4 tips from PNoy on avoiding pyramid scams

4 tips from PNoy on avoiding pyramid scams 

Below are some of President Aquino's advice to investors on how to detect money scams: 

1) You can't explain how the interest is earned.

Avoid Investment Scams

Aquino said he understands why people are enticed to invest especially when the promised returns are high. Aman allegedly lured investors with promises of up to 40% returns in just 20 or 30 days.

The President said that if you cannot explain how a company is able to afford such high interest rate, it is best to step back. "Para mabayaran ka ng ganito kalaking interes, paano niya babayaran ito? At ‘pag hindi mo masagot nang maayos ‘yon, malabo siguro itong pinapasukan mo," he said. 

(For the company to be able to pay you such high interest, how can the company afford that? And if you can understand that question clearly, then what you are engaging in is probably unsafe). 

The company said profits were produced by a Malaysian brokerage firm Okachi (Malaysia) Sdn. Bhd. -- with whom it had a customer agreement -- and which engages in trading commodities such as oil, manganese, palm oil and nickel. 

2) It seems 'too good to be true' 

Comparing companies that promise investments to legitimate banks is another way to detect a sketchy proposition. Aquino pointed out that when you deposit money in a bank, savings interests are only about one per cent per annum or less. 

Companies that offer exponentially higher rates are suspicious, he said. 

He offered advice he received from his parents as a child. "So ‘nung bata ako sinabi sa akin ng mga magulang ko, 'If it sounds too good to be true, it probably is not true'," he said. "Sana makatulong na talagang (kapag) ang ganda-ganda (ng) inaalok, malamang hindi totoo." 

He said he hopes Filpinos would take this to heart to avoid temptation. 

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People ask me if I invest in the US Stock Market. Yes I do. To diversify, I invest 20 percent of my funds there. I use Charles Schwab as my online broker.

They have an office in Hong Kong and you can open your account there. (To open an account, I believe you need a minimum of $25,000. I’m not sure if they lowered this minimum since I opened my account.)

But honestly, I earn so much more in the Philippine Stock Market than in the US Stock Market.

Why? Because the entire world is not doing well financially. The US is still failing economically. Europe is even worse. Even China has been down for the past two years.

 

There are only three countries now that are the economic darlings of the world: Philippines, Indonesia, and Thailand. (Yes, we’re not used to this kind of good news. Because in the past, we always appear at the “worst” lists! Worst airport, worst traffic, worst corruption, etc…)

According to a study released by Knight Frank and Citi Private Bank, the Philippines are expected to be one of the FASTEST GROWING ECONOMIES from 2010 until 2050.

Can you believe that?

Read this carefully: In a separate report made by HSBC, the Philippines could become the 16th largest economy by 2050.

What can prevent this from happening? Politics. So barring extremely, exceedingly insane and selfish politics, the Philippines will become an economic powerhouse.

This is another reason why you need to invest in the Philippine Stock Market, consistently, every month, for the next 30 years. Because you’ll ride this rocket ship all the way to the moon.

So don’t mind the small corrections, small dips, small losses here and there. We’re here for the long-term! Keep your vision straight. Don’t get distracted. Stay steady. Like clockwork, invest, invest, and invest every month.

YOU will rise with the Philippines.

Happy investing!

May your dreams come true,

Bo Sanchez

P.S. I don’t want you to remain trapped financially because of your fear and ignorance. Join me. The earlier you get in, the better. You can still catch up. Build your retirement fund. Build a solid financial future. Clink the link below:

Yes Bo, Teach Me How To Invest In The Stock Market

And Gain Financial Freedom.

Here are our SAM Tables as of closing October 15, 2012

Stock	Current	Buy Below Price	Target Price	Action to take
AP	33.40	33.21	38.19	Stop Buying For Now
BPI	78.55	79.13	91.00	Continue Buying
FPH	80.00	102.43	117.8	Continue Buying
JGS	34.00	34.78	40.00	Continue Buying
MBT	91.80	104.35	120.00	Continue Buying
MEG	2.38	2.50	2.87	Continue Buying
SMPH	14.26	14.78	17.00	Continue Buying

Get Rid of Debt first

Get Rid of Debt first

Get Rid of Debt

It is very difficult to save if we are carrying credit card debt or any high interest debt. Let me explain why. Let’s look at one of my colleague’s situation. He loves electronics gadget, entertainment etc. and believes that since he has a job, he should reward himself by buying whatever he wants. 

