PLAN YOUR FINANCES EBOOK - MJ

Plan Your Finances APPLY! Assess the life insurance you need by filling in the table. An example was done in the second column. Description Example Yours 700,000 Your Annual Income 7,000,000 10x Your Annual Income 16 11,200,000 Number of Working Years 11,200,000 Your Economic Value 3,000,000 (annual income x no. of working years) 8,200,000 Desired Life Insurance Coverage Current Life Insurance Coverage Life Insurance Coverage Needed (Desired Life Insurance Coverage minus Current Life Insurance Coverage) 85 This is your personal copy. Illegal distribution is punishable by law.

Protect Yourself Assess the health insurance you need by filling in the table. An example was done in the second column. Description Example Yours 700,000 Annual Income 3,500,000 1,200,000 5x Your Annual Income 2,300,000 Current Health Insurance Coverage Health Insurance Coverage Needed (Desired Health Insurance Coverage minus Current Health Insurance Coverage) 86 This is your personal copy. Illegal distribution is punishable by law.

Chapter 7 Eliminate Debt Ten years ago, I was enticed by Sheena, a credit card agent, to apply for several credit cards. Since I was financially illiterate then, I believed Sheena when she said that the credit cards could be my emergency funds and with them, I would have additional purchasing power. I remember I got approved for seven credit cards and I would use them to swipe for our groceries, items on sale, or mindlessly using them to buy non-essential things. After more than a year of using them, I noticed that my husband and I cannot pay the full amount due for the cards and we were paying more than 6,000 interest per month which ballooned our monthly dues. When the outstanding balance of our loan exceeded our monthly combined earnings, I know I had to do something or we would be in deep financial trouble. I decided to borrow money from a colleague and offered to pay monthly interest much less than the interest we were paying to the credit card companies. I also promised to pay him when my husband and I received our 13th month bonus. Fortunately, my 87 This is your personal copy. Illegal distribution is punishable by law.

Eliminate Debt colleague trusted me and let me borrow money. When my husband and I received our 13th month bonus, I paid him the amount I borrowed with the interest I promised. One of the crucial steps to financial freedom is to eliminate your debts as soon as possible. Debts take away your hard-earned money because of the interest you pay for the loan. Credit card loans are common for Filipinos for purchase of gadgets, appliances, travel tickets and other form of recreation. Again, purchase of these things are not bad especially if they form a part of your goals but if in doing so, your budget will be disrupted and you would be forced to pay huge interests, you should refrain from buying them. Kurot (Pinch) or Dakot (Handful)? A simple guide to know if it is okay to buy a non- essential thing or not is the concept of “kurot” or “dakot” presented by Vic and Avelyn Garcia in their book entitled “Kontento Ka Na Ba Sa KaPERAhan Mo?” As a rule, buy a non-essential thing if it is a “kurot” in your savings. Do not buy if it is a “dakot” in your savings. Let me illustrate it with the story of Aida and Lorna. Aida and Lorna wanted the latest Samsung phone model which costs around 50,000 pesos. Aida 88 This is your personal copy. Illegal distribution is punishable by law.

Plan Your Finances has 1 million savings in the bank while Lorna has only 60,000 savings. Can Aida buy the phone? Yes, she can since the phone’s cost is only five percent of her savings and it can still be considered “kurot” or a small loss on her savings. Of course, it is important to consider that she still has enough for her emergency fund after the purchase and that she doesn’t need her savings for something more important. For me, 10 percent (or less) is a good percentage of savings which is considered a “kurot.” Can Lorna buy the phone? She can but it is not recommended because the cost is 83 percent of her savings and is definitely a “dakot” or a big loss on her savings. If Lorna buys the phone she would definitely not have an emergency fund and her phone would be surely sold at a lesser cost when an emergency strikes. Interest in Loans The amount earned for the use of money lent is called an interest. It would be nice if interest is given to us not being paid by us. Banks give us an interest of 0.25 percent per annum for our savings account because we are allowing them to use our money while we do not need it. If you file for a personal loan in a bank, they in turn charge you around 14 percent per annum for the use of their depositor’s money. So if you 89 This is your personal copy. Illegal distribution is punishable by law.

Eliminate Debt have paid your loan in two years, you have lost 14 percent of your earnings per year to pay for the interest. Credit card companies charge around 3.5 percent interest per month (or 42 percent per year) for the unpaid balance from previous months. This interest can be seen on the statement of account as finance charge. The finance charge could also include late payment fees if you did not pay on or before the due date. If you pay in full and on time every month, credit card companies do not charge any interest. My husband and I still maintain one credit card for convenience in paying our utility bills and even insurance plans but this time, we treat our credit card as cash. We pay the total amount due on time and in full to avoid charges. We don’t swipe it for an item if we don’t have budget for it. I would recommend though to pay in cash especially for your groceries and other essential needs if possible. If you don’t monitor the use of your credit card well, you could be surprised of the amount to be paid every month. Housing or car loan are also common loans of a typical working Filipino. Every breadwinner would dream of a good car and nice home for their family. For most Filipinos, owning a house or a car are 90 This is your personal copy. Illegal distribution is punishable by law.

