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To fully understand how sCAms work, just imagine a black hole…
A black hole, according to the general theory of relativity, is a region of space from which nothing, including light, can escape. It is the result of the deformation of spacetime caused by a very compact mass. Around a black hole there is an undetectable surface which marks the point of no return, called an event horizon. It is called “black” because it absorbs all the light that hits it, reflecting nothing. sCAms are similar,,, they will suck you and your money into their system…
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*Registered Financial Planner of RFP Institute USA
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In our high school physics subject, we encountered different kinds of simple machines which are used to help us achieve our work efficiently. One of the best forms is the lever. By definition, a lever is a tool that uses a fulcrum to produce a maximum result with a minimum effort. Examples of levers are the hydraulic jack and the seesaw. In replacing a wheel, for instance, a hydraulic jack is used to lift the car. If the lever arm is longer, the effort needed becomes less.
posted in:
http://www.businessmirror.com.ph/index.php?option=com_content&view=article&id=27546:discipline&catid=28:opinion&Itemid=64
As the late former President Marcos once said, “For a country to be progressive, discipline is a necessity.” To a certain extent, he was right. How can a country improve its economy when everything is in disarray? Discipline can, thus, be equated with the habit of putting everything in order.
Just look at our Asian neighbors, such as Singapore, Taiwan, South Korea and Japan. After World War II, we were far ahead of them in terms of wealth and progress. But, at present, we are now lagging behind them. The secret to their status now can be attributed to their strict implementation of regulations. It can, thus, be concluded that wealthy nations are composed of wealthy and disciplined citizens.
Discipline is a simple word that is always taken for granted. But unknown to many, it is a factor in shaping our destiny. Discipline is merely following sets of guidelines for the improvement of our lives. Unfortunately, discipline can also be defined as the habit of doing something one hates most. A perfect example is going to work early. I still remember during my early years in the company when I once reported late by five minutes (my first and last time to be late). Our general manager called up looking for me. When I returned his call, I explained that I already dispatched the crew as early as 6 a.m. by informing the members the day before of their assigned work. But he would have none of it and his response stunned me: How can you be an example to your subordinates if you are always late? His admonition made perfect sense, I realized later. He had the right to reprimand me, not because he was my boss but because he always comes in early. Even if he was the boss, he made it a habit to come to the office early. In short, discipline is the habit of doing the right thing. And it is the hardest thing to do.
When it comes to managing personal finance, discipline is a major contributor to the success or failure of one’s finances. As studied by our Asian counterparts, Filipinos have a very low saving ratio. This is one of the reasons we became a poor nation. This may be due to the influence of our conquerors or colonizers like the Spaniards and the Americans. From Spain, we got siesta and fiesta. From America, we got shopping. All of these acquired habits made the Filipinos consumers and spenders. Maybe if we acquired the mindset of the Japanese conquerors, we would now be equal with our progressive Asian brothers.
Try to notice the emotions of people during payday: isn’t this their happiest time? With their happiness, comes panic and madness. That is why malls always have “madness sale” every quarter. I am at a loss on why people panic over how to spend their hard-earned money rather than stay calm and think of how to start saving money for growth. As for me, what I have done for the past 20 years is that I made it a point to save 30 percent of my monthly income in a bank account. And when my savings grew, I transferred them to a higher-yielding instrument. Up to now, whenever I have extra money, I still carry that discipline and habit. One time, I was having a friendly chat with my superior. He was surprised to learn that in spite of my having a family, I still manage to save quite a big amount monthly. But this time around, it is not into savings account; I wisely invest my extra money. When I share my experience with colleagues, I always emphasize “discipline” and “habit.” It is because no matter how high one’s income is, or how good or high-yielding an investment instrument is, for as long as the person does have the right mindset or the habit in handling money, he will still end up broke.
Financial discipline is one thing that is hard to do. Below are the baby steps I have taken when I started managing my income:
1. Desire or want less. When I earned my first salary, I was so happy. But I always put my emotions in check. I never bought anything on impulse. After giving a portion to my mother, I stashed away my money in my savings account. The more I do not see my money, the less the chance of my spending it unnecessarily. I always consider money saved as money spent. However, it is money spent for buying my future. I always believe that money spent for a want or desire is money lost already.
2. Live below your means. Some may scoff at this statement but a lot of wealthy people still adopt this principle. This simply means that when one earns money, he should make it a point that his lifestyle is lower than what his income can afford. This does not mean he has to live like a pauper. This simply means he can also enjoy life, provided he does not exceed his income. The key here is delaying gratification by controlling your emotion. I also do not give in to challenges hurled at me to make me spend. Once, someone even called me broke when I refused his challenge. It didn’t matter to me; what mattered was what I know about myself and not what the fellow claimed to know about me. Thinking about it now, maybe the guy was really the one who was broke so he wanted me to spend.
3. Save regularly. This is the area where a lot of people fail. Whenever I talk to people and the topic shifts to money, they always say they have no savings, and yet when extra money like incentives or bonuses comes their way, they always think of spending. They always ask me why I do not seem to worry about money. I always tell them one thing: I have savings. They always complain that it is hard to save. For me, savings is not about the amount of money but rather the habit and the discipline. Like the slogan I saw in Banco de Oro flyer, “Savings is FUNdamental”. It makes sense.
With proper discipline, the first thing that will be affected is your thought.
Whatever your thought is, it becomes your word.
Whatever your word is, it becomes your action.
Whatever your action is, it becomes your habit.
Whatever your habit is, it becomes your character.
Whatever your character is, it becomes your destiny.
Edmund Lao is a candidate for Registered Financial Planner (RFP) designation. He is a graduate of Electrical Engineering from Mapua Institute of Technology. Currently, he is a sales engineer in one of the biggest media companies in the Philippines. He is also an active contributor in www.income-tacts.com, the country’s premier personal finance web site. Join the 21st RFP Program (October 2 to November 20, 2010). Visit www.rfp-philippines.com or inquire at info@rfp-philippines.com/Tel. No. 634-2204.
Don’t be a scam victim!
Written by Edmund Lao / Personal Finance
Sunday, 20 June 2010 20:57
http://www.businessmirror.com.ph/index.php?option=com_content&view=article&id=26704
Scam, by definition, is a deceptive business scheme designed to defraud a person or group by gaining their confidence. Scams come in different forms. These are the Ponzi scheme (named for Charles Ponzi), the Pyramid scam and the Nigerian scam, to name a few.
In the
Why are scammers successful until now? Below are some possible reasons:
1. Lack of financial literacy. In order to be able to thwart schemers, a person must have a basic knowledge of money, and how it works. Filipinos are known to be risk-averse. Evidence of this is the banking industry. Most people want to have their money deposited in the banks for two reasons: they feel their money is safe in the bank, and they want easy access and withdrawal. Both reasons are valid, but the downside is they receive a meager interest in exchange for convenience. When insurance and investment agents approach to help them grow their hard-earned money, more often than not, they reject the agents for fear of risk. But when scammers come and sweet-talk them about high-yield investments, especially if they are told that some showbiz people and big-time politicians are also involved, in the blink of an eye, the prospects forget about their fears and the risk.
2. Greed. This is another area that the scammers take advantage of. They manipulate their prospects’ emotions and tempt them by selling them dreams. Because the prospects lack financial knowledge, the lure of making big money through the investments proposed by the scam artist makes them greedy. In their desire to amass wealth in so short a time, they impulsively and unwittingly “invest” all their life savings only to realize later that they have been conned.
3. Lack of awareness about scams. Many people become victims of scams because they are not aware of the operations of scammers. We must know that there are scammers lurking everywhere, ever on the lookout for victims, for a chance to pounce on people’s weaknesses. In a way, a scam is like a game of chess where players try to outwit each other and wait for their opponents to make mistake. Actually, the mistake arises from a violation of the principles of the game. When we make a decision on the handling of our money, scammers just wait for us to violate the principles governing the growth of money. And when they spot our blunder, they take advantage of it and, before long, they’re laughing all the way to the bank, counting our money.
4. Laziness/get-rich-quick mindset. This is another reason many are scammed. I have encountered many people who, when selling their assets, can’t wait to get hold of the cash; they want to have their money within the shortest time possible. A word of caution for them: Always remember the phrase “Easy come, easy go.” The easier one gets his money, the easier this will be spent. Another phrase worth remembering is “Keeping up with the Joneses.” Some people, in their desire to keep pace with their progressive neighbors, search desperately for ways to make more money. And sometimes, the only solution they see is the get-rich-quick scheme, which, more often than not, leads only to a greater loss…and grief.
5. Lack of discipline. When it comes to money, Pinoys find it hard to control their habits. They cannot seem to avoid spending unwisely on things they do not really need. They lack the will to put their money aside for their future. Maybe it is because of the culture we inherited from our conquerors, the Spaniards (siesta and fiesta) and the Americans (shopping). Because of these bad habits, the Pinoys’ income can barely meet their needs. So when a business proposition is offered to them, they unwittingly join, not knowing the company is illegitimate. A lot of business opportunities flood the e-mail, deceivingly promoting financial literacy. But a careful investigation often reveals the company only promotes consumerism. This is a tricky form of scam. Worse, the company may not have undergone the procedures to make it legal.