And, like me and most ambitious individual, he would like to go on nice vacations and buy a house and lot in the future. But how he will achieve this ambitions? He’s spending more than he earned. As a result he owes SAR. 1,000.00 on his credit card. And he doesn’t pay it off in-full. Let’s break it down and see how building up credit card debt makes it impossible to save for future goals.

Imagine that he owe SAR. 1,000.00 in credit card. Every month that he does not pay that debt off in-full, he’s being charged with interest rate of 20% per year by the credit card company for the privilege of the loan they are making to him. That means additional 20% to any balance left on the credit card.

Let’s look at how it plays out. Assuming that he decides not going to add to his debt and he will pay only the minimum payment on his card.

Current debt = SAR 1,000.00

Interest rate paid to credit card company = 20% 

Monthly payment = SAR 30.00

Months to pay = 48 (that’s 4 years)

Total interest paid = SAR 435.00 (on top of the SAR 1000.00)

My co-worker doesn’t like that scenario and decides to tighten his belt and decide to pay SAR 150.00/month to his SAR 1,000.00 debt and not add to it!

Current debt = SAR 1,000.00

Interest rate paid to credit card company= 20% 

Monthly payment = SAR 150.00

Months to pay = 8 

Total interest paid = SAR 50.00

See here’s the different; if he only pays the minimum payment, and don’t even add to the balance, he can end up paying a ton of interest. He pays the minimum per month in the first example and paid an additional SAR 435.00 in interest on top of the original SAR 1000.00.

Would you buy those same electronic gadgets if they cost around 50% more than you’re originally paid for them? I don’t think so.

As you saw in the second example, if my colleague increases his payment to SAR 150.00 each month to pay his debt and didn’t add to the debt. 

In 8 months he get rid of the credit card debt. By increasing his payment, he can markedly speed up his debt repayment.

Let’s reverse the situation and pretend he has zero credit card debt and wants to start saving for his future goals.

Monthly saving payment = SAR 150.00

Interest rate paid by bank = 1.5% (or lower) per year

Balance after 8 months saving = SAR 1,213.00

Total interest received = SAR 6.83

Practical Application

* If he uses the SAR 150.00/month to save, at the current savings rates, he earn about almost SAR 7.00 over 8 months. I know SAR 7.00 isn’t much, but getting SAR 7.00 is still better than paying SAR 50.00 interest.

* Ask yourself would you rather get SAR 7.00 or pay SAR 50.00? 

Clearly, the takeaway is that in order to reach your financial goals, you must eliminate debt first.

Some of you may look at that small interest rate on savings and cringe. Actually, I’m one of those who cringe at the low interest rates on my savings. Don’t worry about the interest rate right now. You see that interest rates go up and down, and we have no control over the interest rates at all. And regardless of how much interest we are receiving on our savings right now, it is better to receive any amount than paying interest on our debt.

As long as you are carrying credit card debt, not matter how much you save, you lose! You can gain more financially by eliminating credit card debt balances than by saving. So pay off your debt first and then saves as you can.

Importance of Having an Emergency Funds

Importance of Having an Emergency Funds

Emergency Fund

Emergency funds are best cushion if we're facing financial crisis. It is true that everyone must build and have an emergency fund that can be use in time of crisis. Although building up of this fund separate from savings fund are very difficult to do specially if we have tight budget or living paycheck to paycheck. But for me, I realized that it is better to face this difficulties of building an emergency fund than facing difficulties of looking and where to get immediate cash in time of crisis and emergency.

I clearly saw this importance of having an emergency fund when our company reduce their expat worker in order to comply in saudization policy of Saudi Arabia government. One of my co-worker lost his job and send back home with no take home money. He depend all of his expenses in one stream of income which is his salary. He is receiving high amount of salary every month but he fail to keep some portion of his salary for savings and emergency fund. Due to unexpected situation of losing job. 

He is now facing a problem of how he gonna pay those debt he made in the Philippines and also some loans here in Saudi. Even those separation payment he received from our company is not enough to cover all his debt. It is very hard to find a solution for his problem. No one can offer a hand to help him because even us are worrying anytime might lost a job. What happened to my co-worker could might be happen also to other and me.

