of emergency stash – whatever you want to call it – should make ANYONE stop and take stock of your situation as if it’s the biggest red light on the street of personal finance.
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If this is any indication how many Filipinos in their forties or thereabouts are just starting to save, holy macaroni! ☺

The article’s number one spot on Business Most-Read is particularly telling. But hey! I’m glad people are starting to realize saving for the future is one of those things in life we must NOT take for granted. Better late than later, and better late than never

To read the article on Donna, who was smart enough to ask for help on how to start saving even at age 40, click here.
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(Photo from Agence France-Presse)

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

1. Take advantage of SM Advantage (and other store cards). They hardly cost any money and carrying them in your wallet won’t give you even a slight kink in your shoulder. The other week, I bought several grocery items and replacement parts for toilet flush and paid for them with my SM Advantage card. Not bad at all.
2. Don’t forget your rebates and freebies. I learned this the hard way. I forgot all about my expiring Mabuhay Miles and found out I was eligible for a free trip to a Visayas destination only when it was too late. Be careful, though. Rebates, rewards and freebies need to be managed carefully. For example, if Casa Armas is giving you 20% discount on a meal, don’t go just for the discount but go because you would have eaten out anyway. If you went out because “hey, we have a discount, cool!” you wouldn’t have enjoyed 20%, you would have spent 80% of the cost of the meal. [Read the rest of this entry »]

Banks are marketing special deposit account products more aggressively these days. With the low returns from time deposits and fixed-income instruments, people are looking for more alternatives and I actually witnessed this in a bank branch the other day.

The Philippine Daily Inquirer’s Doris Dumlao reports today that as of February 8, SDAs have sucked in P546 billion of the money in the banking system. Read her article here.

Here are some useful figures to remember from this article:

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BY MALAYA LARAYA

I recently conducted a half-day seminar on financial planning for some professionals and it was a rather enlightening experience on the mindsets of people when it comes to financial planning. As always there was an open forum at the end and quite a number of questions were asked – some were the usual and some were rather unusual. So for those of you who may have had some of these questions in mind but didn’t know who or what to ask; here is a small FAQ on financial planning.

What is the best investment? This is definitely the most common question that has been asked and the short answer is this : There is none. More specifically, there is simply no investment tool that is the best for all people all of the time. There are instead, instruments that are best suited to each individual’s particular needs, plans and current financial condition. Simply put, what is good for your friend, spouse, relative, lover, workmate, neighbour or child may not necessarily be good for you due to the undeniable fact that you and your friend, spouse, relative, lover, workmate, neighbor or child are two different individuals. Consequently, the two of you will have different sets of wants and needs at different times and will therefore need different solutions. Therefore, be very wary of anyone who tries to sell you a panacea for all of your investment needs as it simply does not yet exist.

Where can I get information about (x)? Despite the fact that we are very much in the online age, very many people still do not know where to get even the most basic information about financial products. From equities to managed funds to pre-need plans; people seem to be at a loss as to where to go. Here are some websites that you can visit as well as what you can expect to read.
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(Cool piggy bank. File photo from Agence France-Presse)

9 weeks: the average Filipino’s rainy-day fund

Saving money, Financial Planning

I have a friend who loves rainy days. She loves the sound of raindrops on her car, her windowpanes, the street – just about everything! I too find the rain very “senti”, uber-relaxing and it puts me in “emote mode” hehe. Helps me to put words on paper too.

But rainy days of the financial kind, that’s another thing. I can’t imagine anyone liking them. They strike suddenly and ruthlessly – and you don’t know long they will last.

Remember the recent study by Citibank that revealed Filipinos have low financial IQ? There’s another revelation in that survey that says average middle-class Filipinos have on the average nine weeks’ worthy of rainy-day funds.

On the one hand, I found it quite comforting that average, middle class Filipinos have a rainy-day fund at all! On the other hand, that fund won’t see us through those dark and depressing days.

As you all know, the prescribed amount is three to six months worth of living expenses. The baseline is not your salary or earnings from business, but living expenses. Here’s a thought: do you know how much you spend monthly? If all you have is a vague figure, get your pen and start jotting down monthly expenses.

I have previously written that putting your money in mutual funds, bonds or equities is foolish if you don’t have an emergency fund first. You don’t want to be caught needing cash when the market’s down!

Our personal finance feature for today from Citibank says:

Nine weeks. That may not be enough to get back on one’s feet. Thus, there is a need for an emergency fund that should cover anywhere from three months’ to six months’ worth of expenses. This will help you tide over the tough times until you get back on track. Besides, borrowing money to cover emergencies will cost you more.

Should you save for three months’ or six months’ worth of expenses? Some financial experts advise only three months’ worth of expenses in the emergency fund if you are employed. If you are self-employed, they say you’ll need six months’ worth of expenses.

But of course, the more you save, the better. You do not know when bad things may happen and for how long they will last. Save at least six months’ worth of your expenses — living expenses, bills, saving for a child’s education, and the like.

As to your big challenge: How to save for an emergency fund when there doesn’t seem to be enough funds in the first place.

Here are some tips:

1. Stick to your goal. If you say to yourself that you will start an emergency fund, be committed to do all it takes to fulfill that goal.
2. Review your obligations. You mentioned that you have “so many other obligations.” Study your list and find an expense you can cut down. For example, if you haven’t been going to the gym at least three times a week, then you may be better off canceling your gym membership. The savings you will get from canceling the monthly dues can be channeled to your emergency fund. You can find another exercise alternative that won’t cost you money, such as walking in the park.
3. Before spending anything for the month, save first. Once you get your paycheck, set aside some money for your emergency fund. Start with at least 10 percent, and increase it as you free up more obligations. Making saving a priority will be beneficial for your financial future.
4. Open a separate account for your emergency fund. This will help you to avoid dipping into your emergency fund for living expenses.
5. If you have a sideline income or receive a windfall (example: bonus or prize money from a contest), use this to pay off your debts, then put the rest in your emergency fund.
6. Cut down on expenses that you can do without. These may include weekly trips to an expensive coffee shop, or going for designer clothes. Just think: if your family is in need or has an emergency, you wouldn’t even think of these things. But you will rack your brains thinking of how to meet the family emergency with your meager funds. Thus, prioritize the emergency fund.

If you or anyone you know is struggling to set up an emergency fund, how’s this for motivation. Forget the three to six months rule of thumb for the moment. Just start saving any amount upwards of P1,000 this payday and move on from there. Start with small steps and give yourself a pat in the back afterwards. Consistency is what matters most. You’ll find it easier as you go along.

Good luck!

(Sleeping lizards don’t go anywhere, but they don’t grow too. So like putting all of one’s savings in low interest-bearing savings deposits. File photo from Agence France Presse)

I picked up several things from Noet Ravalo’s column today:

For those that still offer some interest, the lowest that I have seen is a rate of about one-tenth of one percent and this is still taxable at 20 percent withholding tax. At this rate, your monthly return for an outstanding balance of P50,000 comes out roughly to about P3.33 — an amount small enough to miss out among your transactions but big enough to be a nuisance if you try to balance your books before you get your printed statements. The other way of looking at this interest rate is that you have to set aside and keep untouched a balance of P400,000 in your account so that your net interest affords you a small-sized serving of French fries from a popular burger franchise every month.

I would tell the bank to shove the French fries up his nose (no funny words here please), but that’s just me. The owners of more than P3 trillion of deposits out there are still parking all of their money in bank deposits.

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