Message from Haiyan

My visit must have opened your mind that you need to be financially fit in this day and age.  Don't be naive. You need 8 months to a year's worth of monthly expenses as an emergency fund, not only for you but for seniors and children in early childhood as well as school children.

What will you do if the schools have been destroyed?  If you lose power, water, and communications?  No fb, and instagram, no candy crush, no dota 2.  No groceries, no meds, no hospitals, and no police, no help and no government?

Watch last week's news on youtube to remind yourself I'm not inventing these realities.  Think about a space in your home for emergency supplies for real emergencies so you don't need to steal when your stomachs start to ache for hunger and your brains stops functioning well to think of morality and good.

What will you do if you lost loved ones, your businesses, your joys, your peace?  Can you wait 2 weeks for help?  Would you just pray, or curse God for sleeping, or post a rant on Facebook against the government for incompetence?  Come on.

You need insurance for a good night's sleep.  You need insurance for your properties so you can rebuild your homes, for a brand new roof over you and your chosen ones.  You need health and life insurance, especially if you are a breadwinner.  You might need a second home in another region during emergencies, and you need high-powered weapons for you and your family's security. In short, you must decide to be better prepared or prepare to suffer.  Study.

Dying this way is also not very pleasant.  All services have been wiped out. Being unprepared means you are willing to die like a dog on the street without a casket, much less a decent funeral parlor where your family and friends may cry and mourn for your loss for a week or so.

Reliance on your government or someone else in times of trouble can be a fatal mistake. I came to wake you up for your own good and for the sake of Filipinos in the next generations. What I'm sure of definitely is that I won't be the last. There will be others of my kind perhaps in a different shape or form. I'm not trying to impress fear because I know what this nation can do and be, the moment it decides to be what it has to be.

Haiyan a.k.a. Yolanda

Octoberfest for Investors in Doha

Just completed examination for the Associate Financial Planning Course (AFPDoha) for OFWs held at Philippine School of Doha in Madinat Khalifa yesterday.  The exam was the final piece of event in the recently concluded 2-day training program within the scheduled weeklong Octoberfest for pinoy investors here in Qatar.  

The training which began on the 4^th and 5^th of October for AFP, along with two other information-packed talks: Estate Planning 101 and Stock Smarts held on October the 2nd was organized by the thoughtful men and women of the Overseas Filipino Investors and Entrepreneurs Movement (OFIE-M), whom invited powerhouse guest speakers: Mr. No Non-Sense himself, Randell Tiongson, RFP (author, No Non-Sense Personal Finance), and Mr. Stock Smarts, Marvin Germo, RFP (author, Stock Smarts, Stock Investing Made Easy), two of the most recognizable leaders and coaches in personal finance and investing in the Philippines today.

Feedback from attendees, my savvy self included, was fairly excellent and is highly recommended for all overseas Filipinos here in Qatar. Organizers have been buzzing about this year’s AFP class to be the first ever batch of AFPs, which meant that plans for future batches may already be in the drawing board along with similar series of talks next year.

I personally missed one talk entitled Money By the Book, a Biblical Finance talk by one of the speakers. I was lucky there’s a youtube upload made available by one of the attendees for public viewing.  I don’t own this video and may be taken down anytime by account holder. 

It’s always always a pleasure to hear stuff like these as it not only gets you around like-minded people consciously taking charge of their future, not only that it gets the mind in that supportive environment that don’t need to be convinced about those great great possibilities, but it also provides the required continuous immersion in practical concepts not taught in formal education we gotten from schools.

As we’ve been reminded in one of Randell Tiongson’s topics in the AFP course, personal finance is largely behavior-based.  Our behavior towards resources as well as opportunities is influenced by years and years of cultural conditioning, our backgrounds, our environment, etc.  This conditioning shaped the way we feel and act on certain things, and automatically filtering out anything unsupportive of its own expectations.

Yet as we continue learning and expanding awareness around these subjects, and consciously building on competencies around managing resources and investing, may we not only gain even greater results and abundance in our personal lives but as well somehow become meaningful channels of abundance and wellness to others.

8 Lessons Learned from AFP Doha

#1 Never Take Peer and Cultural Pressures Lightly

It was an Aha! moment for me.
I read about it in blogs and books but never seen determinism presented by comparing cultures: Filipino to Chinese, Indian, and Jewish cultures. Very enlightening.

Filipinos think everything that happens has to do with God. A quick look at history of colonialism in the Philippines is very helpful.

