2012 outlook

2012 outlook

Wednesday, 25 January 2012 12:00 AM Edmund Lao

2011 has been witness to various events such as typhoon Pedring in Metro Manila, typhoon Sendong in Cagayan de Oro, iligan and other parts of Mindanao, not to mention political upheavals like the cases of fraud and plunder filed against former President Gloria Macapagal Arroyo. Dispiriting!  But there were events too to feel optimistic about.

The economy for instance.  Tthe Philippines has done quite well, judging from the performance of the stock market. Investor confidence is on the up and up.

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The outlaw

 The outlaw

TO preserve peace and order, laws were put in place for people to follow for their protection. Breaking the law would mean disrupting the system that will benefit its constituents.

More often than not, the penalty for breaking the law goes from a minimum penalty of fines to a maximum of death penalty. These penalties are aimed at preventing people from committing actions which are against the law. Even during Biblical times, the Ten Commandments were given to the Israelis. Breaking one results to harming himself and be subject to punishment.

In modern times, people who break the law created by men are called outlaws. Examples of outlaws are hold-uppers, kidnappers, drug dealers, car-nappers, hired killers and the like. Outlaws are the cause of miseries to the citizens where they extort money through threats and bodily injuries. They also cause trouble to law enforcers when they are subject to the penalty and yet remain free. In general, outlaws are a nuisance to society. They are a hindrance to the progress of a country.

In personal finance, the same principle applies. There are also outlaws that affect a person’s financial life but not to the extent of being a criminal like the examples above. Usually, these outlaws are very well known and very close to a person – they are his in-laws.

Majority, but not all, in-laws cause a heavy burden upon the personal financial life of a person. Filipino culture dictates that the in-laws are already a close family member of a person once he gets married. Most often than not, the problem of the in-laws becomes his problem.

I remember very well some years back, I was able to exchange e-mails with a husband whom I met through an on-line forum. He was having a very hard time making both ends meet, being the sole breadwinner of the family. His problem was that whenever his in-laws had money problems, he was always the solution to the problem. His wife always approached him and narrated the situation of her parents and siblings. Being a good husband, he would agree to the demand of his wife to loan his in-laws a certain amount of money. Time would pass and the loan would be forgotten by the in-laws. The cycle continued again and again. Getting sick and tired of the situation, he joined a finance forum and yours truly was one of the respondents to his predicament. By exchanging views, he said that working for several years, he was not able to save even a single centavo because his in-laws totally depended on him. If he did not give in to his wife’s request, a word (world) war would ensue. 

I had a colleague who experienced the same situation. However, the wife did not need to ask from him any amount of money. The wife controlled the husband’s paycheck. It is a well-known fact that whoever controls the paycheck controls everything. In this case, the husband is under control and is treated as the unlimited ATM. The wife would pawn his ATM for loan that charges seven percent a month and the husband paid the loan.

I gave them a very simple advice that my late father narrated to me through a story some years ago. He had a friend in Chinatown who owned a business. My father was only an employee but he was very frugal and had a substantial lifetime savings. His friend was sure he could borrow from my father back then. The amount he needed was quite sizable.

My father, who could always sense danger and risk, turned him down politely. Naturally, his friend felt bad for being rejected. Their relationship was affected. My father told me this principle: “It is better not to loan to a friend and temporarily have a bitter relationship than to loan to a friend and create a lifetime enemy.” True enough, after a short period of time, they were on speaking terms again as if nothing happened. But the sad thing was that the business closed down in less than a year and his friend succumbed to a heart attack. Had my father not been wise in handling his money, it was quite certain that our future would have become bleak since his savings would have been wiped out. He did not preach to us greed but just showed good judgment in managing risk. It must be noted that whenever we shell out our money, there is always a credit risk involved.

So I gave them the lesson learned, implying that they should put a stop on the dependency on each of them. I also said that that before they help others, they should be able to help themselves first. For how can one be a blessing to others when he is not a blessing to himself? Knocking some sense into their minds, they seemed to have awakened from a deep sleep. My colleague heeded my advice and freed himself from the bondage to his out-laws, rather his in-laws. By freeing himself from his in-laws, he could then start to put order into his personal financial life.

Another classic example is that of the two house helps of a friend. They are cousins-in-law and are 10 years apart. Both of them earned the same wage.  For reasons unknown, the older one was deep in debt to the younger one in the amount of P8,000. She kept on borrowing money whenever payday came. Since they were related, the younger one just could not say no. When the younger one needed money to send home, she still has to borrow money from her employer. In this case, the lender becomes the borrower. She could not get her money when she needed it. The other one did not make any attempt to pay back her debt. Sometimes, one can’t help but feel like being held-up by a crook to extort his money. Indeed, in-laws like these are really the outlaws of one’s financial life. There is only one antidote to a problem like this: Be an outlaw to your in-laws and for sure, they will disappear from your sight.

****

Edmund Lao is a candidate for registered financial planner (RFP) designation. Edward was recently awarded the 1st Investment Savvy Award by Sunlife’s It’s Time!. To know more about becoming a Registered Financial Planner (RFP®) , please visit www.rfp.ph or inquire at info@rfp.ph.

Who’s afraid of pre-need plans?

Who’s afraid of pre-need plans?

There are many ways by which we can put into practice the principles of making money grow. We only hav to study carefully how a particular instrument works in relation to our goals, risk tolerance and time horizon.

One good instrument is the very popular pre-need plan. Pre-needs were in demand back the…

read more…

Revelries over

Revelries over

Monday, 09 January 2012 19:39 Edmund Lao / Personal Finance

http://businessmirror.com.ph/home/banking-a-finance/21733-revelries-over

DURING the 1990s, on Christmas Day, only the movie houses were open in the malls for the Manila Film Festival. I only got to watch some films after the season was over since I hate queuing. The shops in the malls were usually closed. For that reason, I do not frequent the malls on that day ever since.

