Quick Win of the Week: Learn to Eye Gaze

via left hand

It is a tendency especially for us Asians, to avoid staring in the eye. It is interpreted as being rude.

However, for this week, I am encouraging you to do this exercise. Learn how to look people in the eye.

As you go through your day, try to catch people's eye and hold it for two minutes. Do this with strangers or with people you are not really close with. Hold it until the other person looks away. 

Short Term or Long Term: Where to Place Your Money

I have always mentioned that goal-setting is important in personal finance. And part of having a goal is being specific about it. You must be specific and set timelines on the time when you plan to realize your goals.

Depending on your timelines, below are the investment vehicles you should consider.

Short Term vs Long Term

My Namesake in the NBI Records

For those who subscribed to my blog for personal finance and personal development posts, you may skip this post. I just had a funny story to share and can't help but make an entry on this site. You will get your posts next Tuesday and I know you will like it.

NBI person: Sir, hindi po kayo maaasikaso ng satellite office. Kailangan nyo hong magpunta sa main office sa carriedo. (Sa quiapo pa dati ang NBI)

Guy: Bakit po sir?

NBI person: Main lang po kc nagpoprocess nung sa inyo. Me kapangalan po kc kayo.

Quick Win of the Week: Clean Up

via hstoutzenberger

A cluttered space clutters the mind so clean up.

Clean all the piles in your desk. Remove all the unnecessary things. Throw all the stuff you don't need or place them in a box away from your gaze.

Thinking About Retirement

Have you given thought about retirement?

via Ota_Photos

In all honesty, I have not given this topic a lot of thought. Why? because of two things

Quick Win of The Week: Smile

via orsocurioso

Stupid Smile.

Smile Like You are in Love.

You know what I am talking about. That smile you often see in people.

Sinigang na Hipon and Taking Action

"Daddy, what is the taste of tamarind?" my son asks me.

"Sour" I responded "Why?"

"How about candy," he continues ignoring my question.

"Sweet", I replied.

"Ok. Thank You. We studied about different kinds of taste in school " he proudly tells me.

True enough. He has memorized by heart the different kinds of food and their corresponding taste as they appeared in his textbook. Ask him about a food and he can tell the taste. He even answered his quiz without making a single mistake on this topic.

Knowing Where You Want To Go And Going There

I have shared this in facebook and sharing it here in my blog.

The other day, while we are in 7-11 and drinking water, my son blurted out of nowhere "Daddy, I want to become like you!"

Upon hearing that, a smile broke in my face. I swear blood rushed to my cheeks and I was proud and ecstatic. Who wouldnt? I think all parents will feel proud if they hear their kid saying that they want to grow up just like them. I was about to ask my son why we want to become like me but he continued without me asking.

"Daddy, I want to be fat like you. How do I become fat like you!"

Quick Win of the Week: Get a Mentor

If there is something you want to learn then go get a mentor.

This is the fastest and quickest way to do it. Never do it alone because it might take up a lot of time. Find someone who knows that thing you wanted to learn and ask him/her to help you.

For now, your only concern is to get the skills or experience. Once you have mastered it, then tweak it, improve it and put your signature on what you do. But for now, find that person and model after him/her.

This tip shows up in different wordings and different forms but it is also about the same thing.

Stock Investing - Where to Start

via teegardin

It has been awhile since I posted about Stock Market and I thought this post will be a good rejoinder for people who might be interested but have not started yet.

Similar with all other things, taking the first step is the hardest. I have heard about stories of people able to buy house and lot just by trading in the stock market. Then I hear stories about how the stock of PLDT was just P10 before and now it is more than a thousand pesos. Or people sharing about Globe's stock only worth P916 and now trading at P1,600. It all look as an easy money making scheme that my first thought "If there is money in the stock market, then why not all are in it?"

Day 5: Personal Finance Course - Pit Stop

This is the fifth of the series financial planning posts to help readers get started in managing their personal finance. Sharing the links for the earlier posts for those who have missed it 
Day 1: Setting Up Your Financial Goals 
Day 2: Knowing Your Net Worth 
Day 3: Understanding Your Income Flow
Day 4: Budgeting

This is the last post of the series and will be a short one.

Reminder

Thinking and reading will not help you achieve what you want. You have to take action. You have to move.

Day 4: Personal Finance Course: Budgeting

This is the fourth of the series financial planning posts to help readers get started in managing their personal finance. Sharing the links for the earlier posts for those who have missed it

Day 1: Setting Up Your Financial Goals
Day 2: Knowing Your Net Worth
Day 3: Understanding Your Income Flow

This step is critical and very important in achieving financial goals.

Budgeting!

via Tax Credit

What is budgeting? Budgeting is planning where your money will go.

This reminds me of the statement “Failing to plan is planning to fail.”  You don’t want that. I don’t want that. We don’t want that. We want to achieve our dreams so we are going to do this exercise even this might bore us to death.