Another thing is what TV does by continuous emersion. This mode of mind conditioning is done every single day more than 8 hours a day for life. Some of my friends keep asking me why I keep on reading new and old books on personal finance. This is why.

We are up against that box on the wall that we allowed to control our brains very consistently. And it will be a challenge to compete with that without replacement. At some point, consumerism must be broken until passive income capacity is built. Otherwise, life will always be limited, extremely dramatic, and full of struggles.

Environment is something that can't be ignored. Our choice of friends, the community we live in, a spouse, and those we chose to spend time with, somehow dictates our behavior the same way TV does. Consider longterm effects of these, best practices, and how these if not interrupted may ensure failure and frustration in your future.

#2 The Secret to a Happy Life is a Happy Wife

Filipino culture is heavily influenced by western consumerism. According to surveys, the no. 1 goal of the poor is to be entertained, and the rich prioritizes education.

In the accumulation stage of wealth building, turning a blind eye on overspending and debt is not only counter-productive but a real struggle which may lead to an even more expensive breakdown in the relationship. A split may be quicker when both are financially illiterate.

These are proven very expensive outcomes with a direct hit in accumulation efforts. Therefore it makes a lot of sense for couples to get themselves a little financial education. Learn each other's VALUES, be in the same page, the right page altogether to accomplish goals as a team.

Relationships can be complicated and challenging. One may only control one's self and choices. And this is why most the affluent first-generation dollar multi-millionaires in the book The Millionaire Next Door by Thomas J. Stanley are married to frugal women. You don't really need that much to love and please these types.

#3 Zero Debt is the New Status Symbol

TV and the constantly aggressive marketing campaigns by businesses and the banks created the belief that accumulating debt like a pet (snake) is just the way we should run our lives. We can't live without it. This is true (for misinformed free-spirits). And buying everything now and working for it 'later' is the way. Wallah of course.

How could anyone borrow from the future? This is normal, right? And guess what, what we've been told in AFPDoha is that we build and protect our bright future from today, not borrowing and sucking from it. Get this, we've been told to 'save' to become 'savers', then become 'investors'.  How weird can that be? 

And if you don't have this so called 'savings', you don't buy anything. Would you be surprised if one of those AFP slides actually says: Zero debt is the new status symbol! Not your brand new house & car purchased with debt, and other similar fake appearances of wealth.

#4 The 20/20 Rule
The 20/20 rule suggests it requires around 20 years to conveniently prepare for a 20-year retirement. What it says has to do with the value of time by compound interest in investing.

I went back to review annuities not long ago to convince myself of the awesome power of compound interest told by Albert Einstein.  But it needs at least more than 15 years to see profits fly off the runway so to speak.  This is why starting early in so called 'saving' and 'investing' is very very important.

Having said this, it is important to emphasize that what makes it happen, and what really drives build up of funds is the money that you allocate for investing. It is not so much about compounding profits. Sounds really confusing but what do you expect from small things?

Earn as much as you can. Save and invest as much as you can. Avoid getting lured into instruments promising high returns. Take the time and get rich slow. Remember this is a marathon not a sprint.

#5 Anticipation Creates Peace

Learning the goals of insurance planning fills in that spot in your financial plan under the umbrella of protection. The important lesson is that while one is in the accumulation stage, the targeted goals in your retirement plan including immediate needs and educational needs of your children, may be covered by products known as insurance.

It has been said that we work to build our Retirement Fund not only for ourselves but most importantly for the chosen ones. We work using just one physical body without spares. This is a clear risk, and insurance gives you and your chosen ones the peace and confidence to live the life you intended for them, with or without you.

#6 Take the OFW Advantage
Working in most GCC countries means you are earning a rare type of income which governments didn't need commission from. Governments in GCC are not needy. They are rich. Very rich and very generous.

Do you remember how it feels like checking your pay slip with zero chances of actually cashing it all from the ATM? That is because you don't really get all of it. The Philippine government takes its part first before anyone else. You get taxed.

Remember how we got used to it, gotten over it, and eventually accepted it was reality mga bess.

This is proof we can LIVE BELOW OUR MEANS inspite of the low salary were getting sa pinas. Now that we are here in GCC, let's take full advantage of this rare opportunity and immediately divert it to savings. This can be a real blessing.