Remember: before investing, INVESTigate first.
6. Deceptive training seminars. People, by nature and out of desperation, always want to hear positive things. Scammers, realizing this, put up deceptive training seminars to brainwash new members into believing them. Most of the time, they appear to talk like experts by quoting various authors. Scammers also make the members feel good by their make-believe seminars. An example is they make people believe (with ease) savers are losers while the truth is savers end up with more money than the consumers. Such is the hypnotic power of these organizations. They also have different ways to invite people to the same scam. They issue challenges to make people join. It is noticeable that scammers play on people’s emotions.
The following are guidelines to thwart prospective scammers:
Don’t be a victim of scam!
Edmund Lao is a candidate for Registered Financial Planner (RFP) designation. He is a graduate of
Electrical Engineering from Mapua Institute of Technology. Currently he is a sales engineer in one of the
biggest media companies in the
the country’s premier personal finance web site. Join the 20th RFP Program (July 10 to September 4, 2010).
Visit www.rfp-philippines.com or inquire at info@rfp-philippines.comThis e-mail address is being
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Aside from giving you life, what do you think could be the next best thing that your father can give?
I certainly believe that there are many answers ranging from material things, from the tangibles to the intangibles. There are different ways for a father to give the best for his children as long as… read more…
posted at Business Mirror (6/7/10)
http://businessmirror.com.ph/index.php?option=com_content&view=article&id=26129%3Aadd-on-rate&catid=28%3Aopinion&Itemid=64
Add-on Rate
by Edmund Lao
When we were in high school, we learned from Consumer Mathematics that when we place money in the bank, the bank pays interest. The interest is computed based on the principal or the average daily balance, rate of interest, and the time our money stays with them. Interest rates vary depending on the placement vehicle chosen. There are the savings account (passbook and ATM account), Time Deposit, Special Savings account, trust funds to choose from. There was a time when banks interest on time deposits even reached as high as from 16 to 20 % interest per annum even for a five thousand pesos time deposit. Nowadays, interest rates are very low. You can get a measly 3% interest if your money is at least 10 million pesos. The reason we were given interest is that the depositors apparently lent their money to the bank, which in turn use the depositors’ money to do business. In short, the bank is leveraging on other people’s money.
What the bank does with our money is to lend it out to clients and charge them interest for the said loan. And majority of the loan applicants are us, the depositors. Apparently, we are borrowing our own money and paying out interest to a third party. And worse, the interest being charged is higher than the one being paid to us. This is like killing our own cash, Instead of cash flowing into our pocket, cash flows out of our pocket and flows into the lenders’. That is primarily the reason they are rich and we are not. They were able to create money from almost nothing. For illustration, let us use the table below to show how money works:
|
Principal |
100000 |
|
|
|
|
|
maturity amount at given rate |
|
|
|
Age |
4% |
12% |
|
|
20 |
100,000 |
100,000 |
|
|
26 |
|
200,000 |
|
|
32 |
|
400,000 |
|
|
38 |
200,000 |
800,000 |
|
|
44 |
|
1,600,000 |
|
|
50 |
|
3,200,000 |
|
|
56 |
400,000 |
6,400,000 |
Here we see that the same initial amount of money earns differently where the maturity depends on the rate of return as shown. Money works for us if we are earning from the given rate of return. What if depositors put money in the bank that earns 4% while being in debt with the same at 12%? This will be a case of money working against us and it will make us slave by having us work for money. Assuming that the loan was paid after 36 years, the bank would have made 6M from the depositor. That would explain why the banks own assets such as properties and huge buildings that they rent out to tenants. That would also explain why borrowers are always deep in debt. They just do not know how money works. If they knew, they would not be in a financial mess.
There are different kinds of interest rate associated with loan. The most common is the Add-on interest being offered by the banks. Almost everyday, employees receive at least three calls from service providers that sell the idea of applying for Add-on interest. What is Add-on interest and how does this work? By definition from Wikipedia, it is a method of calculating interest whereby the interest payable is determined at the beginning of a loan and added onto the principal. The sum of the interest and principal is the amount repayable upon maturity. For example, assuming you get a loan of 12,000 pesos payable within a year and with an interest of 1% per month. Normally, we think that 1% per month equates to 12% effective interest annually. This is where majority are confused. The principal is then divided by 12 to get the monthly payment of 1000 pesos. The interest is then computed as 12,000 x 1%, which yields 120 pesos. The total monthly payment is 1,120 pesos. In a year, the total payment is 13,440 pesos. If you compute the interest paid, you will be very happy to know it really is 12% per annum. The table below will show you otherwise:
|
Amount |
12000 |
|
|
|
|
|
|
rate 1% per month (12% per annum nominal) |
|
|||||
|
Term |
1 year |
|
|
|
|
|
|
|
|
|
AOR |
|
DBM |
|
|
|
|
Monthly |
Monthly |
effective |
Monthly |
Effective |
|
|
Principal |
payment |
Interest |
rate |
Interest |
Rate |
|
|
12000 |
1000 |
120 |
0.0100 |
120 |
0.01 |
|
|
11000 |
1000 |
120 |
0.0109 |
110 |
0.01 |
|
|
10000 |
1000 |
120 |
0.0120 |
100 |
0.01 |
|
|
9000 |
1000 |
120 |
0.0133 |
90 |
0.01 |
|
|
8000 |
1000 |
120 |
0.0150 |
80 |
0.01 |
|
|
7000 |
1000 |
120 |
0.0171 |
70 |
0.01 |
|
|
6000 |
1000 |
120 |
0.0200 |
60 |
0.01 |
|
|
5000 |
1000 |
120 |
0.0240 |
50 |
0.01 |
|
|
4000 |
1000 |
120 |
0.0300 |
40 |
0.01 |
|
|
3000 |
1000 |
120 |
0.0400 |
30 |
0.01 |
|
|
2000 |
1000 |
120 |
0.0600 |
20 |
0.01 |
|
|
1000 |
1000 |
120 |
0.1200 |
10 |
0.01 |
|
Balance |
|
|
|
|
|
|
|
Total |
0 |
12000 |
1440 |
37.24% |
780 |
12.00% |
|
|
|
|
|
|
|
|
As can be seen from the table, what was once thought to be 12% per annum is actually 37.24% which is thrice the original rate. The 12% effective rate is only applicable to diminishing balance method (DBM) of calculation. The add-on interest applies a fixed interest based on the initial amount of loan, No matter how small the balance is, the interest is still constant.
This kind of loan is a good example of how to slowly kill one’s personal finance. Consider being in this kind of situation, one would work harder just to be able hand over hard-earned money to the lender. Now when take-home pay is not enough, some of the negative effects are: too little time for family, stress, inefficiency in the workplace. Worse, some resort to theft of company time and money. The usual problem here is not that we do not have enough. It is just that we feel we do not have enough.
What if instead of paying the above interest, it was saved? Let us assume that a person aged 20 started saving the 1440 pesos yearly interest for forty years at the rate of 8% per annum, at the end of the term, he would have accumulated 5 million pesos!
If only people have the proper mindset and awareness when it comes to handling finances, these loans would not have been tempting to accept and people can build their wealth.
As the Bible says:
Proverbs 13:11 “Dishonest money will dwindle, but money gathered little by little will surely grow.”
Proverbs 22:7 “The rich rules over the poor, and the borrower is the slave of the lender.”
How Money Works: The Rule of 72
by Edmund Lao
Several years ago, I attended a financial seminar. As an engineer, I thought I already knew about finance, having finished the subject Engineering Economy in college. The seminar went on and the part that caught my attention was the topic about compounding interest. We know about compounding interes…
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Source: www.wikipedia.org
History of LED
A light-emitting-diode (LED) is a semiconductor diode that emits light when an electric current is applied in the forward direction of the device, as in the simple LED circuit. The effect is a form of electroluminescence where incoherent and narrow-spectrum light is emitted from the p-n junction.
LEDs are widely used as indicator lights on electronic devices and increasingly in higher power applications such as flashlights and area lighting. An LED is usually a small area light source, often with optics added to the chip to shape its radiation pattern and assist in reflection. The color of the emitted light depends on the composition and condition of the semiconducting material used, and can be infrared, visible, or ultraviolet. Besides lighting, interesting applications include using UV-LEDs for sterilization of water and disinfection of devices, and as a grow light to enhance photosynthesis in plants.
What is LED?
