Raffy Pekson II was inspired by one of the financial coaches I also follow, Randell Tiongson. After attending one of Randell's seminars, he featured a new investment program by Banco De Oro (BDO) that makes it easy to save up and start investing.
In a nutshell, the investment plan encourages you to open a BDO savings account where you will base your transactions. If your current company is already using BDO for your payroll account, you may skip this step already and simply enroll your BDO payroll account in the program.
From your BDO account, the program will automatically deduct at least Php 1,000.00 every month. When your accumulated contributions have reached Php 10,000.00, BDO will turn your contributions into a UITF account. From here, you can leave your money to grown in the hands of the BDO Trust Group. For a briefer on what a UITF is, you can read this short explanation by Randell Tiongson.
For more information you can read up on this investment plan on Randell Pekson's blog. But before you start out with that article, you may do well to read his introductory article about his realizations on financial wellness after attending Randell's seminar.
Showing posts with label Financial Wellness. Show all posts
Showing posts with label Financial Wellness. Show all posts
Tuesday, August 23, 2011
PERA Tax Rules Ready
by: Diane Claire J. Jiaosource: Business WorldTAX RULES needed to implement the much-awaited Personal Equity and Retirement Account (PERA) scheme have been submitted to the Finance department and are pending approval.
The proposed revenue regulations, among others, set stringent guidelines for tax credit certificates (TCCs) that will be granted to overseas Filipino workers (OFWs) to ensure that these are not used fraudulently.
“We submitted the PERA Revenue Regulations [last week] to the DoF (Department of Finance,” Bureau of Internal Revenue Commissioner Kim S. Jacinto-Henares said on Friday.
Finance officials were not immediately available for comment as to when, or if, the BIR’s tax rules would be issued.
The PERA Act or Republic Act 9505 was signed into law in 2008 and its implementing rules were issued the following year by the Securities and Exchange Commission and the Bangko Sentral ng Pilipinas.
The law, however, has not been implemented up to now given the absence of BIR tax rules.
A stumbling block was the issuance of tax credits to OFWs that could be difficult to monitor for the bureau, Ms. Henares explained.
“We were focused on making safeguards regarding the use of TCCs,” she said.
One of these is the printing of the tax credits on a special security paper so that the documents cannot be copied and counterfeited, Ms. Henares said.
Migrant Filipinos will also have to apply for a tax debit memo when they use their TCCs, stating how much of the tax credits will be claimed and for what tax obligation.
The BIR will also establish internal records of TCC recipients, Ms. Henares said.
“This will ensure that only those who are qualified for the TCCs will get to enjoy it,” she noted.
This was also suggested by Tammy H. Lipana, chairperson of the Philippine Chamber of Commerce and Industry’s tax committee.
“There should be a registry of the TCCs issued, whether directly to OFWs or coursed through the embassies to OFWs,” Ms. Lipana said in a telephone interview on Friday.
“The tax debit memos also ensure that the BIR still gets to approve how the TCCs can be used,” she added.
INVESTMENT ALTERNATIVE
The PERA Act provides Filipinos with an alternative means of planning their retirement, allowing the establishment of accounts where they can contribute a maximum of P100,000 per year. Those working abroad have been provided a higher annual cap of P200,000. Five PERAs can be maintained at any one time but the annual contributions must not exceed the set limits.
PERA investment and reinvestment income will be exempted from a slew of taxes such as the 20% final withholding tax on bank deposits, 10% tax on cash or property dividends and the stock transaction tax on shares traded through the stock exchange.
A tax credit equivalent to 5% of all PERA contributions will also be granted to account holders. OFWs will receive TCCs which they can use to pay their internal revenue taxes. Resident Filipinos, meanwhile, will just get a BIR certification that will be used by employers to adjust taxes on their income.
The PERA Act is expected to attract an estimated eight million Filipinos, especially OFWs and self-employed individuals who are not required to contribute to the Social Security System and theGovernment Service Insurance System.
“The implementation of the PERA act is very much anticipated. Right now, when you save up for your retirement, there are no tax benefits with it,” Ms. Lipana said.
A possible sticking point, though, is that OFWs may not have any use for their TCCs since they are exempted from income taxes under the law, she pointed out.
The BIR’s Ms. Henares, however, said OFWs could have other tax liabilities.
“If they have real estate [assets and they sell this], that is subject to capital gains tax. If they have sidelines and other businesses here in the Philippines, that is subject to income tax,” she responded.
“Also, if the OFWs return to the Philippines to work here, they will have to pay income tax already. They will be able to use their TCCs then,” Ms. Henares added.
The proposed revenue regulations, among others, set stringent guidelines for tax credit certificates (TCCs) that will be granted to overseas Filipino workers (OFWs) to ensure that these are not used fraudulently.
“We submitted the PERA Revenue Regulations [last week] to the DoF (Department of Finance,” Bureau of Internal Revenue Commissioner Kim S. Jacinto-Henares said on Friday.
Finance officials were not immediately available for comment as to when, or if, the BIR’s tax rules would be issued.
The PERA Act or Republic Act 9505 was signed into law in 2008 and its implementing rules were issued the following year by the Securities and Exchange Commission and the Bangko Sentral ng Pilipinas.
The law, however, has not been implemented up to now given the absence of BIR tax rules.
A stumbling block was the issuance of tax credits to OFWs that could be difficult to monitor for the bureau, Ms. Henares explained.
“We were focused on making safeguards regarding the use of TCCs,” she said.
One of these is the printing of the tax credits on a special security paper so that the documents cannot be copied and counterfeited, Ms. Henares said.
