The Zen of Wealth

Tycoons on Facebook

2010-06-02T06:02:00.011+08:00

Lately I've been playing a game on Facebook called Tycoons. It's a simulation of the business world, where you buy businesses and harvest what it produces to be sold to the market or used as upkeep (resources used) of your other businesses. You can likewise upgrade businesses to produce more in a given amount of time, lessen its upkeep, or increase the maximum capacity it can hold (very useful when you can only be online a few times during the day). Production continues even when you are offline, much like in many browser-based games.

What I like about Tycoons is that the decisions you make in the game affects the entire system, as your production impacts on the demand and supply of resources in the market. That means your value changes over time and you have to be aware of what's going on in the market. It also forces you to look into the businesses you have and decide if they are worth keeping or you need to replace them.

Also, there are a number of choices and strategies on how to proceed in the game. You can choose to be self-sufficient, producing the resources you need to produce other products, or you can risk it and go to the market everytime you need something. This removes to a point the "linearity" of progression. With a considerable number of sectors and several businesses within each sector, you can have your own unique strategies and continuously adjust them.

Businesses also has enough capacity so that they can continue producing for a minimum of 12 hours (provided it has the needed resources) before it gets to full capacity and has to stop producing. I can set up the businesses in the morning, stocking up on needed resources and still have it running by the time I can get to check it again in the afternoon or early evening.

On the other hand, a number of features in the game reduces its dynamism. The most significant one is the creation of a single sector that can "produce" population. Since the game has a feature called Tax Revenue, where you earn a certain amount of tax continuously depending on the size of your population (which was placed by the way as a means for players to recover should they made wrong choices early on and squandered their resources), it becomes now a race to own population-producing businesses. At a certain point, the game becomes automated as you start to switch off your other businesses in favor of businesses that produces population. Granted that it takes time before you can sustain this type of business, nevertheless it allows those who already can afford those businesses to just simply accumulate cash and even play the market at the expense of everyone else.

Still, the game is fun, especially at the start, and it offers a change from the usual types of Facebook games. It can even teach a thing or two about business and economics, although you can't expect it to behave like how real economies would. The game is still in beta and hopefully, it will still improve in the future.

Check out the game and let us know what you think.

Caribbean Remittance Forum

2010-05-23T00:01:00.002+08:00

Note: Due to recent events in Jamaica, this Forum is due for rescheduling.

I'm off to Kingston, Jamaica this Monday to participate in the Caribbean Remittance Forum hosted by the World Bank in cooperation with the Canadian Government and the University of West Indies. The regional forum aims at sharing knowledge and generating dialogue to enhance the efficiency and integrity of the migration and remittance transfer process in the Caribbean region through effective regulatory and supervisory processes.

The Philippines has been invited to participate in the forum to share experiences in the regulation of innovative remittance products. As a regulator, I will be discussing the overall Philippine scenario on remittance and the policies set in place to provide proactive guidance to different participants in the remittance system.

The Philippine approach to the regulation of mobile commerce, which includes remittance and money transfers, has been favorably recognized by publications such as The Economist. I wrote about it here. Yet, every opportunity for knowledge sharing such as this still holds lessons to be learned and applied to further improve and maximize the benefits to be derived from a well-functioning remittance and payment system.

I will be sharing more on this in future posts, and I hope you will join in the discussions.

Your Net Worth IQ

2010-05-15T18:15:00.002+08:00

A while back I've written about the initial steps that you can take to get a hold of your finances. As the focus of that post was about you getting a grip of the more immediate matters, namely your disposable income and your cash balance, a discussion of one's net worth was not included. Now, we turn our attention to the larger aspect of your finances.

Simply put, net worth is what you have left with monetary value, after deducting any obligations you may have. Things with monetary value, called assets, include cash and other items that you can convert to cash. This can include "tangible" assets such as loans you gave and properties, as well as "intangible" assets such as trademarks, patents, or rights that is legally yours. Obligations, also called liabilities, are simply what you owe somebody, such as a bank loan.

You get your net worth by listing down and assigning an amount to your assets and subtracting from it the amount you assigned as your liabilities. Some items are pretty much straightforward: cash on hand and in bank is simply that. However, you may need to do some estimates to determine how much is the value of the car you own or the house and lot that you have. Liabilities are usually simple to find out as well, as it is usually billed on you.

Having a high net worth is of course a good thing, but what is a "high" amount is always relative to the lifestyle that you live. If your disposable income, as discussed earlier, is constantly on the negative (because you are spending more than what you are earning), then you can expect to see a decline in your net worth as you take on more liabilities or be forced to sell some of your assets. How fast the decline is a matter of how much larger your expenses are compared to your income.

One tool that can help out in knowing and understanding your networth is NetworthIQ. It's a site that provides you with a template or a sample of the items that you may own or owe, describe what these items or accounts mean, and provide some level of automation for you and a place to keep a record of your net worth month after month. NetworthIQ also goes further than simply being a site to record your assets and liabilities by providing features such as the chance to post financial questions you may have to the site's members, give and receive tips, and even record your financial journey. It will even allow you to compare your net worth against others once you decide to make it public, although I am not particularly sure what is the value of that. But making one's net worth public can be useful for some individuals such as financial planners and bloggers that may have a need to "prove" something.