The first known report of a light-emitting solid-state diode was made in 1907 by the British experimenter H. J. Round of Marconi Labs when he noticed electroluminescence produced from a crystal of silicon carbide while using a cat’s-whisker detector. Russian Oleg Vladimirovich Losev independently created the first LED in the mid 1920s; his research, though distributed in Russian, German and British scientific journals, was ignored, and no practical use was made of the discovery for several decades. Rubin Braunstein of the Radio Corporation of
The first practical visible-spectrum (red) LED was developed in 1962 by Nick Holonyak Jr., while working at General Electric Company. He later moved to the
Shuji Nakamura of Nichia Corporation of
The development of LED technology has caused their efficiency and light output to increase exponentially, with a doubling occurring about every 36 months since the 1960s, in a similar way to
What are the advantages LED?
What are the disadvantages LED?
What are the types of LED?
TSUNAMI!
http://businessmirror.com.ph/index.php?option=com_content&view=article&id=24535:tsunami&catid=28:opinion&Itemid=64
A tsunami (translated from the Japanese word for harbor wave) is a series of huge waves that happen after an undersea disturbance such as an earthquake or underwater volcanic eruption. The waves travel in radial directions from the origin of disturbance, similar to the ripples that happen after throwing a rock into the water. The waves may travel as fast as 450 miles per hour and as the waves approach shallow waters along the coast they grow to a great height and smash into the shore. They can be as high as 100 feet. They can cause a lot of destruction on the shore. They are sometimes mistakenly called “tidal waves,” but tsunamis have nothing to do with the tides.
A perfect example is the tsunami that hit Southern Thailand in December 2004. The tsunami was generated from the Indian Ocean earthquake with a 9.0 magnitude, wherein a lot of tourists were caught flatfooted. The tsunami was the worst natural disaster to ever strike Thailand, causing loss of life as well as major damage to property, the environment and the economy.
A more recent one was the quake in Chile which generated tsunami. The created wave has caused serious damage to the sparsely populated Juan Fernandez islands, and has traveled across the ocean at several hundred km per hour. The earthquake was caused by the floor of the Pacific being pushed below South American land mass. This sudden jerking of the sea-floor displaced water and triggered a tsunami, which crossed the ocean at a speed of a jet plane. However, due to the great distance from the origin, the wave was not able to cause damage when it reached the coast of Japan.
In 2008, people around the world were hit with tsunami. This tsunami did not spare everyone, but luckily there were no lives lost, and no properties were damaged. This tsunami was not a natural disaster but was man-made. It is called as a financial tsunami.
The main cause was a financial earthquake in the form of greed. As in the world of finance, greed is always the primary reason why a person loses his investment. The effect of the financial meltdown in America was so great that it resembled the effect of tsunami once it hits the coastline. There is truth to the saying, “When America sneezes, the world catches cold”. America and the rest of the world can be likened to tectonic plates that push each other. Before a tremor occurs, two tectonic plates push at each other. With the push, stress is built and once the energy is released, the result is an earthquake. The financial crisis in America is like an earthquake waiting to be released. And when released, it created a financial tsunami that changed the financial map of the world.
In our personal finance, we also have our tsunami in the form of debt. Like America, we have also become a nation of spenders and debtors. This is more evident in the credit card industry where consumers charge all their expenses, whether these are wants or needs. Credit cards are not bad. In fact, these are very good financial tools only when used properly. Unfortunately, majority views credit cards as extended wallet. Consumers charge to their credit card without minding if their purchase exceeded their income. Then when the billing statement comes, they see the words “minimum amount due”. Without giving a thought, they pay the minimum. When the next month’s statement arrives, they will be shocked to learn that the amount they owe grew by 3,5% a month. By continuously paying the minimum amount due, they unconsciously created friction like that of the earth’s tectonic plate. When credit card debt grows uncontrollably, it will be similar to a great earthquake that produces ripple that gradually becomes a tsunami. They are so deep in debt that no matter what they do, they are drowned in their financial condition. Psalm 37:21 says “the wicked borroweth, and payeth not again.” The minute a person goes into debt, he loses a portion of his freedom. As Proverbs 22:7 says, “The rich ruleth over the poor, and the borrower is servant to the lender.”
Another financial tsunami is in the form of scam. By definition, a scam is a fraudulent business scheme designed to deceive a person of his money. Scammers usually operate by manipulating the emotion of the people by tempting them with a high return. More often than not, people who are lured into investing are the educated, risk averse professionals who gave in to greed. The scammers use all the tricks like high pressure selling, reverse psychology, insult (or emotional challenge), false motivation just to get you to “invest” your money in them. Usually the prospects fall to the trap laid by the scammers and when they realize the folly of their action, it is too late. The tsunami hit them already. Due to greed and laziness, some give their lifetime savings in the hope of getting a good return. Prov 14:23 spells it out: “In all labour there is profit: but the talk of the lips tendeth only to penury [poverty]” Prov 28:19 says: “He that tilleth his land shall have plenty of bread: but he that followeth after vain persons shall have poverty enough”
I use the word “SLY” as my weapon against scam. Before investing money, always check Stability, Liquidity, and lastly Yield. The reason majority fails against scam is because they think of the yield, yield, and yield. The golden rule is before investing, INVESTigate first. People do not check investment offers, they usually base their decision on the heard and the herd mentality. They just follow what others do, like the rats that died after following the pied piper. What usually happens is people follow what others do and act based on hearsay. Even in real investing, they always go against financial principle and suffer great loss. I use this widely known financial statement to avoid falling for scams, “I am greedy when others are afraid. When others are greedy, I am afraid”.
The key to survival is in any situation is preparation. Always remember the ant principle,for sure a financial tsunami will not affect you. It wasn’t raining when Noah built the ark.
When I was a 10-year old, I heard the song “Mandy” by Barry Manilow, one of the greatest balladeers of our time, and instantly loved it. I did not know that later in life, I would be a big fan of the artist and his subsequent songs. I am a very frugal person and for me, his albums are quite expensive. Nevertheless, I became an avid collector of his albums, and continue to collect his albums to this day. I also went to his only Philippine concert some years back.
During a recent two-week leave from work , I listened to a Barry Manilow album, The Hidden Treasures, and was struck by one track: “If Tomorrow Never Comes.” This song is about a man who lays awake one night, thinking what would happen to his beloved if he died in his sleep. read more
Bonus!
For all employees, this is the best thing that they look forward to receive every year. The reason: the money they will receive is not due to the effort they exerted but is due to the grace extended by the employer. This is also a passive income since employees will earn it apparently without having worked for it. There is a problem accompanying the bonus. Most of the time, this benefit is already a spent money even before it reaches the employees’ pockets. The normal thing they do is to borrow from usurers the money and buy their hearts’ desires and pay it back when they receive their bonuses. It is always the instant gratification that takes money away from their pocket. They only know the statement “Enjoy now, suffer later” principle. Of course now they want the “enjoy now” period and never think of tomorrow. Over the course of time, they will come to know the “suffer later” when it is already too late.
Her second client is a Chinese. As Chinese are known to be shrewd, this client also invested his bonus also in a pre-need plan of a reputable company. The difference is that he looked for old plans that the previous owners are selling for a low price and a shorter horizon and with the same maturity. He computes the rate of return before he buys. Usually the rate of returns of old plans ranges from 8 to 12% per annum. Since the banks offer low interest, he is always on the lookout for this kind of plans. He can amass millions in a short period of time making his money work for him. His advantage is that he knows how to get a maximum return for a short term. In short, he sees opportunities and never let them go, which is very typical of a Chinese
Exercise CAUTION when attending this supposedly “free” wealth course because it could eventually cost you thousands. Members of Create Abundance earn from money invested by their recruits. No recruit, no profit! You will be enticed, sweet-talked (others say brainwashed or bullied) to invest into networking program and some other supposedly “profitable” investment opportunities. That is why invites like these are flooding the web. The only way for members to earn or recoup their investments is to mislead others to join their illicit operation. Create Abundance (ca2020) is a fake “business school” and it doesn’t teach you real business. It teaches you “their” business, which includes networking and operates like a pyramid scheme. One thing you’ll surely learn from them, though, is how to deceive others into joining so you can earn and perpetuate the scam. Coaches of Create Abundance happened to pick-up and read the books of T. Harv Eker and Robert Kiyosaki and decided among themselves they have become expert business mentors. They are not affiliated with the organizations of T. Harv Eker or Robert Kiyosaki. Create Abundance just keeps on quoting these guys to make it appear they are legit. How can you learn about business from a group that doesn’t even comply with the basics of running a business. Create Abundance is not registered with the DTI and BIR, no permit from the city government, no physical office and no landline number. Who exactly would you go after when their operation inevitably unravels and collapses because the public can no longer be fooled?
—————————————-
ALVIN T. TABAÑAG, RFP
Personal Money Management Coach
Pinoy Smart Savers Learning Center
“Helping ordinary Filipinos achieve financial freedom!”
http://www.pinoysmartsavers.com
http://www.facebook.com/alvin.tabanag Tel.No.: +63 46 416-1385, +63 917 502-3149
Is Your Money Simmering This Summer?