Migrant Filipinos will also have to apply for a tax debit memo when they use their TCCs, stating how much of the tax credits will be claimed and for what tax obligation.
The BIR will also establish internal records of TCC recipients, Ms. Henares said.
“This will ensure that only those who are qualified for the TCCs will get to enjoy it,” she noted.
This was also suggested by Tammy H. Lipana, chairperson of the Philippine Chamber of Commerce and Industry’s tax committee.
“There should be a registry of the TCCs issued, whether directly to OFWs or coursed through the embassies to OFWs,” Ms. Lipana said in a telephone interview on Friday.
“The tax debit memos also ensure that the BIR still gets to approve how the TCCs can be used,” she added.
INVESTMENT ALTERNATIVE
The PERA Act provides Filipinos with an alternative means of planning their retirement, allowing the establishment of accounts where they can contribute a maximum of P100,000 per year. Those working abroad have been provided a higher annual cap of P200,000. Five PERAs can be maintained at any one time but the annual contributions must not exceed the set limits.
PERA investment and reinvestment income will be exempted from a slew of taxes such as the 20% final withholding tax on bank deposits, 10% tax on cash or property dividends and the stock transaction tax on shares traded through the stock exchange.
A tax credit equivalent to 5% of all PERA contributions will also be granted to account holders. OFWs will receive TCCs which they can use to pay their internal revenue taxes. Resident Filipinos, meanwhile, will just get a BIR certification that will be used by employers to adjust taxes on their income.
The PERA Act is expected to attract an estimated eight million Filipinos, especially OFWs and self-employed individuals who are not required to contribute to the Social Security System and theGovernment Service Insurance System.
“The implementation of the PERA act is very much anticipated. Right now, when you save up for your retirement, there are no tax benefits with it,” Ms. Lipana said.
A possible sticking point, though, is that OFWs may not have any use for their TCCs since they are exempted from income taxes under the law, she pointed out.
The BIR’s Ms. Henares, however, said OFWs could have other tax liabilities.
“If they have real estate [assets and they sell this], that is subject to capital gains tax. If they have sidelines and other businesses here in the Philippines, that is subject to income tax,” she responded.
“Also, if the OFWs return to the Philippines to work here, they will have to pay income tax already. They will be able to use their TCCs then,” Ms. Henares added.
Tuesday, August 9, 2011
Low-risk investment for your money, until Aug. 15 only
If you have money available that you don’t plan to use within the next five years consider putting it in a safe account that will surely make it grow.
United Coconut Planters Bank is offering to the public Long-Term Negotiable Certificates of time Deposit (LTNCD) from August 8 to 15, 2011.
The features of UCPB’s LTNCD are:
- 6.0% interest per year guaranteed
- interest paid quarterly
- 5.25 years maturity
- insured by PDIC up to P500,000 per depositor
LTNCDs cannot be pre-terminated, but can be sold in the secondary market.
Move quickly if you plan to avail of this. The last time UCPB had an LTNCD issue in November 2010, it was oversubscribed by 50%. If you want to invest or need additional information, please contact any of the following selling agents:
1. UCPB (02) 811-9111
2. Multinational Investment Bancorporation (02) 811-0044, (02) 811-0059
3. Philippine Commercial Capital Inc. (02) 813-0461
4. Rizal Commercial Banking Corp. (02) 894-9513
Citicorp Capital Philippines is the sole arranger of this issue.
United Coconut Planters Bank is offering to the public Long-Term Negotiable Certificates of time Deposit (LTNCD) from August 8 to 15, 2011.
The features of UCPB’s LTNCD are:
- 6.0% interest per year guaranteed
- interest paid quarterly
- 5.25 years maturity
- insured by PDIC up to P500,000 per depositor
LTNCDs cannot be pre-terminated, but can be sold in the secondary market.
Move quickly if you plan to avail of this. The last time UCPB had an LTNCD issue in November 2010, it was oversubscribed by 50%. If you want to invest or need additional information, please contact any of the following selling agents:
1. UCPB (02) 811-9111
2. Multinational Investment Bancorporation (02) 811-0044, (02) 811-0059
3. Philippine Commercial Capital Inc. (02) 813-0461
4. Rizal Commercial Banking Corp. (02) 894-9513
Citicorp Capital Philippines is the sole arranger of this issue.
Thursday, July 14, 2011
Unconventional Career Tips
Many of my close friends have the same problem every time we meet up: money and job satisfaction. This article neatly sums up a practical way of looking at working in today's environment. While the article was written for older and more experienced workers, the same mindset can be used for those just starting out in their careers - especially in the Philippines where local jobs cannot compete with the salaries given by those in other countries.
source: http://www.internsover40.blogspot.com/2009/10/6-unconventional-career-change-tips_29.html
The following is six unconventional mid-life career change tips based on the premise that the key to a successful career change transition is the integration of work, life and financial goals.
Unconventional Tip #1:
Each day you remain at a job because it is not fulfilling your financial goals is another day you postpone your financial freedom.
If you're over 40 you probably already recognize that making a career change when you're young is a lot easier than making a career change when you're older. Typically, the older you are the more you've invested in your current career and the more you potentially have to lose. Many mid-life career professionals remained in careers that were not fulfilling because they felt that their job was “satisfactory.”
If this sounds like you, don't let the fears cause you to stay in a job that isn't satisfying your long term financial objectives. The risks of staying in a career that is not meeting your financial goals are often greater than the financial risks of making a strategic move to a career that you enjoy more and that has the long-term potential you desire.
