Bubble or No Bubble

I have been reading a lot of articles debating on whether we have a "bubble" or not. After reading the articles, I ignored it and moved on minding my own business. But then I realized, I would not be a good investor if I don't take an opinion on this issue. If I am to be a good investor then I should read the articles, read through the opinion and then decide for my own about what I should do with my hard-earned money.

credit: Denisp12

Here are the articles if you want to read them

 Here's Why The Philippines Economic Miracle is Really A Bubble in Disguise
It is not a Miracle, It is not a bubble


First, let us understand what an "economic bubble" is. As I understand it, economic bubble is used to describe a situation where an economy is growing rapidly and hits a point where everything collapses because the growth was not real but air. You know how a bubble forms in a water then rises rapidly only to pop-out. Same with economics, they coin the term bubble for growth that is not real.



When an analyst predicts a real property bubble, that particular analysts believe that growth is fueled by speculation rather by true demand. Let me try to explain it based on what I know. Real Property developers (those who build offices, condominiums etc), it is assumed, build on a market forecast backed on good research. It means that there is a real demand for offices and houses backed up by purchasing power.


Don't confuse demand with wishes. If you go ask your friends, all will say affirmative if you ask them if they want to have a house of their own. Not surprising because, shelter is one of the basic needs as per Maslow's hierarchy of needs. While all of us dreams of having our own house, not all of us, unfortunately and realistically speaking, can afford it. This is the reason why real estate developers build houses and offices based on real demand and not based on wishes and dreams.



Now, if you look at the prices of offices and condominiums, it would seem that nobody can buy one except for the few rich citizens of our country. And that's the role of banks. Banks offer loans to people who want to buy their own house based on the future potential earning of the individuals. Obtaining a loan is getting money now for the money that you will earn in the future. Again, we don't know what will happen in the future and it is a risk. But banks are in the business of managing risk thus they do credit investigation etc. etc.



With the inclusion of banks in the real estate process, the responsibility of credit check now falls into their hands. Sure, real estate developers still perform market research to estimate how many offices and houses to build. But with the bank's role, these companies now rely on the credit investigation done by banks to see who can really buy one and those who cannot.



The author then shares that according to the World Bank, lending standards have been relaxed, with some local banks raising loan to value ratio of 80 or even 90% in addition to waiving requirements such as proof of income. The proof of income requirement has been waived for many overseas Filipino workers or OFWs who are unable to provide proof of income, yet are able to pay the 20% down payment. There is also evidence that easy-pay mortgages are being offered to home buyers, such as those with zero down payment or low payments in the first few years of loan amortization.



Now, the explanation given for growing middle class and consumer spending boom are the rise of the business process outsourcing sector (read: employment - source of income for Filipinos) and remittances from Overseas Filipino Workers). The author then says that BPO only accounts 4.4% of the country's $250 billion economy. As for the remittances, it accounts for 10.4%. Therefore, the BPO and OFW remittances only accounts for 14.4% of the economy. He further adds that 53% of OFW remittances comes from the US of which majority is from nurses. He adds that these Filipino nurses benefits from the healthcare bubble in the US. If you are reading the news, you know that healthcare is a big ticket item discussed by the US Government. Remember that legal is one of the factors that affects an industry. A negative outcome of the healthcare law may mean losses of jobs for these Filipino nurses. Lost of jobs means lost of remittances. Lost of remittances mean inability to pay back loans.



My Thoughts

It is actually too much information to digest for me. To be honest, I have not changed my stock investments. So I guess, while I have not verbally decided on this issue, my action of not changing my investments mean I am taking the side that there is no property bubble. As my professor said, we are always making decisions whether we make one or not. Not making a decision is also a decision.


One thing bothers me though. Ayala Land and BPI are part of Ayala Group. SMPH/SMDC and BDO are under the same group. These companies posted positive earnings in the past few years. These companies both earn in the property value chain process. I just hope credit checks are really done as they should for new property loans.