Last Christmas, my wife prodded me to drive her to the Mall of Asia to enjoy the afternoon breeze along the bay. To my surprise, the area was full of people from different walks of life. So I decided to go inside the mall. I was even more surprised to see that there were more people inside. (I felt that day was a “madness sale” day.)  The parking areas were occupied, the restaurants were fully booked and the stores were also full of shoppers. That day alone meant that business was very profitable. Christmas is now commercialized! Gone were the days when Christmas was observed with sanctity and people were given the opportunity to be together with their loved ones.

I realized then that I was already ignorant of the trend nowadays. From what I saw that time, I observed that people had so much money to spend on that day. Everybody was spending like there was no tomorrow. Indeed there was no tomorrow. Just today, a New Year’s Day, we went to another mall, Robinson’s in Manila.

I smiled when I saw a reversal. The parking area was not full, the restaurants had less diners, and the shops had less clients. Curiously,  my wife asked a sales girl from a department store regarding my observation. The girl replied that on Christmas dDay, the mall was also doing great business like that of SM MOA but come today, on New Year’s Day, people had no more money to spend, hence fewer shoppers.

What the sales girl revealed did not come as a surprise to me. I have a friend who is into the dynamic world of selling. My friend, being frugal, can wait for a year to get his commission. He reasoned that by having his commission annualized, he avoids the temptation to spend unnecessarily and impulsively per month. He lives comfortably below his monthly income. He treats his commission as extra income. And even better, his commission comes along with his Christmas benefit. That makes him wealthier than others every Christmas season. He invests his hard-earned money to make it grow. His other colleagues always get their commissions monthly (they even earn bigger than my frugal friend). Every month they always have to ask for their commission because they have used all their money or spent more than what they have earned.

Just last December, his colleagues got their commissions, SL/VL and 13th-month pay. After a day or two, they were already asking for cash advance. This time around, the reason was that their monies were already used up for buying lavish gifts and partying.

During merrymaking, everybody is happy. After the festivity is over, everybody is burdened with financial problem due to uncontrolled spending. Spending as if there is no tomorrow will ensure that his tomorrow will not come anymore since he will be solving the problem of his past financial mistake.

Ever heard of the definition of the word “INSANITY”? It means doing the same thing over and over again and expecting a different result. How then can a person expect to be wealthier when he continues on spending impulsively and unwisely during the time of bounty?

Below are some tips to help avoid extravagant expenses for the next Christmas season:

Buy gifts in advance and after Christmas. Doing this, one avoids pressure-buying since one can take time and check the quality and price of the item to be bought.

Recycle old gifts. There are gifts that were received which are redundant. Just make sure that the recipient will not know that it was a gift from others. Anyway, it is the thought that counts.

Give GCs. Gift checks or certificates are perfect as the recipient knows what he needs to buy. At the same time, we eliminate the time lost in scouting for gifts.

Give cooked food. Giving cooked food during Christmas is a lot cheaper and can be appreciated by the recipient. Cooking involves effort on the part of the giver and is truly an expression of love and sincerity.

Give old toys and clothes. This is an example of hitting two birds with one stone. Gifting people with old but usable items makes them happy and at the same time, eliminates clutter in the home.

The gift of time. This is the perfect gift one can give. It must be noted that some people are not happy receiving gifts through courier. People appreciate more the normal and regular time and attention given than the once-a-year gift received. Most of the time, the majority need time to be spent with them, just be listened to. Time is money and time is worth more than money can give.

So for the next revelry, before deciding to spend on extravagant items, try considering the above tips. It not only saves you money but will make others really happier.

Edmund Lao is a candidate for registered financial planner (RFP) designation. Currently, he is a sales engineer in one of the biggest media companies in the Philippines. To know more about RFP program, please visit www.rfp.ph or inquire at info@rfp.ph.

Win or draw

Win or draw

 http://businessmirror.com.ph/home/banking-a-finance/18643-win-or-draw

Monday, 31 October 2011 18:16 Edmund Lao / Personal Finance

THE game of chess is both science and art.

It is a science because there are principles and laws governing the game. Break it and more often than not, a player loses a game. Just like with science, if scientific laws are broken, disaster is sure to happen.

It is also an art because it takes a lot of imagination and photographic memory to calculate moves ahead in order to outwit and unnerve an opponent.

Here, our most famous local chess hero is my idol, Grandmaster Eugene Torre. Below is an anecdote on his road to his great checkered career.

Torre shot to prominence in 1976 as a possible future title challenger after winning a strong four-man tournament in Manila ahead of world champion Anatoly Karpov, thus becoming the first player to finish ahead of Karpov in a tournament since the latter became a world champion. The high-point of his career came in the early 1980s when he was ranked world No.17, successfully going on to qualify to be a candidate for the world championship after tying for first with Lajos Portisch during the 1982 Toluca Interzonal.

Torre has the distinction of being the first Asian player to earn the title of International Grandmaster. He also became the first Asian to qualify for the prestigious Candidates Matches for the 1984 World Championship.

The focus of this article will be his stint in the 1984 Toluca Interzonal. In the beginning, he got four draws and a heartbreaking loss in the fifth round game for a measly two-point output. Starting with round 6, five highly-rated opponents fell to the juggernaut of Torre.  He was now leading the field and the championship title was within his sight.

Coming off a five-game winning streak, all he needed was to draw the remaining three games. Everything seemed to be going well as planned until the penultimate round. He was up against the feared Hungarian GM Portisch who was out to play for a win. Torre faltered early on and had an inferior position going into adjournment. He was in danger of losing not only the game but also his chance to be a contender for the World Championship. The game was adjourned twice and looked like a lost bid for Torre who was two pawns down in a king and knight endgame. The general consensus was that there was only a 20-percent chance to draw the game.  And then the miracle—completely exhausted from a whole night of analyzing and unable to find the way to a draw, Eugene fell asleep and in the early morning, the way to the draw came to him in a dream. And indeed, after more than 100 moves, their game was drawn. Both GMs tied up for first place and qualified to the Candidates Matches. Hadn’t Torre been focused, resourceful and tough, he wouldn’t have finished strong and made our country proud.

