The Savvy Investor

Because It's Christmas

2022-12-19T16:52:00.007-08:00

Because it’s Christmas

DECEMBER 20, 2022

https://businessmirror.com.ph/2022/12/20/because-its-christmas-2/

ANOTHER Christmas is around the corner; another opportunity for folks to show how good a year they’ve had.

In the Philippines, September marks the beginning of Christmas. By that month, a lot of people are already planning in their mind about what to do. Based on my experience, this is also the time a lot of businesses are implementing the bulk of their target projects for the year.

This translates to spending according to the budget they have planned beginning of the year. They need to consume their budget so that the following year they can justify planning on a higher budget, specifically for marketing.

Individuals differ with companies during this season because we did not plan the budget early in the year and yet we spend just to celebrate; companies spend to get a return.

I still remember when, as still an employee, a colleague asked me if the bonus is already credited to our ATM account. When I asked for the reason, the reply was he already pawned his bonus earlier. Then he said, it is ok. It is time to celebrate because it’s Christmas.

Because it’s Christmas. This is always a justification by many to splurge whatever additional incentives received. For 20 years as a warehouse officer, I have always encountered workers who borrow money a day after receiving their 13th month pay and SL/VL cash benefits. Every time I ask what happened, the usual reason is that because it is Christmas, their wives spent all their monies to buy expensive food and gifts for their children.

Below are some more expenses people incur, just because it’s Christmas:

• Partying with friends. Since Christmas comes once a year and people have lots of cash to spend, they feel they need to be rewarded so they go into a partying mode. They spend recklessly as if there is no tomorrow. They think the bonus they received is free money (when in fact it is not free money). They feel it is easier to spend it than their salary. Try asking one which is easier to spend, salary or bonus? For sure the answer will be bonus.

• Buying gifts. Christmas is a season of giving. With the incentives they have, this is what they see as the perfect time to buy gifts for friends and loved ones. In effect, without checking their December finances, they go into January broke because the money they have did not make it into the New Year.

• Have a vacation. December is the month where a lot of people are in the fun mode. In the workplace, there is not much work to do since all companies do not have business activities anymore. For this reason, we see a lot of people travel (domestic or international). It is their way to relax and reward themselves for the whole year of working.

• Christmas is for children. Too often, it has been said that Christmas is for children. The children refer not only to our own but to the children of relatives or even close friends for whom we drain our pockets to buy them something to give joy to them. But there’s also a child in some adults. And that is what makes Christmas spending very stressful.

Because it’s Christmas, isn’t it good to think that we will still have more Christmases to prepare for? By not preparing for the future Christmases, we will never be as happy as we are now. Prepare by spending wisely our money this Christmas by:

• Buying protection. As we have our extra monies, it is time to think of protecting our money. As we are all humans, we are prone to illnesses and death and both will definitely drain our pockets. By buying insurance, we are buying our protection, which will help preserve our money that we need as long as we are alive. It would not be a good scenario to see us to outlive our money.

•Buying assets. Buying assets means that in the future, even if we are no longer employed, we will still be able to receive income as if we are still working. Remember that as job provides income, it is not permanent. One day, we will all graduate from employment but still with expenses, Christmas spending included. With assets providing passive income, we can afford to party with friends, buy gift for friends and even go to vacation stress-free.

• Spending less. By spending less, we can afford to buy our assets and protection. Spending less does not mean limiting the purchase. It means buying the same but on lesser price. The best practices are: make a list and check it twice; know your limit/budget; buy local (it is much cheaper); buy from wet markets or ukay-ukay; and, best if possible, give home-made gifts or even recycle old gifts.

So this Christmas season, think first before spending and start building for your future Christmas celebrations.

Merry Christmas!

Edmund Lao is a registered financial planner of RFP Philippines. To learn more about personal-financial planning, attend the 99th RFP program this January 2023. To inquire, e-mail info@rfp.ph or text <name><e-mail> <RFP> at 0917-6248110.

Inflation

2022-12-19T16:42:00.004-08:00

BYEDMUND LAO

NOVEMBER 15, 2022

https://businessmirror.com.ph/2022/11/15/inflation/

INFLATION is the rate of increase in prices over a given period of time. As a result of inflation, the purchasing power (value) of money decreases over time. Inflation affects the prices of everything that we buy.

What causes inflation?

Here are the factors that cause inflation:

1. Supply and demand. In an economy, when the demand for a commodity exceeds its supply, then the excess demand pushes the price up. The result is higher prices due to demand-pull inflation. On the other hand, when the factory prices increase, the cost of production rises too. This leads to an increase in the price level as well.

2. Government deficit. There are times when government spending increases beyond what taxation can finance. In order to solve this, government resorts to deficit financing such as printing more money which in turn adds to inflationary pressure.

3. Population growth. As the population grows, it increases the total demand in the market. Further, excessive demand creates inflation.

4. Hoarding. There is always the possibility that at certain times, the factors of production are short in supply. This affects production. As supply will be less than the demand, Opportunistic businessmen resort to hoarding to push the price up even more, thereby increasing their profit.

5. Non-economic reasons. There are several non-economic factors which can cause inflation in an economy. Examples are war or typhoon (flooding) where crops are destroyed. In effect, this reduces the supply of agricultural products leading to an increase in the prices of our basic commodities. A perfect example was the pandemic where the supply chain was disrupted, which resulted to inflation even if the price of oil was at its lowest.

With the world recovering economically from the effects of the pandemic, Russia invaded Ukraine and this man-made crisis plunged the world into another economic problem. Ukraine is a major exporter of food and Russia is a major oil exporter. Just imagine Ukraine’s food production hampered and the sanction of the West on Russia taking effect. The result is a world-wide inflation because another supply chain was disrupted. I felt it strange for certain groups to blame our current leadership since the crisis we have now is due to a defective decision by one foreign leader. We cannot control external factors but we can control on how we respond to this crisis. We all are affected by inflation and even if we cannot avoid inflation, we can minimize its effect on us. Below are some things we can do:

1. Spend only on needs. By spending less, we can avoid wasting our money on inflation. We must buy only our needs. Best is also to shop around and look for those with lower price (but of same quality). Make it a point to make a budget to keep our costs in control.

2. Avoid debts. As inflation surges, so do the interest rates. Banks need to raise interest rates in order for them to keep pace or outpace inflation. At a high inflation rate, it is the worst time to be in debt. Note that in the past where inflation was low, a lot of businessmen resorted to loans because the cost of money was low and it makes perfect sense for them to use other people’s money to make money.

3. Invest. Cash is not king. During inflation, keeping a lot of cash is not an option as inflation eats away it value. Keep some for emergencies and invest the rest in instruments that beats inflation. An example is the stock market. The stock market is low right now, but over a long rough time frame, that investment can earn a much higher interest rate in the stock market than it would in a savings account. Another one is bonds. It can be another place to put our money for diversification. We can choose from corporate bonds issued by private and public companies, municipal bonds from local governments, or treasury bonds by the government. Note that when stock market is down, bond market can be up.

4. Invest in REITS. Real estate is a good hedge against inflation but only a few can afford. Consider a real estate investment trust (REIT). A REIT is a portfolio of properties with everything from office buildings, hospitals, malls, and more. It’s a great investment if you want a more liquid real estate asset, and may be a smart fit for risk-averse investors.

In any crisis, there is always opportunity. We just have to open our minds. Panicking is not an option. Instead of the blame game, why don’t we do our own research and solution. Just as Jackie Chan said in the movie “Karate Kid:” FOCUS!

Edmund Lao is a registered financial planner of RFP Philippines. To learn more about personal-financial planning, attend the 99th RFP program this January 2023. To inquire, e-mail info@rfp.ph or text <name><e-mail> <RFP> at 0917-6248110.

Wrongfully punished

2022-06-28T01:36:00.000-07:00

Wrongfully punished

BYEDMUND LAO

JUNE 27, 2022

https://businessmirror.com.ph/2022/06/27/wrongfully-punished/

“WRONGFULLY Accused” is a comedy movie starring Leslie Nielsen. It has parodies from many other movies and some series, mostly from “The Fugitive,” “Braveheart” and “Titanic.”

On a serious note, to be wrongfully accused, especially in criminal cases, is already stressful. What more if a person is wrongfully convicted and punished? What if this happens within a family? During the last presidential campaign, then Senatorial Aspirant Rafael “Raffy” T. Tulfo said, “Why should the sin of the father become the sin of the son?”

There is truth in what he said. As Deuteronomy 24:16 says, “Fathers shall not be put to death because of their children, nor shall children be put to death because of their fathers. Each one shall be put to death for his own sin.”

Weeks ago, a family friend (married and a breadwinner) asked for counsel. He narrated that he has two elder half-brothers who are his dependents because they have lost their jobs and did not strive to find one. He shells out P30,000 a month for their living expenses plus medicines. He has been doing that for the past five years.

In effect, a culture of dependency ensured. He effectively became his brothers’ ATM. Fortunately, his wife did not complain on his generosity as this had an effect on their family finance. Early this year one of his brothers felt unwell and sought medical treatment in a prestigious hospital where he got a private room.

Amusingly, this hospital is a firm advocate of surgery (Their motto is, “Delaying your surgery is not an option”). For a one-week stay, the hospital bill amounted to P400,000. My friend had no choice but to pay. Then after a month, the same brother felt unwell again (due to his irresponsibility towards his health) and for another week of confinement, the bill was P800,000. Again, my friend had no choice. He paid out a total of P1.2 million for his brother.

The sad thing was that he nearly underwent surgery due to misdiagnosis. Effectively he became the medical insurance provider to his brother. The money he saved over the years was wiped out in just two months. Now, my friend and his wife are always in a heated argument because if emergency strikes, they will be in a financial disaster. Not only that, his brother has the risk of being hospitalized again owing to his numerous health conditions.

If that risk becomes real, he has no choice again but to pay but, this time, from borrowed money. The former financially-stable person is now a hairline away from poverty, thanks to his irresponsible brother.

Apparently, it will look like he is the one who is very irresponsible in managing his finances. The sins of his brother became his sin and, contrary to the Bible verse, he was wrongfully punished for the sins of his brother.

Here is the thing: we all profess love for our family; it must not only be via lip service. It has to have action. If we truly love our family, we have to make it a point not to be a financial burden to anyone of them because we have no right to be a hindrance to their financial journey.

Otherwise, we will be the one who will cause their money to be wasted unnecessarily. When we begin to earn our own income, it is imperative that we start saving money as much as possible. In short, saving money is equivalent to loving your family and avoiding slapping them the punishment not due them.

Here are the different ways to save money as your way of showing love for your family members:

1. Save for emergency. As early as your first salary, begin to save at least 20 percent of your income in a bank account. Before, the rule was to save up an equivalent of 6 months living expenses. But because of the Covid-19 pandemic, it is recommended to make it at least 1 year living expenses. When emergency strikes, you do not have to panic. At the same time, you don to have to bother your family members.

2. Save for hospitalization. Savings is not always about putting money in the bank. When we save, we want to be able to pay for any event that comes along the way. We can save for hospitalization in case we fall sick but saving money the traditional way will not be of help. Get HMO/Medical Insurance

3. Save for long-term treatment. When critical illnesses such as cancer strike, it will be a big financial drain as the treatment is long term. It can be a combination of hospitalization and home care. Sometimes the treatment may reach up to P6 million depending on the severity of the disease. Without the much-needed fund, we do not stand a chance of beating critical illnesses.. Get Critical illness insurance

4. Save for the inevitable. We all cannot avoid death and, when we die, there are expenses connected with our death. We can prevent letting our family members suffer from our death by buying ourselves life insurance. Life insurance can cover cost associated with our demise. Nobody is responsible to ourselves except us.

