By Dr. Johnny Noet Ravalo
INQUIRER.net
The headlines are blaring, sound clips are plenty and online coverage seems never ending. Amidst all the financial difficulties, someone asked me what new lessons should be learned. I did not have to pause very long. I still think that the main lessons are no different from those that we have tried to share in this column on various occasions even though this crisis is unprecedented in many respects. For me, six lessons particularly stand out.
1. We simply do not have the ability to perfectly foresee the future. Lehman was after all an AA-rated credit so who would have imagined what would become of such a venerable Wall Street name. This human limitation is the best reason why we should be saving. We should save because it is the only way we can transfer purchasing power from when we have a surplus to when we may suddenly need more of it. In other words, saving during normal times helps us manage the difficult times. When difficult times kick in, our financial plans often shift to prioritizing liquidity over profitability. Unless we have a fool-proof way of either marrying into or inheriting liquidity just at the right time, we simply cannot maximize liquidity when we have no saving to speak of in the first place.
2. Change is the one constant in financial markets. With change, perceptions and fortunes can very well change as well. What may be heralded today may suddenly be frowned upon when market conditions change. Mortgage-Backed Securities (MBS) and Collateral Debt Obligations (CDO) were positioned as financial engineering responses to the needs in the housing market. They provided the means for more individuals to obtain their own home via mortgage while allowing financial institutions to re-package the exposures. Yet as market rates reversed, what were once labelled as “innovations” had evolved into the “sub-prime” saga.
3. Financial value is a relative concept. A trader, for example, would have a different mindset from an investor. This matters because ultimately the portfolio of a trader should be different from the portfolio of an investor. There is always that natural urge for any investor to get a bit more but without realizing it, some of us cross over and mimic a trading position and get consumed in the day-to-day changes in market values. This will be a problem because traders build their portfolios based on different investment objectives and look forward to “re-balancing” the portfolio to generate returns. Most retail investors would not have the “information infrastructure” to monitor the markets ticker-by-ticker and adjust their portfolios accordingly. Instead, it may be more prudent to give up on higher risk instruments for those that can provide a reasonable gain over longer periods, with due consideration to our shifting liquidity needs and the changing fortunes of the credit quality of the instrument issuer.
4. Financial markets provide a value-added service but they do not have to be “equal” to all to get this job done. This is perhaps the hardest lesson of all and it does not mean that financial markets are inherently unfair. What it simply says is that the financial market cannot accommodate everything that each of us want because trade-offs are necessary. For example, we cannot generate the highest return without taking more systemic risks. And no matter how we work on it, a pool worth P5,000 is much less flexible than a pool worth P500,000. This is not being unfair. Rather, it is a testament to our differences; differences that make markets work so that differentiated products are offered for different needs.
5. Market dynamics have a way of containing excesses. Unfortunately, the realignment is never painless because it may mean getting a bump, a bruise or a bleeding cut every now and then. This is not a critique of the financial market but more of a blunt reminder that there needs to be a certain amount of balance in what we do in these markets, both for our individual portfolios and our collective behaviour as stakeholders. It is important that we identify what we want out of our investments, make sure that our investment objectives are consistent with our own capacities and have the discipline to stay within our means. This is often not easy and this is where we really need the objective eye of financial advisers and brokers.
6. Finally, information is supreme in financial markets. It is important that we know what’s going on in the market because it is our saving that is at stake. The difference between an informed investor and a panicky investor is often the absence of quality information. Deal with financial institutions that make a clear effort to communicate with you and take the time to keep the lines open. This is not an excuse to abdicate on making financial decisions. That part still rests with us because it is the action item that comes from gathering the relevant information.
These are the lessons that I always keep in mind. I don’t mean to suggest that it is an exhaustive list and I do not also represent them to be a recipe for financial success. For me at least, it helps in maintaining a perspective and all day-to-day financial choices are anchored on that broad view.
Tuesday, October 27, 2009
Monday, October 26, 2009
Top tips on how to handle money in 2009
MANILA, Philippines--The year 2008 has been a challenging year. Oil soared high triggering an increase in prices of commodities from rice and sugar to canned goods and bread.
But it also slumped, resulting in rollback of prices at the gas pump and in transportation fares.
Inflation reached double-digit levels but recorded its lowest low as well. It was this year that the world felt the effects of a global financial crisis.
Thousands of workers in many countries have lost their jobs and homes as corporations and financial institutions buckled under the financial crisis.
Filipinos are not exempted. Crisis is in the air and many are taking stock and preparing for what may lie ahead. That includes managing finances better.