Edmund Lao
It’s summertime. Humid weather is here once again. Majority of people look forward to outings and trips outside the country to enjoy cooler temperature. As people look for ways to beat the summer heat, they might not be aware that there are always costs that will accompany such activities. Just like Christmas celebration, almost all go deep in debt for the sake of going with tradition. The season changes but attitudes/habits towards money are hard to change especially when instant gratification/satisfaction is the concern.
This season, we can test ourselves how to minimize expenses (non-discretionary expenses like electricity and water go up during hot climate) and make our money last longer. In that way, we can be able to grow our future summer getaways without hurting our pocket.
The following are suggestions for saving money during summer:
Enjoy!
Build Your Nest, Lay Your Egg
by Edmund Lao
http://www.businessmirror.com.ph/index.php?option=com_content&view=article&id=22404:build-your-nest-lay-your-egg&catid=28:opinion&Itemid=64
Whether we like it or not, egg is one of the most important things in our lives. Not only because we consume it as food but more significantly, we were also eggs in our mothers’ reproductive system.
In the reproductive system, life is conceived once the egg cell is fertilized. Almost all form of living things from human beings to animals are reproduced through this method in order to continue the species. It is an expression of love between a man and a woman and binds them closer together. The group Menudo once sung “Because of Love” that includes the line:
“We were born because of love, gently taken care of
Sheltered with love through the years, and thanks to love, today we are here”.
This song makes sense. The best form of love is to give life or to sacrifice one’s life to preserve another. This is the kind of unparalleled love that only mothers can give.
Unlike human beings, there are animals that reproduce themselves by laying eggs, like fowls, turtles, fish, and the pre-historic dinosaurs. The most commonly known is the chicken egg.
The average age for hens to begin laying is 5 to 7 months. Young hens will begin by laying one egg every 3 to 4 days. As a hen reaches around 30 weeks, she will be able to lay two eggs every 3 days. The hens will be at their top laying potential at 1 to 2 years of age. Hens will lay for a period of 4 to 6 days and then take a rest. Some hens will take as little as a day to rest. If the eggs hatched and the cycle repeats, imagine the number of hens and eggs that will be produced everyday.
There is a kind of egg that is very essential to our lives. It is the nest egg, and like the egg we used to be, is a product of love. Similar to the motherly love given to her newly-conceived child, we should treat our nest egg with love. Although our nest egg does not have emotion when it grows, it will surely and with guarantee do its work of love by providing for us when the proper time comes. Realistically, unlike with our offspring specially the male, there is no guarantee of support, particularly after they get married—and to spouses who may hate their in-laws. I personally have seen this kind of scenario where a friend of mine turned his back on his parents after getting a bride. Apparently, brides are more powerful after marriage. There is truth to the Filipino saying “there is only one queen in the house”. Analogously, in Chess, the Queen is the most powerful piece on the board, even more powerful than the King. So for security reason in a world of uncertainty, it is much better for everyone to make some sacrifice now and build his nest egg than to regret later when his son gets her future queen and risk being checkmated. Remember that it is the parents’ obligation to ensure a good financial future for their children and not the other way around. Parents should always be an asset to their loved ones and even pass on to them the legacy thet have built when their time is up.
But what really is the nest egg? The nest egg refers to money set aside in investment, money market, or savings accounts that is designated for some specific purpose. It may also be called a financial cushion, a safety valve, and a variety of other names. Some refer to retirement money specifically as their nest egg, and others have money set aside to later fund their children’s expenses like college, weddings or even down payment on a house.
In order for nest egg philosophy to work, a person must agree with himself that nest eggs aren’t touched except for their intended purpose. It also helps to set aside an amount that is planned to “feather the nest” with each month. In real life, when we find a nest, we are never supposed to touch the eggs, since birds may then reject them. Similarly, our nest egg should remain safe and untouchable, allowing it to grow quietly in the background until it is needed for its intended purpose. A good idea is to pretend you have a poultry business. Treat your nest egg as chicken egg. Let it hatch and grow so it can lay egg that will produce another batch of egg-laying chicken and let the cycle continue..
It’s still important if you plan to invest your nest egg, to carefully consider the types of investments you can make. Usually the term nest egg implies slow growth of money, securely stashed away. Obviously the more money you can set aside, the better. If you have significant amounts of money to invest, you may want to diversify your investments.
Below are recommendations to express your love by building your “nest” and laying your “egg”
Step 1 :Increase cash flow and pay off your debt. Number one priority is to pay off the credit card debt and other outstanding loans that are wreaking havoc on your financial security.
Step 2 :Start saving and build an emergency fund. Aim for 6 months of your monthly expenses to have in a liquid account (easily accessible in a pinch) for things such as medical emergencies or job loss.
Step 3 : Accumulate asset and build long term savings by contributing the maximum allowable amount and watch it grow with time
Step 4 :Get adequate protection and income replacement for the breadwinner and for estate preservation.
If nest egg is a product of love, wouldn’t it be a good idea to replace the flower with egg during Valentine’s Day? An egg might not be as expensive as the flower. 
PHANTOM PUNCH
by Edmund Lao
http://www.businessmirror.com.ph/home/opinion/20987-phantom-punch-.html
Phantom punch (as defined in wikipedia) is a punch of the fist that is not real, for whatever reason, to which there is a reaction as though it were, such as the final blow, according to ringside spectators who did not see it, in the 1965 rematch between Muhammad Ali and Sonny Liston. Almost nobody could believe that an unclear short, counter right from Ali would knock out easy the durable beast in Sonny Liston. Nonetheless, whether it was really fatal or not, its place among the greatest knockouts in boxing history is well secured.
As with our very own Manny Pacquiao, the secret to his KO power lies on his vaunted phantom power punch. This phantom punch is not an unreal punch but rather an authentic punch that was too fast to be avoided He used an angle to most of his victims in such a way they CAN NOT see it coming.. Speed kills only when orchestrated by a master.
Some information from his previous fights is shown below:
Pacquiao - Cotto
Cotto said that Pacquiao is one of the best boxers of all time. He also admitted that he didn’t actually know where the punches came from.
Pacquiao – Diaz
After the bout, Díaz acknowledged Pacquiao’s superior hand speed, stating: “It was his speed. It was all his speed. I could see the punches perfectly, but he was just too fast. I never saw the killer punch—prefaced by a head-snapping jab—coming. He boxed more than I thought he would box. No excuses.” He also said that he thought he saw four Pacquiaos in the ring with him. Such is the power of his speed.
Pacquiao – Hatton
Pacquiao said he would prefer that Hatton would fight him toe-to-toe because they have the same style. He said he would need to be careful to avoid the enemy’s phantom punch. Come fight night, in a simple twist of fate, with less than ten seconds remaining in the second round, Hatton was knocked out cold by a phantom punch characterized by a quick, sharp left hook, prompting the referee to award Pacquiao the win by knockout.
Speed, rather than power really kills. With speed comes power. As taught in Physics, the greater the speed (velocity), the greater will be the momentum. With great momentum, the damage created by the impact is also great.
If there is a phantom punch in boxing, it holds true there are also phantom punches in our life, especially with regards to personal finance, in which a greater part of our population is unaware. Usually, years later (as in boxing, rounds later), they get knocked out without knowing what happened and why it happened. Everyone can avoid being knocked-out financially if there is preparation. As the saying goes, “the best time to prepare for a catastrophe is when there is none”.
In boxing, preparation takes two to three months for a fighter to be physically fit for a bout. Included in the training are diet, weight control, discipline, exercise, sparring, and most importantly, stamina. Stamina will determine if the boxer can last the distance or not. Conclusively, those who get knocked out early sure did not have enough stamina and preparation. In the same way, in our finances, we need to have the proper training and stamina in order to survive or win the bouts that are still to come. Instead of receiving the phantom punch in our financial life, we can either dodge or block it and instead be the one to release it to our financial adversary. If Ali was able to identify his fierce opponents’ strength/weakness, then strategize using the “float like a butterfly, sting like a bee and rope a dope” technique to beat them, we can also plan in order to outmaneuver our financial opponent.
To illustrate, I will discuss only two financial phantom punches, namely inflation and scams and how to deflect them:
1, Inflation: Inflation is the silent killer of our hard-earned money. We can never see it but we can feel the effect. Inflation is the loss of value of our money, brought about by the rise in price of everyday goods due to more demand than supply. The peril of ignoring inflation is realized on retirement day when the money saved outlives and financially knocks out the retiree.
To combat this, the following are suggested:
- increase your income in order to keep pace with price increase and at the same time, build retirement fund.
- Spend less on wants to reduce demand. Buy only your needs.
- Buy items on discount/sale. This is true especially for investments. As an example, I buy old pre-need plans (of reputable companies) at a low price from the original owners who want to pre-terminate their investments. The yield is much better and reaches 25% per annum. At the same time, I have extra insurance coverage..
- Look for a higher yielding investment vehicle. It may be in the form of real estate, stocks, UITF, mutual fund, offshore investment, currency trading, etc.