Unconventional Tip #2:
Tip number two is not to believe that if you love what you're doing you're bound to make money.
While there is quite a bit of wisdom in the maxim "Do What You Love", there is not a direct correlation between loving your job and meeting your financial goals. If money is an important consideration in your career change make sure that you thoroughly research your new career to make sure that if you become the best at what you do that the money will follow.
Unconventional Tip #3:
The third unconventional mid-life career change tip is to focus on money issues -- not work issues.
When making a mid-life career change it is important to thoroughly explore your new career to ensure that it's going to be professional and that you're qualified for the job. However, no matter how much you feel you're going to enjoy a career change and no matter how qualified you feel for a new position don't hand in your resignation at your current job until you've solidified your financial future. No matter how much planning you do you can't anticipate everything that is going to occur down the road. If you're taking a large financial risk by making a career change you may just find yourself in the exact same position in the future -- just 10 years older without the financial resources to make another career change.
Unconventional Tip #4
Unconventional tip number four is to make sure you understand that the reason for disatisfaction with a career usually lies within. A lot of people report a bad boss, bad company, bad economy or bad work environment as their reason for job dissatisfaction when in reality they're just ready for a change. Many people simply feel the need to pursue a mid-life career change in order to experience new things and to grow. There's nothing wrong with this. Just make sure you know why you're seeking a career change. If you blame a career change on factors not truly responsible for your desire to change careers you may find yourself in a career with a great boss, with good company, in a good economy that still doesn't satisfy you.
Unconventional Tip #5
The fifth tip is to not be hasty. Ever heard the maxim "haste makes waste"? Well it applies to making a career change as well. Make sure you thoroughly explore your feelings of dissatisfaction with your current career before you start looking for solutions. One of the biggest mistakes that career changers make is that they rush into a career changing expecting their frustrations to be miraculously resolved. Many times these individuals find themselves in a new career experiencing the same frustrations as they experienced in their previous career.
Unconventional Tip #6
The sixth unconventional mid-life career change tip is to recognize that you need both a sound career plan and financial plan to have a successful mid-life career change experience.
Career planning in and of itself is not enough to ensure a successful career change. Most people pursuing a career change cannot control all of the factors affecting future job satisfaction. In reality there are likely going to be aspects of a new career that are not satisfying.
Financial planning by itself is not enough to ensure a successful career change. While many of us proclaim to be motivate by money, very few of us actually feel inspired by money to work at a job that is not fulfilling.
6 Unconventional Career Tips For Older Skilled Workers
source: http://www.internsover40.blogspot.com/2009/10/6-unconventional-career-change-tips_29.html
The following is six unconventional mid-life career change tips based on the premise that the key to a successful career change transition is the integration of work, life and financial goals.
Unconventional Tip #1:
Each day you remain at a job because it is not fulfilling your financial goals is another day you postpone your financial freedom.
If you're over 40 you probably already recognize that making a career change when you're young is a lot easier than making a career change when you're older. Typically, the older you are the more you've invested in your current career and the more you potentially have to lose. Many mid-life career professionals remained in careers that were not fulfilling because they felt that their job was “satisfactory.”
If this sounds like you, don't let the fears cause you to stay in a job that isn't satisfying your long term financial objectives. The risks of staying in a career that is not meeting your financial goals are often greater than the financial risks of making a strategic move to a career that you enjoy more and that has the long-term potential you desire.
Unconventional Tip #2:
Tip number two is not to believe that if you love what you're doing you're bound to make money.
While there is quite a bit of wisdom in the maxim "Do What You Love", there is not a direct correlation between loving your job and meeting your financial goals. If money is an important consideration in your career change make sure that you thoroughly research your new career to make sure that if you become the best at what you do that the money will follow.
Unconventional Tip #3:
The third unconventional mid-life career change tip is to focus on money issues -- not work issues.
When making a mid-life career change it is important to thoroughly explore your new career to ensure that it's going to be professional and that you're qualified for the job. However, no matter how much you feel you're going to enjoy a career change and no matter how qualified you feel for a new position don't hand in your resignation at your current job until you've solidified your financial future. No matter how much planning you do you can't anticipate everything that is going to occur down the road. If you're taking a large financial risk by making a career change you may just find yourself in the exact same position in the future -- just 10 years older without the financial resources to make another career change.
Unconventional Tip #4
Unconventional tip number four is to make sure you understand that the reason for disatisfaction with a career usually lies within. A lot of people report a bad boss, bad company, bad economy or bad work environment as their reason for job dissatisfaction when in reality they're just ready for a change. Many people simply feel the need to pursue a mid-life career change in order to experience new things and to grow. There's nothing wrong with this. Just make sure you know why you're seeking a career change. If you blame a career change on factors not truly responsible for your desire to change careers you may find yourself in a career with a great boss, with good company, in a good economy that still doesn't satisfy you.
Unconventional Tip #5
The fifth tip is to not be hasty. Ever heard the maxim "haste makes waste"? Well it applies to making a career change as well. Make sure you thoroughly explore your feelings of dissatisfaction with your current career before you start looking for solutions. One of the biggest mistakes that career changers make is that they rush into a career changing expecting their frustrations to be miraculously resolved. Many times these individuals find themselves in a new career experiencing the same frustrations as they experienced in their previous career.
Unconventional Tip #6
The sixth unconventional mid-life career change tip is to recognize that you need both a sound career plan and financial plan to have a successful mid-life career change experience.
Career planning in and of itself is not enough to ensure a successful career change. Most people pursuing a career change cannot control all of the factors affecting future job satisfaction. In reality there are likely going to be aspects of a new career that are not satisfying.