Also, who should I believe in. The 28 year old Jesse Colombo or John Mangun who has 25 year experience in the Philippine Market. Again, age should not matter. Then i recall certain CNN Journalist who goes by the name Anderson Cooper criticized by a local news anchor by saying he (Anderson) does not know what he is saying while she is confined in the air conditioned room far away from the devastation area.

The 17 Ways Rich People Think and Act

image credit: Mufidah Kassalias

Hey!


How is it going? I have been busy in the past few weeks working on a new blog that my wife asked me to put up. It is about parenting and more of personal blog. It is a tandem blog and whenever I feel the itch to write, I focused my energy to that blog so I can schedule posts.


It is always easier doing that. Scheduling posts. I know some does not like the idea but I am one of those who only gets the spark to write once in awhile. So whenever that moments comes, I try to write as many article that I can and schedule them ahead of time.

Thinking About Retirement Again

I shared previously that I have started planning and thinking about retirement. @ralph11ph commented shared his reason why he is not thinking retirement - what to do with too much idle time. I can't help but agree. Retirement is premised on the assumption that we do not like what we are currently doing. It is not always the case. I know people who love their jobs and love doing it until their physical body will no longer allow them to do it.

Perfect example is my mom. She works in a bank. Some six years ago in her 60th birthday, she had a grand birthday celebration.

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

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

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

Day 1: Personal Finance Course - Setting Your Financial Goals

Five Day Personal Finance Course FREE

Copyright Bradipo

I have been thinking of writing a series and I am glad I was finally able to set aside some time to do this.

The reason I wanted to do this is that in my search for personal finance knowledge, I seldom come across a step by step guide. Most of the time, what I read are advice and tips to follows. Advice like be frugal, don’t buy this and that. While helpful, these advice were not able to help me out.

After pouring myself reading books and blogs, I decided to write about the steps that I have taken based on the learning I picked up.

Why five days? Because personal finance bores most people (even me at times). I thought if you read five posts in my blog everyday and do the tasks for the day, somehow, you will be able to learn and apply it .

So if you know anyone who might find the series of posts useful, let them know by sharing the link to mysite. Also, if you haven’t subscribed to my posts yet, I suggest you do so you do not miss out posts.

Alright, after so much introduction, I welcome you to Day 1 of Personal Finance Course. Over the next five days, I will be posting topics that will help you get started managing your finances.

Before we start some key rules
1.     Do the tasks!
2.     Do the tasks!
3.     Do the tasks!

Yes. Three simple rules.

Just don’t go reading the posts but I expect you to grab some pen and paper or use Microsoft Excel, or Microsoft Word. If you want, you can even blog it. If you have a planner or a notebook, use that so you can always go back to your answers to the tasks and review them. You can also print the financial goals worksheet available here.

First Step: Goal Setting

Do you want to be rich? Really? How much do you need for you to say you are already rich? P10M, P20M or P30M or more than that?

Tell me a ballpark figure.

And when you have that money, what are you going to do? You are going to buy a house? What house? Where? How much? How many bedrooms? How many garage?

Oh you also want a car? How many? What make? What color? How much do you need to get them?

You see, it is not enough to say you want to be rich. Rich is a word that has different meaning to everyone. One will define it as owning this and that and another will define it differently. So if you want to be rich, please define it by setting specific and doable goals.

How to Set Goals

1.  Identify your financial goals
2.  Estimate the cost and Set a Target Date
3.  Determine how much you need to save

Setting goals is the first step in turning the invisible into the visible - Tony Robbins, author of Awaken the Giant Within

Copyright AG Gilmore

Identify your financial goals

For this particular step, let your imagination run wild.
If you say you want to be rich, then this is the time to create your own and specific definition of what rich is. If owning two cars is being rich with you then write it down. Own two cars. If having a house in Forbes Park is your dream, then write it down. Own a house in Forbes.

Whatever it is you want to have, write it down.

If you are hindered by the thought at the back of your head saying these goals will never be accomplished, ignore that voice for now. Really. Ignore that voice and dream big.