2, Scams: Scams come and go but people never learn. Scams come in different forms, and people are just willing victims. Most of the scammers play on their prospect’s emotion. Due to desperation (for lack of money due to bad money management) and greed, they fall for the trap laid on them. When reality sets in, it will be too late. Scammers also play reverse psychology to pressure people into joining them. They will even discourage you to make financial plan and tell you savers are losers. With great speed like that of Pacquiao, they easily recruit people, and laugh their way to the bank.
Below are ways to sidetrack scammers:
- Check with government agencies like SEC/DTI the legality of their existence as always stressed by RFP Alvin Tabanag.
- Check if they have physical office. Check with property manager how long they have been there. There are many fly by night companies that rent office only for a short period of time.
- Ask for company profile and financial statement. Since it is your money they want, you have the right to ask for supporting document.
- Do credit/character investigation. Make it hard for them to get your money.
- Never deal with internet-based investment offers.
- If the offer is too good to be true (example 5% per month), then it is not true.
- Most importantly, always guard your emotion and never let it get the better of you.
With the proper information, one is prepared to face the phantom punch, repel it and with wisdom, defeat the foe. Knockout!.
I Have No Time
http://businessmirror.com.ph/home/opinion/20226-i-have-no-time-.html
By Edmund Lao
Time is the most neglected wealth in the world. It is the scarcest resource and it can’t be replaced. Unless it is managed, nothing else can be managed. The full importance of time is realized when there’s little left. Everyone’s greatest asset is one’s unexpired years of productive life. Once gone, we can only look back but never go back.
“I have no time” is the usual reason for not having accomplished a task be it for corporate or personal growth.
An example is an experience with a friend of mine. One time, my friend borrowed a book from me, titled “8 Secrets of the Truly Rich by Bo Sanchez” before All Saints Day. There was a total of 3 days vacation before we return to work. After the vacation, when I asked about what he learned from the book, the reply was that he had no time to read. So I left the book with him for another 40 days hoping that he can finish the book (The book can be finished in maximum of 2 days), I got the same response. For a total of 45 days, my book was with him untouched because he had no time to read (or maybe he did not give time). For me, having no time to read is not an excuse. Just like my friend, I have no time to read books at home. But I compensate for lost time by making it a point to read books during transit to work and to my clients (Going to my clients with the book is also a chance to “accidentally” advertise to my clients the financial books to help them be financially aware).
I can read during transit because I intentionally commute (LRT/MRT/buses) in order for me to make wise use of time. Imagine if I was driving and was caught in a traffic jam, I would have wasted much time in the car wiggling myself out of the traffic, which causes me too much stress. I would also have consumed too much fuel unnecessarily when in a situation like that. By commuting, I save not only on fuel but also on time.
The response of my friend to me is always printed in my mind. I kept on thinking that all of us are given 24 equal hours a day, whether tycoon or employee. How is it possible that my friend has no time to read and the tycoon has time to build his business? For sure, the tycoon is a lot busier than the employee. I firmly believe this has something to do with mindset. I have encountered many people who I have met and talked to about personal finance. As usual, the response is “I have no time”.
The danger with this kind of mindset is that the person programmed his mind to be always pre-occupied to the point that he always ignores new information that can contribute to his growth.. Later in life, he will still say “I have no time”, not because he does not want to give time, but because he has run out of time already, which is a result of the mindset he had earlier.
In financial planning, wealth has a very important factor and it is available to all of us: TIME. We cannot redeem the time we lost today. We can only use or misuse the time now. Tomorrow is the result of how much time we have given for every opportunity that passes us by. The only difference is how we make use of it.
The example below shows how a delay in time costs a person in relation to building retirement fund for different investment returns (inflation not considered here)
Target retirement age : 60
Target retirement fund : Php 5,000,000
|
|
|
required monthly investment for different returns |
||||
|
age |
Horizon |
0% |
4% |
8% |
12% |
15% |
|
20 |
40 |
10416 |
4,230 |
1,432 |
425 |
161 |
|
25 |
35 |
11904 |
5,472 |
2,180 |
777 |
341 |
|
30 |
30 |
13889 |
7,204 |
3,355 |
1,431 |
722 |
|
35 |
25 |
16667 |
9,725 |
5,257 |
2,661 |
1,542 |
|
40 |
20 |
20833 |
13,632 |
8,489 |
5,054 |
3,339 |
|
45 |
15 |
27778 |
20,318 |
14,449 |
10,008 |
7,479 |
|
50 |
10 |
41667 |
33,956 |
27,330 |
21,735 |
18,167 |
|
55 |
5 |
83333 |
75,416 |
68,049 |
61,222 |
56,450 |
The earlier we allot time and recognize good investment return, the less the amount of effort and money for the same target fund. No matter how high the rate of interest, for as long as time was lost, it will be a monumental task to build retirement fund. By acting early, we can control the future instead of the scammers controlling us.
As Mark Twain said:“20 years from now, you will be more disappointed by the things you didn’t do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore, dream and discover”.
I would like to end this article with an Old Irish Prayer I accidentally chanced upon…
Take Time
Take time to work – it is the price of success.
Take time to think – it is the source of power.
Take time to play – it is the secret of perpetual youth.
Take time to read – it is the foundation of wisdom.
Take time to be friendly – it is the road to happiness.
Take time to dream – it is hitching your wagon to a star.
Take time to love and be loved – it is the privilege of the Gods.
Take time to look around – the day is short to be selfish.
Take time to laugh – it is the music of the soul.
‘Excess’mas
http://businessmirror.com.ph/home/opinion/19376-excessmas-.html
By Edmund Lao
Christmas is just around the corner. This is the holiday everyone is waiting for. Long vacation, shopping spree, partying, and especially fat bonuses are the benefits employees get from the companies they work in. During this holiday season, every company and individual is on the spending mode, buying things and food items for gift giving to clients and friends. There is excess money to earn and at the same time, plenty to spend.
I noticed that sometimes, the word Christmas is written as X’mas (read as Exmass). Since this is a season of excesses, it may also be termed as ‘Excess’mas!
Excess money received in the form of bonuses is a good source of investible funds. It is because for the past eleven months, we are able to budget our income for our needs. Whether the benefits are given or not, we have lived comfortably. The problem with the expected benefit is that it was already spent even before it reaches our pocket. It is exactly spending tomorrow’s money today. I remember some years back, I distributed to the workers their 13th month pay and SL /VL cash conversion. The next day, I asked them what happened to their benefits. Not a single one gave me a different answer. All of them consumed the money they received. A big portion went to their wives who bought gifts for their children and lavish food for dinner. The rest of the money went to drinking session. Then a few days after, before Christmas Day, life is normal again. Why did I say back to normal? It is because their normal life is to ask for Cash Advance! They lived a life of a one-day millionaire and a pauper forever.
Let me share what I did for the past twenty years. Every time I receive Christmas bonus, I never spent a single cent. It is because I grew up accustomed to being content with what I have. I saved the whole amount in the bank time deposit. It was my intention not to have easy access to my savings. Mindsetting played a very important factor here. Here is where discipline and attitude counts a lot. I conditioned my mind to believe that my holiday benefit was gone already. In fact, it was already spent in buying my future. Pretending that I have no money anymore, I programmed my mind to believe I have none to withdraw. So I bid farewell to my money, sacrificing gratification, with the objective of seeing it grow when I will need it the most. That time, interest rate was quite high at sixteen to twenty percent per annum. A few more years later, interest started to decline. I then decided to gradually transfer and diversify my funds to other better performing instruments.
Christmas, although commercialized, can be celebrated simply. Below are suggestions to help minimize expenses as we go with the tradition:
By reducing expenses this holiday, for sure there will be extra money after the holiday season is over. Start saving and investing excess money and surely next Christmas, the excess will be our money and not our expenses.
Have a merry and fruitful “Excess”mas ahead !
This appeared in Moneysense Magazine January 2010 issue
The Tired,
The Retired,
and
The Re-Tired
By :Edmund Lao
The Tired
Have you ever heard employees say that they feel sick and tired of being sick and tired? The reason they feel this way is because they have been doing the same thing over and over for years and they are still the in the same situation the day they entered the corporate world. This situation is analogous to a person running on a treadmill. No matter how long the distance shown in the odometer, he is still on the same spot. Such is the predicament of the present day employees. Sadly but with truth, Robert Kiyosaki said that all employees are in a rat race. In a rat race, employees never get rich no matter how much they tire themselves. It is because all they know is to earn income that is directly proportional to the effort they exert. They did not learn and put into practice the methodology to increase their income passively after earning it actively. If they were able to build their wealth during their productive years, they would be able to enjoy the fruit of their labor during their golden years. In any thing that we do, we always feel relieved and indefatigable after we had achieved our target. With building our finances, for sure we would have felt the same. The only time we feel tired and frustrated is when we realize that all our effort were all spent in vain. That is how employees feel today, No matter how hard they strive, they could not make both ends meet and are always deep in debt. They always look for loan and then they work hard to be able to pay their balance due, then get a new loan again, and the cycle repeats. That is the life of the tired employees.