Saving is a must. Start saving early. Plan ahead so as not to punish the ones you love: your family.

The Dispensable

2022-05-30T18:14:00.001-07:00

The dispensable

BYEDMUND LAO

MAY 30, 2022

AS employees, it is normal to hear from superiors the statement “No one is indispensable.” In simple words, it means that anyone can become unnecessary anytime and can lose his job. Employees are at the disposal of the employers.

Employers can simply rotate their employees to different tasks whether the employee likes it or not. The employers know what will be good for their businesses and when the time comes that there is someone better than you, expect that you will be reassigned or worse, retired.

I am no exception to this when I was still employed. In our department where the turn-over rate was high, I was the only one who served the longest time, twenty years. Then change came. I was made to realize that I was not anymore fit to my role.

I was offered early retirement or be transferred to sales. I was so attached to my workplace to the point that I thought that I am irreplaceable. I treated my workplace as my second home. But at that point in time, I was made to realize that there is no such thing as a permanent job.

I had a wrong misconception that loyalty to the company is a guarantee of security of tenure. Anyone in my position is sure to feel bad because of the feeling of being unwanted after serving for so long.

To make the long story short, I accepted the offer and I was able to make good my selling career for five years before calling it quits. Because of my selling experience, now I have my own business. When I was apprehensive before, later I was happy to become dispensable.

Here are some tips for the future dispensable employees.

1. Make your job a training ground. After getting the job you want, make sure to give your best and at the same time, learn from your experience and from your other colleagues. You will have an idea on how things work.

Do not have the mindset of making a routine of just reporting to work from 8 a.m. to 5 p.m. I have learned from my former job and my current business is the result of the knowledge I have from my former job. Be an expert in your current and future roles and use it when you decide to have your own business.

2. Save and invest. As early as your first salary, make it a point to save as much as possible. Financial experts tell us that we save at least twenty percent. If you can make it higher, the better. I managed to save fifty percent since I was single that time. I lived with my parents and I have less expenses.

My only expenses were transportation, groceries and a portion of my income for my mother. I do not buy lunch because I bring my “baon.” When my savings account grew, I transferred some to investments to grow it further. As I was young then, I had time as my friend. Time was on my side so I took advantage of it. That was also the reason why 25 years later, I was not afraid to be dispensable.

A lot of people are afraid because they have no savings to back them up when they quit. Retirement is not a factor of age but of net worth. The more money you have at an early age, the earlier you can retire.

3. Have a side hustle while employed. As the current cost of living is high, it is not enough that you have only one source of income. While employed, try to search and study other sources of income. Make sure that your side hustle does not interfere with your work load. Start small and grow it gradually.

When the time comes that the income from your side hustle is stable and is higher than that of your job, you may want to go full time. As an example, my son, who is a first-year college student, has a small online selling business. I was observing his activity and I was surprised to know that his current average monthly income beats that of an employee.

He earns his income at zero stress level. If he can make his business stable, then he does not need to be employed anymore. From him I learned this: Find the things you love to do and if possible, monetize it.

4. Change of mindset. There is nothing permanent in this world. Everything moves forward. Just think of your job as an education. We have the primary level, secondary level and tertiary level and after that, we hunt for a job.

At all levels we graduate. Maybe we can call our job as quaternary level of education so that parting away from it will not be a sad moment but a step to the next level, like being a business owner. A change in mindset is all we need.

Do not be afraid of being dispensable. Just like old age, it will come. We just need to prepare for it. As the saying goes, “It wasn’t raining when Noah built the Ark.”

Edmund Lao is a registered financial planner of RFP Philippines. To learn more about personal-financial planning, attend the 95th RFP program in May 2022. To inquire, e-mail info@rfp.ph or text at 0917-6248110.

The way of the Chinoys

2022-02-08T00:11:00.006-08:00

The way of the Chinoys

BYEDMUND LAO

FEBRUARY 7, 2022

IT is already the Lunar New Year’s Eve of the Tiger and a lot of Mainland Chinese brave Covid to head to their home. Hopefully, there will be no resulting new pandemic.

Here in the Philippines, due to the pandemic, the usual dragon dance celebration did not materialize as this is a potential spreader event. The Chinoy community has to contend with buying “tikoys” and giving “angpaos” to family members as their simple celebration. As a Chinoy myself, I am amused to see Filipinos celebrate with us. However, not only did our ancestors from the mainland bring this tradition, they also brought with them the secret to wealth. Let me share what my grandmother did.

1. Save a lot. My grandmother was a very shrewd businesswoman. She had a merchandise store and a lot of loyal clients. From her business she made good income. She made it a point to spend only 10 centavos for every 1-peso earnings. Effectively, she saved 90 percent of her income. No wonder, at the time of her death, she left behind a number of gold bars to her children. This is proof that the fastest way to build wealth is to build it slow. She did not believe in get-rich-quick schemes. Learning from her, as an employee before, I saved 50 percent of my income and 100 percent of my bonuses since I was single and had no expenses.

2. Never be greedy. As a businesswoman, she never indulged in overpricing, even if her store is the only one that had the items needed. As long as she did not take advantage of her clients, she is sure to have repeat sales. For her, greed is the highway to failure. As a businessman, I applied the same principle and true enough, we became the preferred service provider of my client due to fair price and good after- sales service.

3. Learn to network. When the Japanese came, everybody was afraid, my grandmother included. But later she turned that fear into an opportunity as she bravely networked with the Japanese and they also became her loyal clients. I still remember my childhood where I was playing with a bundle of Japanese money, not knowing it was my grandmother’s money (but without any value anymore). When I was in sales, I learned to network and true enough my income shot up. Indeed, your network will define your net worth. Who you know is more important than what you know.

4. Spend wisely. My grandmother inculcated values in my father and my father did the same. Conclusively, I have my grandmother’s attitude towards money. Before I spend money, I make sure I spend it on things I need, not want. And when I spend, I buy those with good quality so that I need not buy often. As proof, I still wear clothes even if they were bought 20 years ago. As a matter of fact, I get to have new clothes as gift from relatives or friends.

5. Minimize expenses. Above my grandmother’s store is their residence. It makes perfect sense because only one property is rented for two purposes, residence and business. Having a residence and business rented separately will just increase the total rental fee. When I retired in 2013 from the corporate world, I opened my business. Initially I thought of renting an office but changed my mind and made my home my office. That way, by minimizing expenses, I increase the profit of my business and my income as well.

6. Make money work. My grandmother not only saved. She invested as well. She re-invested the money earned by buying more items for her store. Remember her saving 90 percent of the income. She made that a new capital to buy more items to sell. Early on, she made money work via compounding. Starting from my childhood, whenever I see my money earn interest, it is my income from my money which earned it. I never spent the interest, a habit I have up to now. As long as I am earning income, I will let my money continue to make money for me. As I am into my own business, I am now mentoring my son in his small business where I taught him the principle of compounding his money via his endeavour.

Majority of Chinoys of today started from scratch and for sure they have applied or improved the above principles. I encourage readers to try the Way of the Chinoys and success is just nearby.

Edmund Lao is a registered financial planner of RFP Philippines. To learn more about personal-financial planning, attend the 94th RFP program in March 2022. To inquire, e-mail info@rfp.ph or text at 0917-6248110.

An unstable vehicle

2022-01-25T19:28:00.002-08:00

An unstable vehicle

BYEDMUND LAO

NOVEMBER 15, 2021

3 MINUTE READ

(https://businessmirror.com.ph/2021/11/15/an-unstable-vehicle/)

DURING the onset of Covid 19 and lockdown in March last year, two-wheeled vehicle usage surged. Logistics firms provided the needed delivery services by connecting users with drivers on mobile and web applications.

A lot of employees displaced by the pandemic found an alternative and better source of income via the delivery service industry. In the past, the motorcycle has been linked to crimes like theft and assassination, especially by criminals riding in tandem. The pandemic gave the motorcycle the new image it needed the most.

There are a lot of motorcycles on the road now due to its affordability and ease of travel. Due to its design, the motorcycle can traverse roads even with heavy traffic. The ease of riding one has its risk in terms of safety.

In an article by Michigan Auto Law, motorcyclists account for 14 percent of all accidents and are also 28-times more likely to die than car drivers and passengers when involved in a crash. More than 80 percent of crashes result in injury or death.

Compared to a car with four wheels, a motorcycle is unstable as one would fall over without a kickstand. But when running, the motorcycle doesn’t need the kickstand anymore and will be stable while in motion.

These are all because of the principle of gyroscope. Whenever the rotor of a gyroscope is spun, it tends to continue moving in the same direction. When a motorcycle starts, the rear wheel turns into a gyroscope and the force created by the wheel gives it stability and helps keep it upright. The introduction of an external and unbalanced force like a collision from any side, the gyroscopic function stops. The result will be catastrophic.

The behavior of the driver is also a major factor as some drivers tend to feel invincible and overconfident, especially when overtaking other vehicles.

Some drivers also disregard traffic rules and forget they are still mortals whose life can be taken away with just one mistake. A driver’s behavior results to accidents.

By observing the motorcycle from behind, one can see the wheel touching the ground. We can mark an imaginary dot at the point of contact. Then consider the seat, take the edges at both ends and mark them with two imaginary dots. Connect the three dots and the result is a triangle. In Trigonometry, three points determine a triangle. In Physics, the triangle is the sturdiest and most stable structure.

The problem here is that the triangle is inverted. It will be as if the motorcycle is standing on tiptoe. Just like a human being, one cannot stand on tiptoe and risks falling. That explains why a motorcycle has a kickstand. An inverted triangle may be sturdy but cannot stand on its own because it needs a base to stand.

With regards to personal financial planning, isn’t it evident a lot of people are similar to motorcyclists? Their financial triangle is inverted and cannot stand on its own. A healthy financial triangle should have its base at the bottom.

Logically, it pays to cover the risks so that when the risks become real, the financial loss will not be too much of an impact. A proper triangle should have a building block starting with proper insurance coverage to cover all of life’s risks. Then as one aims higher, he can now go for more complex financial instruments for his long-term needs.

If one follows the inverted triangle, then he would have no insurance but lots of investments. An uninsured person would then be similar to a motorcyclist where a wrong behavior will result to a catastrophic result. Sound financial management will always require an individual to get as much protection as possible.

By minimizing risks, an individual can guarantee himself of a more stable financial condition as if he were driving a 4-wheeled vehicle.

Always remember, when dealing with your personal finance, don’t be a motorcycle driver.

Edmund Lao is a registered financial planner of RFP Philippines. To learn more about personal-financial planning, attend the 93rd RFP program in January 2022. To inquire, e-mail info@rfp.ph or text at 0917-6248110.

Haste to waste

2022-01-25T19:23:00.000-08:00

Haste to waste

BYEDMUND LAO

JANUARY 17, 2022

4 MINUTE READ (https://businessmirror.com.ph/2022/01/17/haste-to-waste/)

THE year 2022 began on a sour note. The NCR was again back to Alert Level 3 due to the steep rise of Covid cases in a matter of days. From December 24, 2021, with only 80 infections, there was an exponential rise in cases. As of January 10, 2022, the infection reached a high of more than 33,000.

How did this happen?

Last August, a hard lockdown was recommended so that consumers and businesses will be able to have a good Christmas. It was also projected that the last quarter will allow businesses to recover. It is a small sacrifice that will give us a long-term gain. Then later in November, the alert level was brought from 3 down to 2; meaning the restriction was more relaxed.

Ever since the pandemic began, I have been accustomed seeing few people in the malls and supermarkets. But this time around, it was totally different. I was shocked to see people behaving as if there was no pandemic. Parents brought their babies or toddlers (unvaccinated and no face mask).