 Estimate the cost and set a target date

Now, go back to your list and put some monetary value to that dream.

An example, for me, one of my dream is to visit Paris in 2025. A trip today will cost me around P100,000 per person. I am planning to bring my wife so that is roughly P200,000.

Determine how much you need to save

In 2012, the published average inflation rate was 3.2%. Well, this is really low but using this number as basis, then by 2025 I will need the amount of P200,000 inflation rate adjusted.

Present Amount: P200,000

Interest Rate: 3.2% (I am assuming this as the required rate based on the assumption that prices of tickets, hotel will increase by 3.2%)

Number of Periods  =  12 years. (Estimate)

Then I computed for the future value using this website 

Future Value I will need would be P291,867.92.

So why do we have to go the trouble of estimating the cost and setting the target date? Because this will help us identify how much to save and where to put our money.

In my example, since my plan is to visit Paris in 2025 and not now, then my goal should be to save money regularly so that I will have the amount of P291,867 by 2025.

If I already have P200,000 now, do I still need to place my money somewhere? Yes. Because if I just leave my money in a savings account or just hold the money, by the time I need it in 2025, I only have P200,000 and will still have to shell out additional P91,867.

Can I just go now? In theory I can because I have the budget but spending that amount is something I considered luxurious with the current income that I have and the current expenses that I pay. I have set a longer timeline because I know by that time, I am earning more and my kids are grown up by that time that I and my wife can leave them with my parents without really worrying that much.

The key thing here is know your goals then set aside money and place it in an instrument that will give you the expected amount by the time you need it.

If you need the money five years from now, then go save your money in a five year instrument.

If you need the money three months from now, then do not put in instruments such as bonds and stocks. Put them in short term instrument such as savings deposit or time deposit.

Quick Summary

1.  Identify your financial goals
2.  Estimate the cost and Set a Target Date
3.  Determine how much you need to save

That's it for today. 

Tomorrow, will talk about net worth. 

If you have not subscribed yet, do sign-up above or bookmark this page. Also, if you know someone who might need to do this, send him/her the link. Better yet, make him a partner as you do the tasks. This way you will be accountable to someone. You can help each other.

Till then

Secrets of the millionaire mind - another book about secrets

This is the second post of my book I'm reading series. If you miss the first book, here's the link.

  Secrets of the Millionaire Mind by T. Harv Ecker

Coincidentally, the second book also has a secret in its title. A bit ironic to think that I should be rich by now having read and learned the secrets. But i am not. Not just yet! and I am on my way. The book tells us that being successful in something is two part. First is the thinking or the desire of having that goal. Next is the execution. They are the two things that are needed to accomplish something. If we spend our day thinking about good stuff and all the desires that we have, it just ends there. It will not happen. We have to move and do something. 

Key points i got from the book are the concept of giving back and measuring net worth.

• Giving back
• Measuring net worth

On Giving Back

Prior to reading the book, I would say I am not a selfish guy. I give back to the Church, occasionally give money to my parents and siblings. Other than that, that's all i can say i do in terms of giving back. I guess there was something in the book that struck a chord in me telling me the importance of giving back. Giving back is showing gratitude for all the blessings that God has given me. 

This year, I started working on giving back regularly a portion of my income. It is still a small amount but I am working on giving back higher. The books suggests giving back 10% and i know that was also written in the old testament. I haven't reached that goal yet but I am working on it. Actually, this one is what fuels me to find additional sources of money. If i want to give back higher, then i must earn higher. I've chosen Unicef because i like their cause (If you want to help them, check their site http://www.unicef.org/philippines/). Or you can begin with your family. We all heard the word "Charity begins at home".  or give your money to me. hehehe. just kidding. I will never ask money. I want to earn it. 

On Measuring Net Worth

After reading about the difference between income and net worth, i started measuring my assets and liabilities last February. A bit awkward for me actually. I took up accountancy in college and worked as an external auditor and general accountant. I spent so many years preparing income statement and balance sheet of companies but I have not really tried working on my personal income statement and balance sheet. I don't know. It feels weird. Or maybe because i don't have much assets to write down. 