The Retired
For majority, retirement means the end of their corporate life. There are some who felt a sense of insecurity. On the other hand, there are some who felt they are finally granted independence from their voluntary prison cell of twenty to thirty years. They also see this as opportunity to build their own business.
A lot of people mistakenly correlate retirement with age when in fact, retirement has something to do with personal net worth and cash flow. The sooner a person reaches his financial goals, the sooner he can retire and enjoy life.
Normally, employees are retired by age 55 or 60, and assuming they have served quite a number of years, say 25 years, some enjoy the benefit of a big amount of retirement pay.
I have heard of a company that paid almost five million pesos retirement benefit to an employee after 30 years of qualified service. So to those people who regularly transfer from one company to another, it is advisable for them to do the math first before making a decision. The problem that is often encountered come retirement day is that the retiree was not qualified to the retirement pay due to limited tenure of service. Then the only source of retirement income he will receive is from SSS. Jokingly, it can be termed as Living On SSS or LOSSS (rhymes with loss).
On the other hand, the retiree who received a huge amount may want to reward himself after working hard for so long that he carelessly spent or invested all his retirement funds.
He has the risk of outliving his fund and when that happens, he will be in the same shoe with that of the one who retired broke. It is not a bad idea to reward one’s self, but he has to be very careful in controlling his emotion specially the excitement of a spending spree.
The Re-tired
What if the retiree became broke after retirement? The usual thing to do is to go to his favorite orphanage institution, his children. He will now experience reality. The time he has abundance, he was the asset and favorite “visitor” of his loved ones. With his present situation, he is now an overstaying liability especially to his sons/daughters-in law. If he has wealthy children, then luck is on his side. Otherwise, he can be compared to a basketball since he will be passed on from one son to another. The former good provider to his children is now a burden to them. The children become “sandwiched” since they have to support their own children and now, their aged parents.
With this kind of scenario, the once happily retired person, out of shame, has no other option but to return to the corporate world to get rehired again (if ever he succeeds considering the competition in job hunting nowadays) and do the things a tired employee does. He is what we can call the re-tired employee because he will just duplicate what he has done as a tired employee.
Solution
From being tired to being re-tired, we can see there is a common denominator, money. Out of desperation, some opt to doing part time work other than the regular job. There are those who voluntarily work overtime as needed. Worse, there are some who resort to theft of time and money from their company. This is a common problem in the workplace.
Employees complain of inadequate pay but they do not realize that it is their lifestyle that has a bearing on their personal finance. Their lifestyle reflects a “living beyond their means” and “keeping up with the Joneses” principle.
The key is to be frugal, budget by reducing unwanted expenses, and most importantly, pay forward so that later, the retired no longer needs to be re-tired.
In order to achieve that, a correct money attitude is a must. Money is just a tool and we are the ones who should manipulate it. Early on, acquire a good habit of disciplined savings irregardless of the amount.
That way, there will be a possibility that your accumulated fund may outlive you. In that case, you have the opportunity to leave a legacy to your family.
Allow me to end this article by quoting the Proverbs:
Proverbs 13:11 “Dishonest money will dwindle, but money gathered little by little will surely grow.”
Proverbs 13:22. “A good man leaves an inheritance to his children’s children”
Special thanks to my very good friend, Engr Rudy Calingo of Metrobank Head Office, General Service Groups, for coming up with the title of this article.
WINNER OR LOSER?
http://businessmirror.com.ph/home/opinion/18811-winner-or-loser-.html
By Edmund Lao
Some time ago, I received a tempting offer from an organization that talks about losers. At first, it seemed to me that the message made a lot of sense. After a short ponder, I had a change of thought.
It is because the message is proclaiming that SAVERS are LOSERS!
The first series of questions that popped out of my mind were:
1. Are savers really losers? Yes
2. Can savers become winners? Definitely!
The two answers may seem to disagree with each other, but with the discussion below, we will see that there is no contradiction.
As we all know, saving money is the hardest thing to do due to the fact that our minds were conditioned to crave for instant gratification. A change of mindset and a lot of discipline is a must for our first step in our quest to win. Study the ants and apply it to the way you save.
If you keep your money in a piggy bank or in your safety box, the statement “savers are losers” holds true. It is because money does not have growth over a period of time. Another thing is inflation eats up the purchasing power of the money saved. It would be logical to spend the money now than to save it since it will not have a higher value in the future to cope up with rising costs. How can savers become winners then? By saving the right way!
The only way to do that is to shift from being savers to being investors. Money saved should be put to work 24/7 through proper “investment”. Remember that you can not invest what you do not have. So by saving first, you can accumulate enough fund to start your investment. There are various ways and vehicles to create, invest, and grow money.
Start by:
Investing in yourself. Be healthy so that you can continuously earn income actively and passively. By being healthy, you avoid monstrous medical costs.
Investing in time. Time is money so it pays to start investing early on. Make use of the power of leverage and power of compounding interest. Time can be your best friend or worst enemy. Make time work for you.
Investing in education. Be up to date in financial information through attending seminars, reading books and morning papers. Surf the internet for information. There are many blogs that are full of information to help upgrade your knowledge. Go and network with people who share your passion and beliefs. If you want to be rich, look for the righteously rich and make them your mentor.
Investing in assets. Look for assets that can make your money work for you. Assets can be in the form of real estate, paper assets, your talent and craft, precious metals, etc. Just make sure that you do not mistake an asset with a liability.
Investing in business. Put up a business of your expertise. Not all business succeed but with hard work, dedication, and sacrifice, success is just nearby. Just follow the principle of our taipans like Henry Sy, Lucio Tan, and John Gokongwei who made it big from scratch.
If there are no savings, would the investments mentioned above become possible? A lot of problems can be avoided with savings. Without savings, the people would have turned to debt to solve their financial problems with another problem.
The next sets of questions that came out were:
What was the purpose of the sender with that message?
Was it to inform or educate me on money matters?
Was there truth to the statement?
Was the message aimed to encourage me not to save but instead to spend it all?
Was it made to lure me to their orientation and then to sweet-talk me into “investing” my hard-earned money in their consumption-based business offering?
Based on the first discussion above, in my honest opinion, the main objective of the message is to condition my mind into believing that I, as a saver, am a loser, and that I have to do what they preach to become a winner. There is the possibility that the source of the message is either broke or is in the verge of bankruptcy. It gradually dawned upon me that if I do not save and do what they say, I will be only making them rich at my expense. I am also helping them prove to everybody that their theory works when in fact I was only made to consume their products that I do not need. Then the cycle continues. This will be a predator-prey relationship. Conclusively, the message can be treated as garbage.
If you were the recipient of the message, how would you have responded? Take note that in the Bible, Matthew 24:4, Jesus talks about religious deceptions. The warning can also hold true in the world of finance. There are groups that claim to give “salvation” from financial mess, but are actually “financial fallen angels” disguised as “financial guardian angels”. Before taking any action, critical thinking is a must especially in dealing with your financial decision.
The winner is always part of the answer, the loser is always part of the problem.
The winner has a dream, loser has a scheme.
The winner sees possibilities, loser sees problems
Are savers winners or losers? You be the judge.
This appeared in the Moneysense Magazine Nov-Dec 2009 issue…
KILLING ME SOFTLY
by Edmund Lao
Killing Me Softly with His Song” is a 1971 song composed by Charles Fox and Norman Gimbel. It was inspired by Lori Lieberman’s response to having seen a performance by Don McLean particularly with his song “Empty Chairs”. Said Lieberman: “I felt as if he knew me and his songs were about my life. I felt like he sang into my soul.”
It has been covered by numerous artists, most notably by Roberta Flack, whose version topped the U.S. pop singles charts, and won a Grammy Award in 1974.
Killing Me Softly is also a movie about a London website designer who faces deadly consequences for abandoning her comfortable and loving relationship with her boyfriend when she forms a dangerously obsessive bond with a handsome, mysterious mountaineer, who turns out to have some secrets.
Now consider the scenario below:
You are given a flyer that reads: “NEED CASH FAST? For as low as 0.99% a month , borrow up to one million. Or a call center agent calls you and says “Good news! You are pre-qualified/pre-approved for a loan without collateral of up to five hundred thousand pesos for only 1% a month. Take advantage of this precious opportunity”.
I have often been the recipient of these tempting offers before and even once I did not attempt to avail. One of my favorite references is the phrase “the borrower is the servant of the lender”, which is a good financial principle sourced from the Bible. This simple phrase is so often neglected that majority go so deep in debt and they end up working hard just to pay off debt. In effect, they work for the lender. That is why every time I am offered a loan, I jokingly but politely decline by saying loan causes me skin allergy. Instead of irritating the agent on the other line, I often elicit laughter from them.