I've signed up with the site, and although one can have some apprehension as to security, it doesn't seem much of a concern for me. The information they require at signup is quite limited. Utilizing the template does not require you to provide sensitive information, although you are pretty much limited as to the level of analysis you can make. Keeping your net worth private is the default for the site. What I find as potential value here is the community that can grow and assist you in your financial journey. You may want to try it out yourself. (Note: I am not related to nor gain income from NetworthIQ).

Slot Machine Investing

2010-05-10T00:01:00.001+08:00

There are a number of things that differentiate an "investment" from a not-so-carefully disguised form of gambling. Understanding these factors can spell the difference between making a payoff and ending up a financial ruin.

1. Investment is all about making informed assumptions. Gambling, on the other hand, relies heavily on luck. While it is true that luck plays a part in getting an income from one's investment, it should never be the primary factor. This is what makes it tricky this early. No one who will offer you an investment will come to you and say that it has a 50-50 chance of succeeding. Otherwise, you are better off heading to a casino (although I don't think there are games there that offer even a 50-50 chance). Rather, what you will get is a carefully packaged set of assumptions and computations that shows a high probability of getting a high income. What makes it an investment is whether or not you can vouch for the plausibility of these assumptions. Or, as a next best thing, your financial advisor (who is not the one offering you the investment), can vouch for it. Of course, there will be varying degrees and methods, but the bottomline is that the decision to invest was made based on facts, and not chance.

2. Investments offer a reasonable return, while a gamble will promise the moon. So, if you are investing in a highly regulated or very competitive industry, a higher than expected return should be a cause for careful evaluation. Not that it's not possible; it's whether or not the assumptions or methods (as mentioned above) allow for such a return to be achievable.

3. Investments feed on fundamentals, gambling feeds on frenzy. That's why so many who are excited with all these "Ponzi" schemes ended up getting burned. They either knew that there were no underlying reason for such a return on investment, or they couldn't care less.

4. Some investments are really just a step better than a gamble. Let's face it, some investments will have assumptions that will not be any better than a roll of a dice. This is true in such cases as pioneer industries or new technologies. The important thing is to recognize it for what it is.

Hopefully this post can help you in making that very important distinction between investing and gambling. Let me know your views or share what other criteria you may be using.

The Benefits of Mobile Commerce

2010-05-02T06:00:00.001+08:00

Mobile commerce (m-commerce) is a way of conducting financial transactions without the necessity of going to an office or place of business such as a bank, a payment center, or other financial institutions. For many of us living in urban areas, we could take for granted the fact that we have access to various electronic channels, like we can pay our bills via the Internet, via SMS or through a simple telephone call. It saves us the time that we could better spend doing our jobs or being with our family. The convenience it provides us is something we can enjoy almost on a daily basis. Likewise, banks and financial institutions are plenty enough in urban areas so that in the event the electronic channels aren't available (or we just don't want to use them), we can always pay a visit to these institution's offices.

For some people, however, m-commerce is more than just convenience. It can become a life-changing innovation in their lives. Take for example a farmer who lives some distance away from the nearest business center. For him to make some transactions, like getting a loan, paying bills, or receiving payments for his produce, he would need to make the trek to town that can probably take him away from his business for a full day every time.

Through the m-commerce network, however, the farmer can receive proceeds of loans and payments made to him delivered electronically through an access device, like a cellular phone, in a form commonly referred to as e-money. He can then use the e-money to also electronically make payments for expenses of his business, or he can "cash out" through a nearby cash center and pay his suppliers and creditors who may prefer to be paid in regular cash.

Through all of these, he would probably spend only a fraction of the time and expense he would have to make if he had to go to town for each and every financial transaction he needs to make. He can then devote this saved time and money to producing more and possibly engaging himself in additional profitable business. Likewise, the risk of losing the money by traveling large distances is also minimized. You can only imagine the impact once this process is replicated and compounded.

For the companies and individuals the farmer deals with, they also benefit from receiving his payments faster. They likewise need to have less people manning their offices, or they can channel their personnel to more productive activities as well. Safety also comes into play in these situations, as fewer people need to handle cash and transport them over long distances.

A lot needs to be done for this system to work, though. Legal frameworks need to be set, infrastructures need to be laid, and the target market need to be made aware and capable of using the network. The efforts, however, is worth it once a vibrant m-commerce is set in place.

eBillme: Paypal killer?

2010-04-29T22:00:00.000+08:00

A recent post from The Christian Dollar featured an interview with the Vice President for Marketing of eBillme. This is a payment method that one can use when shopping online. With eBillme, there is no need to provide any personal or financial information to the merchant store or payment partner, like in the way with the traditional payments via credit/debit cards or via Paypal. Based on some of the instructional videos, when a buyer choose eBillme to pay for his online purchases, he gets an email from eBillme for the amount of his purchases. The buyer now has the option to pay eBillme through online banking or even over the counter to their bank.

The approach of eBillme does seem safer, since payment transactions are done through the online banking channel of one's bank, which limits the number of instances where one's financial information can be compromised. One issue, however, is the additional effort of making the payment yourself. It can find itself challenged by the reputation of safety of Paypal, coupled with its ability to streamline the process of one's online purchases.

