5 FINANCE THINGS TO DO BEFORE YOU HIT 30 by Randell Tiongson

There’s something about hitting 30.

Somehow, you are still considered young at 30 and yet not that young anymore. Many things happen when you cross the 30 mark in the many aspects of your life. Your career should be taking off at this age, you may have started a family or contemplating on starting one, you may have started accumulating wealth and you may have also started accumulating debt.

I have crossed the big 30 many, many, many years ago, I felt there were many things I should have done before I hit 30. I was listening to my friend and colleague Marvin Germo(of Stock Smarts) on the things he has been doing for financial readiness and he is not even 30. Marvin mentioned many things he has done which I only started on much later. If ever I get to do things over again, here are the finance things I will definitely be serious about before hitting 30.

1)      Ensure you have a very healthy cash flow – Folks in their 20s have started to earn and have begun to appreciate enjoying their income. The problem is, they enjoy their income too well that there is a tendency to spend every peso of it. This is a fun season to many as they now have freedom to do what they want and have the means to finance what they want. This is also a time of exploration to many especially for those who had parents who were a bit restrictive (like me as a parent), however, these explorations costs a lot of money. Accumulation of stuff also begins at this season and lifestyle upgrades becomes a social pressure.

Way before hitting 30, make sure you have a good grip on your money management. Working on a written budget is the best place to start. Learn how to allocate your income between needs and wants and make sure that at the end of the month, there is savings left. For those in their 20s, it’s best to have 30% to 40% savings left from income which is very possible if you have the discipline to stick to a budget. The money behavior you will have during this period will a have a lasting impact on your financial future so better start doing things right.

2)      Minimize or resist from borrowing – Credit card companies and financial institutions are always targeting this age group because they understand that people in their 20s loves to accumulate stuff, see the world and enjoy life in general — the perfect setting to lure people into debt! Not all debt is bad but you need learn how to discern a good debt from a bad one. Generally speaking, a good debt is one that will allow you to grow your assets and/or add income like a loan to finance a business or to purchase a real estate property. Any other debt that will not grow your asset base or add on to your income would be considered a bad debt like using your credit card to finance your new Samsung or iPhone smart phone, a Michael Kors bag, or your dream vacation to Bali.

People in their 20s begin to accumulate credit debt and other consumer loans which are grossly disproportional to their incomes. The bad credit decisions you will make during your 20s will have severe ramifications up to your 40s and 50s. Your credit standing will also be made or broken during this time so learn how to use credit responsibly.

3)      Start investing – The best time to begin investing is whey you are young! When you have a lot of time, you can have more options on how to grow your wealth and even take in more risks. Taking in more risks will mean that there is a better chance of growing your wealth faster and you can ride the ups and downs of the economic cycles. If you lose money and you are young, you still have a lot of time to recover. The good investments for long term would be investments in the stock market or Mutual Funds or UITFs that are invested in equities. While they are volatile, they are bound to generate the best returns over a long stretch of time. My friend and investment trainer Ricky So said “take risks when you are young, if you lose your money, you still have your parents to run to” – funny guy!

Start learning how to invest and act on it. There are a lot of seminars and training for the public on how to invest but don’t linger with making that first investment. A good way to start would be putting some money in a mutual fund or the UITF of your bank. Equity laced funds like stock funds or even balanced funds are ideal for young investors. You may also consider some on-line trading if you want to have a say over your stock market investments. Just a note, if you will not have the time and the competence to trade your own stocks, stick to mutual funds or UITFs. Make your investing automatic by regularly adding to your funds or buying more shares. In your 20s, you probably don’t have sizeable investment funds yet but small amounts done regularly will also produce great results. If you started investing only P2,000 every month at the age of 21, you would have accumulated over P1 Million by the time you hit 41 (assuming a yield of 8% p.a.). Have an auto-debit arrangement for your investing; making things automatic does the trick. Remember, invest early, invest wisely and invest regularly.