Plan Your Finances symbols of financial success because a person needs more than one million to own one. A pre-selling condo at the center of Baguio City with about 20 sqm floor area would cost at least 2.5M pesos today. A sport utility vehicle (SUV) would cost around 1.5M pesos. If you have a house or car, it means you can afford having one and technically you are a millionaire. It is rare that people buy a house or a car in cash. More often, Filipinos resort to loans. Amortization Schedule Whenever you file for a loan from a lending institution, you are provided an amortization schedule or table. An amortization table shows the amount of your loan which we call the principal and interest that comprise each payment until the loan is paid off. You would be surprised to know that for your initial payments, majority of what you pay goes first to the interest. Let me show you an example of a part of the amortization table for a personal loan my husband filed to start building our house way back in 2008. He filed a loan of about two million pesos then. The lending institution charged 10.5 percent interest per annum. 91 This is your personal copy. Illegal distribution is punishable by law.

Eliminate Debt My husband is paying the loan semi-monthly at 13,477 pesos. The number of payments is 240 payments (or 10 years to pay). I only showed his one- year schedule of payment here for illustration purposes. Table 1. Amortization Schedule No Due Date Amount Due Balance Principal Interest Prin- Interest Total Total cipal 1 11/15/08 4,727 8,750 13,477 1,995,273 1,225,703 3,220,976 2 11/30/08 4,748 8,729 13,477 1,990,526 1,216,973 3,207,499 3 12/15/08 4,768 8,709 13,477 1,985,757 1,208,265 3,194,022 4 12/30/08 4,789 8,688 13,477 1,980,968 1,199,577 3,180,545 5 1/15/09 4,810 8,667 13,477 1,976,158 1,190,910 3,167,068 6 1/30/09 4,831 8,646 13,477 1,971,327 1,182,265 3,153,591 7 2/15/09 4,852 8,625 13,477 1,966,474 1,173,640 3,140,114 8 2/28/09 4,874 8,603 13,477 1,961,601 1,165,037 3,126,637 9 3/15/09 4,895 8,582 13,477 1,956,706 1,156,455 3,113,161 10 3/30/09 4,916 8,561 13,477 1,951,790 1,147,894 3,099,684 11 4/15/09 4,938 8,539 13,477 1,946,852 1,139,355 3,086,207 12 4/30/09 4,959 8,517 13,477 1,941,892 1,130,838 3,072,730 13 5/15/09 4,981 8,496 13,477 1,936,911 1,122,342 3,059,253 14 5/30/09 5,003 8,474 13,477 1,931,908 1,113,868 3,045,776 15 6/15/09 5,025 8,452 13,477 1,926,884 1,105,416 3,032,299 16 6/30/09 5,047 8,430 13,477 1,921,837 1,096,986 3,018,822 92 This is your personal copy. Illegal distribution is punishable by law.

Plan Your Finances 17 7/15/09 5,069 8,408 13,477 1,916,768 1,088,577 3,005,346 18 7/30/09 5,091 8,386 13,477 1,911,677 1,080,192 2,991,869 19 8/15/09 5,113 8,364 13,477 1,906,564 1,071,828 2,978,392 20 8/30/09 5,136 8,341 13,477 1,901,428 1,063,487 2,964,915 21 9/15/09 5,158 8,319 13,477 1,896,270 1,055,168 2,951,438 22 9/30/09 5,181 8,296 13,477 1,891,089 1,046,872 2,937,961 23 10/15/09 5,203 8,274 13,477 1,885,886 1,038,598 2,924,484 24 10/30/09 5,226 8,251 13,477 1,880,660 1,030,348 2,911,007 Total Principal Payments: 119,340 Total Interest Payments: 204,105 Total Payments: 323,445 As you can see from the table, my husband’s payment of 13,477 pesos was divided into two payments – the principal and the interest. I highlighted the first interest paid. For his payment of 13,477 pesos, he paid an interest of 8,750 pesos, so meaning 4,727 pesos went as payment of the principal amount. It means around 65 percent of his payment went to the interest and only 35 percent went to the principal. I highlighted the principal amount 1,995,273 pesos and the interest 1,225,702 after the first payment. My husband only filed for a two million pesos loan since 4,727 pesos was deducted from the principal of two million pesos, his principal amount was 1,995, 93 This is your personal copy. Illegal distribution is punishable by law.

Eliminate Debt 273 pesos. Notice though that instead of paying only two million pesos, the total amount he would be paying is around 3.2 million pesos. This implies that the total interest he paid for the two million pesos loan is 1,234,453 pesos (1,225,703 + 8750), that is, he would have paid 38 percent [(1,234,453/3,234,453)x100] more if he finished the loan in 10 years. Notice that the amount to be paid is constant for the succeeding payments but the amount that goes to the interest decreases through time. In his second payment, the interest paid is 8,279 pesos. In every housing or car loan, this is always the case. The lending institution uses diminishing interest concept. Much of what you initially pay goes to paying the interest for the loan. After 24 semi-monthly payments (or one year), where did my husband’s money go? I totaled the amount that went to the principal, interest and total amount paid. As shown, for a payment of 323,445 pesos, 119,340 pesos went to the payment of the principal loan amount while 204,105 pesos went to the payment of the interest. Robert Kiyosaki is right in saying that a house is not your asset if you are still paying for its amortization but that of the institution which is lending 94 This is your personal copy. Illegal distribution is punishable by law.