Some finance-savvy people share below how they are handling their finances in the midst of a global financial crunch:
Question: What have you done this year to manage your finances better?
Heinz Bulos, editor in chief, Money Sense magazine: My wife and I are Quicken types and it's easy to track where our money goes since we normally use credit cards and checks for transactions. But it's the cash withdrawn from the automated teller machine that's always difficult to account for. It's fine if we can't trace a few hundred pesos but when it's thousands of pesos "missing," something's not right. So we decided to centralize everything using a simple petty cash system--each of us can only replenish our cash every week once expenses are accounted for with proper receipts.
Karen Galarpe, blogger--Open for Business at www.inquirer.net, freelance editor and speaker on financial issues: I took a long hard look at my spending and have cut down wherever I can. For instance, I now patronize a salon that doesn't charge as much as the salon I used to go to, but still gives quality service. I also looked for a new school for my son that charges a more reasonable tuition fee yet still gives quality education. I patronize more Filipino products rather than imported ones which, more often than not, cost more. In short, I have become more conscious about getting more value for my money without resorting to deprivation. I have also continued my habit of writing down my expenses and checking if I'm living within my means.
Judith Go, Citigold wealth management director, Citibank Philippines: Crisis or no crisis, people need to review their finances every so often to look for areas where one can improve. It could be that the year before, you were setting aside 10 percent of your income, and this year, you will target a higher saving rate. Personally, I realigned my investment portfolio and went for a moderate-aggressive strategy. I know that the markets will recover and I want to take advantage of the tremendous upside when that happens.
Alijeffty Gonzales, registered financial planner, www.acgadvisors.net: 2008 will stand out as the year when classic principles of investments like diversification were turned upside down; the commonly accepted principle of bonds being inversely correlated to stocks does not seem to hold anymore as both dropped at the same time.
As this may affect the liquidity of my portfolio (I don't want to be forced to a selling position when prices are low), the first thing I did was to establish a cash position that is twice as large as I normally would require. This came from the cost-cutting of nonessential expenses and identifying new areas for generating income.
Question: What steps are you taking or will take to weather the financial crisis?
Heinz Bulos: I'm all for a little belt-tightening and some sacrifice, but cost-cutting goes only so far (plus it's not a lot of fun). So we're focusing on increasing the income side. It's not enough to diversify our income sources, working with different companies on ongoing projects. We realize it's very important to own the source of income itself, and that means focusing on our own business. We found a profitable market niche that works for us and we have lined up numerous projects in the coming year. We believe there are opportunities even in a financial crisis.
Karen Galarpe: I look for ways to increase my income without wearing myself down. I look for and work on projects that would be worth my while.
In other words, I don't just jump on any opportunity, but study wisely the pros and cons.
I have also continued being diligent in saving, and have taken steps to diversify my investments. I hope to increase my savings rate this 2009.
Judith Go: Where I used to think twice about spending for wants, now I think thrice, even four times, until I convince myself not to go ahead.
This is something I will keep doing even when the crisis is fully contained and we start to see a turnaround. I'm fortunate that this is something my kids have picked up as well--they are quite responsible when it comes to spending their allowance--and I hope that they'll continue to be this way as they grow into adulthood.
But it also slumped, resulting in rollback of prices at the gas pump and in transportation fares.
Inflation reached double-digit levels but recorded its lowest low as well. It was this year that the world felt the effects of a global financial crisis.
Thousands of workers in many countries have lost their jobs and homes as corporations and financial institutions buckled under the financial crisis.
Filipinos are not exempted. Crisis is in the air and many are taking stock and preparing for what may lie ahead. That includes managing finances better.
Some finance-savvy people share below how they are handling their finances in the midst of a global financial crunch:
Question: What have you done this year to manage your finances better?
Heinz Bulos, editor in chief, Money Sense magazine: My wife and I are Quicken types and it's easy to track where our money goes since we normally use credit cards and checks for transactions. But it's the cash withdrawn from the automated teller machine that's always difficult to account for. It's fine if we can't trace a few hundred pesos but when it's thousands of pesos "missing," something's not right. So we decided to centralize everything using a simple petty cash system--each of us can only replenish our cash every week once expenses are accounted for with proper receipts.
Karen Galarpe, blogger--Open for Business at www.inquirer.net, freelance editor and speaker on financial issues: I took a long hard look at my spending and have cut down wherever I can. For instance, I now patronize a salon that doesn't charge as much as the salon I used to go to, but still gives quality service. I also looked for a new school for my son that charges a more reasonable tuition fee yet still gives quality education. I patronize more Filipino products rather than imported ones which, more often than not, cost more. In short, I have become more conscious about getting more value for my money without resorting to deprivation. I have also continued my habit of writing down my expenses and checking if I'm living within my means.