It seems the government is in such a hurry to revive the economy at the expense of public health. Worse, there was already the threat of the highly-infectious Omicron variant late-November, which the government unintentionally imported owing to its failure to implement a longer quarantine requirement like that of Hong Kong’s.

Unfortunately, a lot of overseas Filipino workers came home with the Omicron variant. Then there was also the news about people skipping quarantine via bribery. In haste, all the gains we got in December went to waste. The effort and sacrifice we all made went to a naught.

We are back to square one.

The hospitals are seeing a rise in the confinement of patients as compared to almost zero last December. We are doing the same thing over and over again but the government expected a different result. Evidently, not only does the government took short cuts; travellers did. too. Similar to driving, if one isn’t familiar with the road network, one can reach a dead end.

The same applies in our personal finance. A lot of people are always in a hurry to get ahead faster than others and, most often than not, end up with nothing. In their haste, they got into a scam. Instead of growing money, they lost everything.

How do we avoid this scenario? Below are some pointers:

1. Know yourself and your situation. Similar to the pandemic, our authorities seem to not know what they are doing. They can see what is happening abroad but seems not to learn anything. They even recommend the same erratic measures that yielded disastrous results. One needs to study the situation and seek wise counsel from those who have been successful.

2. Be proactive. Knowing full well what lies ahead, it pays to have a plan of action as compared to waiting for the risk to occur and then react. That will be too late. Similar to our Covid response, our authorities will act only after the case is severe. In managing money, we need to think far ahead and see the future risk that is certain to occur. Having the luxury of time gives us room to prepare without much stress. Failing to plan the future is simply planning to fail in the future. Lost time cannot be recovered and one will definitely pay a heavy price later.

3. Prevent rather than cure. When our health secretary said that the entry of Omicron is not a matter of “If” but a matter of “When,” I already know his mindset. China’s policy is zero-Covid. So when we read news we see the difference in their actions. Prevention of the entry of the variant is definitely a lot cheaper than letting it come in and treat the citizens. The latter mindset causes government and the citizens to lose lots of money unnecessarily.

Scams are similar to the Covid virus that takes away hard-earned money. When these scammers guarantee high return, we should treat this as a red flag and avoid them the way we avoid the virus. Remember that if the offer is too good to be true, then it’s too good to be true. Using that information as the antidote, we can prevent scams. If only authorities prevented the Omicron variant from coming in, then we will not be in a mess now.

4. Learn from mistake humbly. We already had three surges during the pandemic. Yet authorities still do not seem to learn. Every time a new variant appears, they will always say that they are prepared. They do not want to admit their mistake and reject suggestions from knowledgeable people. The result will always be deaths and overwhelmed health workers.

Similarly, in the haste to make money and recoup past losses, a lot of people keep on getting scammed over and over again. They even go against the warnings of financial advisors on the dangers of the offer. The lure of easy money gave them the idea of invincibility. Unless they humble themselves, unlearn and re-learn, they will keep on repeating the same mistakes until it is too late.

Let us all hope that the pandemic be over soon so that we can continue building our future wealth. Always remember, money needs time to grow and haste only makes waste.

Let this be a Happy 2022!

2021-01-12T08:00:00.003-08:00

THE FAMILY FEUD

https://businessmirror.com.ph/2021/01/12/the-family-feud/

ByEdmund Lao

January 12, 2021

As of this writing, the year is about to end and to be replaced with a new one. Suddenly a thought occurred. What if it is life that is to end? For sure there is no replacement.

Remember the American game show titled “The Family Feud”? This popular game was created by Mark Goodson. In this game, two family teams of five contestants each compete to win cash and prizes. Each round begins with a “face-off” question that serves as a toss-up between two opposing contestants.

The first to give the most popular answer immediately wins the face-off. Otherwise, the opponent responds and the family member providing the higher-ranked answer wins. The family that wins the face-off may choose to play the question or pass control to their opponents.

The family with control of the question then tries to win the round by guessing all of the remaining concealed answers, with each member giving one answer in sequence. Giving an answer not on the board earns one strike. If the family earns three strikes, their opponents are given one chance to “steal” the points for the round by guessing any remaining concealed answer; failing to do so awards the points back to the family that originally had control.

What will be the scenario if the family feud is not a game by two families but an internal feud within the family of five resulting from a spouse’s life that suddenly ended? For sure, it will not be the same result as that of a game show.

Consider this scenario. A husband is critically ill and knows that his demise is sure to come within five months. He has assets that are under his name and he has a wife and children who will survive him. He reminded his children to love one another and support each other.

But for unknown reason, he entrusted all his assets to one of his sons who is living abroad while letting his wife and other children take care of him until his death without leaving an amount to cover all expenses they incurred for him. As expected, the son entrusted with the assets succumbed to greed and made a “steal” to own all the assets, leaving the surviving spouse and siblings with none.

The greedy son did not even make an effort to monetarily compensate his siblings for all the time and personal money they spent for their father. When the surviving spouse asked for some monetary support, he would even offer different reasons for not sending back the money when the fact is that the surviving spouse has a right to it.

Such is the power of greed. As the saying goes, “As blood is thicker than water, money is thicker than blood”.

In the USA, estate laws differ from state to state. When an individual dies intestate (meaning no will or trust to bequeath assets), state law determines how the assets are to be divided among the heirs. Only a third of all states have laws specifying that assets owned by the deceased are automatically inherited by the surviving spouse. In my honest opinion, this makes sense because the spouse is the lifetime partner of the deceased and she is the co-owner of their assets.

Under Philippine law on Intestate succession, only compulsory heirs of the deceased are entitled to inherit from his or her estate. And under the Civil Code of the Philippines, compulsory heirs include the surviving spouse and the children, whether legitimate or illegitimate.

Assuming the surviving spouse is a housewife and has no income, following the Philippine law would leave her at the risk of outliving her share of the estate. Another risk is that the children will be subject to laziness specially if the amount they will receive is great. It must be noted that international superstar Jackie Chan does not plan to leave his estimated $370 million fortune to his son, Jaycee. Chan explained that “If he is capable, he can make his own money.”

In the scenario above, a prospective heir who has “more authority” oftentimes forcefully gets the lion’s share. Usually this kind of set-up lead to siblings fighting each other for the heirloom. Oftentimes, this leads to court battle. Had the deceased planned well before his death, costly family feud would have been avoided.

As parents, we can rectify this kind of error early in life. Here are some guidelines:

1. Talk to the family about death and its impact. As morbid as it may seem, there is a need to discuss about this reality so that everybody will be in agreement about heirloom and there will be no bad blood between siblings later.

2. Educate the family about money matters. By teaching the children on the purpose of money, greed will be put at a minimum. When people do not put a goal on the money they saved, they will only be accumulating money to no end and their only purpose is to have more and more money without contentment.

3. Involve members of the family for every major money decision. Whenever there is a major issue about money, make it a point to have a family meeting to discuss it so that this can be a money lesson for every member, The more they are educated, the lesser the greed will be.

4. Be insured. Insurance is the best tool to manage risk and conflict. By being properly insured, one can assign a certain amount to be given to every member of the family without the need for the siblings to quarrel among each other because at the time of purchase, everyone is involved. Buying insurance is a major money decision.

Always remember, if you love your family, it pays to plan ahead. Give time to study about estate succession and planning.

Edmund Lao is a registered financial planner of RFP Philippines. To learn more about personal-financial planning, attend the 87th RFP program this January 2021. To inquire, e-mail info@rfp.ph or text at 0917-6248110.

The Instruction Manual

2020-07-12T05:18:00.002-07:00

Home Business Banking & Finance

Business Banking & Finance

The instruction manual

ByEdmund Lao

July 7, 2020

Every time I buy something, I make it a point to read the instruction manual putting it into operation. By following the manual, I am sure not to make mistake or damage the item I bought. One day during the ECQ (enhanced community quarantine), my mother sought my help in turning on a mobile phone she borrowed from my brother.

As the gadget was a keypad type and an old one, I had a hard time finding the switch. I tried everything but to no avail. Finally I surrendered and told my mother to ask my brother once he comes back. Later, my mother told me my brother helped her and she showed me how.

That was the problem when I tried to turn it on blindly because I do not have the instruction manual. Had my brother left the phone with the manual, I would have found it easy to operate and not waste time experimenting on how it works. Such is the importance of a manual.

Why is it that when it comes to money, a lot of people are in financial mess? I realized the reason is the same. They do not have the instruction manual on how to manage money. All they know is spending on anything the money they earned. It is similar to my experience with the old mobile phone where I tried to press everything to turn it on. By following the instruction on how to manage money, an individual is sure to use his money wisely to his advantage.

Here are the simple instructions on operating money:

1. Increase income. There are two ways to increase one’s income. One is by decreasing expenses by eliminating the wants through proper budgeting. Cutting down on vices will free up money that can be saved. If money is still not enough, then the only recourse is to free up more time to make more money. Time is money. The more time we allot for an income-generating activity, the more money he can earn.

2. Pay yourself first. This is the principle of saving. One pays all of the supplier of his needs but always forgets to pay the supplier of his finances: himself. By paying himself, he is actually saving money. It is good to save 20 percent of his income. This is similar to the story of Joseph when he governed Egypt. He followed God and instructed all to save 1/5 of the harvest in preparation for the coming drought. It is best to continue saving 20 percent up to the time he accumulates an amount equivalent to six months of living expenses for emergency purposes.

3. Minimize risk. Life is full of risks. Ever since our birth, we face the risk of death or sickness as we are merely mortals. We cannot eliminate risk. We can only manage it to minimize the impact. For the breadwinner, the occurrence of such risks will definitely bring a negative impact on the finances of the family. The only way to negate the impact is by applying for an insurance policy as early as possible. Since insurance is a risk management tool, insurance companies will only accept clients who do not pose a risk to them at the time of application. Remember, when one is alive, his insurance policy is in the safety deposit box. When the time comes that he is in the box, his insurance policy comes alive and replaces his income for the family.

4. Invest for long term goal. After making sure his risks are managed, it is time to prepare for his golden age. As a rule, a person must plan for his retirement starting from the time he receives his first salary. The earlier he does it, the lighter his load will be. He will only be needing a small amount to be invested regularly up to the time he reaches his retirement age. Ignoring this principle will guarantee that he will not be able to retire comfortably or that he will be surely a burden to his children. Remember that the only person who can take care of us in our old age is our younger self today. Just avoid investment that promise quick and big return because it is likely a scam.

5. Wealth transfer. A wise man knows he has to leave his unspent money or assets to the next generation. Failing to do that will only ensure that his children will quarrel over his estate once he dies. Nobody is immune when it comes to issue about money. Even I myself encountered unwise wealth transfer from my late dad. But I did not come to the point of suing my sibling over money. What I got was a real-life lesson that i will not repeat when it is my time to go, I have planned well and even advised my wife on what to do. Whatever we have left will be shared equally by our children. One of the best ways to do it is via insurance.

6. Seek wise counsel. If in doubt, it is best to get advice from experts in managing finances. Always make it a point to review the portfolio annually because there will always be changes in life events.

Just like operating gadgets, by following the simple instructions on handling money, one can be certain that he will not go wrong in his financial journey.

Edmund Lao is registered financial planner of RFP Philippines. To learn more about personal-financial planning, attend the 84th RFP program this August 2020.

To inquire, e-mail info@rfp.ph or text <name><e-mail> <RFP> at 0917-9689774.

It's Yesterday Once More

2020-03-03T22:58:00.002-08:00

Home Business Banking & Finance

It’s yesterday once more

https://businessmirror.com.ph/2020/03/04/its-yesterday-once-more/

Even since my young age, I was already fascinated by science fiction movies, especially about space and time travel. I have watched many time travel movies like Timecop and Back to the Future, to name a few.