4)      Buy life insurance – This is not a pitch for life insurance agents but I encourage you to listen to one. If there are people already depending on your income, do not delay in buying a life insurance policy. Premiums are much cheaper if you buy it before you hot 30 and I also notice that premiums rise sharply when you hit your 30s and 40s. Just remember to buy a policy you can afford. There are many kinds of life insurance policies but I would probably stick to either a term insurance or a Variable Universal Life insurance or VUL. Term insurance if you want to maximize your coverage and keep your premiums low – the downside is that you do not earn from this kind of policy. I suggest that you buy term and also invest in mutual funds or you can buy a VUL which is a term with a mutual fund. Just make sure you chose a reputable provider and one who has a good record on after sales service. For your peace of mind, you may want to limit your choices among the top 10 life insurance companies.

5)      Learn from your mistakes and the mistakes of others – For sure, you will make a lot of mistakes in your 20s – and your 30s, 40s, 50s, 60s and 70s. Along with many other mistakes you are bound to make, some of them are financial mistakes — bad investment decisions, wrong borrowings, wrong purchases, etc. But that’s life and the best way to respond to our mistakes is for us to learn from it and not repeat it anymore. As you make those mistakes, always look for the lesson behind those mistakes and learn to avoid them in the future.

Experience is your best teacher but we don’t always have to learn from our own experience. You can also learn much from other people’s experiences and in this case, other people’s mistakes. Look for mentors who can help you and learn from their experiences and their mistakes as well.

Hitting 30 is a big thing and somehow, it’s a passage rite to many of us. It is a time to learn from the past but be hopeful for what the future will bring.

“Don’t let anyone think less of you because you are young. Be an example to all believers in what you say, in the way you live, in your love, your faith, and your purity.” — 1 Timothy 4:12, NLT

Attend iCon 2013: The No Nonsense Investments Conference

http://www.randelltiongson.com/5-finance-hit-30/

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Why Financial Goals Are Important?

You wouldn't start out on a long trip into unfamiliar territory without a road map, yet many JUAN DELA CRUZ go through life without a concrete plan for their financial future. The road to financial freedom can lead directly to your destination or to a dead end. Specific financial goals and written plans for meeting them help you focus your efforts on the end result. The first steps are to determine your financial status today and then decide what you want to achieve for your future.

Effective goal setting should be SMART!

Goals are like the wheels on your car, they keep you moving in the direction you want to go, and you won't get very far without them. If you haven't started planning for your future, now is the time to begin, no matter what your age is. However, if you are in your twenties, you have a distinct advantage. It will give you the most powerful financial tool: TIME.You'll have to work at it a lot harder if you start later in life.

As the saying goes, "Most people don't plan to fail, they just fail to plan." Without planning, even the best of intentions lead nowhere. Start mapping out your route now. Your entire future depends on it. 

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Who Needs Financial Literacy?

This article is not mine, I read this from Pesos and Sense website. I want to share it to all so we could learn the importance of why every JUAN DELA CRUZ needs financial education. Sino ba sa atin ang ayaw yumaman? Lahat naman tayo gusto, pero ang tanong... may ginagawa ba tayo para dito? When do you plan to take action? Our ability to save has nothing to do with the size of our income... it has something to do with our discipline. If our problem is our inability to manage our earnings, no amount of earnings will solve our problem. 

http://pesosandsense.com/financial-education-for-filipinos/

Whenever the topic of financial education is brought up, most Filipinos brush it off thinking that it is only for businesspeople or for the “rich”. The truth is, we all need it. If you want to be free financially or if you want to be rich, you need to learn this!

Although we don’t pay much attention to it, it does affect our daily lives. To put a child to school, to own a house, to drive a car, to pay the bills – all of these will be affected by both having and not having the knowledge about handling money wisely.

Money and Knowledge

People think that acquiring huge sums of money will solve their problems. It may be true for some, but without the knowledge to handle it correctly, others might find themselves in a more problematic situation.

You may have heard of lotto winners who ended up being bankrupt or in a financial mess. This is what usually happens to instant millionaires who suddenly find themselves rich – in fact, too rich that they do not know what to do with the money anymore.

This is exactly what happened to Dionie Reyes who won 14 million pesos in the PCSO Lotto 6/42 draw last April 22, 2008. After winning, he lived the life of a millionaire.