Judith Go, Citigold wealth management director, Citibank Philippines: Crisis or no crisis, people need to review their finances every so often to look for areas where one can improve. It could be that the year before, you were setting aside 10 percent of your income, and this year, you will target a higher saving rate. Personally, I realigned my investment portfolio and went for a moderate-aggressive strategy. I know that the markets will recover and I want to take advantage of the tremendous upside when that happens.
Alijeffty Gonzales, registered financial planner, www.acgadvisors.net: 2008 will stand out as the year when classic principles of investments like diversification were turned upside down; the commonly accepted principle of bonds being inversely correlated to stocks does not seem to hold anymore as both dropped at the same time.
As this may affect the liquidity of my portfolio (I don't want to be forced to a selling position when prices are low), the first thing I did was to establish a cash position that is twice as large as I normally would require. This came from the cost-cutting of nonessential expenses and identifying new areas for generating income.
Question: What steps are you taking or will take to weather the financial crisis?
Heinz Bulos: I'm all for a little belt-tightening and some sacrifice, but cost-cutting goes only so far (plus it's not a lot of fun). So we're focusing on increasing the income side. It's not enough to diversify our income sources, working with different companies on ongoing projects. We realize it's very important to own the source of income itself, and that means focusing on our own business. We found a profitable market niche that works for us and we have lined up numerous projects in the coming year. We believe there are opportunities even in a financial crisis.
Karen Galarpe: I look for ways to increase my income without wearing myself down. I look for and work on projects that would be worth my while.
In other words, I don't just jump on any opportunity, but study wisely the pros and cons.
I have also continued being diligent in saving, and have taken steps to diversify my investments. I hope to increase my savings rate this 2009.
Judith Go: Where I used to think twice about spending for wants, now I think thrice, even four times, until I convince myself not to go ahead.
This is something I will keep doing even when the crisis is fully contained and we start to see a turnaround. I'm fortunate that this is something my kids have picked up as well--they are quite responsible when it comes to spending their allowance--and I hope that they'll continue to be this way as they grow into adulthood.
Sunday, October 25, 2009
The gift of saving
By Dr. Johnny Noet Ravalo
INQUIRER.net
It’s the end of the year and by now all the gifts have been opened. That also means that our billing statements will soon be in the mail as well. No matter. It’s the season of sharing and we are just as happy to go through the shopping and the wrapping to remind family and friends that they matter.
As I look at my nephews, nieces and godchildren comparing their respective “loot for the season”, I realize that I grew up in a very different, much more measured environment. I turn philosophical (it comes with the season . . .) and ask myself: what gift did I receive from my parents that had a lasting impact on me?
The answer is as corny as it is discerning: my parents invested into my future by saving.
My father’s mantra was “simple living” and he found every opportunity to recite it as if it was a pledge (he still does today). I thought it was just an excuse so we did not have to eat out or take family vacations (if we couldn’t reach a place by car, don’t count on seeing it). Dad was a disciplinarian and it was not a wise move to get the ire of an ex-military man either by being short ten centavos or “agreeing” to receive those green candies in lieu of the right amount of change.
But he also took on two teaching loads in a graduate school, carrying out this responsibility at night after his day job and giving up his Saturdays. Yes, he loved both the teaching part and the mind games of the case studies (I found my business subjects in college quite easy in part because I read cases at a young age). But I could not understand why someone who lives in Quezon City and works full-time in Makati will bother to teach in a school along Taft Avenue. It was simply “out of his way” which for dad was a major infraction on “simple living”. Eventually though, I understood the payoff: for as long as he was teaching and taking the administrative load, my grade school (and then my high school) tuition was discounted significantly.
The biggest hurdle to saving though is that it remains an abstract asset until it is actually deployed. I knew about the tuition discount as a young boy but it wasn’t something I could see or hold. Back then, saving felt more like “foregoing present-day opportunities” rather than an investment for the future.
I don’t think I understood, really understood, why my parents were so “measured” until I was accepted to graduate school abroad. Despite the school acceptance, we still had to show the embassy a bank balance. After that, the trip itself and having to start a new life in an alien environment required a sizeable treasure by itself. I was fortunate to have received an academic scholarship which settled my tuition but I became a working student by circumstance. Trying to match a $3.75-an-hour minimum wage with an $800-a-month rent in Brookline meant that I had to focus more on “working” than on the “student” part of the equation. This was no longer someone else’s saving but something I had to generate and then manage on my own.
What is the point of all these?