Another aspect that eBillme highlights is the fact that since all of the payments coursed through them are essentially cash payments, it can be very effective in helping people to control their expenses. While this is a noble goal in itself, it somehow immediately limits the market for them. What's more, it can alienate some people who may feel that eBillme is viewing credit transactions as inherently wrong.

The entry of eBillme as another payment method provide consumers with another way to conduct their online financial transactions in a manner they deem safe, efficient, and aligned with their financial goals.

Electronic Payments in Government

2010-04-21T15:01:00.000+08:00

The Department of Trade and Industry (DTI) and the Department of Finance (DOF) of the Philippines issued the Joint Department Administrative Order No. 10-01 last March 24, which provides the guidelines in the use of access devices for the payment of government fees that would not require face-to-face contact with a personnel of the government agency concerned. This would include payments made via the internet and mobile devices like cellular phones. Modes of payment include credit cards, debit cards, and electronic money.

Most of the payments made to the Philippine government are still done manually, meaning you have to queue to a cashier at the agency's office. One of the exception would be the Electronic Tax Filing System of the Bureau of the Internal Revenue, wherein corporations can make their payments via their BIR-accredited bank.

Utilizing technology for government payments can provide the benefits of speed and security. However, the challenge would be the setting up of the necessary infrastructure to support such a payment system, as well as educating the public enough on the benefits of using the system. It's still unclear to me at this point who is the target market for this project. But I am guessing that this would primarily be for the corporations and other businesses. That is plausible and practical since they would probably be dealing with the government quite often in the normal course of their businesses. That may probably be the reason why the guidelines were issued by DTI and DOF, which deals with both trade and finances. Hopefully this initiative will be a step forward in the development of payment systems in the Philippines.

Zen Habits

2010-04-18T21:01:00.000+08:00

Zenhabits.net has a nice article on frictionless work and working towards doing ONLY what you love to do. Sounds like a pipe dream for some, as the article admit, but it's still something worth checking out. You might be nearer to it than you think. Click on the pic to get you there. And while you're there, do explore the site. It's got a couple more nice reads. I personally enjoyed the articles on solitude and spending time on myself.

I have to admit, this blog has had its influence from Zen Habits, which I had been visiting regularly at the time this came to life. Not that it's the only reason. I've always been fascinated with Zen and the very sound of it (makes me feel relaxed just saying or thinking about it in my head. So, I thought for this weekend I'd introduce you to the Zen Habits blog/site along with a point to a recent article they had that had really been useful for me. If you like the articles, you can always sign up for their RSS/email alerts to always get the newest post. Sadly readers can no longer leave comments on the site, for reasons specified by the author. Well, it's his site anyway :) I still enjoy what I read there (btw, this is NOT a paid post).

Warning: If you try to get there by typing the URL, it's zenhabits.net. For some reason, Google is giving out a virus warning alert for zenhabits .com.

Enjoy the rest of the weekend :)

How The World's Poor Live on $2 A Day

2010-04-14T23:51:00.000+08:00

My job often takes me into some unexpected mental excursions. I was reviewing a document when I took notice of a reference in the Annex pertaining to a book entitled "Portfolios of the Poor: How the World's Poor Live on $2 a Day". My online search got me to their webpage, which you can reach by clicking on the pic at the left.

The book is the product of a year's worth of on-the-ground research on the world's poorest, which is defined as households living on $2 a day or less. The research provided some surprising insights into the financial lives of the poorest. Although I wasn't able to read the book (it wasn't available locally), I was able to read the 4-page summary that you can get when you click on the Link tab in the site, along with some other summaries and a free look at the book's first chapter. It was already an enlightening account by itself. For example, it was noted that while middle class households would normally decide which loans to take based on the interest rate, the poor is much more concerned with the flexibility of the payment terms and the availability of credit even if it means higher interest rates. Quite practical if you think about it, but these insights are often overlooked since the focus of most financial planning is on getting the cheapest credit possible.

You can also get more insight by reading the three household profiles found on the main page. Do visit the site and get a fresh viewpoint of the financial lives of poor people. It will definitely impact the way you look at them again.

Financial inclusion is a topic that deals with the provision of basic financial services to the poor. It is closely related to the activities of microfinance, as well as the concept of providing financial access to the "unbanked". The provision of financial services to this segment of the population is also facilitated by the use of e-money, which I have been discussing a bit already. I will be providing more information on these subjects in my future posts.

E-Money in the Philippines: Types of E-Money

2010-04-11T15:00:00.000+08:00

There are basically two types of electronic money in the Philippines, each one with its own set of arrangements.

1. Prepaid cards, also called stored value cards, have been issued by banks for some time now as one of their electronic banking products. The cards are loaded with electronic value upon exchange of an equivalent value of bills and coins. You can either load the value over the counter (i.e., the bank tellers), or have the value transferred from a deposit account.

2. Electronic wallets, in contrast to prepaid cards, are usually "inside" a cellular phone, or specifically the SIM. In the same way, value can be loaded via over the counter transactions or a transfer from one e-wallet to another (also called P2P or phone-to-phone transfers). E-wallets are usually issued by a non-bank company, or by a bank in partnership with a non-bank company, like a telecommunications company.