He bought a P4-million house in an exclusive subdivision, drove a sports utility vehicle, and gave balato ranging from P1,000 – P850,000 to his friends and relatives. He also gambled, womanized, and went out every night. After 3 months, he spent all of his money and ended up in debt.*

People lose money for many reasons, and overspending is one of them. This is the reason why having money and financial knowledge at the same time is the key that will greatly help in improving one’s life. Money and financial knowledge go hand in hand. Just like what the author Robert Kiyosaki said, “Money without financial knowledge is money soon gone.”

Money Begets Money

Our culture has taught us that the sure way to become rich is to have a good education, get a high paying job, and live your dreams. Although that is a good advice, a lot of professionals, OFWs, and fixed-income earners know that it is a cycle of “go to work, receive your salary, and pay for the expenses”. The live-your-dream part is always set aside for the future, hoping that things will get better. They are the people who work for money.

But there are some who learned to make their money work for them. How were they able to do that? They acquired the knowledge of Smart Investing.

Know Your Options!

Did you know that you have different investment options?

Investment instruments like Stocks, Mutual Funds, Real Estate, Insurance, and others can help you achieve your financial goal. You may have heard these investments before, but do you really know how they work?

Most Filipinos, even though they want to invest in these instruments, are afraid to do so because they fear that they will lose their money. And because they don’t understand it, they will not invest at all!

As we always say, take the time to learn so you can take away the fear. Understanding the different kinds of investments available will help minimize the fear of investing.

Once you have acquired the knowledge, you will see that investing isn’t so scary after all. You can sleep better at night knowing that you are taking steps today that can potentially change the way you live your life in the future.

Educate Yourself

Gone are the days when information about money is limited. There are books, articles, websites, and seminars that teach financial education to those who need it the most – the common Filipino. These are the students who want to have a brighter future, the parents who want to provide for their children, the young professionals who want to stop working and do what they really love, the OFWs who just want to return home and watch their children grow, and the thousands of skilled Filipino workers who want to live comfortably.

Are you one of them? It is time for you to act!

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HOW TO CREATE A BUDGET?

Everybody has different financial goals. If you have a specific savings plan in place, your chance of meeting your goals increases. Put your goals and savings plan together, then you basically have a BUDGET.

Here are some essential steps involved in budgeting:

Identify your true income. This is your annual take home pay. Items such gifts or bonuses can be used to add to savings, help you get out of debt, or even splurge on a one-time purchase. Since you can't count on them year after year, gifts and bonuses should not be considered part of your income for budgeting purposes. 

Record all your expenses. Start with big items such as house rent, bank mortgages, car payment, etc. Then work your way down to smaller monthly bills like light bills or utility bills. Use your billing statements as your reference, you might be surprised at how many things you are paying each month. Then estimate how much you are spending out of pocket, like cash purchases for lunch, coffees, movies, vices, etc. that you might realize you are making. 

Quantify other financial needs and goals. Your monthly costs are not your only expenses. You will also have long-term needs like saving for retirement, and other financial goals like buying a car or a house. Figure out how much you need to save each year towards these long-term expenses, because they will have to be part of your budget as well. If you need to get out of debt, then paying down existing debts should also be part of your budget.

Compute the surplus/shortfall. Subtract your short and long-term expenses from your true income. This will tell you how much of an annual surplus or shortfall you are running. Since the point of budgeting is to live within your income, a shortfall means you will have to make some adjustments. 

Adjust and monitor. If you are running a shortfall, take a look at your expenses and figure out what you can cut, to get them fit within your budget. If it looks like you will have a surplus, you need to budget specifically for that surplus. It can be something as responsible as adding it to your savings account for your emergency fund. Monitor how your budget is going, and make further adjustments that become necessary as new information takes place.

Invest when you have enough savings. Do not put all your eggs in one basket. When you have enough savings transfer some of your money into investment vehicle that will give you a better return instead of putting it all in a bank. Learn how to diversify.

Start with the basics. Follow these simple steps and stick with it no matter what. It will help you manage your finances.

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Financial Planning Pinoy Style!

I want to share another interesting article I read  from Mr. Randell Tiongson. By the way Mr.Tiongson is a RFP, an advocate of Life & Personal Finance. Hope you find his article not only worth reading but may it also help you to start planning ahead.