I am very sure that I am better off today because of the invaluable opportunity of studying in Boston at a top-ranked institution. Professionally, the academic training gave me a different perspective, if not a broader toolkit to work with. At the personal level, one does not forget the challenges of living alone in a foreign environment without the comforts of family and, more importantly, the consequences of not having savings that you can tap when you need them when the need arises.
All these gains were possible only because my parents had the uncanny ability to maintain the discipline of saving. I’m sure they heard my siblings and I whenever we grumbled at yet another facet of “simple living” but I am very thankful that they either didn’t hear very well or simply chose to lend a deaf ear.
I concede that saving is harder today simply because it is harder to manage today’s environment. Income streams are not as permanent and the cost of living depends a lot on volatile external factors.
But perhaps saving is harder because we have lost our way with this virtue. Saving is not preventing expenses to be incurred but striking instead a hard balance between income and expenses. With a few hugs from my family, we are off to our favourite eating place. It’s an added expense but it does not necessarily make us poor savers. It runs counter to my parents “simple living” rules but I think we can still be effective at saving even if we indulge ourselves every now. In fact my father likes to eat out nowadays, I suppose because he doesn’t pay the bill anymore. The point is that his “simple living” rules are actually not absolute but very much relative.
This is the nature of saving. There must be some rules but do not have to be the same for everyone to make it work. To make the discipline work, we have to be comfortable with it. And the ultimate gauge of whether we are effective in our saving is the ability to transfer purchasing power through time when and where it is most needed.
This is the gift of saving that I have been so blessed to have received. I live a different life because someone saved for me when I didn’t have the capacity to do so and instilled in me the discipline for it when I did have such a capacity.
INQUIRER.net
It’s the end of the year and by now all the gifts have been opened. That also means that our billing statements will soon be in the mail as well. No matter. It’s the season of sharing and we are just as happy to go through the shopping and the wrapping to remind family and friends that they matter.
As I look at my nephews, nieces and godchildren comparing their respective “loot for the season”, I realize that I grew up in a very different, much more measured environment. I turn philosophical (it comes with the season . . .) and ask myself: what gift did I receive from my parents that had a lasting impact on me?
The answer is as corny as it is discerning: my parents invested into my future by saving.
My father’s mantra was “simple living” and he found every opportunity to recite it as if it was a pledge (he still does today). I thought it was just an excuse so we did not have to eat out or take family vacations (if we couldn’t reach a place by car, don’t count on seeing it). Dad was a disciplinarian and it was not a wise move to get the ire of an ex-military man either by being short ten centavos or “agreeing” to receive those green candies in lieu of the right amount of change.
But he also took on two teaching loads in a graduate school, carrying out this responsibility at night after his day job and giving up his Saturdays. Yes, he loved both the teaching part and the mind games of the case studies (I found my business subjects in college quite easy in part because I read cases at a young age). But I could not understand why someone who lives in Quezon City and works full-time in Makati will bother to teach in a school along Taft Avenue. It was simply “out of his way” which for dad was a major infraction on “simple living”. Eventually though, I understood the payoff: for as long as he was teaching and taking the administrative load, my grade school (and then my high school) tuition was discounted significantly.
The biggest hurdle to saving though is that it remains an abstract asset until it is actually deployed. I knew about the tuition discount as a young boy but it wasn’t something I could see or hold. Back then, saving felt more like “foregoing present-day opportunities” rather than an investment for the future.
I don’t think I understood, really understood, why my parents were so “measured” until I was accepted to graduate school abroad. Despite the school acceptance, we still had to show the embassy a bank balance. After that, the trip itself and having to start a new life in an alien environment required a sizeable treasure by itself. I was fortunate to have received an academic scholarship which settled my tuition but I became a working student by circumstance. Trying to match a $3.75-an-hour minimum wage with an $800-a-month rent in Brookline meant that I had to focus more on “working” than on the “student” part of the equation. This was no longer someone else’s saving but something I had to generate and then manage on my own.
What is the point of all these?
I am very sure that I am better off today because of the invaluable opportunity of studying in Boston at a top-ranked institution. Professionally, the academic training gave me a different perspective, if not a broader toolkit to work with. At the personal level, one does not forget the challenges of living alone in a foreign environment without the comforts of family and, more importantly, the consequences of not having savings that you can tap when you need them when the need arises.
All these gains were possible only because my parents had the uncanny ability to maintain the discipline of saving. I’m sure they heard my siblings and I whenever we grumbled at yet another facet of “simple living” but I am very thankful that they either didn’t hear very well or simply chose to lend a deaf ear.