Thinking of this situation of losing a job I ask myself if that happen to me. Am i ready to accept this reality? How will I able to sustain my lifestyle? and for how long before I find and landed for a new job? 

I'm still in the stage of building up my emergency fund and my target is to build up 6 to 9 months of my monthly expenses. Since late of starting my emergency fund, I'm still worrying that it would not enough to cover my needs until I got a new job.

As I observe on what happen to my co-worker fortune. I have now a better, clearly view and understanding that everyone particular those employee must prioritize and build an emergency fund first while their have a job. Having a fund like this, we feel secure, less worries and confidence to face any crisis that might cross our path along the way to financial freedom.

So if you have a chance now to build up emergency fund. Do it now as early as we can to avoid regret later. We can't be sure what might happen in the future so it is better that we are prepared. That's why having an emergency fund is a must to everyone who has only one stream of income.

Hierarchy of Financial Needs

Hierarchy of Financial Needs

Survival Money:

These are funds that you need to make ends meet. The most basic type of survival money is the amount that your household needs for food, clothing and shelter etc. Typically these funds should be in very liquid instruments for easy access.

Therefore savings or checking accounts are the best vehicles for this purpose. A household that may have extra funds can go to short-term deposit placements in order to generate some return from these funds.

Another type of survival money is one you need for emergency situations. A leaky pipe, the car engine unexpectedly conks out, or some minor home repair that needs to be undertaken immediately are examples of minor emergencies that you need to prepare for. 

A good size emergency fund is around six to nine months worth of expenses. Typically these funds will be in short-term instruments like, savings, checking, treasury bills, or money market mutual funds. A stand-by loan facility from a bank might be used as part of your emergency funds. Accident, health, and auto insurances can greatly reduce the need for liquid emergency funds.

Safety Money:

These are funds needed to meet life’s unexpected turns. Normally, safety monies protect whatever real assets you have accumulated in the past like your home for instance. In this regard, fire insurance will be the best investment option to protect this type of asset. General liability insurances can protect your business from unexpected developments. 

However, while there is a need to protect your assets, it is even more important to protect the person that generates these assets. This is where life insurance comes in.

Freedom Money:

While it is important to save and invest for your future, it is equally important to have funds that you can use for your non-basic needs. These are funds for activities that give you enjoyment and fulfillment. After all, life does not start after retirement.

It started on the day that you were born. Certain activities like having dinner with old friends or going to the mall with your kids, or that all-important annual family vacation should not be disregarded in order to save for long-term needs. We need to keep in mind that God did not put in this world to make a living but rather to make a life.

However, these activities will have substantial price tags attached to them and therefore it is important to actually prepare for them. For this purpose, short term instruments like savings and checking accounts, treasury bills and money market funds will be your be your best options.

Another life goal that gives you fulfillment and a high sense of security is home ownership. This is probably one of the biggest single expense that you will incur in your lifetime. Home mortgages can play a vital role for this purpose. However, you need to keep in mind that borrowing money from the bank will require you to put up approximately 20% of the value of the property and this not going to be a small amount. 

Therefore, it is an excellent idea to plan for this activity several years in advance so you can save for the banks equity requirement. Medium to long-term instruments like mutual funds, government or corporate bonds will be the best option to maximize on this type of savings.

Gift Money:

As you go higher in the hierarchy of needs, you develop a need to provide for people or causes that you care deeply for. This could be some kind of charitable institution or foundation or some family member that you want to take care of. But the most common use for gift money is to provide for education. 

Saving for education early on through long-term vehicles like mutual funds, note and bonds, or trust products, will make it more efficient and easier on the pocket. Another typical example for this type of financial need is the desire of parents to leave a reasonable amount of estate for their children. Again, this can be accomplished through long-term instruments. For people whose investment horizon is short or those who may not have enough resources to accumulate a substantial estate, the best way to create one instantly is to buy life insurance. 

On the other hand, for rich individuals who are more concerned with the inheritance taxes that their heirs will need to pay for, a good solution is to get a life insurance coverage equivalent to the taxes that will be incurred by their heirs.

Dream Money:

Dream money pertains to funds that you need to have for all the things that you dream of being, having, or doing. These goals can pertain to your retirement, or the kind of lifestyle you want before or after retirement. Normally these are funds that you will need after you have gone beyond your peak income years. 

