Why is it that we were never taught about “personal finance management?” After studying and working for decades, I realize one thing (most) parents never try or fail to teach their children is how to manage their money through investments. Methinks the previous generation just passed along what their parents taught them – and not. But if parents are responsible for their children’s education, what about the learning institution that is suppose to hone our skills and breed us to becoming the best of who we can be? Chances are there was never a path to which schools intend to teach you the basics of properly managing our personal finance. Many have pockets of subjects and chapters but are scattered all throughout we never have the experience (yet) to tie them all-together.
I recently attended the whole-day seminar on personal finance, “Steps to Financial Peace,” by none other than Randell Tiongson, a Registered Financial Planner (RFP) in the Philippines and a strong advocate of personal finance management, with guest speakers Francis Kong, Paulo Tibig, Jayson Lo and Ador Abrogena.
I always remember listening to Francis Kong on the radio when I was stuck in the car with my late dad and he would love to listen to DZFE-FM where Francis had his daily inspirational talk on business and faith. Today, he is a sought-out motivational speaker to far-flung regions of the migrant and overseas Filipino community, giving 360 talks in 365 days of each year, as he says.
I personally met Paulo Tibig at the “Wealth Summit” and saw him again during the launch party of a company I used to work for in a short amount of time. Paulo has built his logistics company from ground-up and has also gone through the trials of being an entrepreneur. Today, he is an active officer with the Philippine Franchising Association, enthusiastically advocating franchising and entrepreneurship in the country.
Jayson Lo is a new guy to me, with a brief introduction by Randell before he went up on stage to give his talk on his successes, failures and trials in business, losing millions and gaining it back all over again. His story breathes optimism and faith, that despite being down in the rut there should be no direction but up.
Ador Abrogena heads the Trust and Investment Group of Banco De Oro (BDO). They were the major sponsor of the event and this allowed them to present their product as a means to invest money into different financial instruments, i.e. equities, that yields far more returns than nominal savings accounts or worse the piggy bank.
But this was Randell’s show, with each speaker helping hone the messages that Randell spoke of. Like I mentioned, he started off his whole-day talk with education, and the lack of it, in a subject of personal finance that strikes hard into each one of us, from the time we start earning an income to the time most of the video displays of our entire life pass us by in a short span of time. Why is that? Why is our academic institutions not teaching us the rudiments of personal finance? Why didn’t they tell us what a life insurance is for, accident protection, educational and pension plans, stocks, futures, bonds and so many other ways we can make our money earn more rather than the piggy bank mentality of savings?
Randell showed his attendees a video on economic freedom, commenting that the more open and free the economy of a nation is, the more the residents benefit from it financially. The Philippines has a pseudo way of doing it, like opening corporate ownership to foreign entities at 100% for a selected list of industries; I observe that until the industry proves itself first, the Philippine government will not budge at lowering the barriers. Is money remittance the only means to sustaining the wealth of a country? In fact, will it sustain itself or falter once a new nation becomes the new source of skilled, quality workers? Do you think we need more foreign direct investments (FDI)?
I wish I was in high school again, and I was given the chance to attend a public seminar akin to Randell’s where I am awakened by the reality – at an early age – that I need to start planning my life; because today I realize that in order to bring up the stakes of succeeding regardless if an event creates it or not, “life events planning” is the keystone to securing financial success. From school to graduation, from my first job to my second and third one, my first entrepreneurial endeavor and the failures that befall each of them, to my marriage, kids, house, car, tuition fees, health care for everyone, insuring my family’s financial continuity should I die, retirement and the longevity of our lives while we cannot work anymore, and everything that affects my loved ones during and after my death. You think a high school kid will get encouraged to respond positively should he or she attend courses like this? You’ll never know until it happens.
As Randell mentions, there are three ways a person can acquired wealth:
- Inherit it
- Marry it
- Spend less and invest
Of course, the chances of waiting for the first two events to happen is like playing the Lotto – one in a gazillion chance. The best, most rational path to financial peace is the third means; and the age to which you start doing so is so often directly proportional to the odds of succeeding. It’s not just investing cash in financial instruments – the word also describes doing so for yourself. Acquiring new skills, experience, tools to assist you – there are a host of other means to which investing is also related to.
During the break, I was talking to Jenny Magalong, head honcho of Whiteboard, the company responsible for arranging Randell’s seminar, and was telling her how my dad never really prepared for his life events that affected our small-unit family. He only bought one life insurance, and that was out of respect to his brother-in-law, worth a whooping $680 in today’s measurement. He bought no education fund nor anything that prepared him for his retirement. At 54 years of age, he had a stroke which incapacitated him and abruptly ended his professional career and a continued income. By the time he died, all he had left my mom and I was the house. It was good enough I was the only child and supporting such as small family unit wasn’t a huge burden for my dad. I love my dad and my mom, and for everything good that I saw them do during my life; but preparing for the inevitable possibilities of life wasn’t a priority. Typical of the culture to which the average Filipino was brought up, everyone just kept spending but not investing.
The biggest topic which Randell and his guest speakers kept reiterating was all about debt. One story was about a 15,000 Peso per month employee amassing a staggering 1 million Peso debt, done in the course of a few years through friends, relatives and cash advances. It was like a pyramid scheme, loans made to pay off other loans, until the principal and interest payments ballooned to more than 6,000 percent. Another dealt with one who amassed a little less than 10 credit cards and just kept buying beyond her ability to pay until everything exploded in her face and she had maxed-out all her cards.
Obvious to everyone is the simple mathematical equation to financial peace, to wit:
Income – Expenses = Savings
Obviously, income should always be higher than expenses.
Obviously, if income is disturbed, expenses can be controlled down.
Obviously, you should not deduct savings and add it to expenses.
Obviously, savings means extra money stashed away somewhere.
That’s where the falacy of savings exist in our minds: it equates to a savings account in a bank. What many do not know, or attempt to try to know, is that savings also involves investment. Randell tells us the tried and tested rule of getting 30 percent of your total savings and investing this, or making your money grow more money. You leave the 70 percent intact for emergencies and the additional things you want to buy to motivate you to continue doing a good job. (New shoes, anyone?) But as time goes by, you keep iterating the method of investing 30 percent as your income goes up. I will assume that for everyone, 30 percent isn’t much to ask.
Personal finance is as common as common sense tells you – save, invest, lessen cost, find more means to increase income. If you are reading this, it means you have access to the internet. Spend an hour a day sifting through the many ways of saving, of investing, of lessening your cost, of finding additional means to more income. You can also force yourself to start using some tools like a daily expense tally, or go more complex like using QuickBooks and the like. The faster means is hire a retained accountant to do your personal finance books, and a personal finance consultant to help you find the better and comfortable means to managing your finance, no matter how small it is. I remember Randell telling me it only costs about 18,000 Pesos or so to hire a good personal finance consultant which accounts for a series of one-on-one sessions, not just one.
You have to educate yourself to learning more about personal finance management. The likes of Randell’s whole day seminar is a small drop in a bucket of learning how to manage your money and how to plan for your future. Today may be great for you but man’s history is generally sought with many ups and downs. When you are in a period where there is no income coming in, are you prepared? Start today; it’s never too late even if you’re 50 or 60 years old. Better if you are 20 or 30 years of age and you begin planning and managing your present and future finances.
Personal finance – something old but still something new. Sounds like getting married? It is. It’s a lifelong commitment.
Title photo by Ken Teegardin at SeniorLiving.org