These led me to think what if someone makes time travel possible? Can we alter the present by altering the past? What happens if we meet our younger self? Can we interact with people from the past?

It would surely be good to go back to the past and undo the mistakes we did. The only problem is that if everyone can travel back in time, then the present and future might be chaotic due to our top human nature: greed.

We all know that time that passed by will never return. Wasted time equates to wasted money because time is the real money. Anyone who disagrees just needs to look at his paycheck and see how it was computed.

As early as my first salary, I started to save and invest because I want my money to make more so that I need not exert too much effort to grow it. Starting early was an advantage because I was young then and I have time on my side. As my income went up, so did the amount I allotted for investing.

One day, a colleague asked me if I have accumulated a certain amount (he specified). I confirmed. He was surprised because I was hired later than him and yet I saved more. When we computed how much he needed to save regularly to catch up with me, he found it difficult to do. I jokingly told him to go back to the past and tell his younger self to seek my advice.

Is time travel possible? In the field of investment, a resounding yes!

I remember our CEO Rex Mendoza of Rampver Financial mentioned in our past training that “history repeats itself, people never learn.”

What does this mean? History did repeat itself and it’s yesterday once more. It is as if we are in the year 2013.

In this case, we did not go back in time, but time came back to us and for us. Whoever failed to invest in 2013 can invest now (as if it was 2013) even if it is now 2020. This will be their biggest opportunity to catch up with those who invested in 2013.

The 2013 investors can also use this opportunity to add more at the same level (especially if they run out of funds that time). Once the market breaches past 8,000, it may never look back anymore as it is projected to go up even higher. Busy employees who want to take advantage of this rare opportunity but have no time to monitor the market can go for managed funds as there are expert fund managers who know the ins and outs of investing in the market on their behalf.

Here are some pointers:

1. Start investing as early receiving the first paycheck. Time is our friend when we start early as compounding is at the maximum potential for long term investment.

2. Invest regularly. Time can grow wealth but we must not forget that money begets money. The more frequent that we add to our investment, there will be more employees (money) working for us 24/7. At the same time, investing regularly means we are doing cost averaging where our total share price will be between the highest and the lowest. And that level will make our whole portfolio gain when the market recovers and goes up.

3. Look for mentors. No man is an island. Look for same minded people who are knowledgeable and seek wise counsel. In times of crisis where we are emotional, we need experienced mentors who are logical and can remind us the reason we invested. Never be emotional when it comes to investing. As RFP Marvin Germo often says, jokingly: “Leave your emotions to your spouse.”

4. Be informed. As information is now easily accessible, it pays to research and be educated. Education is still the best antidote to fear. The more we are informed; the better is the decision-making.

Don’t be left behind again. This might be the only time that it’s yesterday once more. Happy investing!

Edmund Lao is registered financial planner of RFP Philippines. To learn more about personal-financial planning, attend the 82nd RFP program this March 2020.

To inquire, e-mail info@rfp.ph or text <name><e-mail>
<RFP> at 0917-9689774.

The force field

2019-07-10T04:03:00.003-07:00

Home Business Banking & Finance

The force field

Edmund Lao

July 9, 2019

During my childhood, I always looked forward to go home early on a Friday after school only to watch my favorite cartoon movie, Voltes 5. The weekly show was nearing its climax when it was abruptly banned. The story has a good twist but what really caught my fascination was the defense system of Camp Big Falcon. On a heavy attack, Dr. Smith will activate the force field. which acts as a barrier or shield to protect the base from the barrage of missiles sent by the Boazanian beast fighter. The force field served as a protection for the base to prevent it from being destroyed. Once the base is destroyed, Voltes 5 will be easier to destroy as it will always be exposed to enemy attack.

In the real world, a person will need all kinds of protection to prevent him from being harmed. He needs shelter to shield against nature’s threats. He needs an umbrella to during the rainy season. A politician needs a bodyguard as a shield against threats to his life. A child needs his parents for financial security.

In terms of personal finance, nobody can escape the need for protection, just like the fact that nobody can also escape death and taxation. There is only one instrument that can protect everyone financially. It is insurance, an intangible product that the majority of the population avoids talking about due to the feeling of morbidity.

How can insurance be similar to a force field?

1. Temporary income replacement. The life blood of the family is the breadwinner. He is the one generating the cash flow to meet the expenses of the family. As long as the breadwinner exists, the family does not need to worry about finances. Assuming the breadwinner is taken out of the picture, cash flow stops. This is where insurance becomes important. As long as the coverage is adequate (usually the estimate is 10 times the annual income), the family he left behind will be able to survive and maintain the same lifestyle as if he is still around. The family will surely miss him, but not his income. At the same time, the family has the luxury of time to find ways to grow the insurance proceed and try to find other source of income. In short, there is no panic. Insurance shielded the family away from poverty.

2. Provide money for estate taxation. When a person passes away, his assets will now be called estate. In death, the estate has to be transferred to the heirs. Note that when assets change hands, the government is always never absent. Every time money or any asset moves, there is a corresponding tax. In this case, the heirs have to pay the government tax to allow them to claim the estate of the deceased. This is called estate tax (sometimes called as death tax). If the deceased is not insured and the heirs are not capable of paying estate tax, the government can later claim it. With insurance, the heirs now have a ready cash to pay the tax without getting a loan or shelling out their hard-earned money. Insurance became a barrier that prevented them from losing their money to the government.

3. Provides money for critical illness treatment. Nowadays, we see a lot of young people diagnosed with grave diseases that previously afflicted the older generation. Progress has its drawback. Our world has become more polluted than before, thanks to the mismanagement of the human race. Getting critically ill is a surefire way to damage one’s personal finance. Health-care cost has dramatically outpaced the growth of income of the majority. Once critical illness strikes, a person’s savings can be wiped out and he may yet end up deep in debt just to be cured. If he is not cured, then he cannot pay his debt back and that spells trouble for the lender. By being insured, he shields himself (and his prospective lender) from headache and financial trouble.

4. Provides payment for home loans. Real-estate is booming nowadays as well as the financing business. Real-estate properties are marketed as investments and are offered via financing with a term of 15 to 25 years payment. To minimize risk, real-estate companies require buyers to get a Mortgage Redemption Insurance. This is simply a term insurance that pays the loan balance to the real-estate company in case the buyer dies within the paying period. As this protects the companies, this also protects the family. Upon death, the family need not pay a single cent as the insurance company takes responsibility for all the remaining balance yet unpaid. There is no more need to evict the family for failure to pay.

Insurance is a good barrier to minimize the financial impact of the risks becoming real. Always remember that in LIFE, there is always the IF that we need to be shielded from.

Don’t you want a force field to protect you the way Camp Big Falcon has?

Edmund Lao is registered financial planner of RFP Philippines. To learn more about personal-financial planning, attend the 77th RFP program this August 2019.

To inquire, e-mail info@rfp.ph or text <name><e-mail> <RFP> at 0917-9689774.

Facebook Facebook Messenger Twitter Pinterest Tumblr Gmail WhatsApp Kindle It Viber Yahoo Mail Evernote Instapaper LinkedIn SMS PrintFriendly Share0

The Waiting Game

2019-03-26T08:48:00.000-07:00

Home Business Banking & Finance

The waiting game

https://businessmirror.com.ph/2019/03/26/the-waiting-game/

Edmund Lao

March 26, 2019

There was once a story about a chess game between two grandmasters. The first played very cautious and boring moves.

The other one, who was out to play for a win, was already getting impatient on the situation of the game. Knowing he was rated higher than the other, he played aggressively in haste in order to force a win. However, unknown to him, the other player was just waiting for him to be aggressive and make a blunder. The lower-rated grandmaster won the game.

The loser, still unable to accept his loss, said to the winner, “You won only because you waited for me to commit a mistake.” The winner replied. ”If that is the way to win, then wait!”

Chess is actually a game of wits, nerve and patience. This is a game where one plans and strategizes where to place his pieces to minimize risk and loss while rooting for victory. A small miscalculation can spell the difference between victory and defeat.

Now we have an idea why we were victorious against Spain and disastrous against the Americans in the late 19th century. Just like in chess, a winning player has the risk of losing if he mishandles his position.

In the above story, it is obvious the lower-rated grandmaster was intentionally making safe moves to distract his opponent while keeping his position solid and preparing for an attack if the opportunity arises. Conclusively, there is power in waiting.

In the field of personal finance, waiting has always been said to be related to procrastination. A lot of financial advisors preach about the high cost of waiting. This statement is true if the person does not do anything but wait.

This reminds us of Juan Tamad lying on the ground while waiting for the apple to fall. No matter how we long wait to have a good future, for as long as there is no action on our part, that future will not be realized.

It is a known fact that personal finance is 80-percent behavior and 20-percent knowledge. That explains why even if information abounds, only a few choose to execute the knowledge they acquired. There are a lot of alibis offered, and the most common is “I will think it over.” A simple reason to summarize the alibis is that all are conditioned to spend rather than to save.

The majority finds happiness in immediate gratification of the income received, especially those with the Yolo mindset. One must not forget that time moves forward, and nobody can escape it. Getting old without a retirement fund is similar to playing a losing chess game.

As a chess player, I applied some principles that has helped me in a winning position going into retirement:

1. Save as much as possible. When I started working in 1988, I began with the end in mind. I looked 40 years into the future and decided to save 50 percent of my paycheck.

I spent the remaining amount wisely, making sure that none went to waste. It is hard to start saving, but the fear of an unknown future can propel one to have the habit to save. A lot of times, I pretended (in my mind) that whatever money is in my pocket is my last money so that I will not be tempted to withdraw from my savings account. Saving at an early age can be compared to playing cautious moves in chess at the early stage of the game.

2. List down and analyze expenses. To know where my money is going, I listed my expenses. From the list, I was able to check which expenses I can eliminate so that I can free up cash to boost my savings. In a chess game, some positions will require a player to sacrifice a piece just to gain tempo (momentum) so that he will have the advantage.

3. Invest long term and forget. When I started investing, I forget all about it. I treated investment as an expense. That way, I will not rely on it for the short term need because I invested for my long-term goal. For me to be able to meet my short-term goal, I worked overtime and did some sideline selling to boost my income. Whenever my investments gain in value, I never redeemed because I want my money to compound. A lot of people always think of monthly payout, and the problem with payout is that it prevents money from compounding. At the same time, money from payout ends being spent unwisely. In playing chess, pieces are moved forward to win. When a player is losing, his pieces retreat. A person who redeems the profit of hid long-term investment is similar to a winning chess player who commits blunder and retreats his pieces to a losing position.

4. Be protected. Later in life, I learned the value of protection. I bought myself an insurance to protect my family from financial strain should anything wrong happen to me.

From a person who feared insurance agents, I became believer after I understood its value. It pays to have more than one policy when we go on from one life stage to another.

Just like in a chess game, while playing for a win, it makes sense to protect the King, as well. There is no sense going for the win when the King is exposed to risks from attacks by enemy pieces.

Start your financial journey as soon as you start earning income. Be financially literate. Start investing, then play the waiting game and win later.

****

Edmund Lao is Registered Financial Planner of RFP Philippines. To learn more about personal-financial planning, attend the 75th RFP program this April 2019.

To inquire, e-mail info@rfp.ph or text <name><e-mail> <RFP> at 0917-9689774.

Overcoming your fears of money challenges

2019-03-06T08:58:00.001-08:00

Overcoming your fears of money challenges

https://businessmirror.com.ph/2019/03/06/overcoming-your-fears-of-money-challenges/

Edmund Lao

March 6, 2019

“The only thing we have to fear is fear itself”–Franklin Roosevelt.