I concede that saving is harder today simply because it is harder to manage today’s environment. Income streams are not as permanent and the cost of living depends a lot on volatile external factors.
But perhaps saving is harder because we have lost our way with this virtue. Saving is not preventing expenses to be incurred but striking instead a hard balance between income and expenses. With a few hugs from my family, we are off to our favourite eating place. It’s an added expense but it does not necessarily make us poor savers. It runs counter to my parents “simple living” rules but I think we can still be effective at saving even if we indulge ourselves every now. In fact my father likes to eat out nowadays, I suppose because he doesn’t pay the bill anymore. The point is that his “simple living” rules are actually not absolute but very much relative.
This is the nature of saving. There must be some rules but do not have to be the same for everyone to make it work. To make the discipline work, we have to be comfortable with it. And the ultimate gauge of whether we are effective in our saving is the ability to transfer purchasing power through time when and where it is most needed.
This is the gift of saving that I have been so blessed to have received. I live a different life because someone saved for me when I didn’t have the capacity to do so and instilled in me the discipline for it when I did have such a capacity.
Saturday, October 24, 2009
Savings program for ‘kasam-bahays’
By Dr. Johnny Noet Ravalo
INQUIRER.net
Al was already borrowing money on January 6, so early into the year. When he started working at P7,500 a month over a decade ago, he did not save despite having his living expenses fully covered. Today, he makes double that - not counting non-monetary benefits - and he still has no savings.
Grace sends money to her relatives every so often. Although something is better than nothing, the amount she remits really pales in comparison to what she earns. Grace doesn’t spend for her living expenses but she pours much of her income on cellphone loads.
Al and Grace are “kasam-bahays”. We could debate whether their problem is that they cannot save (capacity), do not want to save (willingness) or do not know how to save (awareness). That debate though would be for another time.
For now, what is on my mind is their saving habit: should employers take a pro-active role in developing the saving habits of their kasam-bahays?
If there is something I know quite well, it is that financial planning is not an inborn talent but more of an acquired discipline. Saving is difficult because it constantly tests our resolve and challenges our ability to react to changing market conditions.
The reality is that very few of our kasam-bahays have a saving plan. Many of them manage their day-to-day cash without thinking longer-term. The challenge then is to show them the longer-term benefits of saving without severely constricting their present-day liquidity.
How then do we move forward?
I think it boils down to our our kasam-bahays wanting to save, not just in words but in deed. This is first a mindset issue because there may be a perception that the saving plan is just an ingenious way to avoid paying our our kasam-bahays their due in income. If it gets to this point, then everything else becomes counter-productive and the working relationship is contaminated by mistrust.
Knowing that cash is important to our our kasam-bahays, deducting part of their existing income will not be a good way to start. This saving will just be felt as a loss in day-to-day liquidity without any perceivable gains.
Perhaps employers may consider advancing the saving and treating this as part of their our kasam-bahays benefits. For example, instead of giving a straight increase in pay, the full-year equivalent of the increase can be invested as a time deposit and periodically rolled over within the year. The beneficial owner of the time deposit is still our our kasam-bahays and they get to see their money grow within the year without any direct loss in day-to-day liquidity.
For our our kasam-bahays who have young children, one variant of this would be something like a trust fund. The fund grows over time for the benefit of our our kasam-bahays without any risk that the money will be depleted as day-to-day expense. As the child gets good grades, give cash gifts to further boost the outstanding balance.
Hopefully, our our kasam-bahays will be encouraged to save part of their income once they see the benefits of their saving plan. Employers can match every peso they save up to some pre-determined limit.
As a community of stakeholders, banking associations may wish to get together and offer special programs for new savings from our kasam-bahays or even other targeted constituencies such as families of OFWs. Certainly, tie ups with government agencies may eventually be needed to formalize these programs. Whatever these arrangements may be, we all benefit from broadening the saving base, increasing our saving rate from its present levels and providing more for our respective futures.
We need to bring saving to the level of those around us. We can talk about financial literacy or great saving schemes but unless we can execute these into actual mobilized saving, I doubt if there is anyone out there that would consider great talk as a success indicator. We need to help ourselves and those around us, just as everybody else helps us in one way or another.
I don’t think we have to look very far. After all, everything starts at home.
INQUIRER.net
Al was already borrowing money on January 6, so early into the year. When he started working at P7,500 a month over a decade ago, he did not save despite having his living expenses fully covered. Today, he makes double that - not counting non-monetary benefits - and he still has no savings.
Grace sends money to her relatives every so often. Although something is better than nothing, the amount she remits really pales in comparison to what she earns. Grace doesn’t spend for her living expenses but she pours much of her income on cellphone loads.