What does this have to do with personal finance? Personal finance is like a chess game. In handling money, there are guiding principles that result to growth. If not followed, the result is financial disaster. Like chess, the goal is to checkmate the King in the end. With personal finance, it is always advisable to begin with the end in mind and checkmate the financial enemy: BEING BROKE.

In 1991 a frugal friend already had P100,000 in his savings account after working only for three years. That time, P100K was already a substantial amount. There was a problem. They bought a lot for P700K and the funding for building their new home was short. He was asked to share his life savings to help fund the new home. It seemed his entire savings would be wiped out. This is similar to the situation of GM Torre’s crucial game against GM Portisch. This situation did not discourage my friend. Instead, he decided that he will aim to accumulate P60K in a year by putting P5K in a time deposit per month from his salary. The interest was then pegged at 16 percent per annum which is very high compared to the standard nowadays.

Unknowingly, he made each P5K deposit work for him when it earned him P800 per year passively. Although he did not reach his goal, his habit helped him save P50K that year alone. He was off his goal by P10K, which can be compared to a game of chess as a draw, as he was more than halfway his goal. As of the present, his P50K, along with his regular placement in his investments, has already grown way beyond his targeted amount.

From the stories above, we can learn some pointers to achieving goals. These are:

• Focus on discipline and habit and ignore negative environment;
• Resourcefulness;
• Strength of character;
• Will to survive and go for the win; and
• Draw and equalize now to win later.

Let us be inspired by this story and start our quest to have a strong financial future.

Edmund Lao is a candidate for registered financial planner (RFP) designation. He was recently awarded the first  Investment Savvy Award by Sunlife’s It’s Time! To know more about the RFP program, please visit www.rfp.ph or inquire at info@rfp.ph.

How money works: the secret to wealth creation

How money works: the secret to wealth creation

From the previous articles on money, combining everything will give us the Wealth Formula, the secret to wealth creation. Knowing the allies and the enemies of money and knowing what to do with them will help us create our wealth.

For more, please check:  

http://www.thepoc.net/thepoc-features/mukhang-pera/wealth-guidelines/13666-how-money-works-the-secret-to-wealth-creation.html

Stock market 101: For newbies in stock market investing

Stock market 101: For newbies in stock market investing

  Edmund Lao

What is a stock?

Simply defined, a stock is an ownership share in a corporation. Each share represents apart ownership for a shareowner of that company. Stocks are traded on exchanges all over the world, the largest of which is the New York Stock Exchange or NYSE.

Why do companies sell stocks?

Almost every company, at a certain point in time needs to raise money, whether to expand its business, or to build a factory or to hire more crop of executives..

for more, click:

 http://www.thepoc.net/thepoc-features/mukhang-pera/mukhang-pera-features/13415-basics-of-stock-investing.html

America is "sick," do we "sneeze?"

America is “sick,” do we “sneeze?”

Tuesday, 23 August 2011 12:30 AM Edmund Lao

On August 5, 2011, for the first time in history, Standard & Poor’s credit rating agency downgraded the long-term credit rating of the United States government from AAA to AA +. This was preceded last August 2 by the passing of a law that increased the debt ceiling of the US government. Otherwise, there will not be enough money to pay some of its debt. The result will be a debt default, a bad scenario coming from the world’s biggest economy that already breached a debt ceiling of $14.3 trillion.

for more, please click   

 http://thepoc.net/thepoc-features/mukhang-pera/mukhang-pera-features/13303-us-financial-crisis-its-effect-on-the-philippines.html

US economic woes, simplified

I am sharing this… Got this from the blog site of my idol and mentor Randell Tiongson…This is worth watching

Here is the link…http://www.randelltiongson.com/us-economic-woes-simplified/

Caste System

This appeared in  the Business Mirror

http://businessmirror.com.ph/home/banking-a-finance/13626-the-caste-system

A CASTE system is a form of social structure that divides people on the basis of inherited social status. With this system, people are rigidly expected to marry and interact with people of the same status. India has a well-known example of a caste system although there are other forms of caste systems that are found in many other cultures, as well. In this system, there is the tendency toward endogamy, meaning that people marry within the same caste exclusively. One cannot also transform from a lowly laborer to a scholar except in very rare circumstances.

Here in our country, there is also a caste system although not exactly like that of India. A good example is the story of my friend. Sometime ago, he asked me to lend him an ear about his recurring problem. All the while I thought it was financial in nature. To my surprise, his problem was the high turnover rate of his domestic helpers. He told me that there is a common reason: pregnancy. To lighten up his mood, I jokingly asked that may be he caused them all since he was the only male in the house.

From his narration, one thing that struck me was all his helpers were not even 20 years of age when they became pregnant! After we parted ways, I could not help but keep thinking of what we talked about. What flashed into my mind was this may be one of the reasons the poor keeps on getting poorer.

The story of my friend goes like this:  He hires a helper from the province and gives a generous amount as a salary. The helper later buys a cell phone for the purpose of communicating with relatives back home. Later, the helper is able to get text mates referred by friends from the same province. Most of the time their text mates also have work somewhere here. Usually the referred friends will be in the same social class as the girl.

Assuming a middle-income class guy is the text mate of the girl, more often than not, the guy will not end up marrying the girl (even if he loves her or gets her pregnant) for fear of rejection of his peers and loss of social status. On the side of the girl, she is skeptic of the guy’s intention. Her only logical move will be to go for the guy of the same class as hers. Since they come from the same location, the helper would easily trust the guy and fall for him. They would eventually meet up on their day-off and later the poor girl gets pregnant, and the guy is nowhere to be found. The helper will be forced to go back to her province and raise a child as a single mother with an uncertain future.