Financial planning by itself is not enough to ensure a successful career change. While many of us proclaim to be motivate by money, very few of us actually feel inspired by money to work at a job that is not fulfilling.
Friday, July 8, 2011
Money Mistakes
This is an article by Alvin T. Tabañag of www.pinoysmartsavers.com , but I also think they are applicable to us here in the Philippines. Read the article below and replace all the references to OFWs with yourself and you might realize a thing or two dragging yourself down in a financial rut.
Millions of OFW families continue to suffer from financial stress despite the significant boost in the OFWs’ income. Many of these money problems can be traced to mismanagement of their finances. Here are some more money-mistakes that many OFWs make.
1. Sending all your savings to the family. This will not be a problem if your family back home knows how to manage money responsibly. We’ve all heard of sob stories about a how the spouse in the Philippines wasted the money sent by the OFW and when the OFW returns there’s hardly anything to show for his hard work abroad. If your family cannot be trusted with large sums of money, it’s best that you don’t give them full access to your savings. You can retain control of your funds by opening an account under your name and putting some (or most) of your savings into this account. You can open this personal (or investment) account in the Philippines or in the country where you work. However, I recommend that you keep a Philippine account. Your family may find it difficult to get their hands on your foreign account in case something happens to you. Besides, you will be helping the country more if you keep your money in the Philippines.
2. Not planning for life after OFW work. Most OFWs will eventually return home for good, either by choice or forced to cut short their stint abroad due to unplanned or unexpected events like closure of the company or getting seriously ill. I recently got an email from an OFW who asked about how he can better prepare for retirement. He’s coming back permanently in a few years but will still have a job in the Philippines. He’s among the lucky ones who have jobs to fall back on after working as an OFW. Many other returning OFWs will be added to the country’s unemployment or underemployment statistics and with limited savings, it will just be a matter of time before these ex-OFWs start to suffer from financial problems.
It is crucial then that OFWs prepare for post-OFW life as soon as possible. Planning way ahead of time will make preparation a bit easier and will give you more options. Save as much as you can while still working abroad and invest your savings. If you can’t save enough to retire permanently, then you will have to keep on working (as an employee or your own boss) when you come back. Continue enhancing existing skills and learn new ones to improve your chances of landing a job when you return. Develop other sources of income back home (e.g. rental properties and small business) while you’re still in foreign soil so that you will have a steady source of funds when you return and stay for good.
3. Taking on too much debt. A large number of OFWs incur debt when they are first deployed. You just have to go near the POEA building in Ortigas to see that OFW loans is big business. Agents of lending companies are always there to distribute flyers with many of their target customers keenly examining the loans they are offering. I can understand OFWs borrowing money to cover expenses for deployment because placement fees today far exceed whatever savings they have. What is troubling is OFWs unnecessarily taking on additional debt because they are now earning more. “I-charge mo na lang sa credit card yung gusto mong kumikinang na sapatos at glow in the dark na make-up, tutal may pambayad na tayo nyan!” or “Sige, kunin mo yung voice-activiated TV na binibenta ng Bombay o umutang ka sa 5-6 para mabili mo yung gusto mong imitation na LV bag!” is something you might hear from an OFW. If you have to borrow money, do so because it is necessary and important. Do not borrow to support extravagant spending.
4. Accumulating unproductive assets. To a typical OFW, investing means buying tangible items that he can see, touch and feel. Ask him where he has invested his earnings and the usual answer will include any or all of the following: house and lot, appliances, furniture, computers, electronic gadgets, car, motorcycle and jewelry. While some of these are valuable assets, many are not productive, meaning they decrease in value over time and doesn’t bring more money into your pocket. In fact, some will make you spend more like fuel, maintenance and insurance for a vehicle. A money-smart OFW will acquire items that will likely increase in value over the years and/or increase his income. Accumulating items that continually decline in value is like slow-burning your money. Besides highly tangible assets like real estate and a car used for business, there are other valuable assets that are less tangible but are great investments nonetheless like investment-linked insurance policies, mutual funds, UITFs and stocks.
5. Falling for investment scams. Scammers take advantage of the OFWs’ burning desire to return home to their loved ones and not having to work away from them ever again. They make absurd promises of enormous earnings in a short period with minimal effort and position their investment as the best way towards getting rich. Sadly, many fall for these false promises. Do not allow criminals to steal your hard-earned money through dubious investment schemes. Before you put money in any investment, study it thoroughly and ask questions. Do not say yes to an investment immediately. Scammers usually persuade would-be victims to decide quickly so you won’t have time to uncover their deception and lies. Think long and hard before deciding. Consult others who are knowledgeable about investing and familiar with what’s being offered to you. If you have doubts about an investment then don’t put your money in it. It’s better for you to miss out on a legitimate investment with great returns because you had doubts than to lose your life’s savings on a scam because you disregarded your doubts and instead believed their lies. Always keep in mind that if an investment is too good to be true, it’s probably a scam!
6. Being overly generous with money. People who are earning well tend to be more generous. Ever heard of the returning OFW who throws a feast not just for the family but for the whole neighborhood? Or the one who lavishes his family, relatives and friends with gifts in kind or in cash? There’s nothing wrong with sharing your money as long as you do not over do it. Remember that there are more important uses for your money than making other people happy with cash. Be sensible when giving money. If you know that it’s just going to be spent on non-essential items then don’t give too much. Better yet give only when it is really needed. Also, be cautious in lending large amounts of money to people who intend to use it as capital for a business. Some relatives and friends of OFWs who do not have the knowledge, skills and right attitude to run a business suddenly feel like they are capable entrepreneurs knowing they can get money from the OFW. Do not lend money for capital unless you have the skill and competence to evaluate the would-be borrower’s business plan and agree that it is feasible and profitable. The more money you have, the more relatives and friends will come to you asking for money. Learn to say “no!”