Question: How should we do personal financial planning based on our culture? Unlike the west, we heavily support family members. Randi Espera Ongoco (@randieongoco) via Twitter

Answer: I have been a student and a teacher of financial planning for many years, and it is true that we do things very differently here in the Philippines.

It is a common observation that financial literacy is not very high in our beloved nation, which makes it very difficult to do financial planning. To make things worse, the citizens of this nation, and the nation itself have very low savings rates. The Philippines has a savings rate of less than 20 percent while it is estimated that the Filipinos themselves have a savings rate below 10 percent. Reports from the Bangko Sentral ng Pilipinas say that of about 36 million Filipinos with bank accounts (with a total of over P5 trillion), 23 million of us have balances below P5,000.

Filipinos are not much of an investor, which is why our investment market, although performing extremely well, is not as big as it should be. The rate of Filipinos with insurance is likewise low at less than 20 percent of the household heads.

Here’s another disturbing statistic, it is believed that only about 10 percent of Filipinos actually prepare for retirement. Because of all these, a big majority of the population ends up financially dependent on their children during their old age. An SSS (Social Security System) study said that over 70 percent of Filipinos during retirement are living with and are being supported by their children.

There are many issues abound with context to your question. We can’t argue the fact that income opportunities in this nation are really a big problem, but I believe that our financial woes go beyond just income. I have personally been a witness to many individuals who had relatively good income and yet failed miserably with regard to being financially secure. For instance, the increase in the average of income employed by the BPOs and our dear OFWs was not a guarantee to see many of them with a financially secure future.

While the results or the symptoms may seem economic in nature, I believe that our problems are largely behavioral and cultural. It is said that personal finance is 80 percent behavior and only 20 percent skill, a notion that I agree with. In our case, we have big issues with both the 80 percent as well as the 20 percent.

A big behavior issue is that we spend much more than we should and we save far less than what we are supposed to. Don’t you even wonder why our nation now has the record number of malls and it seems that many malls are being built monthly, maybe even weekly? The stark increase in the number of shopping malls through the last 10 years only shows that the income of Filipinos is improving; and yet the increase in savings among us is grossly disproportional.

To make things worse, a big cultural issue that you pointed out is that Filipino parents expect their children to support them financially. While supporting parents financially is very noble, the impact of such actions to many Filipinos results in not being able to save enough for their old years and making themselves dependent on their children in the future; a vicious cycle indeed. A skill issue among many of us is we do not really know how to properly invest and we borrow too much.

Here are my tips for you:

Increase your cash flow. You can do this by earning more money and spending less money. Your biggest asset is yourself. If you constantly invest in your competence and abilities, your income will surely grow. Be disciplined in spending, reduce unnecessary expenses, avoid too much “wants” and evade buying too many “stuff.” Having budgets and sticking to it is your best strategy in better handling your finances. As your cash flow improves, you will begin to generate more savings.

Reduce or eliminate debt. Borrowings, especially unnecessary borrowing such as consumer debt (credit card debt, personal loan, hulugan, etc.) is very costly because of the interest you pay. Also, it is difficult to have a good level of savings when you owe too much as you end up paying debt against saving money.

Take baby steps in savings and investing. Often, we think we always think too big when it comes to saving and investing. In reality, big savings is really just small savings done very regularly. The same goes for investing. You may want to enroll in an auto-debit program of your bank so you will have forced savings. Some banks like BDO and BPI offer auto debit arrangements that go into an investment account like a mutual fund or a unit investment trust fund.

Review your finances periodically. It is prudent that you inspect what you expect. Regularly check your progress vis-à-vis your goals. Always check your spending, ideally on a daily or weekly basis. Review your savings level also, maybe twice a month or once a month. Look at your investment progress and performance at least on a quarterly basis so you can make changes if need be. Regular reviews not only keep you informed, it also motivates you when you actually see progress.

Communicate with family. This is perhaps the most difficult task of all. Respectfully discuss financial matters with affected members of the family. Let them know that while you really want to help members of the family, you are also limited by your resources and your personal obligation to prepare for your own future. Limits or budgets are a good way to objectively set expectations. Other members should also be given the obligation to provide assistance. It is unfortunate that many families rely on just one member (the one who earns the most), but that shouldn’t be the case. Reliance on just one or two members of the family results in a scrounging dependence by other family members. Communication done with utmost respect and a lot of love will solve many issues of family members. Remember, you need to do this so that you will not be a burden to your children in the future.