The scenario can be compared to agents singing us a serenade to lure us into giving in to their offer. There is nothing bad with their work but they do not realize that they are instruments in killing us softly with their song. Why did I say killing us softly? Because we are being offered a loan that applies the mysterious add-on rate (AOR)! For sure, the agents and majority of us do not have an idea what it is and how it works against us. Once we avail of that loan, we re in no different situation to that of the website designer who obsessively entered into a dangerous relationship with a mysterious guy.
A perfect example of an add-on interest program is illustrated below:
Loan amount is thirty thousand pesos payable in a year. Payment will be two thousand five hundred for the monthly amortization and four hundred seventeen for the interest which is at 1.39% per month.
The table shows how the program works (add-on and diminishing balance) for a Php 30,000 loan :
|
|
|
|
AOR |
|
DBM |
|
|
|
|
Monthly |
Monthly |
effective |
Monthly |
effective |
|
|
Principal |
payment |
Interest |
rate |
Interest |
rate |
|
|
30000 |
2500 |
417 |
0.0139 |
417 |
0.0139 |
|
|
27500 |
2500 |
417 |
0.0152 |
382.25 |
0.0139 |
|
|
25000 |
2500 |
417 |
0.0167 |
347.5 |
0.0139 |
|
|
22500 |
2500 |
417 |
0.0185 |
312.75 |
0.0139 |
|
|
20000 |
2500 |
417 |
0.0209 |
278 |
0.0139 |
|
|
17500 |
2500 |
417 |
0.0238 |
243.25 |
0.0139 |
|
|
15000 |
2500 |
417 |
0.0278 |
208.5 |
0.0139 |
|
|
12500 |
2500 |
417 |
0.0334 |
173.75 |
0.0139 |
|
|
10000 |
2500 |
417 |
0.0417 |
139 |
0.0139 |
|
|
7500 |
2500 |
417 |
0.0556 |
104.25 |
0.0139 |
|
|
5000 |
2500 |
417 |
0.0834 |
69.5 |
0.0139 |
|
|
2500 |
2500 |
417 |
0.1668 |
34.75 |
0.0139 |
|
Balance |
0 |
|
|
|
|
|
|
Total |
|
30,000 |
5,004 |
51.76% |
2,710.5 |
16.68% |
From the table, we can see that the monthly AOR is constant. It is because the interest is based on the loaned amount of thirty thousand no matter how small the balance after several payments. In effect, the smaller the balance, the higher the interest will be. The interest for thirty thousand is the same as that for five thousand! To the uninformed, they think they had a good deal but upon analysis, they will find out that they are paying more than they should be. The reasonable way is to apply the diminishing balance method (DBM) where the interest is applied to the loan balance. This time, the interest rate will be constant and the monthly interest diminishes over time.
Sadly this is being used only in other countries but not here. By observing the table, we see that AOR is at least three times that of DBM. Now we all have an idea why we are stuck deep into debt especially with credit cards when we pay only the minimum amount due. We incur finance charge at the rate of 3.5% per month. That translates to at least 42% per annum interest. We are very happy paying interest that we thought was affordable, but in reality we pay double. That is why we are poor and the creditors are rich. This is a classic example of money working against us. Instead of money coming to our pocket, money unnecessary comes out of our pocket and into the lenders’.
Knowing the simple secret of the AOR, we are now armed with knowledge to avoid it.
Cancer is a disease which kills slowly and painfully. Add-on interest is also like cancer which kills our finance softly, slowly, and painfully. As with our health, an ounce of prevention is a pound of cure, same goes with our financial health.
Now which loan is better, AOR or DBM? The answer is none. According to a Chinese proverb, No debt is better than good debt.
Achieve financial success by learning to trust the author of wealth, God. Live by His money blueprint for us (the Bible), be frugal, build your investment fund and then eliminate loan/debt. Always remember debt is not a nice word since it sounds like death. To make it clearer, I have slightly edited a portion of the song below:
I heard he grants a big loan Counting my debt with his fingers
I heard it’s AOR
And so I came to see it
To listen for a while
And there he was this young guy
A stranger to my eyes
Sealing my fate with a loan
Killing me softly with this loan
Killing me softly with this loan
Tearing my whole life with this loan
Killing me softly with this loan…
http://www.businessmirror.com.ph/home/opinion/16549-one-step-back-two-steps-forward.html
| Opinion |
| Written by Edmund Lao / Personal Finance/Business Mirror |
| Sunday, 27 September 2009 20:24 |
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SOUNDS like cha-cha? “Two steps forward, one step back” is usually a negative term to describe someone who is having trouble making progress. But switched around, “One Step Back, Two Steps Forward” means that instead of grousing or feeling guilty about a misstep, you can still come out ahead if you put your head down and push forward. This was the strategy of Chairman Mao of China when he ruled. But the more popular application took place in the Philippine Basketball Association, courtesy of the brilliant Utex Wranglers bench tactician Tommy Manotoc. During the 1980 Open Conference, the Utex Wranglers were going up against the Toyota Tamaraws having the legendary Robert Jaworski as one of its star players. In that game, Utex, with less than seven minutes left, was trailing by 11 points but ahead in the best-of-five series, 2-1. Coach Tommy pulled out all his starters, including the two imports, in an apparent sign of surrender. After the game, when asked by reporters why he gave up with so much time remaining, he quipped, “One step back, two steps forward,” referring to his tactic of reserving his players’ energy in preparation for sudden death Game Five. His tactic worked as the Wranglers overhauled a four-point deficit, sent the game into OT, and won the series. In our personal financial planning, can we also do a Tommy Manotoc? The answer is a resounding YES! Being employed in the corporate world is similar to playing a basketball game. We gain employment with the goal of earning money that will sustain our present and future needs. Majority of us think that working harder guarantees higher income. Realistically, we can earn more by working smart. Similar to a basketball game, the harder the team members play, the more points they can possibly make. However, in some cases, the opposing team makes more points seemingly at ease. How is this similar with regard to our finances? Before we earn our paycheck, we already lose. That is because we have a fixed expense in the form of tax , which is withheld from our monthly salary. Taxation is one of the causes people find it hard to build wealth. Income taxation here averages 25 percent of the gross. Then there is another loss—Inflation. Inflation erodes our money’s purchasing power. Although it cannot be seen, it can be felt. It is, in effect, our money’s silent killer! Third, there is unwise spending. It is an example of negative compounding of stewardship of money. Last, scams. We lose money when we unwittingly get involved in investment scams. They are schemes designed to lure us into putting our hard-earned money into the scammers’ pockets. These four are our money’s major opponents. As we build up our financial points, our money’s enemies also build up, making it hard for us to accumulate wealth. Most of the time, our financial opponents outpace our hard-earned money to the point we end up having a huge debt. What should we do? There is a way! Take one step backward, two steps forward. Realize and admit defeat first. Then declare victory later. For the first two factors, tax and inflation, there is not much we can do. We can’t control the tax imposed on us but we can go around it. Ask experienced accountants on how to do it. We also cannot control inflation, as this is the effect of the economy on our money. For the first two enemies of money, we have to admit that we lose since we cannot control them. This is the time we take one step backward and start planning. Then strategize to eliminate the third factor by learning to control money. Just like in basketball, control of the board by a good center can help ensure victory or snatch victory from certain defeat. The same principle also goes with controlling the money that goes into our pocket. In order to gain control, the following steps are recommended: 1. Have the discipline to control your emotions against impulse buying. Remember that money saved is money earned. Doing so will improve the financial points you are building. Create the habit of saving money regardless of the amount. The key is to trick your mind into believing that there is no more money after the money has been saved. Then, with discipline in place, start saving 20 percent of the income to build the investment fund. Spend only on needs. Sometimes it’s okay to spend for wants as long as it’s in check. 2. Take advantage of time, one of the allies of wealth-building. The earlier we save and invest, the lighter the financial load to begin with. Time is the most neglected part of wealth-building, and yet it is the most impatient of all. It waits for no one. Once gone, you can only look back but never go back. Use it wisely to make it an ally for it can’t be replaced. Otherwise, it will be your enemy. 3. Another ally of wealth is compounding interest. It is the 8th wonder of the world. As Albert Einstein said, “it is the most powerful force ever discovered by man.” Compounding interest means your money’s interest is earning interest. Your money is growing without any effort. This means that your money is working for your financial points. Assuming you have P100,000 today invested at 12 percent compounded annually, your money would have grown to P6.4 million in just 36 years! Determine your goals, risk preferences and your investment horizon. Consult reliable financial planners for more information and guidance. 4. For scams, it is observed that history repeats itself, but people never learn. Scams come and go, but due to greed, people always gamble away their money after being sweet-talked by scammers. Always remember the golden rule: If it’s too good to be true, then it’s not true. Investigate before investing. Check with different government agencies on the legality of the investment company. Make a background check on the stability and integrity of the company before deciding to invest your hard-earned money. Having done the recommendations, it is time to start the game again, and armed with the strategies, we can be sure to win the money game and take two steps forward to our financial freedom. Then the final buzzer sounds…only one person knows who won or lost…. It is YOU. |
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http://www.businessmirror.com.ph/home/opinion/15000-checkmate.html
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| Written by Edmund Lao / Personal Finance/Business Mirror |
| Sunday, 23 August 2009 23:00 |
|