More Money-mistakes by OFWs
Millions of OFW families continue to suffer from financial stress despite the significant boost in the OFWs’ income. Many of these money problems can be traced to mismanagement of their finances. Here are some more money-mistakes that many OFWs make.
1. Sending all your savings to the family. This will not be a problem if your family back home knows how to manage money responsibly. We’ve all heard of sob stories about a how the spouse in the Philippines wasted the money sent by the OFW and when the OFW returns there’s hardly anything to show for his hard work abroad. If your family cannot be trusted with large sums of money, it’s best that you don’t give them full access to your savings. You can retain control of your funds by opening an account under your name and putting some (or most) of your savings into this account. You can open this personal (or investment) account in the Philippines or in the country where you work. However, I recommend that you keep a Philippine account. Your family may find it difficult to get their hands on your foreign account in case something happens to you. Besides, you will be helping the country more if you keep your money in the Philippines.
2. Not planning for life after OFW work. Most OFWs will eventually return home for good, either by choice or forced to cut short their stint abroad due to unplanned or unexpected events like closure of the company or getting seriously ill. I recently got an email from an OFW who asked about how he can better prepare for retirement. He’s coming back permanently in a few years but will still have a job in the Philippines. He’s among the lucky ones who have jobs to fall back on after working as an OFW. Many other returning OFWs will be added to the country’s unemployment or underemployment statistics and with limited savings, it will just be a matter of time before these ex-OFWs start to suffer from financial problems.
It is crucial then that OFWs prepare for post-OFW life as soon as possible. Planning way ahead of time will make preparation a bit easier and will give you more options. Save as much as you can while still working abroad and invest your savings. If you can’t save enough to retire permanently, then you will have to keep on working (as an employee or your own boss) when you come back. Continue enhancing existing skills and learn new ones to improve your chances of landing a job when you return. Develop other sources of income back home (e.g. rental properties and small business) while you’re still in foreign soil so that you will have a steady source of funds when you return and stay for good.
3. Taking on too much debt. A large number of OFWs incur debt when they are first deployed. You just have to go near the POEA building in Ortigas to see that OFW loans is big business. Agents of lending companies are always there to distribute flyers with many of their target customers keenly examining the loans they are offering. I can understand OFWs borrowing money to cover expenses for deployment because placement fees today far exceed whatever savings they have. What is troubling is OFWs unnecessarily taking on additional debt because they are now earning more. “I-charge mo na lang sa credit card yung gusto mong kumikinang na sapatos at glow in the dark na make-up, tutal may pambayad na tayo nyan!” or “Sige, kunin mo yung voice-activiated TV na binibenta ng Bombay o umutang ka sa 5-6 para mabili mo yung gusto mong imitation na LV bag!” is something you might hear from an OFW. If you have to borrow money, do so because it is necessary and important. Do not borrow to support extravagant spending.
4. Accumulating unproductive assets. To a typical OFW, investing means buying tangible items that he can see, touch and feel. Ask him where he has invested his earnings and the usual answer will include any or all of the following: house and lot, appliances, furniture, computers, electronic gadgets, car, motorcycle and jewelry. While some of these are valuable assets, many are not productive, meaning they decrease in value over time and doesn’t bring more money into your pocket. In fact, some will make you spend more like fuel, maintenance and insurance for a vehicle. A money-smart OFW will acquire items that will likely increase in value over the years and/or increase his income. Accumulating items that continually decline in value is like slow-burning your money. Besides highly tangible assets like real estate and a car used for business, there are other valuable assets that are less tangible but are great investments nonetheless like investment-linked insurance policies, mutual funds, UITFs and stocks.
5. Falling for investment scams. Scammers take advantage of the OFWs’ burning desire to return home to their loved ones and not having to work away from them ever again. They make absurd promises of enormous earnings in a short period with minimal effort and position their investment as the best way towards getting rich. Sadly, many fall for these false promises. Do not allow criminals to steal your hard-earned money through dubious investment schemes. Before you put money in any investment, study it thoroughly and ask questions. Do not say yes to an investment immediately. Scammers usually persuade would-be victims to decide quickly so you won’t have time to uncover their deception and lies. Think long and hard before deciding. Consult others who are knowledgeable about investing and familiar with what’s being offered to you. If you have doubts about an investment then don’t put your money in it. It’s better for you to miss out on a legitimate investment with great returns because you had doubts than to lose your life’s savings on a scam because you disregarded your doubts and instead believed their lies. Always keep in mind that if an investment is too good to be true, it’s probably a scam!
6. Being overly generous with money. People who are earning well tend to be more generous. Ever heard of the returning OFW who throws a feast not just for the family but for the whole neighborhood? Or the one who lavishes his family, relatives and friends with gifts in kind or in cash? There’s nothing wrong with sharing your money as long as you do not over do it. Remember that there are more important uses for your money than making other people happy with cash. Be sensible when giving money. If you know that it’s just going to be spent on non-essential items then don’t give too much. Better yet give only when it is really needed. Also, be cautious in lending large amounts of money to people who intend to use it as capital for a business. Some relatives and friends of OFWs who do not have the knowledge, skills and right attitude to run a business suddenly feel like they are capable entrepreneurs knowing they can get money from the OFW. Do not lend money for capital unless you have the skill and competence to evaluate the would-be borrower’s business plan and agree that it is feasible and profitable. The more money you have, the more relatives and friends will come to you asking for money. Learn to say “no!”