In both cases, the record of the value is actually stored not in the card or the SIM, but in a database managed by the issuer. This is because of the requirement of the Bangko Sentral ng Pilipinas (the central bank of the Philippines), for issuers to have a system that can track balances and usage of each of the e-money holders that subscribe to them.

More on this topic on future posts. Subscribe via email/Twitter/Google Reader so you can be updated of new posts.

Related Topics:

What is E-Money?
More E-Money

Under Renovation

2010-04-05T15:01:00.000+08:00

I'll be tinkering with the layout of this blog for a couple of days and I just thought it appropriate to let you all of you know about it for a couple of reasons. One, I wouldn't want you thinking you were redirected to some unknown internet backdoor alley that would eventually strip you of your valuables. Second, the changes may affect the placement of some items, or I might unintentionally remove it. This would be the case with the Entrecard widget as well as the Ask2Link tabs. I understand I can have some problems should that be the case, so this advance notice and explanation. Lastly, and most importantly, I would like to get your feedback. The new layout will definitely not be the last one I will implement. I don't even consider it earth-shaking, but in my opinion it would be an improvement over the current standard Blogger layout.

If I might not be able to implement your suggestions at this point, it will go a long way when I start planning for the next set of changes. Also, the changes I will implement will not happen in one big bang, but I would probably put the layout in, leave it a while, tinker with it again after a few hours, then leave it a while again. That could provide me the opportunity to see how the changes are being appreciated. So, I hope you'd pitch in ^^

With that said, thank you very much for your patronage this far and I hope my efforts will be able to somehow provide you with a pleasanter experience when you visit this blog.

Should I stay Linkedin?

2010-04-03T21:01:00.000+08:00

Just finished a week attending a training/workshop, and as usual I was able to network with other professionals. Before, it was my regular routine to get the info from the calling cards I collected and load them up at Linkedin. But lately, I've been concerned about the idea of inviting all my newly found colleagues to be my Connections in the professional networking site. Here are a couple of reasons:

1. Complete visibility. You would think that Linkedin would have realized that some level of confidentiality should be built in to their design. Even in our private circles, we tend to put limits on who gets what info, the way that people do it with List in Facebook. But such is totally absent from Linkedin. You allow one person to be your direct connection, and he gets to see all of your other connections. Something just doesn't feel right with that.

2. The headhunting dilemma. This flows from the first reason. I won't mind getting a headhunter in my Connections, considering the opportunity that they can provide a the proper time in my career. However, it feels like I am violating the trust and confidentiality of the rest of my Connections by allowing these headhunter connections that I have to browse their profiles. For all I know, getting headhunted is the last thing in the minds of my friends. So, for me to increase my network without unduly violating the confidentiality of my Connections, I would have to turn down all invitations for connection by headhunters, which is something useful but will have to be sacrificed. And still it doesn't solve the issue of how to limit what my Connections see in terms of my profile and other connections.

3. Too many things for a price. You want to be able to create folders? You have to pay (though they have a free trial at the moment). You want to see who's been checking your profiles? You have to pay. In this age, the concept of having to pay a networking site to keep it alive is probably resting on a wrong business model.

4. Lack of innovation. I had my Linkedin account for quite some time now, and I can't remember getting excited again after the time that I joined when I thought it was the best thing in the world after Facebook. No real new features. Tripit is the only application that seems to be improving, albeit so slowly, and for additional features that I hardly find any value in.

With that said, Linkedin still has the potential to provide benefits to its members. A wider network allows you to bounce your ideas with more effectively; groups catering to professional niches; and of course, the possibility of developing your own personal brand. Companies themselves find Linkedin so important, that every Fortune 500 company has a presence in it. Just right now, I am reading a magazine that says the boss of Accenture intends to hire no less that 40% of its new staff in the coming years through Linkedin. And Linkedin has responded by hiring key personnel to drive its direction and spruce up the site.

So, I'd probably keep Linkedin despite those "problems", which I hope they would get to address soon.

Have you Linkedin as well? How was it able to help you so far?

Hubze: One card to link them all

2010-03-29T14:35:00.000+08:00

Just finished watching a webinar replay about Hubze. I've signed with them very early on, when they were still called Moneza. The change of name is an effort to make it sound more like what they intend to accomplish: to become a "hub" or a central point where one can automatically update all the social networking sites and subscriptions one is connected to.

To give an illustration, let's take this blog. After I have written and published this post, the only people who will know that I have a new post are those that subscribed to either the Feedburner or the Google Reader on the sidebar (which I am encouraging you to do right now ^^). To be able to let other people know, I need to make an update on my Twitter, Linkedin, and Facebook accounts. The effort to do so is multiplied with the number of social network sites that you belong to.

Through Hubze, one update on my Hubze card informing those connected to me at the Hubze network that I have a new post will also tell people on my Twitter, Linkedin and Facebook networks (who may not be using Hubze) that I have a new post. When I change my contact details, the mirror details in Twitter and Facebook also gets updated. In effect, it becomes a single point of updating for me, allowing me to concentrate more on matters more important to my blog (such as content creation and site design) than having to repeat the announcement in every social network site. It also helps to ensure that I get to update each and every social network site I belong to. For a business person, that would mean being able to reach more audience at a fraction of a time. Other contents are in the works such as an in-house blog and making the site searchable.