Chess…an ancient game of strategy that traces its origin to India, has been around for centuries. The objective of the game is to capture the opponent’s king by checkmate within 2.5 hours, a position where the king has nowhere to go. When an opponent gets checkmated, the game ends. The game has three main stages: opening, middle, and the end game. The opening consists of the starting and the developing moves by deploying key pieces to their most effective positions to control the center. The middle game is the planning and execution stage. It is here that complications arise. The skill of the player in defense and offense and making critical decisions determines the outcome of the game. Erratic evaluations from a deceptive move by the opposing player can cause a winning game to be lost. Making decisions can even gain or lose a tempo (time on/against the side of a player who seizes/wastes opportunity). This is where the nerve of the player counts a lot. The end game is the result of a properly or poorly planned middle game. Masters have varying styles: aggressive, conservative or both. It is usually the young ones who are aggressive and the young “once” who tend to be conservative. In the financial game called money, how do people move and win? Financial planning is like a good game of chess. The opening Playing the opening game in chess poorly always results in a crushing defeat. The same principle applies to personal finance. When one starts earning income (more or less at the age of 22), it is the best time to begin the quest to win the money game by making savings a habit. In this game, money represents chess pieces. As chess pieces are moved forward to attack, one has to move his money forward, too. He has to learn how to manage money and make it work through wise and aggressive investment moves. By being in control early on through financial discipline, the financial success is not hard to achieve. In chess, studying the position is a must in order to have a good chance of emerging victorious. The player has to seize the initiative at the opening. In financial planning, one has to study his position and gather information for him to make good financial decision. Unfortunately, majority commit the same blunder by delaying savings early on and putting first instant gratification or having the herd (or heard) mentality in investing. This kind of financial blunder is very costly, as one cannot take back lost time. Self-control is the key to success. One has to be in control or else he will be under control. By committing himself to learn first, he already built a strong foundation for his personal financial planning. Take advantage of time. Control your emotion and discipline yourself. Think of your goal of checkmating your financial opponent (you). In chess, the opponent is the other player. In financial planning, the opponent is ourselves. It is out human nature to resist change. We need to overcome and change old selves if we want to succeed. The late Bruce Lee once said we need to empty our cup. That means we need to discard the old and useless and retain the useful/absorb the new ones. Be up to date with financial information and put it into action. The middle game As a person begins to earn more, his expenses, unfortunately, also begin to keep pace. It is sometimes inevitable that because of factors such as family needs, lifestlye changes, impulsive buying decisions or new investment opportunities, a person’s expenses exceed his income. When this happens, a correct mindset plays a a very crucial role in keeping in check with your financial target. Before investing your money, investigate first. Remember that scammers will be very happy to have a chip of your hard-earned money. They usually invite people to their business-opportunity seminar and will make them “feel good” and part with their money, only to realize later that they had been “hypnotized” and pressured into taking part with the organization; although not all business-opportunity seminars may be scams. Financial planning has never been a “feel-good” session. In fact, financial planning will present to you the harsh realities of life that you need to address and solve! One needs to gather information and use logic before jumping into any decision. Ask around, make research or background investigation, weigh your options before risking money. Even if you failed because of a bad decision, begin again. Remember the sayings “It ain’t over until it is over” and “There’s no failure until one stops trying”? Like a chess game, a player in an inferior position still has the chance to win when his opponent makes a wrong move. As long as one does not quit, there is always room for success. Whatever the result, continue playing for a win. End game At last! We come to the end of the game and the battle of wits is almost over. The scenario now is much simpler and easier to analyze. There are only a few pieces left on the board. Checkmate is in the offing. Only one will emerge victorious. The winning player remains composed and has plenty of time to make a move while the losing player is usually stressed and finds himself in time trouble. Then suddenly, checkmate! The question is: Are you the announcer or the receiver of the announcement? |
By Edmund Lao
(This article appeared in the July-August issue of Money Sense)
Last week, a Singaporean businessman was here to join the exhibit on outdoor advertising industry. While we were having a short talk, he mentioned that even progressive country like theirs is not immune from the effect of the financial crisis. Business is not good, consumers are not willing to spend, and some employees are laid off. According to him, at least here, the effect is not quite felt. His observation is quite true. While there are companies that cut their costs, there are also companies that are in the expansion mode. For the advertising and signage industry, in this time of crisis, the opportunity to grow is evident as can be seen from the food and banking industry.
For the average people, are there opportunities too? The answer is YES. The only key is awareness to what is happening around. Business opportunities are everywhere, with potential income starting from a minimum of fifty thousand pesos per month. Although going into a business may help, a lot still depends on how well a person handles his finances. A lot of businesses preach financial freedom through earning more money and living extravagant lifestyle rather than preserving and growing the earned money. Just be careful with your emotion in order that you will not be drawn into a pyramid scam.
Building wealth may be difficult but with the right information and proper planning, the task will be a lot easier. Below are some pointers.
1. Begin with the end in mind. This is one of the seven habits in the book of the author Stephen Covey. Without the end in mind, no one would start his quest for financial success. One has to think far into the future so that he can determine what he has to do today. I remember a quote from an anonymous source. It goes like this: “A wise person thinks of tomorrow today. His years of hard work must give a reward which will take care of his needs in the far future”.
2. Invest in your education. Read books, attend seminars, look for mentors, network with people, surf the internet for financial knowledge. Many young people spend money like there is no tomorrow. They think it is time to enjoy when they start working. They are unaware that it is only the beginning of schooling in the University of Life. As the saying goes, “If education is expensive, try ignorance”.
3. Invest in your health. Health is wealth. By maintaining good health, you can eliminate spending huge amount for medicine and hospitalization. Imagine how much critical illness can hurt your finances. With a single stroke, your wealth can be wiped out instantly.
4. Eliminate or reduce vices. Vices are one of the greatest hindrances to wealth building. These are the unnecessary wants that we can live without. Just imagine a person smoking a pack of cigarette everyday. How much money did he burn in a year? Not only that, he also is not investing in his health. In short vices are not good to one’s physical and financial health.
5. Live below your means. This statement has been used so often but is taken for granted. Yuppies tend to splurge money to enjoy the money they worked hard for. That is instant gratification. Sometimes they spend too much that they have to incur debt just to sustain their extravagant lifestyle. Isn’t it debt sounds like death? Remember the book “Till DEBT Do Us Part” by Chinkee Tan? The only way to delay instant gratification is to have proper mindset. You have a choice, either “SACRIFICE NOW, ENJOY LATER or ENJOY NOW, SUFFER LATER”.
6. Start your savings program. Saving money is not at all difficult. Every time people hear the word “savings”, there is only one response” “I have no money left for savings”. They do not realize that the amount of money to be saved is irrelevant. It is the discipline and habit that matters. By saving, you are in principle, “paying yourself first”. Imagine paying all your bills first and leaving yourself for the last and penniless? The trick here is to consider yourself as an expense on top of your other expenses. Take ten to twenty percent of your paycheck and save it. (Remember the story of Joseph as governor of Egypt?) Then budget the remainder for your expenses. Learn to determine the wants and needs. Cut down on wants and focus on the needs. If the budget is still short, it is time to look for additional income so that you can increase your cashflow for your budget.
7. Create emergency fund. As a rule of thumb, savings equivalent to three to six months of salary must be reserved for emergencies. The usual problem is there is always emergency but no fund. Emergencies are those events that suddenly arise without our control. Childbirth can not be considered emergency. Some time in the past, a worker was borrowing money from me for emergency because his wife will be giving birth. I frankly told him that it is not emergency because the time he learned his wife was pregnant, he should have planned and prepared the amount needed.
8. Invest to grow money and outpace inflation. After accumulating emergency fund, it is time to transfer excess money to an instrument yielding higher rate of return. Inflation can not be seen but can be felt. Inflation, by definition, is the loss of value of money over a period of time. To make it plain, just imagine you have fifty pesos last year. That amount today can not be able to buy the same thing you bought last year. So it pays to learn different investment vehicles for your financial growth.
Time is of the essence here. It can be your ally or enemy. One only realizes the full importance of TIME when there’s little time left. Everyone’s greatest asset is one’s unexpired years of productive life. Take advantage of time and make it work with your money.
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Sales Engineer
Graduate of Mapua Institute of Technology
Advocate of personal finance for Pinoys
RFP graduate batch 14
Thanks Mam! March 3 may RFP seminar sa SMART… needed ang RFP… you might want to join… 6-8 pm
Very Nice blog Mon. Congratulations!
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