Fear is a very powerful emotion that causes people to behave positively or negatively. There are some who allow fear to paralyze them. And there are also some who use fear to motivate them to move forward.

When it comes to handling money, fear is a major factor that affects the way people behave toward their decision.

Fear of losing out

When it comes to money, fear is undoubtedly a hindrance to investing.

According to the Bangko Sentral ng Pilipinas, only 3 percent of Filipino adults invest in bonds, funds and stocks. Many prefer to put their trust in guaranteed instruments, such as banks, Social Security System or Government Service Insurance System and the Home Development Mutual, or Pag-ibig, Fund.

They are afraid to invest in other financial instruments for fear that their investment will lose value due to the volatility of the market. They also suffer from analysis paralysis, which cause them not to invest at all.

Just like the American people during the Great Depression, their fear will just make matters worse later in their future. Even if there is a desire to grow their money, their fear is stronger than their dream and the result will be no action.

A perfect example is a person who inquires about investments and having all the information he wanted, decides not to push through out of fear of the market going down when he has really no basis for his fear.

Fear of missing out

Commonly known by the acronym FOMO, the “fear of missing out” as defined by Wikipedia is a “pervasive apprehension that others might be having rewarding experiences from which one is absent.”

Especially in money matters, this kind of fear may be good as it will prompt a person to act than to be passive.

However, the person, out of haste and greed, risks committing an error by having a herd mentality and join the bandwagon without studying the investment offered. This is primarily the reason why scams proliferate.

In the past, many people were duped by scams that offer was 5-percent interest per month. People invested because they were told that many celebrities also invested. They forgot that those people were also human beings who are prone to committing mistake due to greed.

The saying “haste makes waste” in this situation holds true. By hurrying to invest without researching, the probability of losing the whole investment is higher and will be more painful than letting the opportunity pass by due to the fear of loss.

What to do

There is saying that it is not about knowing what to do, it’s doing what you know.

It is important that you have good information but equally essential is knowing what you do with what you know. Since fear is the enemy of will, you have to make will more powerful than your fear.

With regards to personal finance, the only antidote to fear is to be financially literate. By learning the basics of personal finance, we have the knowledge on the different ways to invest our money intelligently.

We will be able to evaluate offers and make sound decision based on logic. Emotions will be never be a part of the equation. We can act the way Superman did to protect himself and win. Even the late Bruce Lee said: “Knowing is not enough, we must apply. Willing is not enough, we must do.”

Are you willing to overcome your fear?

Edmund Lao is registered financial planner of RFP Philippines. To learn more about personal-financial planning, attend the 75th RFP program this April 2018.

To inquire, e-mail info@rfp.ph or text <name><e-mail> <RFP> at 0917-9689774

Financial Tips for Yuppies

2018-11-12T22:34:00.004-08:00

Financial Tips for Yuppies

It’s been a while when I last posted, today I want to share with you an amazing article. Happy reading!

Young urban professionals are earning so much today as compared to 20 years ago. With the proliferation of the BPO industry, even those who did not finish college are eligible to work as call center agents as long as they can speak English correctly and fluently. Initial salary ranges from 20 to 25 thousand Pesos. Higher income translates to higher lifestyle and unnecessary expenses. Due to commercialism, these young people are wasting so much power that they possess in creating and building their future wealth.

It is unfortunate that personal finance has yet to be a required subject in high school or college, so majority is fairly unaware about how to manage their money when they are out in the real world for the first time. The only secret to get started on the right path is the willingness to do a little reading. One doesn’t even need to be particularly good at math, one merely has to change his behavior towards money.

To get started, here are some of the most important things to understand about money in order to live a comfortable and prosperous life.

Be Disciplined

Discipline is doing something you hate to do. Years ago, President Marcos said “Saikauunlad ng bayan, disiplina ang kailangan”. This is true even to our personal financial lives. Discipline can be achieved by having self-control. Self control is an art and the sooner you learn the fine art of delaying gratification, the sooner you’ll find it easy to keep your finances in order. Although you can easily purchase an item on credit by just swiping your credit card , it’s better to wait until you’ve actually saved up the money. Doing that, you’ll save up on interest which you can use on other important purchases.

If you make a habit of putting all your purchases on credit cards, regardless of whether you can pay your bill in full at the end of the month, you might run the risk of still paying for those items in 10 years. It makes perfect sense to always pay your balance in full when the bill arrives, and don’t carry more cards than you can keep track of.

Manage your financial future

If you don’t learn to plan your own finances, other people will find ways in planning to get your money. Remember, malls are everywhere and very often they offer madness sale. People really get mad and flock to the malls to purchase things they do not want just to impress people they do not like. Most of the time, they buy things that depreciate in value. When you buy these, your money is gone forever. It is better to buy assets which will not drain your pocket. Buy books or bond with financially inclined people and get infected by their virus. You will see a big improvement in your financial life.

Know where your cash flows

Once you’ve gone through a few personal finance books, you’ll be amazed to see how important it is to make sure your expenses do not exceed your income. The best way to do this is by budgeting. You’ll realize that making small, manageable changes in your daily expenses can have big impact on your financial situation. In addition, keeping your recurring monthly expenses as low as possible will also save you big bucks over time.

Start an Emergency Fund

One of mostly repeated rules in personal finance “pay yourself first”. No matter how much you earn, it’s wise to set aside 3 to 6 months of salary in your budget to save in an emergency fund every month. The common problem with us is that every time there is an emergency, there is no fund. Having money in savings to use for emergencies can really give you a relaxed life because any crisis that arises will not throw your life into other people’s hands.

Start Saving for Retirement Now

Unknown to many, the time to start preparing for retirement is when one starts to earn income. On the average, a person’s productive years is only 40 years , and the younger they start, the lighter the effort will be because he has time on his side. Another factor to consider is the power of compound interest . The sooner one starts saving, the less principal you’ll have to invest to end up with the amount you need to retire. He will then be able to call working an “option” rather than a “necessity”. Another option is to take advantage of company-sponsored retirement program, whereemployer matches employee contribution. As the employee stays longer in the company, his retirement fund has an opportunity to grow better.

Guard Your Health

The most important wealth generator is YOU. It pays to get healthy. If the health is lost, income will follow.. As former Health Secretary once said “ Bawal magkasakit!”. My late father was once diagnosed to have “colangio carcinoma”, a possible treatment but not guaranteed survival is liver transplant. That procedure costs Php 6M. I always remember a saying that went this way ,” People sacrifice their health to gain wealth, later they sacrifice their wealth to recover their health”. It pays to get protected against health issues by getting HMO, Critical illness insurance or even Hospital Income Plan to cushion the loss of income due to illness.

Guard Your Wealth

If you want to make sure that all of your hard-earned money doesn’t vanish, you’ll need to take steps to protect it. If you want help managing your money, find a fee-only Registered Financial Planners to provide unbiased advice that’s in your best interest. There are a lot of RFPs in the Philippines now who are ready to help clients solve their financial problems. Then get your financial products from a commission-based but reliable financial advisor. That way you get the best of both worlds.

You don’t need any fancy degree or special background to become an expert in managing your finances. If you use these financial rules for your life, you can be as personally prosperous as the guy with an MBA or a PhD.

What is Time?

2018-11-12T22:34:00.000-08:00

What is Time?

by Edmund Lao

The greatest gift you can give to someone is your time, because when you give your time, you are giving a portion of your life that you will never get back. — Anonymous

Time is a commodity that is often taken for granted specially by Filipinos. A proof of this is coming late for appointments. The usual reason is the traffic jam, which has already been part of our lives. That is also the reason we have the term Filipino time. By coming late for an appointment, we are in effect robbing the other person of his precious time which he can use productively.

In the world of financial planning, what really is the meaning of time? We always hear financial institutions say that in building wealth, time is of the essence. From a desk calendar byFirst Metro Asset Management Inc. I saw in 2012, the number one tip was :

Start Early: The only way you can make the most out of the limited time you have is to start early. The sooner you invest, the more time your money will ha e for growth. If you delay, you will almost certainly have to invest much more to achieve a similar result. Let the POWER OF COMPOUNDING WORK FOR YOU.

Many people erroneously think that in wealth building, time is not important. When young , you will often hear the reply “I am still young. Retirement is still far away”. They do not realize that when they delay, they are in effect robbing themselves and their future generation of a bright future ahead. Each year of delay in their investing decision translates to millions of pesos of loss in the future.

Time waits for no one, once gone; you can only look back but can never get it back again.

Let us look into a short story below which I received several years ago:

TWENTIES: I CAN’T SAVE NOW. I’m just getting established. I have credit card due to pay and there’s a loan of the car too. I’m not ready to make commitments yet and I want to have fun while I can. There will be time to think about saving later on, then I’ll save.

THIRTIES: I CAN’T SAVE NOW. I’ve got a family and responsibilities. It costs a lot to raise and there’s mortgage on the house too. It takes all I have to make ends meet, when I am making more and the kids are older then I’ll save.

FORTIES: I CAN’T SAVE NOW. I’ve got kids in college and costs are out of sight. Then there are weddings. I want to help the kids get started. Expenses are their highest and it’s the hardest time to save, but things will ease off soon. Then I’ll save.

FIFTIES: I CAN’T SAVE NOW. Things haven’t worked out like I thought they would. It’s not easy when you are locked in and there’s an opportunity to move up the ladder. I can’t just make a break and start a new career. I’m helping the folks too, now that they need my assistance. I’m just barely making ends meet. Something will open up, and then I’ll save.

SIXTIES: I CAN’T SAVE NOW. I thought things would be better. I wanted to retire earlier but I just can’t do it. I’m trying to pay off the last of the mortgage and get other bills take care of, but things mount up. Remembering the grand children and other things take all I have. I guess that’s the way it is. I wish I could save.

SEVENTIES: I CAN’T SAVE NOW. I’m too old to save. My retirement benefit from the SSS and from my company just can’tgo far enough. Medical bills and long term care expenses really worry me. I’m such a burden on my kids. I wish I had saved when I should have. Now it’s too late… I REALLY CAN’T SAVE NOW.

The above story just showed one thing. Procrastination is a thief of time. Now that his 40 years of productivity was stolen from him, automatically, his future wealth also vanished into thin air with the passage of time.

Almost 10 years ago, I was thrust into the wonderful world of investment. Ever since joining a seminar that changed my mind-set, I hungered for more knowledge. For me, knowledge is nothing unless it is applied. Having knowledge made investing for me a lot less risk. I started investing in different kinds of instruments ranging from low to high risk. I realized that even high risk investment is not that all risky for as long as there is a goal and time attached to it. When I invested my money, I pretended that it was spent already. It was really spent not on consumption but on buying my future which is certain to come. It is a fact that we cannot prevent old age and getting sick but we can do something to provide for that certainty. True enough, after years of having invested, the returns are far beyond my expectation. I earned more without exerting a single effort. It was time that allowed my money to grow. Conclusively, time is the real money.

Now that we know Time is money, would you still waste it? START early and make it your friend.

What is Working Smart?

2018-11-12T22:33:00.003-08:00

What is Working Smart?

In our High School Physics, we were taught that the term work is weight lifted through a height. The French mathematicianGaspard-Gustave Coriolis defined work mathematically as applied force multiplied by the distance travelled by a body due to the force exerted onto it. This principle shows us that for a work to be done there must be an effort or hard work to get a result.

