Retire Before 40? Some Folks Say it Can Be Done

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 Published: Wednesday, 27 Mar 2013 | 12:26 PM ET

By: Matt Krantz

MachineHeadz | E+ | Getty Images

To most people, "retiring early," means 55. But to Jason Fieber, that's too long to wait.

Everything Fieber does is with one goal: Retiring well before he hits the big 4-0. Fieber, a 30-year-old service adviser at a car dealership in Sarasota, Fla., even moved to the Sunshine State from his Michigan home, in large part to live in a state without income tax. The sunnier climate has a side benefit, too, in that it allows him to more comfortably use the bus to get everywhere without a car.

By keeping costs down, Fieber, who earns $50,000 a year, is saving 60% of his net income each year and has saved more than $100,000 in three years. He figures he can bank more than $400,000 by the time he's 35. That's plenty for him to retire on, he figures, since he only spends $15,000 a year.

"I knew nine-to-five until you're 65 isn't the answer," says Fieber, who also runs a blog chronicling his plan to retire before 40. "The goal is to move from the working class to the investment class. Money can work harder than I ever could."

Briefcases, pocket protectors and martini lunches are all signposts of bygone days of office life. But some young workers are going even further, calling the idea of waiting until age 65 to retire as outdated as a lime-green cubicle.

Ambitious young workers, primarily in their 30s, but also in their early 40s and even their 20s, are turning the traditional idea of retirement on its head. They refute the idea that workers must slave away for decades until 65 or longer. These "extreme early retirement" fans are finding ways to make conscious financial decisions now so they have ample nest eggs to give them freedom by the time they're 40, or even younger.

To aspiring extreme early retirees, even the term retired is outmoded, as it sounds like someone who's resigned to the golf course after working to the bone for 40 years. For early-retirement hopefuls, the preferred goal is to be financially independent as quickly as possible. "I'm just trying to find the best way to play the game," says Ryan Farrelly, 31, of Staten Island, N.Y., who plans to be "financially independent" by 35. "It's about reaching financial independence, vs. just retiring."

Like many others with aims of extreme early retirement, Farrelly's plan started years ago. By being mindful of where he's spending, Farrelly has saved enough to buy two rental properties in addition to his house. At this clip, he says the rental income will be ample to support him and his wife in four years. They pay for everything in cash to discourage wasteful spending.

But retiring early isn't just about being frugal. The key principles that many extreme early retirees hold true include:

* Faith in nest-egg mathematics. Two simple and well-understood mathematical principles form the cornerstone of many uber-early retirement plans. First, fans of extreme early retirement say any worker who makes the right choices has an even greater chance at retiring young, getting the most benefit of what Albert Einstein once called the most powerful force in the universe: compounding. Mathematics dictate that $100,000 saved by a frugal young worker is worth much more in the future than $100,000 saved by a 50-year-old, due to the power of compounding. Starting to save for retirement, while other thirtysomethings are loading up on expensive cable TV plans and fancy smartphones, speeds retirement.

Second, extreme-early-retirement believers typically hold great faith in the so-called 4% rule, which dictates that a retirement nest egg can last for decades or longer if the retiree withdraws 4% in the first year, then increases that dollar amount each year to adjust for inflation. Some extreme early retirees spin the 4% rule a bit by setting a goal of never taking more than 4% of their portfolios out each year no matter what. Doing so means that those who can save 25 times their annual expenses would have enough to last their lifetimes.

* Strict spending priorities. Extreme early retirees dodge the trappings of the rat race, avoiding wasting money to reach financial freedom. The urge to get that giant house, fancy new car or shiny smartphone are lost on them. "Most Americans spend more than 100% of their income, including the debt they accumulate," says John Greaney, 57, of the Seattle area, who retired when he was 38, largely by banking a majority of his income as an engineer for an oil and gas company.

Early retirees see items that aren't necessary or something they highly value as barriers standing in the way of early retirement. Housing is a big area when in which many people overspend, Greaney says.

But that's just the start, says Patrick Meninga, 37, of Kalamazoo, Mich., who quit his full-time job two years ago at an addiction treatment center.

By avoiding costs others think are necessities, such as cable, expensive cellphone plans and movie services, Meninga currently spends less than $1,000 a month and says he can cut spending even more. At $12,000 a year, Meninga figures he can easily live off his $180,000 in savings invested in stocks, by withdrawing no more than 3% a year and making up the difference from income generated by ads from websites he runs mainly for fun.

While some might think that avoiding a luxurious lifestyle is a sacrifice, to many, trying to avoid the work-to-65 routine is what makes life interesting.

"The key is living like you did when you were a student," says Rich Ligato, 45, who lives in San Diego. While not completely financially independent, Ligato and his wife, Amanda, stopped working steady jobs more than a decade ago. Their goal is working for three years, taking odd jobs, saving their money, then enjoying a year-long vacation break, doing something such as living in India or biking along the Western coast of the U.S. When they return, they take entirely different jobs.

Rich is currently teaching biking classes and managing an apartment, while Amanda is teaching yoga. "It's not about money, it's about freedom," he says. "If you're just driving to make things secure and safe, think about what that means. There's nothing interesting in life. You might as well die."