Well, at least that's what the developers envision Hubze to accomplish. It's still in its very early stage, though the Hubze card will probably be out in a couple of days. You can click on the pic above to take you to the registration page, with me as referror. It really doesn't matter if you have been referred or not, you can simply go to their site at www.hubze.com if you like. But by being connected to me, we have started the networking and we can check on the effect of Hubze to our networks.

Thanks and let me know if you signed up and what's your initial impression of Hubze.

Fiverr - How Much Is Your Five Dollars Worth?

2010-03-25T15:01:00.000+08:00

What will you be willing to do or sell for $5? Or conversely, what would you be willing to buy for the same amount? Fiverr provides the platform to meet the needs of sellers and buyers of good and services that are priced at very low amounts.

You register to Fiverr, and if you have something to sell (either something you will deliver or service you will perform) you post a notice called "gig" which are fixed at the price of $5 each. Conversely, you can browse or search through the gigs and buy one that you need.

Buyers pay $5 in advance via Paypal, while sellers get their net share of $4 (the site keeps the $1 as fee) after the sale has been completed. Sellers are notified that buyers are interested in what they are selling, and they have 24 hours to accept the order, otherwise the system cancels the order.

I haven't gone through the list of gigs available for purchase, but one problem I see in this set up is the lack of protection to the sellers. The Terms and Conditions state that if a purchase is canceled by the seller, the amount paid by the seller through Paypal will not be credited back to their Paypal account but will remain in their Fiverr account and will be available for their next purchase. The trouble with this is if you've got several canceled purchases or you do not see other goods and services that you would like to buy, you've got your money locked-in. It would be better if the buyer at least has the option to get back his money (minus any processing fees) when his Fiverr account reaches a certain amount, the way that the seller gets their Paypal account after reaching the $40 threshold.

With that said, the possibility of finding some gems in this virtual haystack is always there. And for those of you who have time to burn, you may check out the Silly Stuff category for some amusement.

And while you're at it, why don't you leave a comment and let us know what will you be willing to buy or sell for $5. You might just get the deal of your life!

E-Money in the Philippines: What Is E-Money?

2010-03-19T20:37:00.000+08:00

I'm off to Bacolod on Monday to give a short presentation about electronic money. And I thought I'd get myself all primed up by posting a bit on what I will be sharing there. I provided a short perspective about e-money in the Philippines in my previous post here, and now I would like to start going deeper into the subject by defining what is considered e-money in the Philippines.

E-money in the Philippines is defined as monetary value that is:

1. Stored in an electronic device or instrument; and

2. Issued in exchange for an equal amount of cash (or sometimes less, if there are charges involved, but greater than the amount received); and

3. Acceptable as a means of payment to the issuer and other merchants; and

4. Withdrawable in cash and other cash forms; and

5. Have complied with the requirements of Circular 649 of the Bangko Sentral ng Pilipinas (BSP) which is the Philippine central bank.

What are the implications of this definition? If you are an issuer (meaning, you accept cash in exchange for e-money), then you must ensure that the e-money you are issuing complies with BSP guidelines.

On the other hand, if you are an e-money holder (you've exchanged your cash for e-money), then you should be aware of the various features of the e-money that you have, including those that the BSP required for certain reasons.

Next time, we'll discuss some of the types of e-money. Do leave your comments and questions to liven up the discussion.

Wish me well on my presentation!

Pay Yourself First

2010-03-16T15:00:00.000+08:00

Robyn of Get Out of Credit Card Debt has started a discussion in her blog about Paying Yourself. As far as I can remember, I first encountered the phrase Pay Yourself First from the E-Myth, which is basically on the premise that a new entrepreneur should consider the amount that he should be paying himself to show whether or not the business is actually earning or not. The same concept has started to be applied to personal finance along the concept of setting aside first, often automatically, a portion of what one receive as income or salary. This automatic setting aside of money as savings is also being advocated by David Bach of the Finish Rich fame. And like most things that has been passed around, it pays to reconsider again what does the phrase Pay Yourself First really mean.

1. Is Paying Yourself First (PYF) any different from savings? Essentially it's the same thing. However, the emphasis here is on "first". Which means that saving should be prioritized over any expense.

2. Is PYF for everybody? Obviously, if you are spending more than earning, then it won't work. But the more important thing to realize is that this is a goal that one should strive to one day achieve. Start here to get your finances in order.

3. How much should you pay yourself? You can always start somewhere, and slowly build up the amount you pay yourself over time. It can be as painless as starting on a very small amount, or you can start off with an amount where you can feel the "pinch" on you, reminding you that getting into good financial health does not come without sacrifice. To make the amount you decide to pay yourself more realistic, you may consider the amount of disposable income you have after you have taken out your expenses.

That's it for now. Do share your thoughts on this topic and help enlighten all of us.

Preparing for a Rainy Day Part 2: Insurance

2010-03-12T16:00:00.000+08:00

Nobody wants tragedy or loss to strike one's life and loved ones. And yet it happens in the most unexpected time. Which makes preparing for it all the more important. Despite all the efforts of planning and knowing our expenses and building up an emergency fund (see here), a family's finances may still not be able to take on the pressure if a breadwinner is suddenly unable to earn income because of death or disability. That's why having an insurance for accident and life is a very important component of personal/family financial planning.