In the corporate world, employees are required by the company to work hard and give their best in exchange for the salary they agreed upon during the hiring process. Just by observing the working class, one can easily see that these people earn money by exerting so much effort in making their employers rich while they are striving to make both ends meet. They are so busy doing the jobs assigned to them that they forgot to look for much simpler ways to make life easier for them. In Physics, we learned the use of lever to make work easier. The same can be applied to our personal financial lives. True, we work hard to earn money by but we can always have the ability to earn money by working smart. Working smart is actually applying the law of Physics by using the power of leverage in maximizing our income with the least effort.

Below are some ideas on how to leverage:

1. Invest in mutual funds. Putting your money in a mutual fund is a form of leverage. Here you can use the principle of Using other people’s money, time and effort. By joining a mutual fund, you are leveraging on the expertise, effort and time of the fund manager is growing your money. Investors do not need to be directly involved in thinking of ways on how to increase their income. At the same time, their money is pooled with other people’s money to form a larger amount that can buy securities. By being pooled in the fund, let their money work the same way as those of the rich.

2. Invest in good companies. By putting your money in big companies as a shareholder, you automatically become a part owner of that company without having gone through the hassles of building one. By being a shareholder, one is leveraging on the experience and business decision of the owner, the system of the company, and the productivity of the employees without the headaches of running one. When the company declares dividend, you as a shareholder, also earn. This can be possible by buying share of companies in the stock market. Just make sure that you study well before investing.

3. Join Network Marketing. One of the most effective but controversial instrument is the MLM industry. So many individuals have abused this to the point that majority of good MLM companies were called scams. By joining MLM, you can be able to multiply your time without limit because you will have a lot of people working with you and for you. It must be remembered that time is the real money. More time equates to more productivity which translates to money. You can notice that employees are busier than the employer because the latter owns the former’s time (40 working hours a week). If he has 10 employees, that means he has 400 working hours a week. When you build your MLM business right, you will be the same as the employer who earns with the least effort.

4. Use social media. With the advent of the internet, more and more opportunities to earn were made available. You can use the online store to sell your products or your services without any overhead cost. You can also maintain a blog where you earn via advertising.

5. Build a client base. Another source of active and passive income is to have a wide base of loyal clients. A perfect example is the insurance industry. For as long as you are able to give good service to your clients, as long as you have created a good system and your clients regularly renew their policies (especially true for non-life), you are guaranteed a huge passive income even if you do not get new clients anymore.

6. Get good team/partners. Tie up with people who can fill your weakness. That way, you need not waste time trying to perfect something you are not good at. This is reminiscent of a story about Henry Ford about his alleged ignorance from which came his intelligent reply: ”If I really want to answer that foolish question you just asked, or any of the other questions you’ve been asking me, let me remind you that I have a row of electronic push buttons on my desk, and by pushing the right button, I can summon to my aid men who can answer any question I desire to ask concerning the business to which I am devoting most of my efforts. Now, will you kindly tell me, why should I clutter up my mind with general knowledge, for the purpose of being able to answer questions, when I have men around me who can supply any knowledge I require?” This is leverage at its best.

7. Think. Of all living creatures, we human beings are the only ones who can think. Our mind is the greatest gift to us by our Creator. All of the people who became rich just observed, saw the problem and thought of an idea to solve the problem. An example is the parking guide in our major malls. The one who thought of that solution has surely made a lot of money due to his innovative idea.

8. Take advantage of time. Time is money. Never abuse or waste it. Time waits for no one. Once gone, you can only look back but can never get it back. While young and working, start saving and use the power of time to grow your money with proper investment. Time will come that you need not work for money as your money will be the one working for you.

Yin and yang of personal finance

2018-10-31T18:57:00.003-07:00

Yin and yang of personal finance

https://businessmirror.com.ph/yin-and-yang-of-personal-finance/

Edmund Lao

October 30, 2018

IN the world of martial arts, especially kung fu, the basis is the symbol of the yin and yang. The most famous advocate of this principle is the greatest martial expert to have lived, the late Bruce Lee. Proof of this is in the The Tao of Gung Fu by John Little.
In the West, it is common to mistake yin and yang as being one the opposite of the other, but in the Tao they are seen as complementary. One cannot exist without the other.
Bruce Lee explains yin and yang like this:
“They are conceived of as essentially one, or as two coexisting forces of one indivisible whole. They are not cause and effect but should be looked at as sound and echo, or light and shadow. If this “oneness” is viewed as two separate entities, realization of the ultimate reality of kung fu won’t be achieved.”
“Yin” represents negativity, passiveness, gentleness, internal, insubstantiality, femaleness, moon, darkness, night, etc.
“Yang” represents positivity, activeness, firmness, external, substantiality, maleness, sun, brightness, day, etc.
Joined together, yin and yang illustrate the balance that is necessary and inherent; nothing can survive long by going to either extreme, being pure yin or pure yang.
From the said book, Bruce also quoted, “Extreme heat kills as do extreme cold. No violent extremes endure. Nothing lasts but sober moderation. Notice that the stiffest tree is most easily cracked, while the bamboo survives by bending with the wind. Firmness without pliancy is like a barrel without water, and pliancy without firmness is like water without a barrel.”
Another great example of this is riding a bicycle. It is impossible to move forward without simultaneously pushing down on one pedal (yang) and releasing the other (yin). Both seemingly “opposite” motions are needed to go forward. This yin and yang action results in the bike moving forward. Note that neither extreme will get you anywhere on its own…if you simultaneously push down on both pedals at the same time or “release” them both at the same time, you will most likely fall over.
In the world of personal finance, yin and yang is also applicable. There is a need to be balanced in the choice of instruments to meet our financial goals. Getting just one type for all objectives will mean a disastrous financial plan. As an actual example, there was once a question to me about an inquiry on how to build a fund intended for the down payment of a real estate two years into the future. I was informed that an insurance agent suggested VUL for that purpose. The agent is not balanced in his suggestion. This is just similar to asking for a yin and getting a yang response.
Just like Bruce Lee, he applied the yin/yang principle and made his martial art method balanced by being a multidimensional fighter. He studied and exchanged ideas with masters of different disciplines and used whatever is useful during an actual fight. The result is an almost perfect form of martial art, where he is almost unbeatable. Knowing either one of these in the absence of the other will absolutely ensure failure just as a one-dimensional fighter is sure to lose to Bruce no matter how hard he trains.
The same follows for a student of personal finance. He has to learn the different types of investment vehicles so that he personally knows what will be the best for him and at the same time not be misguided by those pretending to be real financial advisors whose goal is just to sell. Instead of becoming an ally, these types of financial advisors are enemies of your financial freedom. Choose the right people who can help you grow financially the way Bruce chose Taky Kimura and Dan Inosanto to help him grow his school. Having the right people around you can help much in balancing your financial decision and reduce the risk of getting wrong advice.
Knowing the industry and the instruments combined with strategies obtained from different experts is crucial to your financial success, just like the yin and yang.
Finally, here is a final word of wisdom that you can apply:
“Kung fu is a way of life as well as a mode of self-defense. It is based on yin [negative] and yang [positive], where everything is a complement. Examples are softness with firmness, night with day and man with woman. It is a quiet awareness of one’s opponent’s strength and plans, and how to complement them.” —Bruce Lee, The Warrior Within

****

Edmund Lao is a registered financial planner of RFP Philippines. To learn more about personal-financial planning, attend the 73rd program this November 2018.
To inquire, e-mail info@rfp.ph or text <name><e-mail> <RFP> at 0917-9689774.

Financial planning lessons from Green Lantern

2018-09-12T18:14:00.002-07:00

Financial planning lessons from Green Lantern

https://businessmirror.com.ph/financial-planning-lessons-from-green-lantern/

Edmund Lao

September 11, 2018

“In brightest day, in blackest night, No evil shall escape my sight. Let those who worship evil’s might. Beware my power—Green Lantern’s light!”
THIS is a very powerful oath spoken by one of the most powerful superheroes of the Justice League, the Green Lantern.

Ever since my childhood, I have been an avid fan of this superhero and, in fact, when playing superhero characters with my cousins, I chose to be Green Lantern.

I was very amused to watch him defeat his opponents using his power ring. All the while I thought that the source of his power was the power ring. Only in my adulthood did I come to know that his power comes from his will. The stronger his will is, the higher the chance of him overcoming Sinestro (his arch-enemy) and others. In fact, the best-known power of the Green Lantern is to create green energy constructs that reflect the will and imagination of the wearer.

When it comes to our personal finance, our will plays a major factor. Sadly, a lot of people have will but their will is too weak to compel them to act. As the saying goes, “If there’s a will, there’s a way.”
Here are some will powers we need to have to succeed financially:

Will to save. Financial planning requires us to save at last 20 percent of our income. Saving money means you are paying yourself first. Remember when Joseph was governor on Egypt? God inspired Joseph to require Egyptians to save one-fifth of their harvest to prepare for the impending famine.
Saving 20 percent of our income serves the same purpose for us. In fact savings is the basics of financial planning because we cannot go on with the succeeding steps without it. If you do not want to have famine in your future, your will to save should be more powerful than your will to spend.

Will to create emergency fund. Saving money is one but creating emergency fund is another. Unless a part of the savings be allotted to emergency fund, it runs the risk of being spent for other things. After saving money, the first priority is to build this fund. Unless your will to be free from debt is strong, you run a high risk your life to be at someone else’s hands when emergency strikes. Never depend on Bahala Na.

Will to be insured. No one is exempted from owning an insurance policy as nobody is immortal. Getting ill or dying at the time you are needed most can be a source of financial stress to the family as this can drain your savings. Insurance provides a buffer fund in case the risk we do not want to happen occurs. Insurance premium may seem costly but remember that the occurrence of risks comes with the greatest drain on our pockets.
I was once a doubting Thomas about insurance but, after I learned the beauty of it, my will to be insured adequately was stronger than the thought of potentially losing my savings made me buy a lot of policies.

Will to invest. Nowadays, saving money is never enough. Two generations ago, my paternal grandmother was a shrewd business person even during the Japanese occupation. She was able to save a lot of money and used these to buy gold bars. My grandmother, even with good eyesight at that time, was farsighted. She knew that Japanese occupation will not last long so she converted here Japanese money into gold. Her fear of losing the value when the occupation is over strengthened her will to invest in a tangible item that is not controlled to inflation.
Sadly, the millennial generation thinks only of “You only live once.” They do not realize that because of technological breakthrough in medicine, people can now live longer and without investing today, their financial future will be at risk. Ms. Rose Fres Fausto gave a good refutation “You also grow old.” Stephen R. Covey said it right in his seven habits for highly effective people, “Begin with the end in mind.” If you want a financially trouble-free future, you must have strong will to look far and imagine your future and start investing today.

Will to plan ahead. Time is short. We will soon part ways with whatever we have built in our lifetime. We can never bring our ownership in the next life. The difficult part is to be unmarried to you possession.A lot of old people find it hard to give away their possessions for fear of losing control over their children. But the same fear has created chaos among siblings when the asset changes status and becomes estate. Old people should have strong will for succession planning so that whatever they leave behind will be assured of continuity.

The question is: Is your will as strong as that of Green Lantern?

****

Edmund Lao is a registered financial planner of RFP Philippines. To learn more about personal-financial planning, attend the 72nd RFP program this October. To inquire, e-mail info@rfp.ph or text <name><e-mail> <RFP> at 0917-9689774.

The Thief Inside

2018-04-26T09:00:00.003-07:00

https://businessmirror.com.ph/the-thief-inside/

Home Business Banking & Finance The thief inside

The thief inside

Edmund Lao

April 24, 2018

In school, we were taught that thieves have a bad habit called stealing. That’s why the majority of us grew up wary of thieves. Encountering them is such a nerve-wracking experience. Several years ago, I was walking on my way to work when riding-in-tandem robbers tried to snatch my laptop bag. Sensing it was too light to have a laptop, they let go of my bag and sped away. I was lucky that they did not hurt me. That experience sent shivers down my spine.