Financial planning “Pinoy style” is a bit tricky, but it is not rocket science. The only way for this country to really move towards a financially peaceful future is to start planning today.

http://www.randelltiongson.com/financial-planning-pinoy-style/

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Invest As Early As You Can

One of the main reasons why we need to start investing as early as we can is to fight INFLATION.

Inflation is the rise in prices commodities. Yearly, we do have inflation rate. Inflation decreases the purchasing power of our money. The tricky bit to remember is that with rising prices, we get corresponding decrease in purchasing power. In 1989, jeepney fare in Metro Manila was only P1.00 .Today minimum jeepney transport fare is P8.00.

Now that we know about inflation, it is very important to educate ourselves when it comes to investing. You should invest in a type of investment that could provide you an interest rate at least higher than the inflation rate. If the annual inflation rate is 5%, then you must find an investment that will give you a yield or return at least 6%. In that way, the purchasing power of your money is preserved and you could have earned an additional income too.

Everything in the world changes with TIME.  The saying "the early bird catches the worm" is true when it comes to investments. You cannot get rich overnight. You need time for your investments to grow. The earlier you started, the higher the chances of getting better returns for your hard earned money. Let's take a look on Pesos and Sense Educational Video:

Time is passing by. You don't want to waste it and ponder one day when your old enough why you never started. TIME is Money! You've got to start building your investments now! not tomorrow, not next week, not next year, but NOW!

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BASIC STEPS TO FINANCIAL SECURITY

People have different goals, risk tolerance, financial resources and personal circumstances (age, marital status, number of dependents). It is therefore important to develop a financial plan that will guide us and give us a financial roadmap to know where we are and where we are heading.

Below are the 6 basic steps towards Financial Security:

1.) SAVE AND INCREASE CASH FLOW 
- the first step is to get a good grip on where your cashflow currently stands and where it is likely to go in the future. You have to master the art of saving. Without any saving or any cashflow, it is impossible for you to achieve financial security.

2.) GET OUT OF DEBT & STAY OUT OF IT 

- getting out of debt & staying out of debt is not easy. If you are buried under a lot of debt, here are five CRUCIAL ACTIONS you need to make (excerpts from Bo Sanchez 8 Secrets of the Truly Rich)

1. Declare Your Freedom Day - write a deadline when you'll be financially free.Call it your freedom day. Read this goal daily, think about it daily, pray for it daily. Sleep with it, walk with it, work with it, eat with it.
2. Create New Ways of Pleasure - Discover new habits of simple joys. Examine your lifestyle. It's time to cut back on things you can do without. Don't spend more than you're actually earning.
3. Schedule Your Steps to Freedom - With your increased savings from simplier lifestyle, sit down and write how much you can set aside each month to pay your debts. Schedule all payments, starting with high-interest loans first. and if you can, transfer high interest loans to low interest loans.
4. Don't Borrow When You Can't Afford It -- PERIOD! - Don't borrow to buy consumer goods ever again. If you don't have money right now to buy it, then don't buy it. If the credit card in your wallet is a huge temptation, then get rid of it until you acquired discipline.
5. Negotiate with Your Creditors - see your creditors regularly -- assure them you'll pay -- but negotiate to reduce their interest rates. 

"Avoid Bad Debt Like Bad Bacteria" - Bo Sanchez

3.) CREATE EMERGENCY FUNDS

- Rule of thumb, every time you receive your salary get 20% and put it into your savings. To create an emergency fund you should have at least 3-6 months of your monthly salary in your bank account. This will be your instant money so when emergency arises, you have no problem borrowing from others.

4.) ENSURE PROPER PROTECTION

- Protect yourself by having a life insurance. If you don't have any, it's a MUST to get one for yourself.  This will be the safety net of your dependents should anything happen to you, most specially to the breadwinner of the family.Here's the formula: Multiply your annual expenses by 10. So if you spend P100,000 a year, you need P1 Million insurance. If you spend P300,000 a year, then you need P3 Million insurance. Idea is in case of death, dependents can live up to 10 years living the same lifestyle with your income.