But thankfully, i have read the book and it motivated me to do it. A bit tedious process actually but doable. I started listing down all my savings account, checking account. Then i worked on my obligations such as credit card dues. My first draft was just that. Then i worked on improving the list by adding on assets i forgot to add such as value of mutual fund and other investment. My wife actually had done it easily as she don't have other investments when she started. It was as simple as writing down the bank accounts their value less the credit card dues. 

Income is like a faucet while net worth is the bucket. The exercise reminded me that though i am enjoying the steady flow of income from my job as a faucet, i should also think about how much water i already have in the bucket. Because one day, the faucet might stop giving me water and when that time comes, i should have enough water in my bucket to use while i am looking for a new faucet. 

The book is available at Amazon if you want to read it  (Note: affiliate link) Secrets of the Millionaire Mind

Quotable Quotes

Just like with my first post, I wanted to share key ideas worth considering

1. My income can grow only to the extent that i do!
2. If I want to change the fruits, i will first have to change the roots. If i want to change the visible, i must first change the invisible
3. Money is a result, wealth is a result, health is a result, illness is a result, my weight is a result. I live in a world of cause and effect
4. Give me five minutes and I can predict the financial future for the rest of my life
5. Thoughts lead to feelings. Feelings lead to actions. Action lead to results
6. When the subconscious mind must choose between deeply rooted emotions and logic, emotions will always win.
7. If my motivation for acquiring money or success comes from a non supportive rout such as fear, anger, or the need to "prove" myself, my money will never bring me happiness.
8. The only way to permanently change the temperature in the room is to reset the thermostat. In the same way, the only way to change my level of financial success "permanently" is to reset my financial thermostat
9. Consciousness is observing my thoughts and actions so that I can live from true choice in the present moment rather than being run by programming from the past.
10. I can choose to think in ways that will support me in my happiness and success instead of ways that don't.
11. Money is extremely important in the areas in which it works and extremely unimportant in areas in which it doesn't.
12. When i complain, i become a living, breathing "crap magnet"
13. There is no such thing as a really rich victim
14. If my goal is to be comfortable, chances are I'll never get rich. But if my goal is to be rich, chances are I'll end up mighty comfortable.
15. The number one reason most people don't get what they want is that they don't know what they want
16. If I am not fully, totally and truly committed to creating wealth, changes are I won't
17. The law of income; I will be paid in direct proportion to the value I deliver according to the market place
18. Bless that which i want
19. Leaders earn a heck of a lot more money than followers
20. The secret to success is not to try to avoid or get rid of or shrink from your problems. The secret is to grow myself so that I am bigger than any problem
21. If i have a big problem in my life, all that means is that I am being a small person
22. If I say I am worthy, I am. If I say I'm not worthy, I am not. Either way, I will live into my story.
23. If a hundred-foot oak tree had the mind of a human, it would only grow to be ten feet tall. 
24. For every giver there must be a receiver, and for every receiver there must be a giver
25. Money will only make me more of what I already am
26. How you do anything is how you do everything
27. There's nothing wrong with getting a steady paycheck unless it interferes with your ability to earn what you're worth. There's the rub. It usually does
28. Never have a ceiling on your income
29. Rich People believe "you can have your cake and eat it too". 
30. The true measure of wealth is net worth, not working income
31. Where attention goes, energy flows and results show
32. Until you show you can handle what you've got, you won't get anymore
33. The habit of managing your money is more important than the amount
34. Either you control money or it will control you
35. Action is the bridge between the inner world and the outer world
36. A true warrior can tame the cobra of fear
37. It is not necessary to try to get rid of fear in order to succeed
38. If you are willing to do only what's easy, life will be hard. But if you are willing to do what's hard, life will be easy
39. The only time you are actually growing is when you are uncomfortable
40. Training and managing your own mind is the most important skill you could ever own in terms of both happiness and success
41. You can be right or you can be rich, but you can't be both
42. Every master was once a disaster
43. To get paid the best, you must be the best

The Science of Getting Rich - is there?