Assuming the guy marries the girl, they will still be in the same social class. Only the guy works. The girl stays home as a plain housewife and raise their children. Since the family is poor, chances are that the children will not finish schooling for obvious reason, thus duplicating their parents’ situation.

I also remembered one of our company workers before who earned daily minimum wage. He has eight children to feed. When asked why, he said they had nothing to have but his children as he views them as his treasures.

To illustrate, the line of a song goes like this:

There’s nothing surer

The rich get rich and the poor get children

In the meantime

In between time Ain’t we got fun

Another example is our garbage collector. He earns a meager income but has two families! It is quite ironic that the upper- and middle-income earners carefully plan the number of children while those on the poverty level increase their number of wives and children. Here we see the compounding effect of poverty. As the cycle repeats itself, more and more people in the poverty level are produced.

From the story of my friend, there are some notes that can be taken into account. The causes of their poverty are deeper than financial illiteracy. These are:

1. Poor moral value.  If my friend’s helpers had high moral values, they would not get pregnant prematurely.

2. Gullibility and wrong people to trust. This is the same with scams. The unassuming girl would trust the guy she loves dearly with all her heart to the point that she will spend all her hard-earned income for him.

3. Short-sightedness. Another problem is their very narrow foresight. They only think of today. They do not think far ahead into the future. Before, I had a young helper. I told her that if she wants to improve her quality of life, she has to save for her college tuition. If she goes to college, chances are that she will meet guys that are of higher caste. And in case she graduates and lands a job, not only will she be personally financially better, but she has a chance of meeting her future husband from the middle income or the rich. Otherwise, she will be forever in the same social class she is now.

4. Enjoy now, suffer later. They always think of instant gratification. What they want is to enjoy their life now and apply the bahala na principle. Like my former worker, he enjoyed having children but is now suffering financially since he has eight mouths to feed.

5. Poor money mindset. The helpers nowadays do not think of saving hard-earned money. Since they are domestic helpers, they get everything for free from food to lodging. Their income is net already. When my former helper left for good, she had zero savings in spite of the fact that my wife kept on reminding her to save up for the future. She sent all her salary home. In effect, she was her family’s unlimited ATM. She should have left a certain amount for her savings.

6. Hopelessness. People from the lowest class already gave up on their dreams. They accepted that they were born poor and will die poor. They just do not realize that by completing their education, they can improve their quality of life. My former helper quit schooling not because her parents could not afford to send her to school but because she did not want to study. Education is the stepping-stone to success.

7. Illiteracy. There is a saying that if education is expensive, ignorance costs much more. Without proper education, there is little chance for a person to earn good income. Combining this with financial education will help him get out of poverty.

As long as the person has dreams, he can get out of his current social status unlike that of India. A very good example is our very own fighting Cong. Manny Pacquiao. From a humble beginning, he is now the world’s best pound-for-pound boxer and is earning millions of dollars from his career.

In order for us to improve our social status the following principles can serve as a guide.

1. Ethics as a basic principle.

2. Integrity.

3. Responsibility.

4. Respect to the laws and rules.

5. Respect to the rights of other citizens.

6. Work loving.

7. Strive for savings and investment.

8. Will of super action.

9. Punctuality.

10. and of course…Discipline

‘We are poor because we lack the correct attitude. We lack the will to comply with and teach these functional principles of rich. If only we teach our children that they can achieve anything they want in life and encourage them to dream, our country would be a much wealthier country.”

 Edmund Lao is a candidate for registered financial planner (RFP) designation. Currently, he is a sales engineer in one of the biggest media companies in the Philippines. To know more about RFP program, please visit www.rfp.ph or inquire at info@rfp.phThis e-mail address is being protected from spambots. You need JavaScript enabled to view it .

Success: Just what is it?

 Success: Just what is it?

HOW do we define success? Is it measured in terms of amassing a lot of money, properties, or businesses? If that is true, then why are some of the supposedly successful people unhappy and sometimes end up committing suicide? Why do some “successful” people fail and end up bankrupt later? Isn’t success the absence of failure? Why is it there are more failures than successful people? Is it only by chance or by a stroke of luck?

Success, by definition, is the positive accomplishment of an objective. The material gains are simply the result of the effort that gave a reward. However, success becomes vanity as a person strives harder to reach more success. It is like chasing after the wind. It is our human nature to be discontented with the present and desires to gain more without satisfaction.

Unknown to the majority, success occurs not by chance but by following a set of laws that govern it. Just like Singapore, laws are strictly implemented to a point when people become disciplined. That discipline, under the leadership of former Prime Minister Lee Kwan Yew, catapulted their country to become one of the wealthiest countries in the world. Let us examine the laws of success and apply it to our lives.

Law 1. Fix the right goal. Goal is like a target. Without a goal, there will be no destination. For example, when going for a vacation, there must be a planned itinerary on a definite destination or else the schedule will be in disarray. The same thing applies in our work and personal lives. A right goal will arouse ambition that will create the drive to reach the objective.

Law 2. Education or preparation. Unlike animals that do things by instinct, humans need to learn or to be taught so that he will be prepared to accomplish his purpose. Without the proper know-how, he cannot make wise decisions that will lead to his goals.  Education here not only refers to school education but values, personality development, knowledge from his networks and observations.

Law 3. Good health. We need to learn and be educated about good health. Our health depends on what we eat, hence the saying “we are what we eat.” Poor health is a hindrance to success because the focus will instead be on how to heal a sick body. For instance, if a man desires to be financially free by saving a certain portion of his income, poor health will force him to spend more to restore his health to normal. That will hamper his goal of accumulating his wealth and will even extend his timetable.