Plan Your Finances you the money to purchase or build the house. The mortgaged house (or car) is actually your liability since it is taking away money from you. If my husband and I have known this before we built our house, we wouldn’t have gone for a house loan. We would rather save and invest first in paper assets and redeem capital gains to have funds for the house construction. Ways to Eliminate Loans I hope by this time you are convinced that debts will take away much money from you and will not help you become financially free. Decide now to eliminate them as soon as possible. The first step is to list all your current debts. If you have a housing, car or personal loan from a lending institution, ask for an amortization schedule. You need to be aware first of how much do you need to pay before you start planning how to pay them. The next step is to make a repayment plan. Arun Gogna, in his book with Bo Sanchez entitled “Kung Gusto Mong Yumaman, Huwag Kang Mangutang,” listed three ways on how to create a repayment plan. Let me share with you what he suggested. 95 This is your personal copy. Illegal distribution is punishable by law.

Eliminate Debt Plan 1. The Debt-that-Makes-You-the-Maddest Plan In this plan, Arun suggested to eliminate first the debt that upsets or agitates you the most. This could be the debt you have from a friend, neighbor or a relative who keep on bugging you to pay for your loan. By doing so, Arun said that this will free you up from negative emotional energy so you can work on your other loans. Plan 2. Snowball Plan This is based on the baby steps to pay off debt by financial guru Dave Ramsey. In this plan, you have to rank the debt you listed from smallest to biggest then eliminate the smallest loan first. For some people, this plan works since they are taking small steps to being debt-free, not overwhelmed by doing it. Plan 3. Laddering Plan In here, the loan with the highest interest should be eliminated first. Logically, this should be the recommended plan since you would minimize the amount of interest paid, meaning lesser financial obligations on your part. This is the plan which my husband and I took. We eliminated our credit card debt immediately since it has the biggest interest. Then we devised a way to eliminate his personal loan. Instead of paying off our loan in 10 years, we terminated our 96 This is your personal copy. Illegal distribution is punishable by law.

Plan Your Finances loan in six years, saving the interest that we should be paying in four more years. How did we do it? We listed our sources of funds and realized that we can set aside our yearly bonuses and withdraw from the fixed savings account of his cooperative which had accumulated a significant amount because he was setting aside funds for it since his employment. While we were saving up to pay up for the loan, I was convinced to get an insurance for me and my husband because the house itself was the collateral for his personal loan. He did not have an insurance for the loan and I realized then if something would happen to him or me, the house would be taken from our sons. The insurance we got would guarantee that the lending institution would not get the house from our sons if ever we died before the loan is paid up (of course, we fervently prayed that this would not happen). It was a security that our hard-earned money will not go to waste. You can choose the repayment plan that would work for you. If you are married, I suggest you talk it out with your spouse. Eliminating your debts is a crucial step in your journey to financial freedom. The more support you have from your loved ones, the easier the journey will be. 97 This is your personal copy. Illegal distribution is punishable by law.

Eliminate Debt APPLY! Decide now to eliminate your debt, if you have. Follow the steps below. 1. Make a list of your existing loans. Get an amortization schedule from your lending institution. For credit card loans, your basis will be the statement of account that the credit card company issues. You can fill out the following table. After listing, rank the loan on the last column (Priority) with 1 as the first to eliminate. Type of Out- Total Target Priority Loan standing Interest Date to Balance Eliminate to be Paid Loan 98 This is your personal copy. Illegal distribution is punishable by law.

Plan Your Finances 2. List the loan with Priority 1 as first. Devise a way on how to eliminate your loans. List your sources of funds. Apply what you learned in Chapter 3 on how to minimize expenses and in Chapter 4 on how to create additional cash flow. You can sell some non-essential items you have accumulated and have no greater use to you now. Another source of fund could be some of your investments which have grown and you can now redeem. You can ask a relative or friend who will be willing to let you borrow money even if you pay for a smaller interest so you can pay off your debt which has a bigger interest. Make sure though that you do not touch your emergency fund. Make sure that you have enough insurance for your loans. Pray about it and discuss it with your loved one. Type of Loan How to Eliminate 99 This is your personal copy. Illegal distribution is punishable by law.

Type of Loan Eliminate Debt How to Eliminate 100 This is your personal copy. Illegal distribution is punishable by law.

Chapter 8 Grow Your Money Do you want to retire comfortably? Do you want to give your children the best education? Do you want to have more than enough budget for your dream travel destination? If the answer to these questions are all yes, you definitely need to know how to grow your money. Growing your money requires both discipline and skill. Develop the discipline of setting a portion of your income on a regular basis for your long-term goals. Start acquiring the skill of investing by finding reliable financial mentors and by doing recommended actions. A reliable financial mentor would be one who is doing what he preaches. If your financial advisor does not have growing investments and is buried in debt, he is not a reliable financial mentor. What is an investment? An investment is an asset acquired for the purpose of generating income in the future. Since income will be generated in the future, one has to be careful with where to invest in. There are many unscrupulous people nowadays who would let you invest in scams which do not intend 101 This is your personal copy. Illegal distribution is punishable by law.

