Friday, October 28, 2011

Having problems paying your Credit Card debts?

Maybe this quote below explains some of the reasons why...

Will Rogers Quote on Money, Debt, and a pretentious lifestyle:

“Too many people spend money they haven’t earned, to buy things they don’t want, to impress people they don’t like.”
― Will Rogers

Step 6. Get Protection or Income Replacement Strategies (a.k.a. Insurance):

Like an emergency fund, insurance protection is intended to be like a financial shock absorber to protect you and your family's financial stability during those times when undesired emergencies or bumps in the road of life are encountered. Insurance protection (also known as Income Replacement Strategies) are designed to provide an alternative source of income for you (or your family) when the income generating capacity of the breadwinner of the family is impaired or stopped. (Wherein the breadwinner is any member of the family or a business vehicle which provides the income for the household needs).

Basically, insurance protection serves the following strategic purposes:

I.    Provide you and your family financial stability during emergencies;
II.   Prevent you (or your family) from resorting to high interests loans/debts during emergencies;
III.  Prevent you from cashing out your long term investment accounts before the intended goals of the investments are achieved.

So avail of Income Replacement Strategies (thru Insurance) to protect the income generating machine/s of the family.

Tuesday, October 18, 2011

Mr. Save EARLY vs Mr. Save LATER

Maximizing the Power of Compound Interest

Mr. Save EARLY:
-> Invests P20,000/year for 8 years @12% annual interest.
-> Started investing earlier @ age 21 yrs old.
-> Total Contributions = P160,000.

Mr. Save LATER:
-> Invests P20,000/year for 22 years @12% annual interest.
-> Started investing at a later age (29 yrs old).
-> Total Contributions = P440,000.

Whose savings will gain and perform better (and at a much lower cost)?
--> Checkout the results below when both men will reach the age of 50. 

Mr. Save EARLY @ Mr. Save LATER @

Annual Interest Rate = 12.00% Annual Interest Rate = 12.00%
Age Payment / Contributions Accumulated Amount (End of Year) Payment / Contributions Accumulated Amount (End of Year)
21 20,000 22,400 0 0
22 20,000 47,488 0 0
23 20,000 75,587 0 0
24 20,000 107,057 0 0
25 20,000 142,304 0 0
26 20,000 181,780 0 0
27 20,000 225,994 0 0
28 20,000 275,513 0 0
29 0 308,575 20,000 22,400
30 0 345,604 20,000 47,488
31 0 387,076 20,000 75,587
32 0 433,525 20,000 107,057
33 0 485,548 20,000 142,304
34 0 543,814 20,000 181,780
35 0 609,072 20,000 225,994
36 0 682,160 20,000 275,513
37 0 764,020 20,000 330,975
38 0 855,702 20,000 393,092
39 0 958,386 20,000 462,663
40 0 1,073,393 20,000 540,582
41 0 1,202,200 20,000 627,852
42 0 1,346,464 20,000 725,594
43 0 1,508,039 20,000 835,066
44 0 1,689,004 20,000 957,673
45 0 1,891,684 20,000 1,094,994
46 0 2,118,687 20,000 1,248,794
47 0 2,372,929 20,000 1,421,049
48 0 2,657,680 20,000 1,613,975
49 0 2,976,602 20,000 1,830,052
50 0 3,333,794 20,000 2,072,058


--> Total Payments
--> Total Payments

-> Mr. Save EARLY reaped a lot more gains from his investment than Mr. Save LATER (P3,333,794  vs  P2,072,058). A huge difference of P1,261,736. 
-> Mr. Save EARLY was able to achieve this at a very much lower cost than Mr. Save LATER. (P160,000  vs  P440,000).

Important Lessons from the above illustration: 
1.  To maximize the power of compound interest in Savings/Investments, START Saving/Investing EARLY.
2.  Work Smarter, Not Harder. Let the power of compound interest Work For YOU thru Investments, and Not Against YOU thru Loans/Credit Card Debts.

Thursday, October 6, 2011

The Explosive Power of Compound Interest

(A much neglected life changing concept and wealth building tool.)
No one ought to be allowed to graduate from college or high school without understanding this concept.
- Dave Ramsey, Personal Finance Expert, Best Selling Author and Speaker.
The concept of percent and interest is taught in basic Filipino high school mathematics. But it is unfortunate that the application of this concept in everyday money management activities is not well emphasized in the high school lessons such that the "power of compound interest" sounds like an alien phrase to most graduates of high schools and even colleges in the Philippines.

And yet this simple concept about the power of compound interest can potentially improve the financial and everyday life of the hardworking Filipino income earner.

One important warning though about compound interest is that it can work for you or against you.
--> It can work for you to increase your income (thru INVESTMENTs) or it can work against you to add to your expenses (thru LOANs and CREDIT CARD DEBTs).

Which do you prefer? Which of the two options will allow you to attain Financial Independence and escape the Rat Race?
--> (Clue: Let Others Pay You interest thru your INVESTMENTs instead of You Paying Interests thru your LOANs/DEBTs).

Enjoy watching this video by Dave Ramsey on the Power of Compound Interest:

Monday, October 3, 2011

Wealth Management and the Economy

Several studies and surveys conducted has already established the direct connection between the wealth management skills of a country's population to the economic strength and wealth of the country:

The better the money management and wealth building skills of the people as a whole, the better is the status and strength of the country's economy.

Sad to see yet another study confirm the poor training in wealth building our Filipino kids are getting especially since we call them the future builders of our nation.

Maybe this news article will motivate us to teach our future nation builders to not just spend, spend, spend, but also to save, invest, and build.

Filipino kids lack money management skills -- study

HONG KONG -- Almost all Filipino children have regular access to cash, but they still do not understand key money concepts, such as earning, saving and spending, and the impact these have on their lives, a study showed.

Read more:
Filipino kids lack money management skills - study