Law 4. Drive. The first three laws will not be effective without drive. Drive is the motivating factor that forces the person to pursue his goals. People with drive are always on the go. They wake up early and stay late. They can be compared to a jet engine that propels rocket into space. Imagine the effort of going against the force of gravity. Without drive, a person cannot be considered truly successful. 

Law 5. Resourcefulness. What if suddenly an emergency occurs that sets one back in his steps to reach his goals? One should always have a contingency plan for unforeseen events that may negatively affect his objectives. Stumbling blocks are actually opportunities waiting to be turned into a stepping stone to success.

Law 6. Perseverance. To people who succeeded, quitting was not an option. Even when their achievements were wiped out, they started all over again. They used their experience and treated it as a learning process. They are now wiser since they already know how to fail. They do not let failure get the better of them. Perseverance is just going ahead and doing what has to be done in the face of adversaries. In my sales experience, I have faced a lot of NOs before getting a YES from my clients. I treated a NO as zero and a YES as 1. So after six Zeroes, I got a One.  It is like getting a One-Million sale from my client.

Law 7. Trust and walk with God. This is the most important law. Without this vital seventh law, all the first six laws will not guarantee real success. That is the reason the so-called successful people do not find happiness despite their achievements. They may have everything but they still feel empty and unfulfilled. Anyone who puts this all-important law last is dooming his life to failure at the end.

The right goal sets the direction of your life’s journey. Success is the destination of that journey. Success is where you finally arrive, and true success includes a happy and enjoyable journey along the way.

****

Edmund Lao is a candidate for registered financial planner (RFP) designation. Currently, he is a sales engineer in one of the biggest media companies in the Philippines. To know more about RFP program, please visit www.rfp.ph or inquire at info@rfp.phThis e-mail address is being protected from spambots. You need JavaScript enabled to view it .

How Money works - Taxation

How money works: Taxation

In building wealth, the focus is always on the growth of invested money. A factor that is always present in hindering growth, aside from inflation, is taxation, especially for the working class. The income they receive is already less withholding tax. More often than not, the net income is insufficient to provide for their needs. In effect, they do not have funds for investment.

Taxation is a form of permanent expense imposed on citizens in order to support government operation. Without taxation, no country can become progressive. Look at Singapore as an example. Their collection system is efficient, and the government is not corrupt. Taxes worked for the citizens as government built road networks and an efficient MRT system, and served the citizens properly. As a saying goes, there are only two certainties in life, death and taxes. Whether we like it or not, we have to live and die with taxes. We cannot escape tax but we can try to minimize it. Even after we have earned our paycheck and invested a part of it, the capital gain by that investment is still subject to tax. Another example is the tax on wealth/asset transfer and inheritance, which is 35 percent of the estate.

for more, please check

http://thepoc.net/thepoc-features/mukhang-pera/wealth-guidelines/11649-how-money-works-taxation.html

How Money Works: Inflation

How Money Works: Inflation

What is inflation?

Inflation, by definition, is the loss of purchasing power of a currency. In layman’s terms, it is equivalent to an increase in the price of a commodity over a certain period of time. The easiest way to illustrate inflation is by an example. Suppose one can buy a piece of siopao for P80 this year and the yearly inflation is 10 percent.

read more…

How money works: It’s about time

How money works: It’s about time

Monday, 31 January 2011 03:50 PM Edmund Lao

In previous articles, we discussed the rule of 72 and leverage as allies in our financial goals. In this installment, we will discuss our greatest ally in wealth generation: the power of time.

Time is the most neglected treasure in the world. All of us are equally given 24 hours a day and yet the distribution of wealth is unequal. A lot of people always complain about their financial condition. They just fail to recognize that the state they are in now is the result of what they have done before. They failed to make proper use of time.

for more, please check: 

http://thepoc.net/thepoc-features/mukhang-pera/wealth-guidelines/11019-how-money-works-its-about-time.html

Wealth Summit

Friends, please check this out…a great event coming up…

http://www.randelltiongson.com/wealth-summit-2011/

Self Control

Self Control
by Edmund Lao

http://www.businessmirror.com.ph/home/banking-a-finance/3172-self-control
 

Self control is the ability to purposefully direct, or suppress, change one’s emotions,
behavior, and desires in order to obtain some reward later. From our personal lives up
to the corporate world, control is essential. Without control, everything will be in
disarray.

A very simple example is poor traffic control on our streets. When nobody directs, every
motorist tends to outmaneuver each other just to get to their destination faster. The result:
horrendous traffic jam that delays travel time. That is one of the reasons we got the tag
line “Filipino time”.

Our financial life can be compared to the traffic situation. In our haste to get hold of money
in the shortest time possible, what happens regularly is that we lack self control in dealing
with our emotions when it comes to money management. This often leads to panic during
payday. People become mad trying to spend all the money they received. Oftentimes, the
result is always the same: DEBT.

Let me share my actual experience recently with a colleague of mine. One Wednesday last
September,I noticed him to be bothered. Since we are close friends too, I asked what his
problem is, I got the usual answer which is money and the problem is that he is deep in
debt. For 2 years, he pawned his ATM (he was no longer certain about the original amount
of his loan) for a add-on monthly rate of 7% (84% per annum). He was paying Php 3,400 monthly
interest. Also, he always renewed his loan even before maturity. For the past 2 years, he was
able to pay a total of Php 80,000 interest. He was shocked to realize the truth. He didn’t notice
that he was able to afford to pay the huge interest in spite of hisminimum wage income. I told
him that his debt is the reason why he is still struggling with his finances..

As part of my advocacy, I made an offer he can not refuse: I told him I will assume his balance of
Php 17,000 and that he pay me back without interest (principle of debt consolidation). He was very
happy with my proposal, but under my condition that after he paid me back in full, he will
continuously pay the same amount regularly into his ATM (that I will keep for him). I told him
that since he already has the habit of paying the amortization for two years, then it will not be
hard for him to use this habit to save money.