(Nope. I haven’t heard or read any news about someone dying out of boredom)

Budgeting is difficult especially to those who does not have the discipline to do the activity. For this reason, I will be sharing two strategies how to do your budgeting. One is suited for those who has less time to do the nitty-gritty of budgeting. The other is best for those who has keen eyes on details.

Strategy 1: Use of Percentages

I picked this up from Secrets of the Millionaire’s Mind. This strategy is very doable and I was able to stick to it. Honestly, I am still using it due to ease but I will soon transition to the other method I picked from Registered Financial Planners of the Philippines.

What is the strategy? The rule is every time  you receive an income, you are to divide it among the following:

• 10% Financial Freedom
• 10% Long Term Spending
• 10% Education Account
• 10% Play Account
• 10% Charity
• 50% Necessity

This action is very doable. The good thing about this strategy is that you can follow the same formula whether you get an increase in your income or decrease in your income.

We all know that when people receives additional income or receives a salary increase, more often than not, the lifestyle changes as well. We reward ourselves with finer things in life. It is not wrong actually. It is your money so it is your decision where to spend it. By following the percentage formula, somehow you also increase your savings and investment in other areas of your life.

Below are the description of the categories. Remember, you can change the percentages as you see fit.

• Financial Freedom – this is money never to be touched. You put the money in investments that will give you returns. 
• Long-Term Spending – this is for future foreseeable expenses. College education fund for kids, or that dream vacation. These kind of expenses fall under this category
• Education Account – the idea is that we should not stop learning. The money under this category should be used for new lessons or reinforcing those skills and knowledge that we already know
• Play Account – you will love this category because this deals with splurging. Saving is a difficult thing to do for most of us and the idea for this account is to use this on things that will reward ourselves for sticking with the planned budget. You can use this to buy new clothes, new gadgets etc.
• Charity -  for giving back to society.
• Necessities – no need to explain. Use the money for expense you need to live

Strategy 2: Line Budgeting

If you have done the Day 1 task, you should know now how much you need to reach the financial goals that you have listed.

For example, if you will need P10M in ten years time and using the present value calculator, we will know how much we need to save regularly so that we will have the amount on the time we need it.

Line Budgeting is setting aside specific portion of your income to its designated goal.
Example, a person who is earning P50,000 per month might set aside P25,000 for his living expenses, P5,000 for his dream car, P10,000 for his dream house and another P5,000 for his dream vacation.

Clear?

Line budgeting is difficult but makes perfect sense because of it being very specific.

Most likely, you might find yourself not having enough current income to save for all of your financial goals. If that happens then you should prioritize which among your financial goals will take priority.

Or you also have the option of finding additional source of income so that you will have enough for all of your dreams.

The Good and The Bad

The first strategy is doable and easier to follow. The only downside is that you might not have enough money to fulfill all of your dreams. Even if you are sticking with the percentages, if you do not have that big income in the first place, you might find yourself not having enough money by the time you reach your financial goals timeline.

The second strategy, while difficult to do, is more realistic and very specific. It ties up with the financial goals. Through monitoring, we will know whether we are on track in achieving our goals or not.

Overall, the best strategy is the one that will help you achieve your dream. Do not put too much thought on which one to use. It is important that you take action and do the budgeting.

Action may not always bring happiness, but there is no happiness without action – Benjamin Disraeli

Day 3: Personal Finance Course - Understand Your Income Flow

This is part three of Personal Finance series where I share guides to get you started on personal finance. If you haven't, read Day 1: Setting Financial Goals and Day 2: Knowing Your Net Worth before proceeding with the post below

Copyright Damian Gadal

Welcome Back!

I am glad you are still with me in this five day personal finance course.

We are done setting financial goals and knowing our net worth. The next step is dive deeper in our cash or income flow

But first, allow me to step back a little bit. How did it feel knowing your net worth?

When I first did this exercise, I was shocked and surprised! I never knew before that I only have that much. I thought it will be higher because I was earning this much on an annual basis. However, my annual income is totally far from my net worth. Where could all those money have gone? I think my wife had the same surprise when did computed for her net worth.

Shocking may it be for some us, at least we have made progress. Knowing where we stand will enable us to move forward.

Understand Your Income Flow

List down your day to day expenses so we get an estimate of how much you spend and how much you really need. The objective of this exercise is to know if you are operating in a net loss or profit.

Your typical expense will include the following

• Home/Rent – includes mortgage, lease, rent
• Utilities – Includes payment for your electricity, gas/heating, telephone, cellphone, internet, cable, water and garbage
• Groceries – your expenses for groceries, dine-outs for breakfast, lunch and/or dinner.  If you spend for coffee include it here.
• Entertainment – Will include your purchases for movie tickets, mp3s (if you pay and not download illegally. Please stop music piracy J )
• Car/Auto – include here your expenses for transportation. Taxi fare, jeepney fare, MRT, Gasoline for your car, parking fees, car wash
• Insurance Medical – If you pay for your insurance on an annual or quarterly basis, compute for the monthly amount. Say if you pay P24,000 for your insurance, then dividing it by 12 will give you a monthly cost of P2,000.
• Departmental – This is where I group expenses for clothes, personal items, books, magazines, appliances
• Miscellaneous – are those out of the blue expenses and one time expenses that is not part of the first categories. One time purchases like that one night spent paying for a hotel.

