The Long View : Making ends meet
Interesting read from Manuel L. Quezon III
[source]Updated 09:06am (Mla time) Oct 04, 2004
By Manuel L. Quezon III
Inquirer News ServiceMONEY is a mystery. It is so essential and yet making it can be quite a challenge. Saving it, in our hand-to-mouth economy, seems virtually impossible. For those with business background, making money may be a little less tough. But for those who don’t have such background, making money, spending it wisely and putting something aside for either a rainy day or a comfortable retirement may seem an impossible dream.
There are, however, people who have made “making money easier for others” their business. One such person is Efren Ll. Cruz. Over the past 20 years, he has been involved in various aspects of fund management, the last nine years in the mutual fund industry. It was in mutual fund that
Cruz learned a lot of lessons about personal financial planning. For some time now, he has taken to teaching the lessons he learned by conducting personal financial planning seminars for his mutual fund clients.It became clear to Cruz during his seminars that many working people do not have access to the many ways there are for making money and saving it. It’s easy to tell people to save and live within their means, but what of the details that modern living requires? How to compute net worth? What exactly to expect from their savings or checking account? Why do checks bounce? Or where and how to buy a bond? How to compute its returns? Making sense of the growing number of pre-need plans available-all these things can make the average person dizzy and disappointed. Investment professionals take for granted these details which, to most Filipinos, are frustrating and intimidating.
This realization led Cruz to write a book on personal finance. From pre-need plans to credit cards, from bonds to stock market, the book is a clear source of information for young urban professionals, overseas Filipino workers, or anyone who wants to get a handle on their financial future in a Philippine setting.
Aside from the book, readers who register their copy at the Platypus website (www.platypus.ph) are sent electronic worksheets to take the hassle out of number crunching and help them figure out which pre-need plan, loan, or insurance policy makes the most sense for them. One worksheet even helps parents find out how much they need to save for their child’s college education.
The genius of Cruz’s work is that it addresses issues and problems that exist in the real world, for Filipinos.
Here’s some salient points from his book: From Chapter 2-”Milestones in your road map”: “The best time to do financial planning is now-not tomorrow nor New Year’s Day but now! While you’re young you should:
“1. Pay yourself first by saving. Developing the habit of saving at an early age will be of great use in later years when there will be strong temptations to draw more from savings rather than add to them.
“2. Get as much life insurance as you can as early in life as practicable. Be aware, however, that you may have to change your beneficiaries as you get older and start your own family.
“3. Invest to better beat inflation. The beauty of investing, especially if you invest in fixed income instruments, is the magic of compounding. Compounding simply means that the interest on your investment earns interest itself.
“4. Avoid debt as much as is practicable. But if you do have to incur debt, shop around for the best rates, ask for the effective interest rate, get the shortest repayment period your income can afford, and repay debts earlier if you get windfall income.
“As you get older, events in your life will dictate some change in the way you run your finances. You may get married, raise a family, buy or sell a home, start your own business, fund a college education and/or fund your own retirement. The key to coping with all these milestones lies in the financial habits that you nurture early on in life.”
From Chapter 3-”Who NOT to approach”: “The Pinoy’s naivete when it comes to financial planning unfortunately leads to many problems. For instance, many scams plague the country, taking advantage of the Pinoy’s urgent need to get out of poverty.
“Avoid pyramiding. Pyramiding is an operation whereby the sales agents earn primarily from recruiting other sales agents instead of selling products or services.
“A Ponzi scheme is another scam. The scam was named after Charles A. Ponzi, an Italian immigrant to the US who defrauded hundreds of investors in the 1920s. A Ponzi is a scheme whereby a person is promised an exceedingly high return on investment, when the money used to pay such returns merely comes from the principal investments of succeeding investors.
“On the debt side, avoid contracting too much consumer debt, like abusing credit card debt. Abusing the use of credit cards gives you a false sense of wealth since you don’t immediately feel the drain on your resources when you swipe your card. You just get the unpleasant surprise when the monthly billing arrives.
“Also on the debt side are many informal micro-financing operations run by individuals and who charge very high interest rates. These persons can charge anywhere from a nominal rate of 3% to 20% per month with the interest based on AOR and/or interest paid for in advance (in other words, deducted from the loan proceeds from the start of the loan).”
If you think these nuggets are pure gold, think of what the whole book has!
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FULL disclosure: “Pwede Na! The Complete Pinoy Guide to Personal Finance” is published by Platypus Publishing, in which I am a partner. For copies, please contact Shiella Ducay at + 630916 3005672 or e-mail sducay@platypus.ph for details. Or check out http://www.platypus.ph.