Encountering robbers at any point time gives us fear because of the danger associated with it. However, unknowingly, a lot of people tag along a thief wherever they go. Since they are unaware, they don’t feel any threat. They do not realize that they are being robbed every second by someone known only to them: their own selves. They unconsciously rob themselves of opportunities through procrastination.

Procrastination is the habit of putting off for tomorrow what needs to be done today. By doing that, the work to be done for tomorrow has to be delayed for the day after tomorrow and so on.

In the management of money, procrastination plays a very big factor in the deterioration of a person’s financial situation. This is because, in growing our money, time is the most essential component.

The more time we have, the better the chance of catching opportunities for growth. Procrastinators always want instant gratification and leave their fate to chance. They do not realize that they can still enjoy life now and in the future by making some sacrifices today. By delaying the saving/investing decision, they are, in effect, robbing their own self of future wealth. When the day of reckoning arrives, no amount of regret can correct the mistakes they did during their younger years. Time wasted is just similar to a robber getting your valuables, where there is no chance of recovery.

What are the effects of procrastination in our personal financial lives?

Lost opportunity. When an opportunity knocks and we never respond, it will just pass us by, and we can never buy it back anymore no matter how much money we infuse. Time moves forward and never comes back. Remember the Global crisis in 2008? That was a perfect opportunity to buy investments at a bargain price.

The index dropped 50 percent to 1872. After the recovery, the market never looked back and the index is now at 8600. Had we invested, for example, P10,000 back then, it would have become almost P46,000 today. If a procrastinator invests P10,000 today, how sure are we that he can gain the same? And in 10 years, the procrastinator would still lag behind the first investor. He can never match the profit made by the first, unless the market tumbles back to 1872. By delaying, one loses a lot.

Limited time. As the person procrastinates, he is diminishing his allotted time to make more money. As he has less time, he needs to catch up the lost time by investing a bigger amount of money just to reach his future financial goal. He has to work harder to earn more, as his expenses are growing. With time getting shorter by the day, coupled with increasing responsibilities, this will make life more stressful. Worse, the procrastinator might find it too difficult to achieve his goals and brace for a disastrous future. What started as a dream will turn into a nightmare.

Desperation. There are people who delay investing to time the market. A lot often erroneously enter high and sell at panic prices when the market reverses. In desperation, they resort to high risk investment in the hope of recovering their loss. Unfortunately, the instrument is a scam and, instead of a recovery, they lose all their money. This explains why haste makes waste.

Respect time, and it will respect you back. Lost time can never be brought back. Always remember, time is money. If you want the older you to thank the younger you, eliminate your internal robber, start saving/investing early and let the power of compounding interest grow your money.

****

Edmund Lao is registered financial planner of RFP Philippines. To learn more about personal-financial planning, attend the 68th RFP program this May 2018.

To inquire, e-mail info@rfp.ph or text <name><e-mail> <RFP> at 0917-9689774.

Conor Mcgregor’s lessons

2017-09-09T08:35:00.002-07:00

Conor Mcgregor’s lessons

By Edmund Lao

SEPTEMBER 4, 2017

Floyd Mayweather claimed his 50th victory in a usual boxing match by beating mixed martial arts (MMA) champion Conor McGregor and kept his record unblemished. McGregor was written off before the fight but, surprisingly, the Irishman took the fight to the 10th round.

McGregor got off to a rousing start, counterpunching and outpointing Mayweather in the first four rounds. In round three, he got a warning as he illegally hit Mayweather on the top of the head. Despite this, the fight was a controlled professional display from the MMA fighter.

Mayweather seemed a different fighter when he fought Pacquiao, as he struggled to make an impact on his younger opponent up to the fourth round.

Starting in the fifth, the American turned the table with successful punches and was in command. He was composed and his confidence was building, as McGregor seemed to tire already. He finished off the Irishman in 10 rounds.

The UFC champ may have lost but he sure gave us lessons to remember.

Haste makes waste. McGregor was in a hurry to dispose of the American. He did not realize that Mayweather’s plan was to drain his energy. Mayweather knows UFC fights last less than 10 rounds. He has stamina on his side. This is similar to investing recklessly with the intention of quick profits. The investor does not know he is already being tricked by the solicitor opposite him. Before throwing away money, be a thinking fighter like Mayweather, who throws jabs knowing he will hit his target.

Choose your battles. McGregor may be a feared MMA fighter but that does not give him a guarantee that he will win in boxing. The reason is that there are restrictions in boxing that prevents McGregor from doing his usual in the ring. In short, he fought someone else’s battle. Investing is no different. When we invest, we must have knowledge of the instrument so that we can choose the investment that fits us. An example will be a conservative investor who invests in equities. He has a high risk of losing money as McGregor lost to Mayweather. Invest only in instruments you know and align it to your risk profile. That will give you peace of mind and minimal chance of loss.

Be experienced. Nothing beats experience. Mayweather may be old but he leveraged on experience. McGregor has less experience in boxing. Remember that boxing is not all about brawling. Boxing is a science. It takes a lot of experience to become a scientific boxer like Ali and Mayweather. It must be noted that in their early years, both suffered losses from which they learned. Same with investing.

Experience makes us financially and emotionally stronger. Those who invested during the global financial crisis are certain to have learned lessons in investing. When another crisis comes up, they will welcome it and plan strategically to invest more during the bargain season. The inexperienced ones will surely stay away and make the mistake of not taking risk. Instead of winning by gaining when the market recovers, they permanently lose the opportunity to gain. Mayweather used his vast experience to lure his opponent into a false sense of security in the early rounds. Experienced scammers use this technique to unsuspecting victims. By learning from personal and other people’s mistakes, we can avoid losing our hard-earned money.

Have a coach. Do not be a know-it-all. No man is an island. We need other people to mentor us in whatever field we are. To succeed financially, we need to be mentored by people who are good in personal finance. It is better to look for someone who has done it already than to have a coach who is good in theory only.

Bruce Lee, considered the father of MMA, was once quoted: “Knowledge is not enough, we must apply. Willing is not enough, we must do.”

Learn how money works and just do it. Happy investing.

****

Edmund Lao is a registered financial planner of RFP Philippines. To learn more about personal-financial planning, attend the 65th RFP program this October 2017. To inquire, e-mail info@rfp.ph or text <name><e-mail> <RFP> at 0917-9689774.

The need to invest

2017-08-22T04:38:00.004-07:00

The need to invest

By Edmund Lao -

AUGUST 21, 2017

Aside from death and taxes, another thing that is certain is change. Change is constant. Nothing is the same forever. One powerful proof is we all get old and there is no stopping time from moving forward. The song “Some Good Things Never Last” show that even in the field of romance, nothing is permanent. As per my personal experience in my former job, I have seen changes in my tenure. From day one, I told myself that I will serve my employer until I reach the age of 60. How would I have known that my retirement at age 46 is dependent on the company’s change of direction? Luckily, I was able to do something earlier that most employees fail to do: I took the risk and decided to invest. As Facebook founder Mark Zuckerberg said, “The biggest risk is not taking any risk. In a world that changes really quickly, the only strategy that is guaranteed to fail is not taking risks”.

What is investing?

Investing is an act of buying assets with the hope that it will generate income or will appreciate in the future. Most of the time, the investment is a monetary asset purchased with the idea that the asset will provide income in the future or will be sold at a higher price for a profit. Investing also can be in the form of time you put into the study of a prospective business. It must be noted that time is also money. Facebook was the result of investing time to create a program from which Zuckerberg is now reaping tons of benefits. His idea benefited us all by making us virtually connected, and it made him one of the richest people in the world.

Why invest?

Investing wisely is the key to building wealth. But remember that investing comes with a risk. The return is not guaranteed so it is very important to make a research first. To build wealth, the investment value must outpace inflation. As prices of goods keep going up, our money should grow at a faster rate.

How to invest

Depending on the knowledge acquired, you can make an investment through a bank, a broker, or even via an insurance company. In most cases, these organizations pool the investment money to make more large-scale investments, and each individual investor has a share of the larger investment. You can also make an investment with a broker, who will handle the order in exchange for a fee or commission.

Types of investment

There are two major kinds of investment: Fixed income and variable income. Fixed-income investment refers to an investment instrument that brings in a regular amount of interest income on a regular basis, such as bonds or time deposits. Variable-income investment refers to business or property ownership, such as mutual funds or stock shares. In the variable-income investment, the income that results can come in many forms, including profit and appreciation, especially in the long term. Another kind of income can come from trading/speculating, which are short term in nature and often deal with heavy turnover and, consequently, a higher amount of risk.

Before investing, make sure you have done the following:

Paid off-debts. Nothing beats being debt-free. Without the burden of debt, you are free from bondage.

Emergency funds. Emergency fund strikes anytime so it makes sense to have a buffer fund so that you do not have to “bother” your money to make more money for you.

Insurance. You need to cover life’s risks as the occurrence of the risks can easily wipe out your investments and might put you in debt.

****

Edmund Lao, is a registered financial planner of RFP Philippines. To learn more about personal-financial planning, attend the 64th RFP program this September 2017. To inquire, e-mail info@rfp.ph or text <name><e-mail> <RFP> at 0917-9689774.

Lessons learned from Brisbane

2017-07-10T18:16:00.000-07:00

Lessons learned from Brisbane

http://www.businessmirror.com.ph/lessons-learned-from-brisbane/

Edmund Lao

JULY 10, 2017

In the Battle of Brisbane, Australian challenger Jeff Horn shocked our very own Manny Pacquiao and turned the fight into one of boxing’s greatest upsets. Pacquiao was heavily favored to win, as Horn was handpicked to make Pacquiao look impressive

A lot of fans of the fighting senator surely felt bad about his loss. We have a lot to learn from his experience.

Learn to respect Father Time

Pacquiao is already 38, and a lot of boxers this age (with the exception of a few) are past their prime. Their punching power and speed start to diminish. For the past eight years, Pacquiao has yet to score a knock-out victory. He also suffered losses in more recent fights. It is evident that Father Time is catching up. He has to learn to quit when he is still on top. As in the movie Rocky IV, Rocky said they are no longer the same as they were five years ago. Every boxer should realize that. All of us cannot prevent time from moving forward.

What this means to us

When Pacquiao was in his prime, he was a knock-out artist and can take blows as fiercely as he delivers his own. He even dominated in eight different weight classes and outclassed his famous opponents either by knockout or by decision. Along the way, he suffered some losses but managed to stand up and go on to become the eight-division world champ. If he started boxing at a late age, he will find it difficult to reach his achievements today. Unlike other boxers who squandered their wealth, Pacquiao invested his earnings to ensure that his family will never be poor again. Win, lose or quit boxing, it is next to impossible that he will outlive his wealth.

Similarly, young income earners have the potential to make more than the previous generation. They can afford to take risks by job-hopping to increase their income. They can choose to fire their bosses if they wish. Since they are still young, they must start to invest in higher risk instruments, as they have plenty of time to recover if they suffer losses along the way. As they grow older, things change. They have to play it safe with their jobs because they need job security. They cannot simply switch jobs because of greater competition from the fresh graduates. Even if they have experience on their side, like Pacquiao, the youth still have the advantage innovation and aggressiveness. Shifting jobs at an old age is similar to starting boxing very late. Worse, if the old employee does not have any investments when he retires, he will be just like many other boxing champs who return to the ring to make money only to be knocked out cold by youthful adversaries.