#7 Not all Insurance Plans are created equal
We learned several types of insurance plans in the market: both life and non-life insurance. Not all of them are the same in the sense that some of them are good, some are obsolete, others are  scams. Marvin Germo taught us how to do simple math I call the bloody IRR Method to verify the level of stupidity of insurance products.

The lesson here is that part of your due diligence as an investor is to ensure that what you are getting won't be a waste of your time and money. Talking to insurance agents in my experience doesn't work. They are  of course looking for their own interest which is commission. Consult  an independent financial planner. They will tell you the latest chika in the world of insurance.

#8 Hang sarap pala maging Single..
During a talk on insurance planning, an example was given to analyze protection needs for a family of three children showing a huge chunk of expenses allotted for child expense, living expenses, and education. Those numbers are not at all a joke. It is a huge responsibility.

Looking closer, and trying to fit in the shoes of those married dudes with lots of children and mediocre income, it's not hard to imagine the AGONY. This is perhaps the reason why Covey thinks building a family and raising kids is hard farming lol. I really don't know but better be prepared than sorry.

On the other hand, Pag nachugi kang bigla at alam mong walang iiyak (if you die unexpectedly and you know no one really cares): is great news! You're looking at a huge savings in life insurance which can be diverted to other growth or business funds. An exception applies to bread-winners and martyrs.

To all singles, my self included, may awa pa si Lord according to Randell Tiongson. However, sifting through all the kantyaw and panglalait of your friends and relatives as per previous paragraph, gives you a reason to build suspicion. Why do you think they're doing it? Are they really concerned or just looking for katabla? lol

4th Quarter Calculations

It's not much of a math but it's quite amusing to think how it affects your future.

This backup plan taught in financial planning falls under portfolio income generation. It's basically for people who want to become employees for the rest of their lives! This is why I always consider it a backup, something to fall back on as an option just in case.

Remember the formula for Financial Freedom where your portfolio income is a function of.  And that is: 

FF= (Passive Income + Portfolio Income)/ lifestyle expenses, 

where FF must be greater than 1. Very simple!

Calculations are done using my 2-step question method (naks I call it the Derek Method) as follows:

1. How much income I need without working in my retirement? and,
2. How to save for it?

Now to calculate for that desired retirement income from your portfolio/ paper assets, the first consideration in my opinion is: it must be enough to cover your lifestyle during retirement with or without a passive income source.

This is because in any case I'd prefer to be in the safer position because during retirement, I won't be this quick, powerful, and in-demand due to old age. In other words, give me a break I'm ageing!!!!

Deciding for the monthly income you require in your retirement is crucial because it determines the amount of the fund needed to generate the same. Your monthly income is usually 10% of this fund you are going to build in your working years. In financial planning, we call this fund: critical mass.

So how much monthly income do you want? And how much money you need to retire today?

When you decide for the amount, multiply it by 12 for the annual equivalent, and multiply it again by 10 to determine your present critical mass equivalent.

It can be expressed as follows:

Critical Mass present equivalent= desired income x12 x10

So for instance, you want a PhP50k monthly income in your retirement, multiply by 12 then 10, you'll find a critical mass equal to PhP 6M. This amount invested to generate at least 10% growth will generate your PhP50k monthly income today.

So what is the problem?

The problem is, we don't have 6 millions of pesos today, unless you 've been a highly paid OFW for quite some time, you inherited this much cash from your rich dad, or just busted the local bank.  In any case, we assume we're not that lucky or evil, and we need to do it the self-made millionaire's way via savings and investments.

This brings us to Step No. 2: How do I save for it?

to be continued..

PADI Training

It's throw back Thursday and just uploaded some clips from a couple of months back during an open water certification course in Mactan. It was an experience to come back to, and highly recommended as a hobby. 

But I'm warning those emoticons out there! This may not be for you. If you start feeling more than thinking at more than 20 meters underwater, big problem!

The trick is just to enjoy the exploration. It is a fascinatingly different world down there!

4th Quarter

A lot of Filipinos are fond of a game called basketball played in 4 quarters. Officials accumulate all points from start to the last quarter, and the team with the highest points wins.

I was a great fan of Robert Kiyosaki series of books from Rich Dad Poor Dad to the later ones released called Unfair Advantage since 2004.  In one of those books the author broken down an average person's lifetime into quarters and likened a person's financial life with a game that has to be won.

Unlike the game of basketball where all quarters must be played to determine a winner, the game of life called the rat race according to Kiyosaki, may be won in any of the quarters.  It doesn't even have to reach the end of the first quarter. He outlined the  strategies mainly using cashflow to win the game.

