budgeting 101

the third part of our financial literacy seminar in SFC is budgeting 101.

here are some tips on how to take care of your finances.

1. give first the ten percent (10%) of your net monthly income (less tax) to God as tithes. this is a priority. remember it is God's money as discussed in our previous topic on financial stewardship. so don't focus on the 10%, but on the 90% we keep for yourself.

note: if the situation is really tight then you can ask for an excuse. you can give to God whatever amount you can. after all, what is important is the condition of your hearts when you give.

2. allot another ten percent (10%) to your retirement fund. why retirement fund? because you cannot just entrust your future from your Social Security System (SSS) or Government Service Insurance System (GSIS) monthly pension when you retire. it may not be enough to sustain your daily expenses specially your medication. remember, you may live longer than you expected. invest your retirement fund through long term financial vehicles such as mutual funds, bond funds, etc.

note: if your money is not enough to buy shares from mutual funds, you can save it first in your preferred bank or cooperatives. when your savings is enough then transfer it to financial institutions that offers financial management like mutual funds. whatever happens don't touch it. you should only use it when you retire.

3. again allot another ten percent (10%) for your emergency fund. this is to ensure that your retirement fund is safe from your emergency needs. put this to your preferred bank or cooperatives to maintain the liquidity of your money.

note: for emergency purposes, you will need at least six (6) times equivalent of your monthly income.

4. live on the remaining seventy percent (70%). yes, you read it right--live on the remaining 70% of your monthly income. you will need to prioritize your expenses. avoid unnecessary spending. delay self-gratification. learn to simplify your lifestyle. don't spend more than what you earn. that's suicide. if you think that you cannot do it, think again. if there's a will, there's a way. you must have will power, determination, discipline, patience and hard work.

note: if your expenses overshoot your budget and you still need to get more money to augment your expenses, try looking for other means. try selling anything. as long as it's legal and moral. remember, money problems are just mind problems. you can solve it.

5. ensure your family. your insurance is for your future needs if you live longer. but what if you die young or become physically handicapped? what will happen to your family? what will happen to those people that are dependent on you and your income? don't leave them helpless. if possible, get a life insurance to protect your family/dependents.

note: to compute on how much insurance that you really need to get, multiply your annual expenses by 10.

source: Bo Sanchez, 8 Secrets of the Truly Rich

financial stewardship

i believe that God created the universe (Genesis 1:1). everything in this world is God's (Psalm 24:1). everything that i see, i touch, i feel, i own are His.

God gave man the authority to govern, utilize and consume all these things. and therefore, we are all God's stewards. (Psalms 24:1. Haggai 2:8) we owe our prosperity to God. (Proverbs 10:22. 1Corinthians 4:7. Ecclesiastes 5:18)

as Christians and servants of God we should know how to handle our finances and learn to spend wisely. we should learn how to create abundance and multiply God's blessings. we should be the instrument of God in distributing His wealth to others especially those who are in need.

why God gives us blessings?

1. to glorify God. Proverbs 3:9 says "honor the Lord with your wealth". God, the source of our wealth, provides us money, possessions and richness not just for our own sake. we should use His blessings to serve Him and to finance His works on earth.

tithing. according to Malachi 3:7b-10, "we rob God if we don't tithe". tithing is a concrete expression of gratitude to God. we give back to God a part of His gift in acknowledgment of His care, protection and love. the tithe consists of 10% of an individual's income after taxes from whatever source. example: wages, rents, investments, business, etc.

the church and its communities need our finances to further Christian mission and to help our brethren. this will be used for members' formation, community activities, administrative expenses, etc.

compute your tithe from your total net income (less tax, etc.).

2. to bless others. we should learn (not force) the virtue of sharing. we receive wealth so that we can share it to others. if only all people in the world will learn the principle of sharing there would be no poor people or poor country in this world. there will be enough for everyone. let's share our wealth with the poor and the needy.

model: the mission and vision of Gawad Kalinga (GK): "less for self, more for others, enough for all."

2.1 resource sharing. it means lending our material resources to care for the specific needs of our others and sisters (Deuteronomy 15:7-8). it is done by means of sharing our material goods or by providing interest-free loans to others in need.

2.2 almsgiving. it means giving money or goods to the needy and poor.

giving is receiving. when you give, you actually receiving God's grace and making yourself an instrument of God in giving His blessings to other people. God uses His people in distributing His wealth and not through some kind of magic. we, as His children, are the key in opening God's door of abundance to His people.