Al and Grace are “kasam-bahays”. We could debate whether their problem is that they cannot save (capacity), do not want to save (willingness) or do not know how to save (awareness). That debate though would be for another time.
For now, what is on my mind is their saving habit: should employers take a pro-active role in developing the saving habits of their kasam-bahays?
If there is something I know quite well, it is that financial planning is not an inborn talent but more of an acquired discipline. Saving is difficult because it constantly tests our resolve and challenges our ability to react to changing market conditions.
The reality is that very few of our kasam-bahays have a saving plan. Many of them manage their day-to-day cash without thinking longer-term. The challenge then is to show them the longer-term benefits of saving without severely constricting their present-day liquidity.
How then do we move forward?
I think it boils down to our our kasam-bahays wanting to save, not just in words but in deed. This is first a mindset issue because there may be a perception that the saving plan is just an ingenious way to avoid paying our our kasam-bahays their due in income. If it gets to this point, then everything else becomes counter-productive and the working relationship is contaminated by mistrust.
Knowing that cash is important to our our kasam-bahays, deducting part of their existing income will not be a good way to start. This saving will just be felt as a loss in day-to-day liquidity without any perceivable gains.
Perhaps employers may consider advancing the saving and treating this as part of their our kasam-bahays benefits. For example, instead of giving a straight increase in pay, the full-year equivalent of the increase can be invested as a time deposit and periodically rolled over within the year. The beneficial owner of the time deposit is still our our kasam-bahays and they get to see their money grow within the year without any direct loss in day-to-day liquidity.
For our our kasam-bahays who have young children, one variant of this would be something like a trust fund. The fund grows over time for the benefit of our our kasam-bahays without any risk that the money will be depleted as day-to-day expense. As the child gets good grades, give cash gifts to further boost the outstanding balance.
Hopefully, our our kasam-bahays will be encouraged to save part of their income once they see the benefits of their saving plan. Employers can match every peso they save up to some pre-determined limit.
As a community of stakeholders, banking associations may wish to get together and offer special programs for new savings from our kasam-bahays or even other targeted constituencies such as families of OFWs. Certainly, tie ups with government agencies may eventually be needed to formalize these programs. Whatever these arrangements may be, we all benefit from broadening the saving base, increasing our saving rate from its present levels and providing more for our respective futures.
We need to bring saving to the level of those around us. We can talk about financial literacy or great saving schemes but unless we can execute these into actual mobilized saving, I doubt if there is anyone out there that would consider great talk as a success indicator. We need to help ourselves and those around us, just as everybody else helps us in one way or another.
I don’t think we have to look very far. After all, everything starts at home.
Friday, October 23, 2009
Loose change and your saving habits
By Dr. Johnny Noet Ravalo
INQUIRER.net
What do you do with loose change you acquire everyday? Do you drop them into canisters and forget about them? Do you count if you got the right amount in the first place? Do you leave them as a tip, finding them to be too much of a nuisance?
There are a lot of things that loose change in your hands – or lying somewhere around the house – can say about you and your saving habits.
Let me go back to Al of the Tale of Two Drivers that I wrote about months ago. Al’s salary is 40 percent higher than the other driver but he had no savings. Today, he still doesn’t save.
Al has the bad habit of being a “non-counter”. He doesn’t check if he got the right amount of change. It is not unusual for Al to be one paper bill short in change (he has been short P1,000, P500, P100, P50 and P20 ... at least he is that consistent). At the same time, Al has no qualms giving a would-be watch-your-car guy P30 even if parking has already been paid for at the car park entrance and the P30 is not even his money but the loose change of his employer.
Non-counters like Al often do not have any saving. Al takes a laid back, fatalistic perspective and is prone to dismiss his situation as part of the difficult times. What I find different about Al and other non-counters is that they often don’t have the urge to do something about their cash flows.
This is not about a lack of income since Al gets almost P170,000 a year. It is about a lack of perspective in handling his money. Al prefers to buy all the food he and his family consume daily. The family has a refrigerator but don’t cook. Al turned down an offer from his employer to pay for his son’s school expenses at a better school. As far as Al is concerned, he can easily afford the P350 a quarter he is presently paying, never mind if the teachers don’t show up. In his mind, moving his son to a P9,000 a year school makes no difference because the boy learns to read and write anyway.
Some non-counters are also “coin huggers”. Once they get their hands on coins, they will instinctively set them aside ... somewhere. The coins are left to pile up. They are merely part of normal transactions.