Everything agreed upon verbally, he was able to make the first payment to me. Before
the second payment is due, he approached me again and said that he will pay me in full.
As I suspected, the payment he will make came from another loan, this time around 5%
monthly interest. I just can not understand what made him do that. I likened his situation to a
person in a quicksand. The person was pulled out of the quicksand. And after being rescued, he
jumped into it again. I asked him for the reason of his decision and after grilling him, he
revealed that it was his wife who is in control of their finances and his credit card (even if
he is the breadwinner).  His wife even pawned his “unearned yet” 13th month pay. I
remembered a saying and it goes like this” “Whoever controls your paycheck controls you”.
Apparently, my colleague is not in control of but is under control by his wife. The wife
has no self control and is always on panic mode every payday. The wife has no income of
her own and treated the husband as the unlimited ATM.  Now, I understood why my
advice and effort were in vain.
Money, like gun, is neutral. It depends on how we use them. Used properly, it gives security.
Otherwise, it gives trouble.  The wife is a poor money manager because she spent more
than my colleague’s income. They lived beyond their means. Now they are deep in debt.
There is a saying that whoever lives by the gun dies by it. The same way, whoever lives
by debt will meet death. Debt sounds like death. More often than not, debt is the cause
of one’s death.
No matter how hard and how long the husband, as long as the wife does not have the
discipline to control herself, he will never be free from debt. He will be forever be a
servant to the lender.

To avoid this kind of situation, the following suggestions are possible solution:

   1. Cut the credit card. Doing this, he can eliminate his wife’s impulsive unnecessary
      spending.
   2. Pay off debt.  Start paying the debt with highest interest. Look for additional
      source of income so that he will not resort to debt to pay another debt.
   3. Start saving and investing. Stash away a portion of his income into a savings
      account. Just bring home his net income after saving. If possible, he can save an
      amount equal to his monthly debt payment. He should talk to his wife and both must
      agree to create discipline and self control in managing finance.

   4. Live below their means. He should take charge of their finance and base the budget on the            
      net income. Expenses must be based on needs only. As a rule,spend active income (income
      derived from working) for needs and spend passive income (income derived from investment)
      for wants.  If there is no passive income, it is better to delay instant gratification
      and just buy the needs. Just be frugal and look for the best deals. Spend wisely
      in order to build wealth, as RFP Alvin Tabanag said.
 

Financial blackhole

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…

Ask a Friend, Ask Efren

Check out the new web site of Personal Finance Advisers (www.personalfinance.ph)

There is a new feature called “Ask a Friend, Ask Efren” where you may ask any personal finance question, FOR FREE!

Thanks.

________________________________________________

Efren Ll. Cruz, RFP*

Bestselling Author and Personal Finance Coach

Chairman and CEO

PERSONAL FINANCE ADVISERS PHILIPPINES CORPORATION**

Telephone Nos.: (63-2) 216-1541; (63-917) 505-0709

Email Addresses: efren@personalfinance.ph; cruise@skydsl.com.ph

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Personal Finance Discussion Group: http://www.income-tacts.com

  *Registered Financial Planner of RFP Institute USA

**Philippines’ first “International Best Provider” of workplace finance education as recognized by the Personal Finance Employee Education Foundation, USA

How money works: Leveraging

How money works: Leveraging

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.

read more…

Discipline

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.comThis e-mail address is being protected from spambots. You need JavaScript enabled to view it /Tel. No. 634-2204.

Don’t be a sCAm victim!

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 Philippines we had the well-known Multitel (P100-billion pyramid scam) in 2002, the SM Fund in 2007, the Francswiss (P1 scam) in 2007, the PIPC ($250 million) in 2007 and the Royal Manchester Five (P2-billion scam) in 2008. And it is difficult to imagine why, despite the number of scams that have plagued our fellow Pinoys in the past, we keep falling victims to them. Scams come and go, but people never seem to learn. So why is it that con artists never seem to run out of victims? In the first place, there would be no scammers if there were no “prospective clients” apparently willing to be conned.  

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: 

• Be careful if the person offering investment hurries you up and does not give you anything in writing. Take time to think things over.
• If you are offered a high return with little or no effort, and there is no explanation on how your money will be invested, chances are it is a scam.
• Do not show that you are impressed by their attire and their presentation.
• Do not provide any personal and financial information, unless you have established that the company is legitimate. Check also if their claims are valid
• Check with the Securities and Exchange Commission or Department of Trade and Industry about any plan you are considering.
• Be skeptical. Remember, your hard-earned money is on the line.
• Always keep in mind: If the offer is too good to be true, it is a scam.

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 Philippines. He is also an active contributor in www.income-tacts.com,

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

protected from spambots. You need JavaScript enabled to view it /Tel. No. 634-2204.

Lessons from my father

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…

Add on Rate

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:

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:

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

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…

read more… 

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Light Emitting Diodes

 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 America reported on infrared emission from gallium arsenide (GaAs) and other semiconductor alloys in 1955. Braunstein observed infrared emission generated by simple diode structures using GaSb, GaAs, InP, and Ge-Si alloys at room temperature and at 77 K. In 1961, experimenters Bob Biard and Gary Pittman working at Texas Instruments, found that gallium arsenide gave off infrared radiation when electric current was applied. Biard and Pittman were able to establish the priority of their work and received the patent for the infrared light-emitting diode.

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 University of Illinois at Urbana-Champaign. Holonyak is seen as the “father of the light-emitting diode”. M. George Craford, a former graduate student of Holonyak’s, invented the first yellow LED and 10x brighter red and red-orange LEDs in 1972.