3. for our personal use. we are God's children. our God is the King of all kings. it is only righteous that we share the abundance of His richness. we need these blessings to satisfy our needs and wants. we need to provide for ourselves, our families and our future.

God loves us so much. He doesn't like seeing us buried in debts. He doesn't want us to suffer from poverty. let's take care of His blessings. let's save. let's invest. let's put our money where it can multiply and grow exponentially. invest in mutual funds or create businesses. let's compound His gifts and be a blessing to others.

source: CFC Singles for Christ (SFC) Expanded Talk Outline on Financial Stewardship

move! act now!

"nothing happens unless something moves."

at long last, i made an appointment with an agent from a mutual fund company. we will meet on sunday afternoon to discuss the details on how we can invest in their stock or equity funds.

why mutual funds?

because mutual funds are managed by professional money managers. by owning shares in a mutual fund instead of buying individual stocks or bonds directly, my investment risk is spread out.

stock or equity funds

stocks funds are considered risker than bond funds (although certain bond funds can be very risky) and are used for growing your money. money market funds and bond funds typically provide returns just a percentage or two above inflation, but stock funds should do much better over long periods of time.

inflation fighter

for the Philippine investor, inflation is a particularly serious challenge since the Philippines has a high inflationary environment. it's worth noting, though, that the average historical rate of return of the Philippine market in the past ten years largely outpaced the inflation averaging in the double-digits.

that being the case, your savings need to grow at a rate that will outpace inflation. otherwise, you will be losing valuable purchasing power from the capital that you've worked so hard to accumulate. investing in stocks of publicly traded corporations through the stocks or equity fund can provide you with built-in protection against the erosion of your savings over the long-term.

long term investment

when you invest in a mutual fund, you are investing in a diversified portfolio of securities that normally fluctuate in value. to obtain the best results, they should generally be regarded as long-term investments which means they should be held for seven years or more.

the securities markets in which mutual funds invest tend to rise and fall over the short-term, as well as the value of your investment. your ability to withstand short-term volatility, especially on the down-side, will generally result in greater returns over the long-term. when the value of your investment decreases, and it will from time to time, be patient.

that is why this kind of investment is very suitable for my retirement fund. but since i also up to capital gains, i'm still investing in stocks through online trading. this may take sometimes but i promise that this month will not last that i will put my hard-earned money to work for me.

Think Rich, Pinoy! Millionaires Club

we'll be having our second meeting for our group in TRPMC Makati Club tomorrow. though i haven't look for a possible property for our project (as our individual assignment), i think we have so much in the agenda that we could handle other tedious things like this.

looking for a good foreclosed property in banks is so time consuming and very frustrating. it's not enough to look through the list, you still need to see it for yourself if the property is worth buying.

next time i will share to you the things you should consider in buying a property. have a good time!

mutual funds & online trading

up to now, i haven't invested yet to stock market or mutual fund. gee, its been a week since my first post this year and still i haven't done anything. i was struck by "analysis paralysis".

though i already made up my mind on what mutual fund company and agent should i put my hard-earned money into, i still yet to contact them.

mutual funds

there are several types of mutual funds in the Philippines. the common types are:

1. stock or equity funds - invest in shares of stock of Philippine corporations listed in the Philippine Stock Exchange (PSE). equity funds offer the highest possibility of growth among all mutual fund types, but they also have a corresponding high amount of risk.

2. bond funds - invest primarily in fixed-income securities such as bonds or treasury notes issued by the Philippine government and commercial papers issued by reputable Philippine companies. since these bonds are normally guaranteed, the possibility of loss is very low. investing in bond funds provide capital preservation while maintaining conservative asset growth.

3. balanced funds - is a mixture of equity and bond funds. the high potential growth of equity investments is tempered by the conservative growth of fixed-income securities. obviously, the return of a balanced fund is normally somewhere between the return of an equity fund and a bond fund.

4. money market funds - are similar to bond funds because they also invest in fixed-income securities and the growth of the fund is conservative. the main difference lies, however, in the term of money market fund investments, which is usually short-term such as one year or less.

i'm very optimistic this year so i will choose to invest in equity funds.

online trading

because of the technology and the internet people can now make orders online and put them in control on when to sell or buy stocks. you don't have to wait for your broker to take your orders over the phone. just trade stocks right at your fingertips. all you need to do is to check the facilities, terms and requirements. as of now i'm still weighing my options between two brokers.

five factors to consider in choosing an online stock broker

1. commissions. online brokers or even the conventional brokers charge a fee each time you buy and sell. but most online brokers charge lower commission rates than live brokers. obviously you want the lowest commission rate which is 0.25%. this is the lowest allowable commission rate set by the PSE.