Coin hoggers are sensitive to form and scale. A crisp P100 bill is not the same as 20 pieces of P5 coins. They prefer P100 bills and their disinterest with coins can often be explained by their having more than sufficient income.
Coin hoggers are more of investors than savers. Instead of having 30-day time deposits, they most likely will go for higher yield-higher balance-longer tenor instruments. At the highest end of the income spectrum, coin hoggers simply skip the coins altogether and they become “coin avoiders.” Their saving simply would neither be defined nor affected by the tiny detail the rest of us refer to as coins.
Then there are “transactors.” These are people who set aside coins and count them. In most cases, transactors not only build value with their coins but also actively use them.
Most of us started out as transactors when we filled up our alkansiya. We derived great pleasure in taking stock of the weight of our alkansiya because it was the defining moment of building value. We didn’t want to break the alkansiya and instead just kept on feeding it more coins.
Transactors are patient savers who do not mind taking small steps in creating value. Today, the fancy term is emotional quotient but back then it was just plain patience. Among family and friends who kept their alkansiya growing up, I find them today to be conscientious savers. There is no need for them to learn of newer techniques of saving; they simply make the effort to set aside and keep going and going and going.
This is not a distinction between rich or poor. Non-counters may be ultra-rich while some transactors may not. What we are talking about here is the saving habit and how our attitude towards the small stuff can affect what we do with the bigger stuff, if ever we get there.
Saving does not guarantee that we will always have enough when we need the added purchasing power. By not saving though, we consign ourselves to the world of Al.
Al looks, behaves and is actually content. It is only when his children get sick, when added school expenses come up or when his mother wants to go to the province does he realize that he has no saving and must borrow again. If you borrow from Al, more likely he will actually produce some cash from somewhere. This is why it all boils down to perspective because his income does give him the notional capacity to save.
Do you know how many loose coins you have floating around at home?
INQUIRER.net
What do you do with loose change you acquire everyday? Do you drop them into canisters and forget about them? Do you count if you got the right amount in the first place? Do you leave them as a tip, finding them to be too much of a nuisance?
There are a lot of things that loose change in your hands – or lying somewhere around the house – can say about you and your saving habits.
Let me go back to Al of the Tale of Two Drivers that I wrote about months ago. Al’s salary is 40 percent higher than the other driver but he had no savings. Today, he still doesn’t save.
Al has the bad habit of being a “non-counter”. He doesn’t check if he got the right amount of change. It is not unusual for Al to be one paper bill short in change (he has been short P1,000, P500, P100, P50 and P20 ... at least he is that consistent). At the same time, Al has no qualms giving a would-be watch-your-car guy P30 even if parking has already been paid for at the car park entrance and the P30 is not even his money but the loose change of his employer.
Non-counters like Al often do not have any saving. Al takes a laid back, fatalistic perspective and is prone to dismiss his situation as part of the difficult times. What I find different about Al and other non-counters is that they often don’t have the urge to do something about their cash flows.
This is not about a lack of income since Al gets almost P170,000 a year. It is about a lack of perspective in handling his money. Al prefers to buy all the food he and his family consume daily. The family has a refrigerator but don’t cook. Al turned down an offer from his employer to pay for his son’s school expenses at a better school. As far as Al is concerned, he can easily afford the P350 a quarter he is presently paying, never mind if the teachers don’t show up. In his mind, moving his son to a P9,000 a year school makes no difference because the boy learns to read and write anyway.
Some non-counters are also “coin huggers”. Once they get their hands on coins, they will instinctively set them aside ... somewhere. The coins are left to pile up. They are merely part of normal transactions.
Coin hoggers are sensitive to form and scale. A crisp P100 bill is not the same as 20 pieces of P5 coins. They prefer P100 bills and their disinterest with coins can often be explained by their having more than sufficient income.
Coin hoggers are more of investors than savers. Instead of having 30-day time deposits, they most likely will go for higher yield-higher balance-longer tenor instruments. At the highest end of the income spectrum, coin hoggers simply skip the coins altogether and they become “coin avoiders.” Their saving simply would neither be defined nor affected by the tiny detail the rest of us refer to as coins.
Then there are “transactors.” These are people who set aside coins and count them. In most cases, transactors not only build value with their coins but also actively use them.
Most of us started out as transactors when we filled up our alkansiya. We derived great pleasure in taking stock of the weight of our alkansiya because it was the defining moment of building value. We didn’t want to break the alkansiya and instead just kept on feeding it more coins.
Transactors are patient savers who do not mind taking small steps in creating value. Today, the fancy term is emotional quotient but back then it was just plain patience. Among family and friends who kept their alkansiya growing up, I find them today to be conscientious savers. There is no need for them to learn of newer techniques of saving; they simply make the effort to set aside and keep going and going and going.