Therefore, these types of needs will require large amounts of monies. Long-term vehicles like mutual funds, note or bonds are the best instruments for establishing your nest eggs for this purpose. While more and more people are becoming aware of the need to save for retirement, very few people realize that a big portion of their retirement funds will be spent on medical needs. In this regard, it is prudent to set aside funds specifically for the purpose of funding for medical expenses after retirement.

In my situation, Survival money is done although six months only. Now im preparing for the next level which is safety money. I hope within this coming year 2012.   How about you? Which Hierarchy of Financial Needs are you now?

Emergency (Safety) Savings Fund

Emergency (Safety) Savings Fund

Emergency savings fund

Emergency savings fund for others but for me, I would rather call it safety fund because it is more positive and considering the law of attraction! When you say Emergency, you may attract emergency scenarios, so I would rather call it as a safety saving fund. Starting a safety fund is one of the fundamental building blocks in building a personal finance foundation for yourself.

Many personal finance gurus agree that this is one of the first things you should do, before investing, buying cars, and houses or simply say, before you make fund other expenditure. 

It also ranks ahead of paying off high interest debt. It’s not a flashy topic, but smart personal finance has little to do with flash. This post will cover why you need safety savings, how much you need, and where to put it.

Why Save for Safety? 

There are a number of situations that arise in life that you simply do not have control over. Should these situations require immediate cash flow, it is essential to have safety savings to cover it. 

If you have a personal investing account or retirement account you could pull funds from these, but for a number of reasons including bad market timing like if your investments are in stocks and the market is down, early withdrawal penalties, or a delay in the liquidity of actually selling your investment and receiving your funds, this is the last thing you want to do.

Having money set aside for safeties or unforeseen events not only prevents this from happening, but also gives you the peace of mind that if something unfortunate was to happen that you will have a little financial cushioning to ride it out.

What Types of Situations May Require Safety Savings?

I’m sure that you have needed fast cash for a number of situations in your life, or seen situations where others have. Insurance may cover many of these scenarios for you, but there is always a chance that it won’t fully cover what you will need.

Here are a few examples:

*lost job or layoff (general rule is that you need a safety fund that can support you for 6 months)
*began a new job that required you to expense a geographic move
*auto accident, auto retirement, or major repair
*major home expense such as a broken water line, fire, natural disaster effects, etc.
*family health care
*unexpected taxes owed to BIR
*death in family that required you to help pay for funeral and other expenses
*unexpected medical expenses not fully covered by insurance 

How Much Should you Put in Safety Savings?

This is where the experts tend to differ. There are a wide range of guidelines out there for how much you should save. Pick one or a combination, but ultimately, you have to choose an amount that you’re comfortable with and that feels right for you. Here are some of the general guidelines out there:

*2-3 months worth of take home salary
*6 months worth of living expenses
*Start small and pay off debt before building 3 to 6 months worth of living expenses.
*8 months worth of living expenses. In the Laws of Money, the Lessons of Life, Suze Orman told readers that the 6 month time frame was no longer enough and that you should have “8 months of cash saved”.

I believe in a combination of the above, with a little twist. I think it is wise to start small and work your way up, I don’t think it’s realistic or wise to pay off ALL of your debt before saving more than P50,000.

Focus on paying off high interest debt like credit cards, but when it comes to school loans and mortgages, paying all of those off first before adding to your safety savings is not a good idea. Once you’ve paid off high interest debt, then shoot for a minimum of six months of expenses.

Here’s where the twist comes in – if you are anticipating a major life changing event coming up, add to your fund or simply another savings account. You do not want to be pulling from safety funds to pay off anticipated expenses. 

Where Should you Put your Emergency Savings?

You should be earning interest from your savings, otherwise, you are losing value due to the effects of inflation. Place your safety fund into a high interest savings account, checking account, or money market account (MMA). Stay away from Time Deposit because if you pull your money out prior to the TD expiring, you will lose interest in the form of a penalty.

Go with a bank that offers quick and easy access to your fund and a competitive rate. The 5 online banks with a wide variety of product offerings and the highest savings yields are usually Metrobank, BDO, BPI and PNB. Use this as a starting point to see what the current going rate is before committing. 

Check back periodically to see if you’re getting the best going rate. If you’re not, don’t be afraid to switch. If you haven’t already, start building your emergency savings. It will help you sleep better at night.