5.) BUILD LONG TERM SAVINGS

- You've got to start building your retirement fund as EARLY AS YOU CAN! Don't put your Retirement Fund in the BANK, yes you heard me right... not in the BANK. Evaluate Investment Option. Below are the rules to remember.

RULE 1: Don't invest in something you don't understand. This doesn't mean that you should put all your money in a time deposit because that's the only type of investment you know. Educate yourself. Try to understand the investment product that is being sold.

RULE 2: No Risk, No Gain High Net Worth Individual are the ones who are less averse to risk, they have money to cover possible losses. People with less financial resources, tend to have less tolerance for risk. They want to keep their hard earned money in a "safe" place like the bank savings account. But INFLATION (purchasing power of money ) is real! So if you are content with simply saving money in the bank instead of investing it with MUTUAL FUNDS, UITF, STOCK MARKET, BONDS, don't be surprised if you don't achieve your goals. 

RULE 3: Match the investment product with your time horizon. Professional investor have a term for the choice of investment they make based on the amount of returns they want over a given period of time. It is called INVESTMENT TIME HORIZON. You can make the most out of investing by categorizing it according to your needs. These categories are short-term, medium-term and long-term investment. When you invest, you actually invest also in the power of time.Time is the magical element that makes your investments grow. 

RULE 4: Don't put all your eggs in one one basket.  DIVERSIFICATION is the key to managing risk. It pays to spread your money over different types of investments, issues, terms and funds.

6.) PRESERVE YOUR ESTATE

- estate planning is a tool towards managing the transfer of one's properties, personal and real, to the beneficiaries in an efficient way, either during his lifetime or upon his death. Government shares in the properties of the deceased through estate tax. All properties would normally form part of the gross taxable estate for which the government gets a percentage ranging from 5% to 20% depending on the value of the estates. In other words, when you accumulated so much wealth and want to transfer it to your heirs either you or they will have to pay for the estate tax.

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Financial Ignorance Is Expensive

" The number one problem in today's generation and economy is the lack of financial literacy" - Alan Greenspan

I loved reading Bo Sanchez books. His book "8 Secrets of the Truly Rich" is a good guide of personal experiences, well-researched investment information and sound spiritual guidance. It inspires the readers to have the right attitude towards wealth, and give practical tips on how to achieve financial success.

We all wanted to gain financial freedom, but it does require that we become financial literate. Anyone can do it! It does not require that we should have a lot to get started. Opportunities are always there if we learn the system and start looking. We don't have to be genius. We all have the same sized of brain, so the question is how much of it will we use? If we can read, then we can learn. Will you read just enough to pay your bills or will you read to gain wisdom greater the world has?

Wisdom is an invaluable commodity. It will make you successful if you have it. It is critical that you develop the right mindset.

• Determine where you are so you can get your life under control and change your direction.

• Adjust your attitude

• Develop a passion so you can move forward

• QUIT MAKING EXCUSES!

All of these depend on developing financial literacy. The trouble is that these are all steps you have to take yourself. No one is going to do the preparation or the work for you. You alone have to make the effort. Look for financial mentors and learned from them.

"If you think financial wisdom is expensive, then try ignorance."

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LEARNING THE VALUE OF TIME

Nowadays, there are many people who want to get rich quick. One proof is the lotto outlet... every time there is a big Jackpot you will see how long the lines are. Who wouldn't want to get rich anyway? It's everybody's dream... and it's your dream too!

But becoming wealthy is a Journey, NOT a destination. So many lottery winners are now bankrupt after throwing away their winnings through unwise spending. It takes time to earn money and it also takes time to make that money grow.

TIME can be a powerful tool, the younger you are, the more opportune it is to build wealth. The less time you have, the less likely it would be to build significant wealth-- but still you can!

Ask this question:  "WHERE AM I RIGHT NOW?"

BE AWARE - Don't throw up your hands in despair and give up; instead let this reality inspire you to make some changes. Be concerned in the sense that you know you have some work to do, to bring your finances under control so you can do something about it.

If you don't know where you are, then you don't know where you need to start. It is not an accident of fate that you are where you are. If you do not change the choices you made in the past, you will end up in the same place in the future.

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