Shuji Nakamura of Nichia Corporation of Japan demonstrated the first high-brightness blue LED based on InGaN borrowing on critical developments in GaN nucleation on sapphire substrates and the demonstration of p-type doping of GaN which were developed by I. Akasaki and H. Amano in Nagoya. In 1995, Alberto Barbieri at the Cardiff University Laboratory (GB) investigated the efficiency and reliability of high-brightness LEDs demonstrating very high result by using a transparent contact made of indium tin oxide (ITO) on (AlGaInP/GaAs) LED. The existence of blue LEDs and high efficiency LEDs quickly led to the development of the first white LED, which employed a Y3Al5O12:Ce, or “YAG”, phosphor coating to mix yellow (down-converted) light with blue to produce light that appears white. Nakamura was awarded the 2006 Millennium Technology Prize for his invention.

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 Moore’s law. The advances are generally attributed to the parallel development of other semiconductor technologies and advances in optics and material science. This trend is normally called Haitz’s Law after Dr. Roland Haitz.

What are the advantages LED?

• EFFICIENCY. LEDs produce more light per watt than incandescent bulbs. This is useful in battery powered or energy-saving devices.
• COLOR. LEDs can emit light of an intended color without the use of color filters that traditional lighting methods require. This is more efficient and can lower initial costs.
• SIZE. LEDs can be very small (>2 mm2) and are easily populated onto printed circuit boards.
• On/Off time: LEDs light up very quickly. A typical red indicator LED will achieve full brightness in microseconds. LEDs used in communications devices can have even faster response times.
• CYCLING. LEDs are ideal for use in applications that are subject to frequent on-off cycling, unlike fluorescent lamps that burn out more quickly when cycled frequently, or HID lamps that require a long time before restarting.
• DIMMING. LEDs can very easily be dimmed either by Pulse-width modulation or lowering the forward current.
• COOL LIGHT. In contrast to most light sources, LEDs radiate very little heat in the form of IR that can cause damage to sensitive objects or fabrics. Wasted energy is dispersed as heat through the base of the LED.
• SLOW FAILURE. LEDs mostly fail by dimming over time, rather than the abrupt burn-out of incandescent bulbs.
• LIFETIME. LEDs can have a relatively long useful life. One report estimates 35,000 to 50,000 hours of useful life, though time to complete failure may be longer. Fluorescent tubes typically are rated at about 10,000 to 15,000 hours, depending partly on the conditions of use, and incandescent light bulbs at 1,000 - 2,000 hours.
• SHOCK RESISTANCE. LEDs, being solid state components, are difficult to damage with external shock, unlike fluorescent and incandescent bulbs which are fragile.
• FOCUS. The solid package of the LED can be designed to focus its light. Incandescent and fluorescent sources often require an external reflector to collect light and direct it in a usable manner.
• TOXICITY. LEDs do not contain mercury, unlike fluorescent lamps.

What are the disadvantages LED?

• HIGH PRICE. LEDs are currently more expensive, price per lumen, on an initial capital cost basis, than most conventional lighting technologies. The additional expense partially stems from the relatively low lumen output and the drive circuitry and power supplies needed. However, when considering the total cost of ownership (including energy and maintenance costs), LEDs far surpass incandescent or halogen sources and begin to threaten compact fluorescent lamps.
• TEMPERATURE DEPENDENCE. LED performance largely depends on the ambient temperature of the operating environment. Over-driving the LED in high ambient temperatures may result in overheating of the LED package, eventually leading to device failure. Adequate heat-sinking is required to maintain long life. This is especially important when considering automotive, medical, and military applications where the device must operate over a large range of temperatures, and is required to have a low failure rate.
• VOLTAGE SENSITIVITY. LEDs must be supplied with the voltage above the threshold and a current below the rating. This can involve series resistors or current-regulated power supplies.
• LIGHT QUALITY. Most white LEDs have spectra that differ significantly from a black body radiator like the sun or an incandescent light. The spike at 460 nm and dip at 500 nm can cause the color of objects to be perceived differently under LED illumination than sunlight or incandescent sources, due to metamerism, red surfaces being rendered particularly badly by typical phosphor based white LEDs. However, the color rendering properties of common fluorescent lamps are often inferior to what is now available in state-of-art white LEDs.
• AREA LIGHT RESOURCE. LEDs do not approximate a “point source” of light, but rather a lambertian distribution. So LEDs is difficult to use in applications needing a spherical light field. LEDs are not capable of providing divergence below a few degrees. This is contrasted with lasers, which can produce beams with divergences of 0.2 degrees or less.
• BLUE HAZARD. There is increasing concern that blue LEDs and white LEDs are now capable of exceeding safe limits of the so-called blue-light hazard as defined in eye safety specifications such as ANSI/IESNA RP-27.1-05: Recommended Practice for Photobiological Safety for Lamp and Lamp Systems.
• BLUE POLLUTION. Because white LEDs emit much more blue light than conventional outdoor light sources such as high-pressure sodium lamps, the strong wavelength dependence of Rayleigh scattering means that LEDs can cause more light pollution than other light sources. It is therefore very important that LEDs are fully shielded when used outdoors. Compared to low-pressure sodium lamps, which emit at 589.3nm, the 460 nm emission spike of white and blue LEDs is scattered about 2.7 times more by the Earth’s atmosphere. LEDs should not be used for outdoor lighting near astronomical observatories.

What are the types of LED?