Grow Your Money to deliver what they promised. Their intention is to get your money for themselves. As a rule, before you invest, you should understand your investment plan and investigate about the stability and integrity of the investment company. I have a former student who told me that she and her husband invested large amounts of money in an investment scam years ago and lost a lot of money. As a result, they had to go to work outside the country to pay off their debts that they incurred because of that wrong investment. Since they did not do research before investing, instead of growing their money, they lost their hard-earned money and even got into debts. Investing early is the best way to grow your money. For people who have some information about investments, they would ask me, “What is the best investment plan?” I cannot really give them a straight answer because the best investment plan depends on several factors such as their investment horizon and risk- appetite. Investment Goal and Horizon When investing, the purpose why you are investing in the first place should be clear. 102 This is your personal copy. Illegal distribution is punishable by law.

Plan Your Finances What is your investment goal? Is it for your child’s education, your retirement or your dream travel destination? Go back to your list of WISE financial goals in Chapter 1. It is important that you know clearly your investment goal because that will dictate the type of investment that you should have. Asking yourself when do you intend to achieve your goal will give you an idea of your investment horizon. Your investment horizon could be short-term, medium-term or long- term. Short-term investment would take less than two years to complete and are recommended to be placed in conservative instruments such as fixed income securities. Long-term investment would take more than ten years to complete and are recommended to be placed in aggressive instruments such as equities. For medium-term investment which would take between two to ten years to complete, moderately aggressive instruments such as balanced funds are recommended. Retirement Fund As mentioned in Chapter 3, one of our financial needs is to have enough retirement fund. Dr. Sanjay Tolani said that retirement is our longest vacation. Just like any other vacation, if you want to enjoy it, you have to take the time to plan it. 103 This is your personal copy. Illegal distribution is punishable by law.

Grow Your Money Before our Japan trip, I spent around five months to plan so we could maximize our stay. I researched and asked around the best places to go and to stay. I booked our plane tickets in advance. I read about the mode of transportation to go from one prefecture to another, what unique places to visit and what are the best restaurants where we could eat the food we wanted with the budget and time we had. My family and I were able to travel to Osaka, Tokyo, Hiroshima, Nara and Kyoto for only seven days. We were able to ride the Shinkansen or bullet train several times, enjoyed Japanese food, ate in a revolving sushi bar, enjoyed the Harry Potter ride and other rides at Universal Studios Japan and did a lot more with less than 250,000 pesos budget for a family of four. We did maximize and enjoy our vacation since I planned well. If it took me five months to plan a 7-day vacation, what about our retirement years? Have you asked yourself how long will your retirement years be? If you plan to retire soon, ask what would you do after retirement and how much do you need to comfortably retire? If we do some mathematics, if you plan to retire at age 60 and you would live until age 80, you would need about 10 million pesos retirement fund, assuming that you spend 500,000 pesos per year during your 104 This is your personal copy. Illegal distribution is punishable by law.

Plan Your Finances retirement (500,000 pesos x 20 years is equal to 10 million pesos). To build your retirement fund, Dr. Sanjay Tolani suggested to set aside 20 percent of your income. So if you are earning 50,000 pesos a month, you should set aside 10,000 pesos a month or 120,000 pesos annually for your retirement. If you do this continuously for, let us say, 20 years before your retirement, you have set aside 2.4 million pesos. You should place this amount in instruments which would yield more than 10 percent per annum to meet your retirement fund. For those who haven’t planned well their retirement years, they would face the harsh reality that their retirement fund won’t be enough. And that there are only two options available – to be dependent on their children or relatives, or to find another job after retirement. In my computation of retirement fund, I did not even consider inflation. Inflation is the decreasing purchasing power of money. The average inflation rate last May 2020 was about 2.2 percent which means that if a merchandise costs 50,000 pesos last year, its cost would be equivalent to 51,100 pesos this year. I also did not consider possible expenses relating to sickness or hospitalization during retirement. 105 This is your personal copy. Illegal distribution is punishable by law.

Grow Your Money Education Fund If you have children, another financial need that you have to plan is the education of your kids. My eldest son who is studying in a premier state university in the country has at least 130,000 pesos living expenses annually. This does not include tuition fees and books. Tuition fees and books would cost around 80,000 pesos per year. My husband and I would be spending around 210,000 pesos yearly for his college education if he didn’t have scholarships. Fortunately, he had two scholarships so we are only spending around 15 percent of his total college education cost. For my youngest son who will be going to college in 6-year time, I expect that his college expense would shoot up to at least 333,000 pesos annually since the inflation rate of educational expenses is about 8 percent. Dr. Sanjay Tolani recommends to set aside five percent of your income for child’s education. Every good parent would like to provide good education for their children. It would be best to plan ahead. 106 This is your personal copy. Illegal distribution is punishable by law.