This is not a distinction between rich or poor. Non-counters may be ultra-rich while some transactors may not. What we are talking about here is the saving habit and how our attitude towards the small stuff can affect what we do with the bigger stuff, if ever we get there.
Saving does not guarantee that we will always have enough when we need the added purchasing power. By not saving though, we consign ourselves to the world of Al.
Al looks, behaves and is actually content. It is only when his children get sick, when added school expenses come up or when his mother wants to go to the province does he realize that he has no saving and must borrow again. If you borrow from Al, more likely he will actually produce some cash from somewhere. This is why it all boils down to perspective because his income does give him the notional capacity to save.
Do you know how many loose coins you have floating around at home?
More OFW families turn to savings
By Michelle Remo
Philippine Daily Inquirer
MORE HOUSEHOLDS ARE NOW saving the money sent to them by relatives working abroad, a survey by the Bangko Sentral ng Pilipinas showed.
The quarterly survey involved 486 OFW households.
The BSP said that 39.9 percent of households receiving money from overseas Filipino workers said they were saving a a portion of the remittances—a significant rise from the 30.4 percent seen in in the third quarter of last year.
Also, in the second quarter of this year, only 38.3 percent of respondent-households engaged in savings.
BSP officials said the increase in OFW savings was a welcome development, explaining that the rise in bank deposits would provide the needed funds to support investments.
Amando Tetangco Jr., governor of the central bank, also said savings by OFWs would help secure the country’s future.
The survey also showed a year-on-year increase in the number of households that allotted money for investments.
OFW households that engaged in investment activities in the third quarter stood at 7.6 percent of respondents, up from 7.4 percent in the same period last year.
The percentage number of OFW households that invested, however, was lower than the 8.3 percent reported in the second quarter.
Analysts said the global economic turmoil, which led to concerns about job security among OFWs, forced many households to save more.
Rather than invest the money sent in from abroad, people were forced to place their cash securely in banks, fearing the risks brought on by the crisis. This risk aversion could have led to the quarterly drop in the number of OFW households that engaged in investment activities.
The BSP said it would promote financial literacy among OFWs and their households. It had conducted road shows in various countries, educating OFWs about investments and savings. The BSP likewise conducted seminars on the same topics among families of OFWs.
“We want OFWs and their families to become financially sophisticated,” Tetangco earlier said.
In the first half of the year, remittances sent to the Philippines amounted to $8.5 billion, up 2.9 percent from that in the same period a year ago.
The government reported that $16.4 billion in remittances were sent in last year.
Remittances could post a decent single-digit growth for the full year 2009, the BSP said.
Philippine Daily Inquirer
MORE HOUSEHOLDS ARE NOW saving the money sent to them by relatives working abroad, a survey by the Bangko Sentral ng Pilipinas showed.
The quarterly survey involved 486 OFW households.
The BSP said that 39.9 percent of households receiving money from overseas Filipino workers said they were saving a a portion of the remittances—a significant rise from the 30.4 percent seen in in the third quarter of last year.
Also, in the second quarter of this year, only 38.3 percent of respondent-households engaged in savings.
BSP officials said the increase in OFW savings was a welcome development, explaining that the rise in bank deposits would provide the needed funds to support investments.
Amando Tetangco Jr., governor of the central bank, also said savings by OFWs would help secure the country’s future.
The survey also showed a year-on-year increase in the number of households that allotted money for investments.
OFW households that engaged in investment activities in the third quarter stood at 7.6 percent of respondents, up from 7.4 percent in the same period last year.
The percentage number of OFW households that invested, however, was lower than the 8.3 percent reported in the second quarter.
Analysts said the global economic turmoil, which led to concerns about job security among OFWs, forced many households to save more.
Rather than invest the money sent in from abroad, people were forced to place their cash securely in banks, fearing the risks brought on by the crisis. This risk aversion could have led to the quarterly drop in the number of OFW households that engaged in investment activities.
The BSP said it would promote financial literacy among OFWs and their households. It had conducted road shows in various countries, educating OFWs about investments and savings. The BSP likewise conducted seminars on the same topics among families of OFWs.
“We want OFWs and their families to become financially sophisticated,” Tetangco earlier said.
In the first half of the year, remittances sent to the Philippines amounted to $8.5 billion, up 2.9 percent from that in the same period a year ago.
The government reported that $16.4 billion in remittances were sent in last year.
Remittances could post a decent single-digit growth for the full year 2009, the BSP said.