This is the first post of the "book review" series I will be posting in the following weeks. I can't exactly call them review but rather me trying to summarize what the book is all about and the learnings i picked up from the book. This is more about what the book suggests we do rather than if you should read it or not.

When I started reading

I started reading books when I was in elementary. I studied in a public elementary school and you know how public schools here in the Philippines operate. They work with a small budget and to augment the small budget, they teach pupils manual labor. It is a win-win situation really. Students learn how to garden, fix stuff and the school gets its needed maintenance for free.

Continuing on my story, i got exposed in reading books when one of my teachers asked me to help move books in the library. I vaguely remember the even except that at that time there are tons of books donated in our small library. Together with three of my friends, I was asked to help arrange them and put them in the shelves. I guess one of the reason i was asked to do that because of the my built. I was heavy even as a child and with that built, carrying heavy sacks of books will be an ease.

So there we were, carrying books and putting them on the shelves. During breaks, i got to read stories which are very entertaining. I think i was so much engrossed in reading books that i missed some of my classes. I can't help it. I think that was the first time i learned that there are books other than the prescribed books for a grade level. 

My teacher noticed it too that I was way spending too much time. She reprimanded me for missing my classes armed with a reason "I am helping in the library". She told me that I should know my priorities; studying and not reading books in the library. She even instructed the librarian that beginning that day i am no longer allowed to help in the library. I guess she hates it when one of her good performing students is always absent in her class.

Moving on with a long backgrounder, let's talk about the book The Science of Getting Rich

The Science of Getting Rich

Getting hold of the book, i was expecting a detailed step by step about getting rich. After all that's what science is. A systematized process. Alas, the books does not exactly do that. (Blame me for expecting that. LOL) The key point of the book as i get is to develop a vision and focus all your efforts towards that vision.

Points raised in the book

• Getting rich is not dependent upon your engaging in some particular business but upon your learning to do things in Certain Way
•  Begin in your present business and in your present location to do things in certain Way which causes success

 The books says the everyone has the opportunity to become rich. It is not about being in a certain business. It is about being in a business or activity where you can deliver the most value by using what you know. If you know something, then that's good. If not, everything can be studied and learned. The book also adds that we should be in the activity that we love. Maybe that's a no-brainer or even a cliche for some but it feels good to be reminded of that.

Quotable Quotes

• To think what you want to think is to think TRUTH, regardless of appearances
• It is necessary then to cultivate the habit of being grateful for every good thing that comes to you; and to give thanks continuously
• To get rich, I only need to use my will power upon myself
• When i know what to think and do, then I must use my will to compel myself to think and do the right things. That is the legitimate use if the will in getting what i want - to use it in holding myself to the right course. Use my will to keep myself thinking and acting in the certain way
• If i want to help the poor, i need to demonstrate to them that they can become rich; prove it by getting rich myself
• Thought is the creative power ir the impelling force which causes the creative power to act; thinking in a certain way will bringriches to you but you must not rely upon thought alone paying no attention to personal action
• All i have to do is to retain my vision, stick to my purpose and maintain my faith and gratitude
• I cannot act where i am not, i cannot act where i have been and i cannot act where i am going to be, i can only act where i am
• I can only advance by being larger than my present place
• I will get rich most satisfactorily if i do that which i want to do
• Never allow yourself to feel disappointed. You may expect to have a certain thing at a certain time and not get it at that time; and this will appear to you like failure but if i hold to my faith i will find that my failure is only apparent.  

Update on My Mutual Fund

I've been busy thus was not able to post new articles to this blog.

If you happen to read this, then thank you. Most of the time i wonder and I ask myself "Is anyone out there reading my blog beside me, my wife and my brothers)". Truth be told, this blog is aimed at employees like me. Someone who aims to save, earn more and learn. Plus, my entries serves as a reminder to myself.