Plan Your Finances Ways on How to Grow Your Money There are many ways to invest but I would focus on paper assets in this chapter. I would be discussing some simple facts about investment in mutual funds and stocks. Investment in these paper assets is the cheapest way of investment these days with high potential for growth. If you are a beginner in investing, I would recommend that you invest in mutual funds. A mutual fund is a pooled fund managed by a fund manager who is an expert in that investment portfolio. The fund manager determines the composition of the fund. As an investor, you buy shares of the fund which is mainly dependent on the amount you invested. Each fund has a net asset value per share (NAVPS) which varies daily (Monday to Friday) due to market changes. The NAVPS is determined by the amount of assets and liabilities of the fund as well as the number of shares. The management fee of the fund manager is incorporated in the NAVPS. Typically, there is a holding period for the fund. The holding period is the time that the money should stay with the investment company. Otherwise, if you redeem or withdraw before the holding period, they would charge you an exit fee. Sales load is also charged 107 This is your personal copy. Illegal distribution is punishable by law.

Grow Your Money when investing in mutual funds. The sales load is the payment for the costs of having and maintaining the fund. You should know these charges so you know what to consider when redeeming your fund. You earn money in a mutual fund if, when you redeem your shares, the NAVPS is higher than the NAVPS when you bought them. The investment companies selling mutual funds post the daily NAVPS of their funds and the historical prices on their websites. They also give a portal for their customers so they can monitor their investments. Since I am a certified investment solicitor of Philam Asset Management Inc. (PAMI) funds, I would give examples of PAMI mutual funds in the succeeding discussions. You can verify the information I will be giving at www.philamfunds.com. Investment Risk Appetite If you have started investing in mutual funds or even in VUL products, you should have answered a risk profile questionnaire to know your investment appetite. An investor can be classified as conservative, balanced and aggressive. There’s a corresponding investment plan for a certain risk- appetite. A person’s risk-appetite refers to the type and degree of risk they can take to meet their investment objective. 108 This is your personal copy. Illegal distribution is punishable by law.

Plan Your Finances Why is there a risk? In any investment, there is a risk that you are going to lose some of your money in a particular period of time since most investments are dependent on economic conditions. So, you have to know how much risk you can tolerate. This can be identified when you answer the risk profile questionnaire. There is a general rule in investments: the higher the risk, the higher expected return. Everyone wants high return but not everyone can tolerate the risks associated with each investment type. Below are brief descriptions of the different types of investors so you have an idea what type of investor you are. You are a conservative investor if you do not want your investments to fluctuate much in value. Your goal is to keep most of your money. If you are a conservative investor, conservative investment instruments like money market funds and bonds are suited for you. You are an aggressive investor if you do not mind fluctuations in your investments as long as you get very high returns. Your goal is to maximize growth of your money even if this would take long to achieve. If you are an aggressive investor, aggressive investment instruments such as equity funds are suited for you. 109 This is your personal copy. Illegal distribution is punishable by law.

Grow Your Money If you like to get a higher return than those offered by conservative instruments but worried with fluctuations in your investments, you are a balanced investor. A combination of bonds and stocks is suited for you if you are a balanced investor. Based on the explanations above, what type of investor are you? You have to understand that before you start your investment journey. Bond Fund Conservative investment instruments include money market funds and bonds. I have mentioned about money market funds in Chapter 5. Let me discuss some basic details about bonds. A bond is a form of fixed income securities. Fixed- income securities are issued by governments, corporations or other institutions to finance their operations. These institutions issue certificates to their investors as proof of their indebtedness and promise to pay interest on a regular or fixed basis and to pay the principal amount upon maturity of the certificate. If you are a conservative investor, you can invest in a bond fund. This fund is managed by an expert in investing in fixed income securities. An example is the Philam Bond Fund, Inc. In 2019, Philam Bond Fund Inc ranked first among the mutual funds in terms of return on 110 This is your personal copy. Illegal distribution is punishable by law.

Plan Your Finances investment (ROI). It had a one-year ROI of 11.54 percent (pesolab.com). You only need 1,000 pesos to start the fund and to add 500 pesos to your investment portfolio anytime. It has a holding period of only six months. This means if you withdraw after six months, you can get the proceeds without any exit fee. If you withdraw within six months, you will be charged with one percent exit fee. This bond fund charges three percent sales load. Let me give you an illustration to understand how to grow money in a bond fund. Joshua invested 10,000 pesos on Jan 10, 2019 in Philam Bond Fund Inc and added 1,000 pesos every month for six months then withdrew his money on February 10, 2020. On the page at the back is a table showing the amount invested, net amount invested, NAVPS bought, and the number of shares he accumulated for this fund. The net amount invested is computed by subtracting the sales load. The number of shares bought is computed by dividing the net amount invested by the NAVPS. 111 This is your personal copy. Illegal distribution is punishable by law.

Grow Your Money Illustration of bond fund investment Date Amount Sales Load Net Amount NAVPS No. of Invested (3% of Invested Shares Jan10 amount (amount 3.9117 Bought Feb11 10,000 3.9673 Mar11 1,000 invested) invested minus 4.0242 2480 Apr10 1,000 300 the sales load) 4.0576 245 May10 1,000 30 4.1606 241 Jun10 1,000 30 9700 4.2151 239 Jul10 1,000 30 970 4.2772 233 TOTAL 1,000 30 970 230 16,000 30 970 227 30 970 3,895 480 970 970 15,520 From Jan. 10 to Jul. 10, 2019, he has accumulated 3,895 shares. The total amount that Joshua invested is 16,000 pesos. On Jul. 23, 2020, the NAVPS is 4.6587 pesos so he can withdraw 18,145.64 pesos (3,895 shares x 4.6587 pesos). For only a year, his money grew by 2,145.64 pesos or about 13 percent. If the NAVPS is lower than the prices when he bought them, it is not recommended to redeem his shares. 112 This is your personal copy. Illegal distribution is punishable by law.