While Kiyosaki's ideas are brilliant considering most people's training in personal finance, a strategy on how to manage a person's resources for his own advantage wasn't really outlined in his teachings. This is what financial planners call it: asset allocation a.k.a. don't put all your eggs in one basket.

Following the concept of asset allocation, assets are to be distributed into several asset classes in order to reduce overall exposure to risk. Asset allocation covers several items including retirement planning which ranks somewhere at the top of the hierarchy.

I could die out of boredom from these 4th quarter preparations, but hey, I’d rather be bored doing what I want to do in my terms than worry like most people do. Uncertainty does spice up life at some point but not this. When you know you can do something today of this great opportunity of being young and productive, then just stop thinking about your self for a while.

A lot of folks out there would rather choose denial and probably would never find out what they’re really missing out on. I’d rather worry now than later when I start losing my powers lol. Only broke people think this is a responsibility of the government or their employer, or someone else but themselves.

But what if you know how much you're going to spend your whole lifetime? The surest way is to plan for it because the income you’re generating is not something comparable to what the oil sheiks are producing. It is the answer to the question of how much you should be saving and investing in your productive years in order to effectively cover your self and your chosen ones in the 4th quarter minus all headaches.

I know much of these headaches and believe it or not I’m continuously associating financial ignorance and poverty with pain and more PAIN just to keep myself away from complacency and over-spirituality. Believe me, God has nothing to do with your financial ignorance. So imagine if we try plotting it in the following timeline:

I'm quite fascinated with a couple of financial calculators from android play store lately. Very exciting! You put in the rates and wallah! You may search for iQuick savings calculator and Just Retire android apps and just play with it if you want to see how the numbers work for you in the future.

And here's the problem: everyone knows at some point we're going to age and loose our capacity to work and earn some income. And by that time we should be responsible enough already (were not young anymore!) to cover ourselves and enjoy life even more, and perhaps handover something worth sharing into the next generation?

We all know this is NOT the case for most people. And the result:

• zero or not enough resources,
• completely dependent from others, often their OWN children,
• and worse, competing resources with their OWN grandchildren!
• unnecessary worries instead of enjoying the supposed golden years, etc. 

How cool is that?

At least in my standards this is terribly IRRESPONSIBLE in uppercase. Just looking at what you can spend spend spend in the short-term means you are educating the next generation to learn from your stupidity and inconsideration. Needless to say these dudes must grow up quicker and faster because you have acted like a child your whole life, never thinking about the needs of your future self. And now they get to carry unnecessary burden. Believe me these cute little guys never asked and will never ask for something like that especially from their OWN parents.

Solution?

The math is very very very simple. It’s called compound interest from your regular savings. How to save is entirely a different story here because it has to do with your behavior and relationship with money: how you create value and get paid, how and where to spend it, and where you launch and grow what you have paid your self (savings). The following timeline should illustrate a pretty decent happy outcome.

For me this is just a backup plan I call the “slow plan”. In order to buy and secure the future in the time of global economies, global downturns, and shifting fortunes, we need at least two plans: a cashflow plan to finance small business and the slow plan shown above. 

So what's the future in store for you? Are you going to be the champ you are destined to be comes 4th quarter?  The answer is: it’s up to you.

 

Are You Ready?

I was asked what kind of small business would I suggest given this sum of cash savings, etc.  The amount is really not important as the sincerity of the question raised. It is quite a common question found in various investment forums online as well as offline.

And the straight answer is this: ask someone who’s not selling anything or at least has the time for sharing stuff related to the subject.  The fact is, many sales people, if you’re unlucky to approach one, asking them such questions means you’re up for a serious trap.

This is not a problem if you don’t have difficulty rejecting a proposal or just plain saying ‘NO’ when you don’t have enough information or for whatever reason.  It doesn’t mean you have to be less nice of a person but most of the time, salespeople, if not all of them are just up for a commission.  The moment you notice them running a pitch instead of asking you a sequence of questions about you and what you really are looking for, then you know you’re in big trouble.

This reminds me of two insurance companies in SM City Cebu and another in their corporate building around Ayala Business Center in Cebu that I approached during my vacation to the Philippines this year.  All of them just ran a pitch straight through and my only defense was I didn’t have any credit card, checkbook, etc. with me.