Sunday, May 22, 2011
We Can Make A Difference!
Earlier this year, one of my respected HR gurus, Raffy Perfecto, sent us this interesting list he came up with that he thinks can help make a difference in improving the country. I also believe in his list - though I may sound like a hypocrite to those who know me personally. However, over the years, I've tried to do much of the things in this list.
Rather than dwell on the things we cannot change, let us focus on the above concerted actions that can help to move our economy forward, provide more internal resources (capital), and increase our employment rate. I believe that 84 million Filipinos acting together can make life better for all Filipinos. (No one can do everything, but EVERYONE CAN DO SOMETHING!)
- Invest your surplus funds on agricultural ventures and enterprises. Encourage our businessmen to concentrate on providing enough food for all Filipinos
- Buy only Filipino-made goods. (Avoid buying smuggled or imported goods). When we buy Filipino-made goods, we assure our children jobs when they graduate.
- Use your spare time studying entrepreneurship or learning a new business. Make yourself productive all the time.
- Cut-down on recreation and entertainment expenses and save the amount in our local banks.
- Each one should save at least 10% of their income, no matter how small. If half of our population (42 million Filipinos) save P10.00 per day, our local banks will have P12.6 Billion every month to lend out to Filipino businessmen at very low interest rates.
- Boost Philippine tourism by inviting friends and relatives abroad to visit home twice a year. It is estimated that there are at least 20 million Filipinos abroad!
- If you are fortunately employed, you are encouraged to go the extra mile for your company and your country. Many Filipinos are just using 70% of their abilities. A 20% to 25% increase in individual productivity is attainable.
- Organize more Cooperatives to help the poor.
- Reduce tariffs on imported production & agricultural equipment
- Respect property rights; observe the rule of law; and BE HONEST.
Rather than dwell on the things we cannot change, let us focus on the above concerted actions that can help to move our economy forward, provide more internal resources (capital), and increase our employment rate. I believe that 84 million Filipinos acting together can make life better for all Filipinos. (No one can do everything, but EVERYONE CAN DO SOMETHING!)
Wednesday, April 28, 2010
Saving For Your Retirement
I've realized in the recent year that it is really difficult to save up for your retirement. How much do we need to be able to retire comfortably? How many years will we be in retirement? How do I come up with that type of money?
If you think about it, even normal and regular saving is difficult. Extraneous factors always get in the way - like the recent Ondoy, or the more common medical emergencies. Most people just give up trying to save altogether, and just live off what they get from paycheck to paycheck.
Jean Chatzky tells us more about this, and how to psyche ourselves up to save in his article at the Reader's Digest website:
“But I can’t save any money.” It’s an excuse I hear a lot. Sometimes it’s a whine. Other times I detect a note of defiance. In the past few years, it has become increasingly frequent, as more and more of us make less than we spend, eating up the equity in our homes, while increasing our borrowing. Savings rates are declining. And the situation seems to be getting worse.
The question is: Why? Why don’t we make saving a priority? We certainly know that saving money – like eating broccoli and strengthening our core muscles – is good for us. In the latter cases, we listen. Yoga and Pilates have never been hotter. And broccoli now comes as a baby vegetable, precut and bagged, and even in purple. Yet saving for tomorrow is still a largely ignored and unappreciated skill. There are three reasons for this.
One: Saving today is harder. “If you’re having to spend a disproportionate amount of income on food and gas, it’s hard to save,” says Anthony Pratkanis, a psychology professor at the University of California, Santa Cruz, who specialises in financial issues.
Over in our part of the world, food and fuel prices have increased substantially, eroding much of the income growth we’ve enjoyed in the past few years. According to the UN Food and Agriculture Organization, food prices soared nearly 40 percent since last year. Meanwhile, crude oil prices have surged more than five-fold since 2002.
What’s worse, the prospect of still spiralling inflation amidst a current slowing global economy will make it more difficult for already strapped households to save.
Two: Credit became too accessible. For years it was simply too easy to get your hands on money to spend. Banks are eager to extend credit to you if you meet their requirements.
A financial cards study by Euromonitor International reported there were 580 million credit cards in circulation in Asia Pacific last year, a 54 percent increase since 2002. Correspondingly, credit cards transactions has increased 62 percent in the same five-year period.
Another study by the Bank for International Settlements, the bank for central banks, noted that many Asian countries such as Singapore and Malaysia, racked up a 200 to 500 percent increase in credit card usage volume, including the use of cards both to make purchases and to withdraw cash, between 1998 and 2005.
With such easy credit available, why save when you could get that big flat-screen TV today and pay for it with a simple swipe of plastic?
Three – and most intriguing: Saving is, was, and always will be no fun. “Saving money,” explains Jason Zweig, author of Your Money and Your Brain, “doesn't feel good.” Think about it this way: Choosing to save almost always means opting for delayed instead of immediate gratification. “You can buy a pair of shoes today,” says Zweig, “or have a nice retirement 20 years from now.” You’re going to buy the shoes because the pleasure of getting something good today is much greater than the pleasure of getting something good years in the future – even if the reward in the future is bigger.
IF IT’S NOT SHOES THAT make you go mushy inside, it may be technology, or rare books. But that’s not only an intensity you feel, it’s an intensity neuroeconomists can see. In recent years, this relatively new breed of experts in economics and neuroscience have started using MRIs to view the brain as it is making money choices.