Plan Your Finances Balanced Fund Balanced mutual funds include a combination of bonds and stocks. Stocks are shares of ownership. If you buy stocks of a company, you are considered part owner of the company. Compared to bonds, stocks are more volatile. Its value changes more frequently and the change are very erratic than bonds that is why it is suited for aggressive investors. I would give more information about stocks in succeeding discussions. Balanced funds are suitable for balanced investors and recommended as medium-term investments. One example of a balanced mutual fund is the Philam Fund Inc (PFI). Initial investment for this fund is only 1,000 pesos and minimum additional investment or top-up is 500 pesos. PFI has a 6-months holding period and three percent sales load. If economic conditions are favorable, balanced funds normally give higher return of investments than bond funds. The same with bond funds, the net amount invested is divided by the NAVPS to get the number of shares. The shares accumulate until the investor wanted to redeem. There is growth if the NAVPS at the time of redemption is higher than the NAVPS when it was bought. 113 This is your personal copy. Illegal distribution is punishable by law.

Grow Your Money It does not always follow that the longer time invested, the higher is the return. To maximize returns, it is best to buy at low NAVPS then redeem at higher NAVPS. Equity Fund In an interview with Rex Mendoza, former CEO of Philam Life and current CEO of Rampver Financials, by Bo Sanchez during a Truly Rich Club segment, he compared investing to planting and harvesting. He compared short-term investment to planting rice where you could get to harvest immediately after a year. Long-term investment, on the other hand, is like planting mahogany trees wherein harvesting is between 10 to 20 years. As Rex said, we don’t expect to harvest mahogany trees in three years so we wait. It is the same in our stocks investment – we should not expect our investment to grow in a few years’ time since our investment horizon is more than 10 years. This concept should be understood if you want to invest in stocks or aggressive type of mutual funds. Investment in stocks would be for capital growth for more than 10 years. It is a suitable fund for retirement and for a child’s education. Equity fund is the mutual fund suited for aggressive investors. The investment portfolio 114 This is your personal copy. Illegal distribution is punishable by law.

Plan Your Finances comprised of stocks of different companies as determined by the fund manager who is an expert in equities. When you own stocks of a company, you are considered part-owner of the company and you are entitled to the company’s earnings and assets. If you own stocks of a company, you are called a shareholder of that company. As a shareholder, you are also entitled to dividends which is an amount paid by the company to its shareholders out of its profits. The fund manager has the freedom to choose the composition of an equity fund. If this is the case, he is actively managing the equity fund. There is another type of equity fund which is called the index fund which only follows the performance of a stock index. The stock index is a measure of change in the equities market. In the Philippines, the index is called the Philippine Stock Exchange Index (PSEI) which is dictated by the top 30 corporations in the Philippine Stock Exchange (PSE). The PSE is where the stocks of publicly-listed companies are bought and sold. Since index funds only follow the PSEI, fund management fee is lower than other equity funds. Just like the other types of mutual funds, it is best to buy at low NAVPS and redeem at high NAVPS. You accumulate shares until such time your money has grown or you need your money. 115 This is your personal copy. Illegal distribution is punishable by law.

Grow Your Money The best time to buy stocks is during an economic crisis and the best time to redeem is when you need money and economic conditions are high. If you started investing in equity funds, it is also good to listen to or read business news to be informed. There are many equity or index funds available in the market today. An example is the PAMI Equity Index Fund Inc (PEIFI). This is a relatively new fund which was started only in July 15, 2019. PEIFI also has 6-months holding period and three percent sales load. You can start your investment with only 1,000 pesos and top-up at least 500 pesos. In March 2020, during the enhanced community quarantine (ECQ), the NAVPS of this fund dropped to around 31 pesos per share. After about three months when the general community quarantine (GCQ) was implemented, it went up to around 42 pesos per share. Imagine an 11 pesos per share profit in a matter of months. The highest NAVPS of PEIFI since inception was 59 pesos per share. You can visit www.philamfund.com for the daily NAVPS and historical prices of this fund. Bo Sanchez recommends that if you only have less than 5,000 pesos to invest monthly, you invest in mutual funds first. If you have 5,000 pesos (or higher) invested monthly, you can start investing in stocks directly. 116 This is your personal copy. Illegal distribution is punishable by law.

