I attended a talk by Mr. Armand Bengco yesterday on Pisobilities (Managing Personal Finance). He is a co-founder of the Colayco Foundation, a local firm advocating financial literacy towards financial freedom.

Mr. Armand’s presentation was lively and informative, esp. to beginners. But a financial literacy enthusiast like me was able to gain a few tips on refining my personal cash management.

Here are the tips I find useful:

1. Differentiate needs from wants. If you cannot persuasively justify the purchase as a necessity, it must be a want.

2. Develop your kids’ financial management skills. Only supply the necessities. Let them work/save/invest for wants. No class, no allowance. Instill in their minds that they will not get a single peso from you once they get married. If you can, don’t pinch in for the wedding expenses.

3. There are 3 realities common among Filipinos – first, most have little or no savings; second, many live from paycheck to paycheck, and third, many have too much debt. Debt is more than a friend that a foe. Filipinos should know that debt is a privilege and not a right.

4. Wealth is relative. Not only does the number of your relatives increase in proportion to your wealth (LOL), the definition of wealth varies from person to person. Being wealthy is not having to work to pay for your expenses/desired standard of living.

5. Personal finance management encompasses money (nauubos), income (natatapos, will stop) and wealth (can be accumulated; protect it; share it so it can generate more wealth).

6. On wealth management. In order to generate wealth, you have to earn enough, plan regularly, save prudently, spend wisely and invest wisely.

7. On savings. Try living on 80% of your active income and save/invest the rest. If you cannot do that, use your active income only for needs. Fund your wants with your passive income.

8. On debt management. The following are the rules of thumb in borrowing:
– 30-40% of your active income for a house
– 10-20% of your active income for a car
– business – borrow only if earnings can pay off debt
– education – only if it can be reversed (that is, you can pay it before the next school year)

9. Don’t borrow if: it has no purpose, it is merely a want, to pay off debt, beyond 40-50% of active income, for groceries/car expenses not paid on time, for education/emergencies, or to be given/lent to others (do not give what you do not have).

10. On investment. Have a clear purpose (need to be addressed), target (amount of gain) and timeline (length of time) when you are investing. Avoid losers/stay with winners. The higher the return, the higher the risk. Time is your friend so be patient. Think long-term (more than 5 years).

11. One typically overspends if with kids. So make sure to eat before oru leave the house. They should be full before you shop.

12. There are 2 types of investments: lend and buy (own). Lending involves instruments givng fixed, guaranteed, insured return (interest). In Philippine setting, they typically give 1-8% return annually. Buy investments are stocks, mutual fund, UITFs, fx/commodities, and real estate/landbanking. Returns are no guaranteed.

13. Choosing between lend and buy investments will depend on your age (50 yo and older ate safer with lend instruments), investment horizon (buy instrumenst are recommended if lookign at a 3 years and lonegr horizon), country of investment’s economic environment (if the economy is not good, stick to lend instruments), and investor’s personal experience (if you are good in stocks, invest in it even if you are retired).

14. Continuously hone your financial literacy skills. You can never control the winds but you can learn to adjust your sails.

Mr. Armand Bengco shared this wonderful motto of Ms. Gloria Romero “Let us not be afraid of tomorrow. We have seen yesterday. Let us make the most of today.”

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You too can learn all this and more on September 29, at the Pisobilities: Wealth Within Your Reach Seminar to be conducted by Armand Q. Bengco. For complete details get in touch with Renzie at 09178088857.