Here are some pointers to consider in taking out an accident or life insurance:

1. An insurance policy should allow you or your loved ones to get money years after you have entered into a contract with the insurance company. Obviously, stability and strength of the insurance company is of primary concern. Understandably, people are wary of handing over their hard-earned money for several years only to find out that their insurance company, even the reputable ones, are in the red several years later, as what have happened in the recent financial crisis. And yet, not taking out an insurance on that basis is even more unwise. One way to spread the risk is taking out insurance coverage from more than one company, say, two separate contracts that pays 1M proceeds each, if you intend to be covered for 2M. Of course, that may jack up the premiums you may need to pay, which you should also consider.

2. How much insurance payout is enough? Ideally, the proceeds of the insurance should allow a family to pay off any debts it has, basically starting on a clean slate. It should also tide it over for several months of limited income while other members of the family try to find regular livelihood to replace the one that was lost.

3. Keep insurance premiums low by availing of "plain vanilla" insurance. There are insurance policies that include additional "benefits" that you would hardly use. For example, would you really avail of a loan window that has an interest rate higher than the prevailing?

4. Avoid paying yearly premiums in several installments, as you will pay more in total that way. As much as possible, pay in one or two installments per year, instead of monthly or quarterly. You will probably not earn enough (in interest, for example) for the money that you didn't pay immediately compared to the discount that you will get for paying ahead in the year.

5. Compare the total premiums you will pay. Some insurance have the option of paying for a certain number of years, with the remaining years "self-liquidating" from dividends being earned from the premiums. That sounds nice, but you still need to check if an option to pay for the full duration of the policy will result in shelling out less money overall.

6. An insurance, especially a life insurance, is intended to benefit those that you will have left behind. Make sure that the beneficiaries are aware of the insurance you took, and the benefits that they can have if the unfortunate should happen. Provide them instructions on how to claim benefits, telephone numbers and insurance agents to call, forms needed, etc.

In case of accident insurance, the same applies, as you may be unavailable to arrange for these matters should the accident turns out to be serious.

With these info, hopefully you can get for yourself and your loved ones an economical yet effective tool for protecting your finances.

Preparing For A Rainy Day Part 1 : The Emergency Fund

2010-03-05T16:01:00.000+08:00

One of the first goals one should have with regard to finances is having an emergency fund or buffer. The purpose of this fund is obvious enough: it is intended to tide you over during those times when things happen that may take a toll on your finances. Some of these situations may involve a medical emergency or being between jobs. These are not things that we want or expect to happen, but such is the reality of life. Here are some things to consider in setting up an emergency fund:

1. How much is enough? This is something that would differ from person to person. The usual rule of thumb is around 6 months of one's usual expenses. Personally, I would go for a full year, since it makes sense to provide for a normal yearly cycle. These expenses should include not only the daily expenses that we've been monitoring through our simple exercise (click here), plus other non-daily expenses like tuition fees, maintenance, periodic dues, etc. Of course, one cannot simply wish to have an emergency fund of 6-12 months. The important thing is to make it a goal to stash enough in a given period of time. Knowing how much you get to keep at the end of a month can help you in arriving at a reasonable idea on how long before you can reach your target emergency fund amount.

2. Set up your emergency fund first before committing your money to long-term investments. At the very least, you should have a buffer that can cover for the next few month's expenses, while you are still building up a full year's worth of emergency fund.

3. Don't let your fund sit idly, though. You may want to place it in short-term investments that allow you to "preterminate" once you have need of it, with minimal penalties. At the very least, you'll probably get a lower interest for your money if you preterminate, but that's just fine. Your main concern at this stage is liquidity, rather than profitability. As you build up your fund, you may vary the maturity of your investments so that you can avail of better interest rates.

That's it for now. Next time we'll take a look at another aspect of Preparing for a Rainy Day.

Related Post:

Preparing for a Rainy Day - Part 2

Where is My Money?

A New Year's Resolution to Make this Year

The Buried Life: What Do You Want To Do Before You Die?

2010-02-28T16:01:00.000+08:00

Got some time to listen to American Top 40 today while driving on my way to an appointment, and they have as guests Duncan, Ben, Dave, and Jonnie, who are the stars of MTV's The Buried Life (click the pic for the site). The idea is for them to accomplish a "bucket list" of 100 things to do before they die. In the process, they will help other people achieve their dreams as they "tick off" their list.

Based on information available at Wikipedia, I am not really excited about the redeeming value of their efforts. It really doesn't get me excited that as they tick off List#6: Attend a Party at the Playboy Mansion, they were able to provide a computer to a school of underprivileged kids. Too bad MTV is still incapable of providing respectable programming (but that's just my opinion).

However, the question What Do You Want To Do Before You Die? really deserves some thought for each one of us. That is where true wealth can be found.