• MINIATURE LEDs. These are mostly single-die LEDs used as indicators, and they come in various-size packages
• FIVE-AND-TWELVE-VOLT LEDs. These are ordinary miniature LEDs that incorporate a suitable series resistor for direct connection to a 5 V or 12 V supply.
• FLASHING LEDS. Flashing LEDs are used as attention seeking indicators where it is desired to avoid the complexity of external electronics. Flashing LEDs resemble standard LEDs but they contain an integrated multivibrator circuit inside which causes the LED to flash with a typical period of one second. In diffused lens LEDs this is visible as a small black dot. Most flashing LEDs emit light of a single color, but more sophisticated devices can flash between multiple colors and even fade through a color sequence using RGB color mixing.
• HIGH POWER LEDS. High power LEDs (HPLED) can be driven at hundreds of mA (vs. tens of mA for other LEDs), some with more than one ampere of current, and give out large amounts of light. Since overheating is destructive, the HPLEDs must be highly efficient to minimize excess heat; furthermore, they are often mounted on a heat sink to allow for heat dissipation. If the heat from a HPLED is not removed, the device will burn out in seconds.
• MULTI-COLORED LEDS. A bi-color LED is actually two different LEDs in one case. It consists of two dies connected to the same two leads but in opposite directions. Current flow in one direction produces one color, and current in the opposite direction produces the other color. Alternating the two colors with sufficient frequency causes the appearance of a blended third color. For example, a red/green LED operated in this fashion will color blend to produce a yellow appearance. A tri-color LED is also two LEDs in one case, but the two LEDs are connected to separate leads so that the two LEDs can be controlled independently and lit simultaneously. A three-lead arrangement is typical with one commmon lead (anode or cathode). RGB LEDs contain red, green and blue emitters, generally using a four-wire connection with one common lead (anode or cathode). The Taiwanese LED manufacturer Everlight has introduced a 3 watt RGB package capable of driving each die at 1 watt.
• ALPHANUMERIC LEDS. LED displays are available in seven-segment and starburst format. Seven-segment displays handle all numbers and a limited set of letters. Starburst displays can display all letters. Seven-segment LED displays were in widespread use in the 1970s and 1980s, but increasing use of liquid crystal displays, with their lower power consumption and greater display flexibility, has reduced the popularity of numeric and alphanumeric LED displays.

TSUNAMI!

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.

If tomorrow never comes

If tomorrow never comes

Friday, 09 April 2010 12:00 PM Edmund Lao

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!

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.

I have a friend who is a financial consultant, She had encountered different kinds of people and their money habits and over the years, She always see the same mindset with regards to the way they treat their money. For this article, I will focus on the principle “sacrifice now, enjoy later” principle that her 2 clients exemplified.

Her first client started to invest money in pre-need plans the moment she got her bonus starting from her first year of work in a multinational company. Not a single cent was spent for expenses. As she grew in the company, her salary, benefit, and bonus started to grow too. Every time she receives extra money, she calls my friend to help her in investing. As she started early, time was her ally and she was able to maximize the power of compounding interest. As of the present, her total investments has a value of  Php 9M.

 
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

In conclusion, These two clients have one similar quality. Both of them have discipline to save and build their future. The question is: Are you ready to have discipline?

Warning on "Free Wealth Course"

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?

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:

1. Go window shopping at malls. But take precaution. Be sure your tummy is full to avoid the temptation to eat out. Do not also bring credit card so as not to fall victim to impulse buying. Bring enough cash (let us say Php 150) for emergency and transportation. Remember, our objective is to escape from summer heat. Malls are totally air-conditioned. We can enjoy cool environment for free by just strolling.
2. Another good thing in the malls is the supermarket. Most of the times, there are free demo taste of snacks/food/drinks for the grocers. Imagine eating a little for free!
3. Go to parks late afternoon and enjoy the cool breeze.
4. Avoid drinking sodas. Bring your own water to quench thirst wherever you are.
5. If out of country destination is desired. Plan in advance. Transportation fees can come in discount if paid in advance.
6. Use CFL for lighting, CFLs emit less heat than ordinary fluorescent. If possible, households should go for green energy. However, the technology is quite expensive. Maybe later in the future, we can imitate South Korea where homes are using LED for lighting. LED is one of the applications of green energy. Not only does green energy save on energy cost, it also helps save environment.
7. Use timer to control usage of air-conditioning units.
8. Most importantly, go out of town location where you have friends to save on hotel accommodations.

Enjoy!

Build Your Nest, Lay Your Egg

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

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

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

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

‘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 13^th 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:

1. Buy gifts ahead of time. Always make it a point to start buying as early as possible especially when there are mallwide madness sale and tiangge. Divisoria is the favorite place to shop because of the low price. Just make it a point to buy good quality item.
2. Recycle gifts. There are gifts from last year’s holiday that may be useful for the intended recipient.  It is the thought that counts.
3. Home made delicacies. It is much cheaper to give home made delicacies than to buy from the store. At the same time, home made items are produced with labor of love so it is more appreciated by the recipient.
4. Engage in business. This is a great time to do business. A lot of gift items can be produced out of creativity. Doing business brings additional income for investments.
5. Avoid buying firecrackers. Buying and exploding firecrackers is a sure way to unnecessarily burn money. Not only that, there is a risk of fire hazard and New Year revelry accidents that costs a lot of money. There are other ways to greet the coming year safe and pollution free.
6. Savings account as Christmas Gift. It is a good idea to instill savings to children while they are young. We will be inheriting to them our wealth later when our time us up. It pays to educate them so they will be good stewards of the money we will leave for them. In that way, we have not spent our effort in vain, since the reason we earn money is to give our children the best .
7. Live simply. Be content with what we have. Never compare with others. What may be good for them may not be good for us. The major culprit of unnecessary expense is envy. The less desire we have, the better for us.
8. Avoid credit card purchases. This is the time to avoid flirting with credit card as the temptation to buy is so strong that we might be charged high interest for items we bought on impulse. There is a risk we might waste our bonus to pay for credit card interest, finance charge and late fees.

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 !

The Tired, The Retired, and The Re-tired

 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?

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.

KILLING ME SOFTLY

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 :

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
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

Counting my debt with his fingers
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…

One step back, two steps forward

One step back, two steps forward

http://www.businessmirror.com.ph/home/opinion/16549-one-step-back-two-steps-forward.html

Checkmate!

Checkmate!