Then same with the exercise we did with the assets and liabilities, add up your expenses. 

Next step is to do the income part. List down all your sources of income. If you are an employee like me, you are receiving salary from your employer. Write it down.  Add all other source of income if any.

Now, deduct your assets from your liabilities. The goal is we should be earning more than we are spending. The excess earnings are then to be added in our assets to increase our net worth.

So there, you will now know if you are living within, above or below your means.

Ideally, you should be generating positive income and not occurring losses.

If you are, I suggest you find ways to increase your income. If you can’t then time to review those expense and cut those unnecessary ones. We haven’t reach the third day but it is critical that you aim for a positive net worth and positive cash flow.

Tomorrow is tying it up together: Preparing a Budget

Day 2: Personal Finance Course - Know Your Net Worth

This is part two of Personal Finance series where I share guides to get you started on personal finance. If you haven't, read Day 1: Setting Financial Goals and do the task in that post before proceeding with the post below.

Copyright Alan Cleaver

Taking Stock

One time, I got a call from a friend who was visiting Makati for the first time.

He called with a panic tone on his voice “Ton, I am lost. I need to be at this building by 11am for an important meeting and I don’t know if I will reach it in time”

“Where are you?” I responded

"I don't know" he replies. "That's why I called you. I am lost. I don't know where I am. You have to help me. You are familiar with this place than I am"

On my mind I was thinking, this guy is being smarty pants. Why should I help him with that sarcastic response?

Anyway, I kept my cool and answered “I cannot help me if you don’t tell me where exactly you are now. What do you see? What are the stores, buildings or any landmark around you?

He responded and with the descriptions he told me, I was able to guide him from Point A to Point B.

The same concept goes for personal finance. If we have identified where we want to go after setting our financial goals, we also need to know where we stand. If you have goals and plans, know where you are currently and plan how to reach that goal and plan based on where you stand.

How to know your Net Worth

Task: List down all your assets and liabilities to know your net worth.

1. List all your assets
2. List all your liabilities
3. Compute your networth = (Assets minus Liabilities)

Grab your pen and paper or open an excel or word document. Here is a copy of a workbook you can print and download if needed.

List down all your savings account, your cash, and all the investment that you have.  Those are what you call assets. Asset are future sources of income or money.

No. Please don’t include that mighty iphone 5 that you are holding. Or that expensive bags that you own.

Just limit that assets to your cash, savings account, current account, mutual fund and investments. I do not want to include your gadgets or those expensive bags because they are rarely source of income.

If you insists including them, then tell me that you don’t really need it on a day to day basis and if I ask you to sell it now you can and you will. If you cannot say yes, do not include them.

Next are liabilities,

Grab your credit card statement and include it under the liabiliies. If you own someone money, you should include it too. If you have PAG-IBIG loans, company loans, SSS loans and all loans, you should include them under the liabilities.

Now that you have both assets and liabilities, add them up. Add the value of your assets separately and then add up the value of your liabilities separately. Do you like what you are seeing?

For the final step, do this “Assets – Liabilities = Net Worth”.

Say if you assets totaled to P100,000 and your liabilities added up to P20,000 then your net worth is P80,000.

Purpose of Knowing Your Net Worth

So why do we need to know the net worth? We need it because it represents our financial value as of now. If you see a positive number it is a good sign. If is a large amount, then I say you have a good net worth. Is there an ideal number? I have not seen anything published but I will like to share what I got from “The Millionaire Next Door”.

What's the ideal net worth?

The book offered the below formula for calculating what your net worth should be

Target Net Worth = Age X Annual PreTax Income / 10

Now, if pretax income is confusing to you, then just use your annual salary or your annual net income. I don’t want to discuss on this post what’s a pre tax income is but to simplify it just you your annual income whatever it is.

Example? For a 23 year old single guy who earns P240,000 a year, his target net worth should be

Target Net Worth = 23 X P240,000 / 10 = P552,000

Do I use this formula? Actually no. Why? Because I am not interested in a dictated formula from a book but I rather have a networth that matches my financial goals.

And setting financial goals is the third topic for this five day personal finance.

So that’s it. Very easy right?

Image from www.seniorliving.org

Tasks Summary

1.     List down your assets

2.     List down your liabilities

3.     Compute for your net worth (Formula: Assets – Liabilities = Net Worth)

Bonus Task

Now that you know your net worth, how does that make you feel? Are you happy about it? Are you glad? Did it make you sad? Whatever your reactions are write them down.

Topic for tomorrow is your Income and Expenses

If it's important to you, you will find a way. If it's not important to you, you will find an excuse