So instead of focusing on the show, I would rather concentrate on the inspiration for this show, which is the poem of Matthew Arnold, which is reproduced below (see the source HERE):

THE BURIED LIFE

Light flows our war of mocking words, and yet,
Behold, with tears mine eyes are wet!
I feel a nameless sadness o'er me roll.
Yes, yes, we know that we can jest,
We know, we know that we can smile!
But there's a something in this breast,
To which thy light words bring no rest,
And thy gay smiles no anodyne.
Give me thy hand, and hush awhile,
And turn those limpid eyes on mine,
And let me read there, love! thy inmost soul.

Alas! is even love too weak
To unlock the heart, and let it speak?
Are even lovers powerless to reveal
To one another what indeed they feel?
I knew the mass of men conceal'd
Their thoughts, for fear that if reveal'd
They would by other men be met
With blank indifference, or with blame reproved;
I knew they lived and moved
Trick'd in disguises, alien to the rest
Of men, and alien to themselves—and yet
The same heart beats in every human breast!

But we, my love!—doth a like spell benumb
Our hearts, our voices?—must we too be dumb?

Ah! well for us, if even we,
Even for a moment, can get free
Our heart, and have our lips unchain'd;
For that which seals them hath been deep-ordain'd!

Fate, which foresaw
How frivolous a baby man would be—
By what distractions he would be possess'd,
How he would pour himself in every strife,
And well-nigh change his own identity—
That it might keep from his capricious play
His genuine self, and force him to obey
Even in his own despite his being's law,
Bade through the deep recesses of our breast
The unregarded river of our life
Pursue with indiscernible flow its way;
And that we should not see
The buried stream, and seem to be
Eddying at large in blind uncertainty,
Though driving on with it eternally.

But often, in the world's most crowded streets,
But often, in the din of strife,
There rises an unspeakable desire
After the knowledge of our buried life;
A thirst to spend our fire and restless force
In tracking out our true, original course;
A longing to inquire
Into the mystery of this heart which beats
So wild, so deep in us—to know
Whence our lives come and where they go.
And many a man in his own breast then delves,
But deep enough, alas! none ever mines.
And we have been on many thousand lines,
And we have shown, on each, spirit and power;
But hardly have we, for one little hour,
Been on our own line, have we been ourselves—
Hardly had skill to utter one of all
The nameless feelings that course through our breast,
But they course on for ever unexpress'd.
And long we try in vain to speak and act
Our hidden self, and what we say and do
Is eloquent, is well—but 't#is not true!
And then we will no more be rack'd
With inward striving, and demand
Of all the thousand nothings of the hour
Their stupefying power;
Ah yes, and they benumb us at our call!
Yet still, from time to time, vague and forlorn,
From the soul's subterranean depth upborne
As from an infinitely distant land,
Come airs, and floating echoes, and convey
A melancholy into all our day.
Only—but this is rare—
When a belov{'e}d hand is laid in ours,
When, jaded with the rush and glare
Of the interminable hours,
Our eyes can in another's eyes read clear,
When our world-deafen'd ear
Is by the tones of a loved voice caress'd—
A bolt is shot back somewhere in our breast,
And a lost pulse of feeling stirs again.
The eye sinks inward, and the heart lies plain,
And what we mean, we say, and what we would, we know.
A man becomes aware of his life's flow,
And hears its winding murmur; and he sees
The meadows where it glides, the sun, the breeze.

And there arrives a lull in the hot race
Wherein he doth for ever chase
That flying and elusive shadow, rest.
An air of coolness plays upon his face,
And an unwonted calm pervades his breast.
And then he thinks he knows
The hills where his life rose,
And the sea where it goes.

Email Alert is Up...Sort Of

2010-02-24T13:01:00.000+08:00

You may have noticed my recent attempts to set up a way for readers of this blog to be updated of new posts via email. So far, the email subscription system via Feedburner which I set up to send email updates of the test posts I published (which I already deleted) did not send email updates to two test e-mails that I subscribed to the service.

I tried to check things out from forums in the internet, and what I am getting is that a bunch of folks are also having problems with this service of Feedburner. Either the system took some time to determine that there are subscriptions (which means the subscribers eventually received the updates later) or the subscribers did not receive any updates at all.

Nevertheless, in the absence of an alternative way to provide email updates to the readers (I am still doing my research for such an alternative), it won't hurt to subscribe to the email alerts should you wish to be updated of new posts to this blog. Of course, you may also choose to follow me on Twitter. Just check out the sidebar for the applicable buttons.

Thank you very much and any advice you can provide will be highly appreciated.

Update: Started receiving the email alerts. Maybe it was just a matter of time. We'll see in the coming posts.

You're So Money - Are You Frugal or Cheap?

2010-02-22T12:37:00.000+08:00

I chanced upon in Yahoo! last night a 6-minute interview of Farnoosh Torabi, author of You're So Money: Live Rich Even When You're Not. It's no longer available in Yahoo! today but what I was able to find is the source of the interview at ABC News (click on the pic for the link). The interview was quite nice, and briefly but sufficiently provided a distinction between being frugal and being cheap. In a nutshell, being cheap is characterized by a short-term minded approach to saving. While being frugal is a thoughtful, measured, and long-term approach to saving. Sounds clear enough, but it can get confusing in actual practice.