When something we want to buy comes into view, they see the pleasure centre firing up as we get a feel-good dopamine rush. Similarly, getting a few dollars today is thrilling – more thrilling, in fact, than getting a slightly larger profit tomorrow. And if you have to wait a few weeks or months for that gain, it will have to be much bigger in order to arouse the same interest in your brain. Things way off in the future – like retirement – don’t jostle the pleasure centre much at all.
“HUMANS, LIKE MOST ANIMALS, have a strong preference for immediate reward over delayed reward. If you offer me $10 today or $11 tomorrow, I’ll probably say I’d rather have the $10 today,” says Zweig. Even bigger numbers don’t seem to make a difference. Financial experts routinely use what-if scenarios to try to encourage people to save more and at a younger age. You’ve probably heard that if at age 20, you put $100 a month into an account earning 8 percent interest, you’d have $527,454 at retirement. If you waited until you were 30 to begin, you’d have only $229,388. Yes, the examples are striking, but by Zweig’s logic, they probably aren’t very effective.
“A reward you get in the distant future has no emotional kick to it. It’s just an abstraction,” he says. “Even if you tell people you’ll have a million dollars 30 years from now, the brain doesn’t get it.”
Which, of course, is perfectly rational. “If tomorrow’s reward is based on promises – which retirement is – the people making the promises might be lying, they might not be around 20 years from now, your goals might change, many things could happen,” says Zweig. “So you have this automatic preference for an immediate reward. And that probably comes from our [hunter-gatherer] ancestors.” Back in those days, food was scarce. Given the choice of eating now or maybe eating more later, the cave folk who chose the latter very likely starved to death.
So the question becomes: Knowing what we know about our money and our brains, what mind games can you play to psych yourself into saving?
Visualise your goals. Let’s say you're 31 and you want to retire in 25 years. The key is to make the goal as concrete as you can, says Zweig. Pick your birthday circa 2033 as the day for your retirement goal. Then ask yourself, What do I want to do when I retire? Do I want a villa in Bali, a yacht to sail the seas in, or a paid-off mortgage? It’s different for everyone. But you’ve made retirement tangible: You have the date. You have the goal. Then you give it a name. It becomes “The Villa in Bali Fund.” You put a little Balinese music on your desktop, or cartoons of the beach – whatever reminds you of your goal. Put your account statements in a manila folder and decorate it with coconut trees.
Sound corny? Sure, but what you’re doing, Zweig says, is building an emotional environment that you can save in. All these things work together to motivate you, and then when you see the pair of shoes, it will be easier for you to say to yourself, This is a choice between shoes and Bali. Suddenly, you can leave the shoes in the store.
Rally your team. Use your friends and family as a way to discipline yourself. Tell them what your goal is, and ask them to remind you if you’re about to spend money on something you won’t need. (Tell them you won’t get cranky and will appreciate the help.) You can even do this on the internet. Dean Karlan and Ian Ayres of Yale just launched a website called stickK.com, which lets you post your goal, notify your friends, and set up penalties if you fail. It worked for both founders, who lost a significant amount of weight by pledging a significant amount of money if they didn’t drop pounds. But you could also use it to build an emergency stash, increase your contribution to your retirement savings, or amass an education fund for your kids.
Break it down. Stephen Brobeck, executive director of the Consumer Federation of America, says that one reason many middle-income families don’t save is that they don’t believe they can come up with big enough sums of money to do it effectively. The fact is, he says, small amounts can be quite effective. Start with your change. “It sounds trivial, but we have story after story of people who accumulated hundreds of dollars that way, realised they could do it, and worked harder to get more,” he says. Then add an automatic transfer from checking to savings account every month.
Finally, recognise that the saving process is actually healing. It makes you feel better – a better person, a better spouse, a better parent – to know that you have something put away for your future. Says Brobeck, “You may have to make sacrifices in the short term, but you’ll feel so much better in the medium to long.
” Additional reporting by Arielle McGowen, Chan Hse May and Shawn Pang
If you think about it, even normal and regular saving is difficult. Extraneous factors always get in the way - like the recent Ondoy, or the more common medical emergencies. Most people just give up trying to save altogether, and just live off what they get from paycheck to paycheck.
Jean Chatzky tells us more about this, and how to psyche ourselves up to save in his article at the Reader's Digest website:
“But I can’t save any money.” It’s an excuse I hear a lot. Sometimes it’s a whine. Other times I detect a note of defiance. In the past few years, it has become increasingly frequent, as more and more of us make less than we spend, eating up the equity in our homes, while increasing our borrowing. Savings rates are declining. And the situation seems to be getting worse.
The question is: Why? Why don’t we make saving a priority? We certainly know that saving money – like eating broccoli and strengthening our core muscles – is good for us. In the latter cases, we listen. Yoga and Pilates have never been hotter. And broccoli now comes as a baby vegetable, precut and bagged, and even in purple. Yet saving for tomorrow is still a largely ignored and unappreciated skill. There are three reasons for this.
One: Saving today is harder. “If you’re having to spend a disproportionate amount of income on food and gas, it’s hard to save,” says Anthony Pratkanis, a psychology professor at the University of California, Santa Cruz, who specialises in financial issues.
Over in our part of the world, food and fuel prices have increased substantially, eroding much of the income growth we’ve enjoyed in the past few years. According to the UN Food and Agriculture Organization, food prices soared nearly 40 percent since last year. Meanwhile, crude oil prices have surged more than five-fold since 2002.