Plan Your Finances Before I became a CIS of PAMI, I was already investing in the Philippine stock market with the help of the Truly Rich Club. I can buy stocks in the Philippine Stock Exchange through the online stock broker COL Financial Inc. You can be a customer of COL without being a member of TRC if you have the time to learn stock investing by yourself. In TRC, members like me are given a stock update to know what the best price to buy a stock is and when is the best price to sell. We are also given financial education not only about stock investing but also how to have a wealthy mindset. I can also earn affiliate income by inviting others to join the club and start their financial literacy journey. If you are interested in joining the TRC, you can be my affiliate by going to bit.ly/trcAffiliate. One distinct advantage I noticed in buying stocks is that I get cash dividends more frequently from my shares than in mutual funds. In mutual funds, I was told the dividends are normally converted to more shares. On the other hand, one disadvantage for direct stock investment is you might lose more money for lack of sound judgement. I had several shares of a company which was not included in the list of 117 This is your personal copy. Illegal distribution is punishable by law.

Grow Your Money foundational stocks and I wasn’t able to sell them when they hit the target price. (Foundational stock is a term used by TRC members to refer to stocks which belong to Top 10 companies in the country which would likely experience growth in the future). Anyway, I am holding onto it until its price picks up again. In TRC, recommended stocks are blue chip companies. In the Philippines, blue chip companies are those which comprised the Philippine Stock Exchange Index (PSEI). They include Ayala, SM, Robinsons, BDO, BPI, Metrobank, Globe, PLDT, Jollibee, MERALCO, etc. Short-term dips in their stock price is due to adverse economic conditions and will most likely bounce back because of its stability and reliable growth. One just needs to wait until prices are high again before selling. 118 This is your personal copy. Illegal distribution is punishable by law.

Plan Your Finances Best Investment Plan Let us now answer the question, “What is the best investment plan for you?” This table summarizes my recommendation. Investment Type versus Investment Horizon and Risk-Appetite Investment Type Investment Risk-Appetite Horizon Bond Fund Less than 2 Conservative years Balanced Fund 2 to 10 years Balanced Equity Fund/ More than 10 Aggressive Stocks years To know the best investment plan for you, know your investment horizon and risk appetite. If you are still confused by this time, I suggest you contact a reliable certified investment solicitor to help you out. +++++ 119 This is your personal copy. Illegal distribution is punishable by law.

Grow Your Money APPLY! List your investment goals, determine the investment horizon, the amount you need for the goal, and the investment plan suited for the goal. An example is given in the first row. Investment Amount Investment Investment Goal Needed Horizon Plan Retirement 10 20 years Invest 10,000 Fund million pesos monthly pesos in equity funds 120 This is your personal copy. Illegal distribution is punishable by law.

Chapter 9 Create a Crisis-Proof Budget If a crisis struck today and you are forced to stop earning for yourself and your family, are you financially ready? If your answer is no, apply the things you have learned in the previous chapters to plan ahead and crisis-proof your budget. According to the World Health Organization (WHO), the COVID-19 pandemic affected around 16 million (and counting) people worldwide as of July 27, 2020. According to the Asian Development Bank, the pandemic estimated about $8.8 trillion losses and this means a huge negative economic impact. If you are affected financially, I hope this book has given you some fresh insights on how to be prepared if ever there will be another economic crisis. Pyramid of Crisis-proof Budget Let me summarize through a pyramid the six essential steps to make your budget crisis-proof. See Figure 1 on the next page. The foundation should be a wealthy mindset. Believe that God has gifted you with a lot of talents 121 This is your personal copy. Illegal distribution is punishable by law.

Create a Crisis-Proof Budget and skills which you can monetize. With a wealthy mindset, you prioritize your savings, investments and tithes before your expenses. Pyramid of a Crisis-Proof Budget 122 This is your personal copy. Illegal distribution is punishable by law.

Plan Your Finances Remember the wealth formula which can be visualized through the pie-chart below. Savings Investments Tithes Expenses Wealth formula in 3-dimension From your earnings, set aside at least 10 percent for tithes to finance God’s kingdom on Earth. Set aside at least 10 percent for savings and at least 10 percent for your investments. Use only a maximum of 70 percent of your net earnings as expense fund. As I learned from Bo Sanchez, there is abundance of blessings in the universe. Always make sure that you have a positive cash flow. Find ways to earn more and to minimize your expenses. After having a positive cash flow, build up your emergency fund. I recommend you build an emergency fund equivalent to 6x to 12x of your monthly expense to be kept in the bank and a money market fund. With the last crisis, you might have realized that an emergency fund of 3x your monthly expense is not 123 This is your personal copy. Illegal distribution is punishable by law.

Create a Crisis-Proof Budget enough. Limit your emergency fund though to 12x of your monthly expense unless you are retiring in the near future. Invest the rest of your savings in more aggressive instruments so you can grow your money. You can build your emergency fund with the 10 percent of your earnings that you set aside monthly. When you already have at least 6x of your monthly expense as emergency fund, buy insurance for your protection. For me, it is better to get insured before you totally pay your debt because the insurance would guarantee that your debt will be paid even if something happens to you. You can get term insurance if your budget is low. Seek advice from a trusted financial advisor. Before you invest and if you have loans, eliminate them first. The interest that you pay in your loans could have higher value than the interest that your investment might be giving. If you are debt free, you can maximize your investment returns. You should have a growing investment if you want to fulfill your long-term financial goals. Seek advice from a trusted certified investment solicitor. 124 This is your personal copy. Illegal distribution is punishable by law.