As discussed, some of the tell-tale signs that one is no longer being frugal but already being cheap include the following:

1. Passing up on opportunities if it means spending money

2. Being disrespectful to others when trying to save

3. Wasting time trying to save money

4. Feeling entitled to a deal

5. Focusing solely on short-term goals

For the rest of the discussion, see the interview by clicking on the pic above.

I Need Some Techie Help

2010-02-19T17:55:00.000+08:00

I want you guys to be able to subscribe to new posts via email so I can keep you updated of new materials. But I want to do it in such a way that only a portion of the post will be delivered by mail, and the rest of the post will be available at this site. That way, you can continue to see other useful updates that I will be making here. I tried using Feedburner, but it seems that it delivers the entire post via email, and I don't know how to tweak it to make it work the way I want it. Hope you guys can help me with this little dilemma of mine, or maybe let me know of other similar tools that I can use.

Thanks a lot in advance! Happy Friday!

Do You Think I Am Handling Our Finances Well?

2010-02-14T23:05:00.000+08:00

That's the question my wife asked me, trying to confirm comments from her friends who are saying that she seems to handle our family finances quite well. In all fairness, her financial decisions are quite sound, and it has been evidenced by the way we were able to grow our savings and engage in some activities that generate revenue in addition to the 9-to-5 job that I have. I have to attribute the primary reason for this to the simple philosophy that we have: we strive to live within our means. Which is what I had been advocating as a New Year's Resolution for all of us.

However, it is evident that no matter how valuable that principle is to steer us financially as a family, some things still need to be done. Precisely the kind of things that we have been discussing here. True, we know where we are financially, it will not take us long to find out our bank balances as well as our debts. What we don't have information on is how much are we really spending on a daily basis. So I asked her the same question we have been asking here: do you know where your money is? Do you know how much we spend on food, utilities, entertainment, etc.?

Now, I've been trying to live what I preach here, as I have been keeping tabs on my own daily expenses. But now that she sees the value of doing the same for the rest of the expenses of our family, I believe this could turn out so much better for all of us. I had been mulling about the idea of asking her to do as I do in tracking our expenses, but I have second thoughts of doing so for fear that she might take it the wrong way. But now, the communication line for this aspect of our lives has been opened. And what a wonderful time to start something like this than this season of the hearts.

Happy Valentine's Day everyone!

5 Reasons Why You Need To Know Where Is Your Money

2010-02-12T23:50:00.000+08:00

One of the comments I got from a friend who's been reading the Where Is Your Money series in this blog is that she doesn't feel the need to go through all the efforts of finding out where her finances are in the short-term, let alone go through the process of recording her daily expenses. She reasons that for as long as she tries to spend wisely, she would be okay in the short and long term.

Rather than say she's mistaken in her viewpoint, I would rather point out some of the benefits of taking stock of your short-term finances, the way we've been discussing over the past weeks:

1. You aren't really sure unless you can see it. Think you haven't been running through a spending spree? Maybe you haven't been doing it in a day, but the little things here and there everyday do add up, oftentimes unnoticed.

2. You don't know where to make changes. This one flows from the first reason. Without some information on your spending patterns over a period of time, you won't know what changes you can make to free up some cash or use your money more wisely.

3. It starts with being faithful with the little. You've probably heard it said: penny wise, pound foolish. True, some people can be so careful with the small details, and mess up the big things in their lives. But I doubt if you would ever hear a saying that goes something like "pound wise, penny foolish".

4. The details are not the end in itself. For most people, a budget simply shows them where to cut back and what to modify. That by itself can already provide significant improvements to one's finances. But financial planning takes more than that. And knowing the details of one's finances provide the information one needs to prepare for such things as how much should you have in an emergency fund; knowing what, where, and how much to invest; contributing to a retirement fund; and others. All of these and more we will tackle one by one in future posts.

5. Lastly, good habits beget good habits. The discipline of being aware about one's finances rubs itself off to other areas of one's life, as well as the lives of people around us. Hopefully it can affect for the better the way we handle other areas of our lives, bringing us closer to the essence of true wealth.

I hope that this post could convince my friend and you as well. It's never too late to start taking better care of your finances.

Electronic Money in the Philippines

2010-02-07T19:10:00.000+08:00

The use of electronic means of payments in the Philippines has been around for quite a while, and it has even gained the attention of The Economist magazine - click HERE for the article A Bank In Every Pocket?. If you can't see the article, you can sign up for a free 14-day subscription that will allow you access to the article and other archives.

In my case, I was fortunate to be able to travel to Chennai, India as a resource speaker to discuss the use of mobile banking technologies for microfinance operations, as part of the International Development Law Organization's (IDLO) series of workshops.

What is common with these electronic modes of payment is the convenience and speed that it can provide to the user. The term branchless banking has been used loosely to describe these payments methods, since it allows an individual to conduct transactions that can normally be performed by an individual with a bank account. Since some of these instruments did not originate from or issued by banks, the term mobile commerce or m-commerce is being used to describe it more appropriately.

For its part, the Bangko Sentral ng Pilipinas (the Philippine central bank) has issued Circular No. 649 in 2009, as the primary regulation to govern the issuance of electronic money and the operations of electronic money issuers.

Related Posts:

E-Money in the Philippines: Introduction
What is E-Money?
Types of E-Money