Like a written contract, this blog serves as a reminder to my forgetful mind; about what i said i'll do, what i have been doing and what i will do next to make sure i reach what i have intended to do.

Without a topic in my mind, i decided to give you an update on my mutual fund.

If you remember, I started putting in a regular amount in a mutual fund. To recap for those who haven't read my previous posts, investing in mutual fund is similar to buying a public company's stock. You  own a certain number of shares based on the amount of your investment. Share price fluctuates depending on the performance of the fund. Performance of the funds depends on the performance of the companies that comprises on the fund. It is becoming an co owner of publicly traded companies indirectly by owning shares of mutual funds. 

I decided to invest following the belief that stock prices increase through time supported by a good company performance. I also invest in the stock market but i don't really have the time and expertise of mutual fund managers so i have decided to try mutual fund.

The table above shows that I've put in P5,000 every month to purchase shares of mutual fund. You'll notice that my P5,000 purchased fluctuating number of shares. That's because share price of mutual fund fluctuates. My P5,000 bought more shares when prices are down and less shares when prices are up. It is worth noting that from Jan - June, the general price trend is upward.  As of this post, the share price (called Net Asset Value per share or NAVPS) is P2.8319 per share. Assuming that today I no longer want to invest, the company who manages the mutual fund will pay me P2.8319 per share (excluding charges). Overall, my money earned 8.5%. Not much but definitely way above what bank deposits offer.

What's Next

I plan to continue putting in P5,000 plus I really need to find another source of income to increase that my monthly investment. If you look at it, my total investment is just enough to buy me an ipad. Not much and definitely low to sustain a living. But it is a start. If you are interested to learn and invest too, comment on this post or follow me on twitter (@accabiao). I don't earn from sharing what I know but more than willing to help.

From Evernote:

Personal Financial Planning

I was fortunate to attend Coffee Talk yesterday at Social Hall B of One Serendra. The COFFEE TALK is one of BPI's Preferred Banking Enrichment Series wherein financial management professionals from BPI Asset Management Group shares and enriches its clients understanding of the latest economic and business trends.  As expected, the coffee talk also included presentation of different investment options that caters to various individuals depending on each investment horizon and risk appetite.

Personal Financial Planning

The talk presented a simple definition of personal financial planning through four simple steps

1. Determining what you have
2. Knowing what you want
3. Finding out how much you need
4. Making a plan to achieve what you want

The four simple steps are very clear. The statements are also simple that everyone can understand and relate to.

Determining What You Have

This process involves making a personal listing of income and expenses and assets and liabilities. A simple inventory taking of sources of income and list of expenses. The difference between income and spending is the money available for investment. For an employee, income is the bi-monthly salary and expenses are money spent for food, rent, telephone bills and other expense. The excess of income against expenses is the money left that can go to savings or investment.

Listing of assets and liabilities can be accomplished by writing down your current cash, savings in the bank and other investments as part of assets. Liabilities on the other hand pertain to credit card dues, money you borrowed from your friend and other payables. Cars and Homes are assets too but they may also be liability. For simplicity, i don't list down cars and homes as assets since they don't generate cash fast. 

After doing the exercise, this should give you your financial standing. 

Knowing What You Want

This step is knowing what you want to do with your life and future activities. Taking a long vacation in Europe can be one. Enrolling your children to a well known and reputable university is also a goal. For me, buying my own house and lot. There are many goals to choose from but may I suggest to limit it to five goals and write the down.

Finding out How Much You Need

The third step is putting value in your goals. How much money will you need for that vacation, for the tuition fees and that house and lot. 

Making a Plan (& executing it) to Achieve What You Want

Knowing what you want, then how much you'll need plus your current financial status will tell you where you stand at this point. Your savings/investments might not be enough thus you have to make a plan how to get that money you need by the time you want to have your goal.

Summary

Financial Planning seems easy but it is tough. Tough but doable. 

For starters, i suggest tackling that income and expenses list then your assets and liabilities statement. You have to know first your standing before moving forward.