Let us all learn from our favorite boxer by investing early. Make TIME our ally. Time is the real money. The earlier we invest, the better our future will be. Remember that time waits for no one. It moves forward forever. We can only look back with regret but can never take it back. Respect time and later it will give us due respect. If we procrastinate, time will be our enemy. If we start to invest early, we are investing stress-free. When we invest later, it will be stressful because we have a lot of catching up to do. Likewise, if Pacquiao wasted all his money, he will have to knock out all his younger opponents (a hard task to do) even if he is aged 50. Learn from him so that when we reach our twilight, we thank ourselves for having done a great job this very moment.

****

Edmund Lao, is a registered financial planner of RFP Philippines. To learn more about personal-financial planning, attend the 63rd Registered Financial Planner program this July 2017.

To inquire, e-mail info@rfp.ph or text <name><e-mail> <RFP> at 0917-9689774.

Why Saving Money is Not Enough

2017-07-07T05:45:00.004-07:00

Why Saving Money is Not Enough

Written by Edmund Lao

Saturday, 24 October 2015 - Last Updated on November 1, 2015

The Philippines is the lowest, if not one of the lowest in term of savings in the Southeast Asian region. In fact, we are a country of consumers rather than savers. Whenever there is a new gadget that is launched, expect the high volume of sales coming from the middle class. They do not mind buying at a high price just to keep pace with the others who can really afford to buy one without going deep in debt. Ironically, the few rich people in the land just do the opposite. They buy simple gadgets that will be of help in their businesses. That is one of the reasons the rich get richer and the poor get poorer.

There is a big need for everyone to change their mindset with regards to money management. People need to start savings money little by little. It is not the amount that matters but the attitude towards it. Financial guru Dave Ramsey said that personal finance is 80% behaviour and 20% skill. No matter how much money one has, for as long as he has a poor behaviour in handling money, he will run out of money in no time. Remember the story of a lotto jackpot winner? He consumed all his winnings and ended up worse. He ended up deeper in debt. He may have the skill in managing his winnings but his emotion got the better of him. Saving money is the basic foundation of wealth building. As proof, here is what Proverbs 13:11 has to say, a person who gathers money little by little by little makes it grow.

Is saving money enough? Although saving money is a great way to start, it is not enough. Here is the main reason:

Inflation. The average inflation in the Philippines is four to five percent (the past months showed inflation below one percent). Saving money in the bank gives us less than one percent interest which will still be taxed twenty percent. Saving money in the bank will only safe-keep our money but not grow it. The purchasing value of the money you save will be eroded by inflation, just as corrosion eats away metal. By the time you need it, your money will not be enough to buy you your basic needs. You might end up owing money from other people. As an example, assume you are buying rice for fifty pesos a kilo. At four percent inflation, the same kilo of rice will cost fifty two pesos next year. Your fifty pesos is not enough anymore. To be able to buy rice at fifty pesos, you have to buy the same at a lesser weight or buy a cheaper variety of rice which is not your liking.

How do we counter-act this effect? We have to invest. Investing is a process wherein we put time and effort into something to generate a return. Why do we need to invest? Below are reasons:

Fight inflation. We need to invest our money which has a potential to grow and outpace inflation. Investing does not mean we will become rich. Investing will enable us to buy the things we need as time moves forward. We will not feel the rising price of good because our money is moving faster ahead of inflation. And by investing our money, we are effectively putting it at work 24/7. It must be noted that money is a good servant as it does not complain like employees do. As soon as we start to earn money, we need to invest because we have finite amount of time to work compared to money.
Educational funding. Saving money in the bank will not guarantee that you can send your children to college. Tuition fee is one of the needs that has become a luxury nowadays. Just thirty years ago, my tuition fee is only two thousand sixty pesos per year for the next five years while presently, the same school charges at least one hundred sixty pesos per year. By investing as early as the child is born, it pays to regularly invest targeting the future educational cost.
We grow old and companies retire us whether we like it or not. We cannot rely on our bank savings as it will be wiped out in the shortest time possible. We also cannot rely on the SSS as the benefits we get is too small to sustain our living expenses. By investing early on, we are actually helping ourselves in the future. The only person who can help us in our older years is the younger version of us. There is no guarantee we can get help from our children specially if they get married to spouses we cannot get along with. It is better to plan ahead because the future is certain to come as we cannot prevent time from moving forward.
Healthcare costs. When we get old, we are prone to get sick as our body becomes weaker. At old age, some insurance companies do not accept senior citizens since they are considered higher risk to cover. The best way is to create a contingency fund in preparation for medical cost. I remember my late father when he got sick. He never asked money from us since he has saved up for this kind of situation. In his sickbed, he was not even a liability. We can never know the financial situation of our children when such situation arises.
We do have dreams and dreams come with a price. We can never get our dreams if we continuously spend money like madman. If we want to realize our dream, we have to save up and invest. Otherwise, the same dream can become our own nightmare.

Before we can invest, start saving up and create your emergency fund and get your protection. That way, you can start investing without worries. Successful savings is a combination of savings, protection and investing your hard-earned money.

Five Bruce Lee principles for your financial dreams

2017-06-06T20:41:00.003-07:00

Five Bruce Lee principles for your financial dreams

http://www.businessmirror.com.ph/five-bruce-lee-principles-for-your-financial-dreams/

By Edmund Lao JUNE 5, 2017

Even after his death four decades ago, Bruce Lee’s philosophy still has a great impact not only in martial arts, but also in our financial lives. He was an actor, martial arts guru, philosopher, film director and screenwriter. UFC founder Dana White believed in Bruce’s principle of having no particular style as style, retaining what works and throwing away the useless.

Let us learn from his principles as they apply to our financial dreams.

Take knowledge from as many fields as possible.

When Bruce Lee was developing his martial-arts philosophy, he connected with other masters to learn from the different styles. He even took up boxing, fencing and dancing lessons and combined them. To learn about money, be connected with people who were good in personal finance and learned budgeting and smart spending, investing (mutual funds, stocks, forex and real estate), and protecting and preserving wealth. As Bruce Lee said, “Adapt what is useful, reject what is useless and add what is specifically your own”.

Break the rules.

Bruce grew up in Hong Kong, where he was taught traditional martial arts. During that time, they were prohibited from straying from the teachings of their masters. They have to adhere to a fixed pattern of fighting. Bruce went against the flow and later developed Jeet Kun Do.

Unlike in the past, savings can no longer help solve today’s financial problems. As Robert Kiyosaki said, savers are losers as the interest rate for savings accounts is currently 0.5 percent. One should get out of their comfort zone in banking and invest money in legitimate instruments.

A good example is Steve Jobs, who applied this principle when he launched the Apple desktop. Steve Jobs revolutionized the computer industry because he broke the rule that there was no need for computer in someone’s house.

According to Bruce, “All fixed set patterns are incapable of adaptability or pliability. The truth is outside of all fixed patterns.”

Develop your true potential.

Bruce was an avid reader of all forms of philosophy and used them to influence not only his views on martial arts but also in his film career. So positive was his mind that he even proved his doctors wrong when they said he may never walk again. He went on to pursue his mission to spread martial arts worldwide. According to Bruce, even as a child, he had this instinctive urge for expansion and growth.

Don’t let your dreams be controlled by the fear of how other people view you. Work on yourself. Do something every day that allows you to expand and grow. Never mind the negative people around you. Surround yourself with positive people and realize your own dreams.

Don’t listen to other people.

Bruce was seen as a “super hero” because he provided an example that anyone from any background or ethnicity could become someone and have a massive impact on the world. He said, “I’m not in this world to live up to your expectations and you’re not in this world to live up to mine.” Each of us have different ways to achieve our dreams. Never make the mistake of listening to the doomsayers. Just focus on your goals and listen only to yourself. When people say investing is risky, do not mind them as long as you know what you are doing.

There are no limits.

In 1970 Bruce wrote himself a letter. He wrote he will be the first highest paid oriental superstar in the US. He aimed to achieve world fame beginning in 1970, and from 1980 he will have material possessions worth $10,000,000.

He believed that by putting limits on everything you do, this will spread to your work and on to your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them. At the time of his death, he was on the verge of fulfilling all that he had written down on that piece of paper.

Dreams are free and have no limits.

However, dreams do have a price. Sacrifices have to be made in order to achieve them. By investing diligently, one can achieve one’s life goals. Anything our mind can conceive and believe, we can achieve.

Dream like Bruce and you be certain to succeed.

****

Edmund Lao, is a Registered Financial Planner of RFP Philippines. To learn more about personal-financial planning, attend the 63rd Registered Financial Planner program this July 2017.

To inquire, e-mail info@rfp.ph or text <name><e-mail> <RFP> at 0917-9689774.)

The 10 commandments of personal finance

2017-05-15T20:45:00.001-07:00

http://www.businessmirror.com.ph/the-10-commandments-of-personal-finance/

The 10 commandments of personal finance

By Edmund Lao

MAY 8, 2017

392

During the time of Moses, God gave him the 10 Commandments for his people to follow. If the people followed these commandments, then peace will reign.

In the world of personal finance, we also need commandments that will give financial peace to us and our future generations. Breaking these commandments often lead us to more harm than good.

By doing our best to follow these commandments, we are almost certain to have the financial peace we are looking for. Breaking any of them guarantees that we suffer the consequences. Here they are:

Thou shalt spend less than you make. Whenever you generate income, make sure you check your expenses. You may want to think twice before letting go of your money. It is best to spend less than what you earn to avoid ending up in debt.

Thou shalt pay yourself first. When you receive your salary, always remember to pay your major provider, you. A minimum of 20 percent of your income is good. But if you can pay yourself higher, the better for you.

Thou shalt avoid keeping up with the Joneses. A lot of people fall into the trap of competing with others with regard to purchasing things. They want to look good on the outside even if their pockets are already hurting. Just ignore what you see and focus on yourself and your need.

Thou shalt cut your excess credit cards. Credit card is a good financial instrument, as it eliminates the risk of bringing too much cash with you. In short, credit cards offer convenience but not without a price. A wrong usage due to temptation can wreck your financial plan. Terminate your other unused cards so that you will not be charged annual fees.

Thou shalt pay off your debts. No matter how much your debt is, it makes sense to pay them off as this will free you from slavery. If you are continuously in debt, you are, in effect, working for the lender. As the bible says, “The borrower is slave to the lender.”

Thou shalt avoid scams. Scams come and go but people never learn. Scammers have been improving on their skills in tricking people to part with their money. When you are offered an investment opportunity, watch out for the following signals: high pressure selling, the words “guaranteed high return” and lack of valid documents. Then stay away from the offer no matter how tempting it is to invest.

Thou shalt protect against risk. Wealth building is not complete without risk management. We all want to preserve our investments by diversifying so that the exposure to risk is minimized. Another way to protect against risk is by having a life insurance. When we do not have insurance, we risk losing everything if an untoward incident happens. Insurance will provide the money should the risk becomes real.

Thou shalt educate the next generation. As we are successful in making our own personal financial plan, it is our responsibility to teach our children who will be the recipient of our assets. Any individual would not want the assets he generated through hard work to go to waste.

Thou shalt plan for old age. The only person who can help you when you reach the autumn of your life is no one else but the younger you. When you start working, you should be thinking of retirement already because, whether you like it or not, retirement day will come as you cannot stop time from moving forward. Time is money so start saving and investing early.

Thou shalt have action. Information without action is merely entertainment. Applied power is actually applied knowledge. Without execution of the information obtained, a person will only be in the same financial situation no matter how hard he works or does his routine.

****

Edmund Lao is registered financial planner of RFP Philippines. To learn more about personal financial planning, attend the 62nd RFP program this June 2017.

To inquire, e-mail info@rfp.ph or text <name><e-mail><RFP> at 0917-9689774.WhatsAppKindle It ViberYah y