Plan Your Finances Crisis-Proof Budget I hope you were able to accomplish the activities in the previous chapters, so you are now ready to create your own crisis-proof budget. An example is given in the following table. All amounts are in pesos. Crisis-Proof Budget 40,000 Net Earnings from salary 8,000 Income from side-hustle 2,000 Dividend income Total Earnings 50,000 Item Amount Remarks Tithes Savings 5,000 10% of net earnings Investments 5,000 Can divert to investment or insurance premiums when emergency fund is achieved 5,000 If you have no insurance yet, you can use to pay for insurance premiums. Can be more than 10% of net earnings 125 This is your personal copy. Illegal distribution is punishable by law.

Create a Crisis-Proof Budget Expenses 35,000 See breakdown below Food/Grocery 12,000 Essential Expense Rent/Mortgage Essential Expense Utilities 5,000 Essential Expense (electricity, gas, 4,000 water) Phone and 1,500 Essential Expense internet Transportation 2,000 Essential Expense Education 2,500 Essential Expense Insurance 3,000 Essential Expense Loan payment 2,000 Essential Expense Entertainment 1,000 Non-Essential Expense Travel 1,000 Non-Essential Expense Recreation 1,000 Non-Essential Expense Emergency Fund 420,000 (35,000 x 12) 126 This is your personal copy. Illegal distribution is punishable by law.

Plan Your Finances You can create your own below. You can message me at my FB page Queen B Financials or thru my IG account Quennie Balidoy, email me at [email protected] or contact any trusted financial mentor if you need some help. My Crisis-Proof Budget Amount Remarks Net Earnings from salary Income from side- hustle Dividend income Total Earnings Item Tithes Savings Investments Total Expenses Food/Grocery Rent/Mortgage 127 This is your personal copy. Illegal distribution is punishable by law.

Create a Crisis-Proof Budget Utilities (electricity, gas, water) Phone and Internet Transportation Education Insurance Loan payment Entertainment Travel Recreation Emergency Fund Now that you are done, apply the principles consistently and share the concepts you have learned with a loved one or a friend. Let us help every person we know to start their journey to financial freedom. 128 This is your personal copy. Illegal distribution is punishable by law.

About the Author Quennie Balidoy is a financial advisor of Philam Life and a Certified Investment Solicitor (CIS) of BPI Investment Management Incorporated (BIMI) which now holds and manages Philam Asset Management Inc. (PAMI) funds. She holds degrees in BS Metallurgical Engineering and MS Materials Science and Engineering from the University of the Philippines (UP) Diliman, and MA Mathematics Education (Magna Cum Laude) from Saint Louis University. The first six years of her career involved engineering research. She was a science research specialist in a project involving patterning of thin films for semiconductor device fabrication under the UP Department of Mining, Metallurgical and Materials Engineering and the Department of Science and Technology (DOST). She also was a university researcher in the College of Engineering of UP Diliman. She dreamed of having an engineering career in a semiconductor company like her husband, Egay; but when she settled with him in Baguio City, she shifted to Mathematics teaching so she could spend more time with his sons, Matt and Josh. She had some doctorate 129 This is your personal copy. Illegal distribution is punishable by law.

About the Author units in educational management and environmental engineering but she decided not to pursue them. She taught Mathematics and Metallurgy for 13 years before she filed her sabbatical leave then decided to resign as college professor on her 14th year of teaching. She is one of the founding servant leaders of The Feast North Luzon Baguio where Egay, is currently the Feast Builder. Her service in the Feast allowed her to reflect on what truly matters to her and helped her decide to leave the academe and to join the insurance industry. She considers Egay, Matt and Josh as her greatest treasures. Follow her on social media: fb.com/QBFPhilamLife instagram.com/quennie_balidoy linkedin.com/in/quenniebalidoy Email her at [email protected] 130 This is your personal copy. Illegal distribution is punishable by law.

Have you ever wondered why your earnings seem not always enough? Everyone longs for financial stability but not everybody knows how. In this book, you will learn how to: Fulfill your financial goals Assess your financial standing so that you can move forward Determine ways on how to maintain a positive cash flow Be ready with any financial crisis like sickness, disability or loss of income Grow your money by starting small and being consistent Create a crisis-proof budget \"Quennie is amazing. If you want to grow in your financial life, use this practical, inspiring book as your ladder to financial freedom.\" - Bo Sanchez, bestselling author \"Surely, there are major things that stand out in this book by Quennie. First is the fact that it is simple and practical. Anyone who wants to improve his or her financial position will benefit from it. Second, she has provided steps, guides, and tables that are easy to follow and complete. One of the main reasons why people avoid financial planning is because it oftentimes looks too complicated. As a result of these two main points, readers can readily execute. This is where the \"rubber meets the road\" and where genuine lessons can lead to a substantial difference in one's financial journey.\" - Rex Mendoza, President & CEO Rampver Financials About the Author Quennie Balidoy is a financial advisor of Philam Life and a CIS of BIMI. She holds a BS Metallurgical Engineering and a MS in Materials Science and Engineering degrees at UP Diliman. She also has a degree in MA Mathematics Education (Magna Cum Laude) at SLU Baguio City. She was a college professor for 14 years and is one of the servant leaders of The Feast Baguio. She considers her husband, Egay, and sons Matt and Josh as her greatest treasures.