Showing posts with label Savings. Show all posts
Showing posts with label Savings. Show all posts
3 Phases of Investing in Stocks - Edward Lee
I am a Money Magnet! We are Money Magnets!
3 Phases of Investing
by Mr. Edward Lee of CitiSecurities and COL Financial
1. Does It Work?
Stocks, over time, outperforms all other asset class!
Does Investing in the Stock Market Work? YES!
The reason behind why companies continue to grow is because GDP continues to grow, driven by consumption and the growing population.
Lessons from Finance Superstar Suze Orman
I am a Money Magnet! We are Money Magnets!
Personal Finance superstar Suze Orman was in the Philippines for a brief road show, encouraging Filipinos to believe in the Philippines, to start saving, and to finally launch that journey to financial freedom. Here are some of the key points that she imparted during her stay.
On Marriage and Finance
- Having a Prenuptial agreement (prenup) is good.
- Marry someone who you can freely discuss money issues with.
On Debt
- Debt is financial bondage.
- You will never achieve financial freedom if you have debt.
- Pay off all your debt first before you start saving.
- The most common financial sin is Credit Card debt.
Saving is Not Investing
In a recent article from BPI Asset Management, author Kleia Crucero highlighted why in the past 5 years, if you simply placed your money in a savings account or even a time-deposit account, you would have lost a fraction of your money's value due to inflation.
The five year average time deposit rate and 5 year average inflation rate for the Philippines are highlighted in the table below. While your saving's numerical value actually increased, your money's purchasing power actually decreased by -2.49% annually due to inflation.
This article highlights the fact that we should strive to find other investment instruments that can effectively beat the inflation rate. Possible alternatives are investing in bonds, stocks, mutual funds, or Unit Investment Trust funds (UITFs).
Continue reading the article to know more.
In the news: One Million Peso Deposit Insurance
In the news today (October 22, 2008), President Gloria Macapagal-Arroyo announces her support for a proposal to increase deposit insurance coverage from 250,000 pesos per depositor to 1,000,000 pesos!
I hope this pushes through! This can definitely boost up savings and time deposit accounts (^o^)v
By the way, the deposit insurance coverage is on a per bank per depositor basis and not on a per branch basis. So if you have multiple accounts in different branches of the same bank, technically, you are still only covered upto P250,000 (by PDIC). (Nothing still beats knowing the manager and the personnel in the banks.)
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Investment Principles Everyone Should Know: No. 1 Time Value of Money
This series will present fundamental principles everyone, especially the young, should know when it comes to personal finance.
The Time Value of Money
Money received and invested today is not the same value as that of money, with the same face value, received in the future.
Most would think that a hundred pesos received today is the same as that of a hundred pesos to be received next year. This assumption is wrong simply because of all the ways you can make the money grow during that gap. Just by putting the 100 pesos you received today in a savings account, you'll at least earn interest on it, thereby increasing its future value.
Here's a simple formula to determine the future value of funds compounded annually given a specific interest rate:
FV = Future Value
PV = Present Value
i = interest rate
n = number of years
Example:
If I have 69,500 pesos and I allow it to compound for 31 years at an annual interest of 9% per annum, the future value of my money would be
FV = 69,500 (1+.09)^31
FV = 1,005,092 pesos!
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How To Track Your Spending
Before you can cut your expenses, you'll need to know where your money is being spent on. That is why there is a need to track your spending. Sad to say, if you are looking for a shortcut, there isn't one. You will have to be diligent enough to keep all your receipts and record your expenses. Here are some tips to make your work easier.
- Record expenses in a ledger or a notebook as soon as you make the payment. If you don't carry it with you, keep all receipts in one place and record them later.
- Not happy with tacking all the receipts in your bag or wallet? Use your phone's SMS service in the meantime, keep a record of the purchases as a message draft and then transfer them later to your notebook.
- If you have a computer, use a spreadsheet application to record your expenses. Using a spreadsheet application, like Microsoft Excel, will allow you to compute for sums and averages easier.
- If your using a smart phone with a spreadsheet application, use that.
Once you've gained the habit of recording your expenses, the next step is to categorize them. Here are some common categories: Transportation, Phone and Internet, Entertainment and Dining Out, Groceries, Health and Beauty, Clothing, Home (Rent / Maintenance), and Utilities.
Once you've categorized them, find out where most of your expenses are coming from. Determine the categories where in you can try and save more. Come up with a monthly budget and discipline yourself to stick to that budget. As for unused budget for the month, you can either decide to carry that over to next month's budget or save and invest it instead.
Here are a few tricks to help you stick to your budget:
- One method is to designate one envelope for each major category of expenses and dole out a specific amount of money into each envelope monthly. Each time you make a purchase, determine which category it is and use the money in that particular envelope. If the envelope runs out of money, that means you have consumed your budget and must discipline yourself to abstain from any further purchases for the rest of the month.
- Another way is to always bring with you your ledger (notebook). Indicate in a separate column your budget for the month for each category. Subtract every expense from this budget at the time of purchase. And don't forget to consult your ledger for the budget's balance before making any major purchases. (This will be easier if you use a PDA phone with a spreadsheet application but these phones are usually very expensive. I'm not encouraging you to buy one. Get one only if you have spare money for it.)
Limit your Expenses: Iphone 3G in the Philippines
In a recent article from the Inquirer, Globe announced that it will be releasing the Apple Iphone 3G in the Philippines on August 22. The phones are set to be sold in prepaid kits starting at almost P42,000 and postpaid plans starting at about P2,000 (2 years contract).
These are way too expensive, I think. And my suspicions were validate when in just a couple of days Globe released another announcement slashing around P3,000 pesos from the intended price offers.
Well, a P3,000 discount is big but that doesn't make the Iphone 3G less expensive. Before you splurge and buy this product think again. Your P40,000 might be better off invested on mutual funds, your retirement fund, or your business capital fund.
Treat your Savings as an Expense!
A lot of people perceive savings as the left over amount after all the expenses have been paid for. As a result, people only save a few or some even save none at all every month! Paycheck after paycheck, putting aside an amount for savings is taken for granted. This is scary!
If you want to improve your financial status then you must shift your mindset starting today! Treat your savings as an expense! Put aside a certain amount every time you receive your paycheck! You should deduct this from your salary first. The rest of the amount left should be the only amount that you use for your expenses. This way, you get to save some money every month!
Remember:
Treat your SAVINGS as an EXPENSE!
Set aside some money for SAVINGS FIRST!
The Pareto Principle (80/20 Rule)
The Pareto principle originally referred to the observation that 80% of Italy's wealth belonged to only 20% of the population. But over the years, the principle has been expanded to describe the characteristics of typical distributions. It indicates that most things in life are not evenly distributed.
- 20% of your employees produce 80% of the output
- 20% of bugs produce 20% of computer crashes
- 20% of your customers bring 80% of the profit
Why is this useful? It is useful because it states that majority of results come from a minority of inputs or action. We can then concentrate on putting in that first 20% that will make a difference. Like say, saving 20% of your income and investing this every month could very well mean the difference between a luxurious retirement stage or having to strive and work hard for money forever.
The small things that you do today will count in the end. Start saving now!
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