The same is true in many MLM companies.  I almost thought these guys just want to flash SUVs and some Mitsubishi Pajero sport to lure you into recruiting for their sign-up bonus.  These guys may teach you the best they can how to recruit and then they’ll show you how to loose all of your earnings and go massively broke by getting into so much debt from a car or housing loan just for you to look good as some type of testimonial to your so called ‘new found success’. Freaking stupid.

In my opinion, the best way answering these types of questions has to do with readiness.   Are you really ready to invest? How financially fit and educated are you?  How much regular savings do you have in your savings and investment accounts?

When you know how fit the person is financially then you know you got a real prospect and not just someone wasting your time.

If you want to invest or build a business then I would hope taking the risk and losing all the money you put on the line would not mean you don’t have food to eat in the following week, or you’ll be in debt for the next 2 to 3 years, etc.

I suggest reading Dave Ramsey’s the Total Money Makeover in order for you to set up your financial life ready to attract more of the good stuff instead of disasters in case you fail.  The following is a simple flow chart just to give you an idea how it should be the financial planner’s way.

In this diagram, you don’t start investing or building a business without an emergency fund.  This is 6 months to a year of your regular expenses in cash in case of an emergency: losing a job, getting sick, or having an accident and other surprises around the house and family. This fund covers you without you taking out a bank loan or bothering / borrowing from your friends and relatives.

For couples, a 6-months worth of your expenses in cash is fine. For singles, single income households, this is equivalent to 12 months.  It is much bigger since losing a job, for example, means a 100% loss of income when something like that comes up.

Maintaining an emergency fund in cash actually goes in line with the principle of asset allocation taught by many financial planners.  I heard this from Tony Robbins as well as in Dave Ramsey’s books and audios.

It acknowledges the fact that emergencies of all sorts do happen and this is normal.  Anyone who don’t think about this reality is of course naïve and stupid.  Disasters come as well as upsets and you might as well grow up and be prepared because everyone isn’t.

I can’t tell you enough how important an emergency fund is as it once saved me from the recent Great Recession that hit the world’s markets.  I was in Dubai in 2009 and this once fabulous city was one of those hit hard by the collapse.  If it wasn’t for my emergency fund, I wouldn’t be in Qatar at the moment. I would have missed many other opportunities and more! I can’t tell you more lols

So, are you ready to invest? 

Successions and Transitions

I’m amused and grateful at what happened today.  It’s in the news that the Qatari leadership just handed over power to his son to replace him as Emir of the rich state. It is amusingly out of this world especially in this region where power seems to be so scarce everyone wanted it til death do they part. Meanwhile, I know a lot of folks, especially expats, are grateful for the unexpected non-working holiday today. It’s just awesome!

I’m sure many of those politically inclined folks are excited to see a little change in the way power transition is done in countries still run by monarchs.  In many ways, it is a paradigm shifting experience for everyone around.

So, who’s going to be next? I’m still in doubt if everyone’s favorite Sheikh Mo of Dubai would do the same.  It is not impossible though in spite of him being notoriously workaholic and his inspiringly ambitious tendencies LoL.  The guy knows nothing about retirement for sure.

In my opinion, monarchy where significant economic development is consciously pursued and seen to be apparently beneficial to its people will continue to be accepted.  Many of those other governments where economic activity and expansion are weak, and people around see more of the negativity such as corruption have for some reason been threatened by last year’s so called Arab Spring, and more. It’s quite ugly and horrible.

I am extremely grateful for the opportunities Qatar has somehow provided for myself within the Emir’s term.  These are opportunities some might think is just luck.  Of course, not everyone is happy here.  There are a few whom would rather complain for petty reasons.  But for those whom have gone overseas with a plan, it is a real blessing.

Like the Emir, it requires a transition person to do such selfless deed.  As mentioned, this rarely happens in the Middle East.  And as for expats, especially Filipino expats, in this day and age, it takes a transition person to be an OFW with a plan, an exit, a vision of a meaningful transition into the next phase. 

We may no longer follow those whom have gone without a plan and cannot come home for apparent reasons.  Some might just stand up and act like grown ups to look at reintegration into Philippine society a “must”. 

It just takes a transition person to do so: a person not ruled by tradition and default thinking, someone far bigger than his own fear of criticism of others. No one told it's easy. Of course it's doable using leverage. It takes leverage from those with the discipline, skill, and results left for those determined to accomplish the same.

Test

The quick brown fox jumps over the lazy dog.