2. minimum initial deposit. you should check the online broker's minimum initial deposit. as a newbie, you want to get your feet wet with as little money as you can afford to play with. there are online brokers that require P5,000 only. you should also check the minimum account balance as well as the penalty for going below this level.

3. features. DIY or do it yourself, is the main attraction of online stock trading and investing. of course, you want to have all the tools necessary to make the best decision to buy or sell. you need to take a look at the range of services they offer in terms of research, their online tools and functionalities and other products which can enhance your trading experience. look for streaming charts and data, real-time stock quotes, financial news, analytical tools, and research reports. other offers margin financing, allowing you to leverage returns through a flexible and convenient trading line at competitive rates.

4. ease of use. you can have the lowest commission and all the tools you want but if the user interface, site availability, and speed of page loading suck, then you're in for a terrible experience. ask for a demo account to see if you like how smoothly the entire process goes before you commit.

5. customer support. you would also feel much better if your online broker will pick up the phone immediately and quickly responding to your queries and complaints as needed. so get the best customer service possible.

now, i have to act as quickly as possible and invest my money before it disappears on thin air.

happy investing!

my to-do list this 2008

here's my to-do list this 2008. better write it down so that i will not forget anything.

a. finances. this is inspired by Bo Sanchez' 8 Secrets of the Truly Rich.

1. to invest. during the last month of 2007, God bless us enough that made us think to start investing. we will divide our investment into two.

1.1 stock market. i've been playing the Stock Trading Game of the Philippine Stocks Exchange since november 2006. it's more than one year so i think it's about time for me to test the waters. though stocks are very volatile it is where the return rate is very high. i will consider the online trading.

1.2 mutual funds. we're currently looking for a mutual fund company that we can entrust our initial investment. if i don't succeed in my bid in the stock market at least in mutual funds our money is in good hands with the investment experts. we will include here the aguinaldos received by our two kids last Christmas.

2. to save. though my combined earnings with my wife is not that much, i think we can still allot some for our savings. this will serve as our emergency fund and at the end of the year we will add this to our investment

2.1 budget. we should put in writings all our expenses and allot our income just to make sure that our expenses would not exceed our combined monthly income.

2.2 prioritize. to minimize our expenses we will prioritize our buying according to its importance and our need.

action plan: from our net income (gross income less tax) i will take automatically 10% for our tithes, 10% for our investment and 10% for our emergency fund for a total of 30%. we will live within the remaining 70%. we can do it! ika nga, "kapag maikli ang kumot, matutong mamaluktot".

3. to explore. i will still look for other business opportunities that we can ride into to further boost our stock.

3.1 franchise. last year i won a Kettle Korn Negosyo Package from attending the Go Negosyo, Go Gobyerno at the Philippine Trade and Training Center, Pasay City. this year, i will claim my prize and try it.

3.2 foreclosed properties. i've read Robert Kiyosaki's Rich Dad, Poor Dad and Larry Gamboa's Think Rich, Pinoy! and Grow Rich, Pinoy! i also attended Larry's Think Rich, Pinoy! Workshop and played Cashflow 101 Boardgame last year. i've met new friends and future partners in this real estate business. hopefully, i can come up with my first property soon.

3.3 benefits. we will study how we can avail the products and services of different government institutions like the GSIS and PAGIBIG and use it to our advantage.

4. to ensure our future. no one really knows what lies ahead. only God knows. so whatever happens either we live longer or we live a short life we are insured. we will be at peace knowing that our loved ones will be financially secured. hopefully we still have enough savings for this.

b. service

1. my advocacy. as part of my service, i will continue my financial literacy advocacy for the poor and the youth--diskarte, Pinoy! i'll start with the members of the SFC in our chapter, to the different ministries and organizations in the parish, then to the different puroks and so on... so help me God. hehe

2. plan. we will schedule our planning workshop to plot our activities this year for the Singles for Christ (SFC) members in bicutan.

3. refresher. i will try to attend Bukas Palad Online Community Choir in EDSA Shrine to further improve my knowledge in singing and to learn new songs. i will try to echo it to the Angking Tanglaw Choir (ATC).

4. atc facelift. we will change the ATC into a music ministry. we will include the instrumentalists to serve during mass. live band tayo! hehe

c. family

1. less tv. television shows are so dominating that we became addicted to it. we should limit our watching time to give more attention to our kids, especially to my first born, nico.

d. others

1. drivers license. i will have my drivers license this year no matter what it takes. hehe.

to be continued...