What’s worse, the prospect of still spiralling inflation amidst a current slowing global economy will make it more difficult for already strapped households to save.
Two: Credit became too accessible. For years it was simply too easy to get your hands on money to spend. Banks are eager to extend credit to you if you meet their requirements.
A financial cards study by Euromonitor International reported there were 580 million credit cards in circulation in Asia Pacific last year, a 54 percent increase since 2002. Correspondingly, credit cards transactions has increased 62 percent in the same five-year period.
Another study by the Bank for International Settlements, the bank for central banks, noted that many Asian countries such as Singapore and Malaysia, racked up a 200 to 500 percent increase in credit card usage volume, including the use of cards both to make purchases and to withdraw cash, between 1998 and 2005.
With such easy credit available, why save when you could get that big flat-screen TV today and pay for it with a simple swipe of plastic?
Three – and most intriguing: Saving is, was, and always will be no fun. “Saving money,” explains Jason Zweig, author of Your Money and Your Brain, “doesn't feel good.” Think about it this way: Choosing to save almost always means opting for delayed instead of immediate gratification. “You can buy a pair of shoes today,” says Zweig, “or have a nice retirement 20 years from now.” You’re going to buy the shoes because the pleasure of getting something good today is much greater than the pleasure of getting something good years in the future – even if the reward in the future is bigger.
IF IT’S NOT SHOES THAT make you go mushy inside, it may be technology, or rare books. But that’s not only an intensity you feel, it’s an intensity neuroeconomists can see. In recent years, this relatively new breed of experts in economics and neuroscience have started using MRIs to view the brain as it is making money choices.
When something we want to buy comes into view, they see the pleasure centre firing up as we get a feel-good dopamine rush. Similarly, getting a few dollars today is thrilling – more thrilling, in fact, than getting a slightly larger profit tomorrow. And if you have to wait a few weeks or months for that gain, it will have to be much bigger in order to arouse the same interest in your brain. Things way off in the future – like retirement – don’t jostle the pleasure centre much at all.
“HUMANS, LIKE MOST ANIMALS, have a strong preference for immediate reward over delayed reward. If you offer me $10 today or $11 tomorrow, I’ll probably say I’d rather have the $10 today,” says Zweig. Even bigger numbers don’t seem to make a difference. Financial experts routinely use what-if scenarios to try to encourage people to save more and at a younger age. You’ve probably heard that if at age 20, you put $100 a month into an account earning 8 percent interest, you’d have $527,454 at retirement. If you waited until you were 30 to begin, you’d have only $229,388. Yes, the examples are striking, but by Zweig’s logic, they probably aren’t very effective.
“A reward you get in the distant future has no emotional kick to it. It’s just an abstraction,” he says. “Even if you tell people you’ll have a million dollars 30 years from now, the brain doesn’t get it.”
Which, of course, is perfectly rational. “If tomorrow’s reward is based on promises – which retirement is – the people making the promises might be lying, they might not be around 20 years from now, your goals might change, many things could happen,” says Zweig. “So you have this automatic preference for an immediate reward. And that probably comes from our [hunter-gatherer] ancestors.” Back in those days, food was scarce. Given the choice of eating now or maybe eating more later, the cave folk who chose the latter very likely starved to death.
So the question becomes: Knowing what we know about our money and our brains, what mind games can you play to psych yourself into saving?
Visualise your goals. Let’s say you're 31 and you want to retire in 25 years. The key is to make the goal as concrete as you can, says Zweig. Pick your birthday circa 2033 as the day for your retirement goal. Then ask yourself, What do I want to do when I retire? Do I want a villa in Bali, a yacht to sail the seas in, or a paid-off mortgage? It’s different for everyone. But you’ve made retirement tangible: You have the date. You have the goal. Then you give it a name. It becomes “The Villa in Bali Fund.” You put a little Balinese music on your desktop, or cartoons of the beach – whatever reminds you of your goal. Put your account statements in a manila folder and decorate it with coconut trees.
Sound corny? Sure, but what you’re doing, Zweig says, is building an emotional environment that you can save in. All these things work together to motivate you, and then when you see the pair of shoes, it will be easier for you to say to yourself, This is a choice between shoes and Bali. Suddenly, you can leave the shoes in the store.
Rally your team. Use your friends and family as a way to discipline yourself. Tell them what your goal is, and ask them to remind you if you’re about to spend money on something you won’t need. (Tell them you won’t get cranky and will appreciate the help.) You can even do this on the internet. Dean Karlan and Ian Ayres of Yale just launched a website called stickK.com, which lets you post your goal, notify your friends, and set up penalties if you fail. It worked for both founders, who lost a significant amount of weight by pledging a significant amount of money if they didn’t drop pounds. But you could also use it to build an emergency stash, increase your contribution to your retirement savings, or amass an education fund for your kids.
Break it down. Stephen Brobeck, executive director of the Consumer Federation of America, says that one reason many middle-income families don’t save is that they don’t believe they can come up with big enough sums of money to do it effectively. The fact is, he says, small amounts can be quite effective. Start with your change. “It sounds trivial, but we have story after story of people who accumulated hundreds of dollars that way, realised they could do it, and worked harder to get more,” he says. Then add an automatic transfer from checking to savings account every month.
Finally, recognise that the saving process is actually healing. It makes you feel better – a better person, a better spouse, a better parent – to know that you have something put away for your future. Says Brobeck, “You may have to make sacrifices in the short term, but you’ll feel so much better in the medium to long.
” Additional reporting by Arielle McGowen, Chan Hse May and Shawn Pang
Subscribe to:
Posts (Atom)