* Banking on a diversified low-cost stock portfolio. Extreme early retirees must be very savvy in managing their nest eggs. If they're too aggressive, or make a big mistake, such as panicking and selling in a bear market, they could devastate their portfolios. But if they play it too safe, they won't get the returns they need to make a portfolio last for 60 or more years. Many extreme early retirees have benefited from the market's run this year.

But retiring early also requires a new perspective with investments. Unlike other retirees who load up on low-return, ultra-safe investments such as Treasuries, Greaney has 85% of his portfolio in stock and 15% in fixed income. The key is to bet on low-cost investments and resist the temptation to panic and sell during bear markets.

There's plenty of healthy skepticism from traditional financial advisers about the merits of retiring early.

Cary Guffey, a financial adviser with PNC Investments, cautions that early-retirement hopefuls might be overlooking some hidden risks. He says he's seen clients successfully retiring in their mid-50s, but usually with the help of a pension plan, which most younger workers don't have.

He also warns young investors of the high costs of medical insurance and the financial risks of a major health event. Furthermore, he warns that if the portfolio doesn't last as long as expected, young retirees may find themselves returning to work with outdated skills and a big gap in their resumes.

Christine Fahlund, financial adviser at T. Rowe Price, says the 4% withdrawal rule is designed to generate a reliable stream of income for someone planning to retire for 30 years, not 70.

But many extreme early-retirement fans insist they've thought through all these factors. Changes to health benefits make it easier for people to retire early, Greaney says. Fieber says there are many high-deductible plans available that are cost effective, although he currently doesn't have life insurance. Meninga says he's easily found high-deductible health insurance policies that fit his budget.

Regarding the worry about skills getting outdated, Greaney keeps his engineering license current by taking continuing education classes. He didn't retire early because he didn't like his job. He just didn't like the office politics, he says. "I liked engineering; I just got fed up going to all the meetings."

Maybe only time will tell whether the traditional planners or the early retirees are right. But the opinions on either side run hot. The operator of the Mr. Money Mustache Web site that encourages extreme early retirement, Pete, declines to give his last name since there's such a negative feedback on his plan from those that doubt it. Pete, 38, says he's retired after just nine years of saving more than $600,000, so he could spend more time with his son. But he's constantly criticized by other workers who think the work-to-65 is the only plan that pencils out. "It's like an ongoing argument with society," he says.

Investment Grade and What It will really bring

March 28,3013 by Randell Tiongson

There is every reason why we should be celebrating Fitch’s recent credit upgrade of the Philippines. With the upgrade, we are now officially “investment-grade” which really means many things. An investment-grade status is a confirmation that the Philippines is a sound nation financially and that it has the capacity to pay off its debts.

President Aquino is obviously ecstatic with the upgrade; he said “this is an institutional affirmation of our sound good governance agenda” in a statement.

In a nutshell, the new status will effectively reduce the cost of our borrowings which when managed properly, can be used for key investments and infrastructure that will further spur economic growth. The upgrade will also usher the inflow of more institutional investments such as investment funds of other countries that usually require investment destinations to be ‘investment grade’. This move will even grow the local investment market which has been bullish in the last 3 years. The Philippine Stock Market already reflected a positive sentiment upon the news of the upgrade. It is more likely that the stock market will continue to ride on this upgrade, as well as other investment instruments like bonds.

It is important to note that while Fitch is a very reputable rating organization, the other two rating organizations namely Standard & Poor’s and Moody’s must also upgrade the status of Philippines to confirm our being truly ‘investment-grade’.

I believe that the upgrades merely affirmed what the market has already known as showed by how the Philippine investments have been faring, particularly our sovereign debt. For some time now, the Philippine sovereign issues (ROPs) have been trading with yields much lower than other nations with the same credit rating; in fact, the Yield-to-Maturity (YTM) of our ROPs are even lower than the debts of other nations who are rated as ‘investment-grade.’ Returns are always an indication of the risks involved so when the market makes our debts trade with lower yields, it also means that the market views us as low risk as well.

I asked some of my friends about what the benefits of the upgrade means to them and to the nation as a whole. I’m also proud to say that these friends of mine are experts in their own fields as well – I am blessed with awesome friends right? This is what they say:

“We deserve the upgrade, but remember that a credit rating is just a confirmation ofwhat is already present in a debt issue, the debt security issuer and the economy as a whole. In other words, we and not the rating agency made ourselves investment grade. So upgrade or not, the country is indeed on its way to becoming an economic force in the world arena. We just need to learn how to spread wealth better.”

– Efren Ll. Cruz, RFP- President of Personal Finance Advisers Corp., best-selling finance author, columnist, investments expert

“This is definitely the seal and proof that Philippines is a good country to invest in and supports my bullishness in the Philippines. This will open up our markets to more investors who were not allowed to participate before. Increased Investments will surely open up better opportunities for the ordinary Filipino. I definitely recommend that Filipinos participate in this growth opportunity by investing as well.”

– Marvin Fausto – Chief Investment Officer of Banco de Oro Universal Bank

“The investment upgrade will propel our stock market even further as it will allow moreforeign funds to invest in the Philippines. It will also help our economy as it will allow our government to borrow cheap, build more infrastructures, and allow businessmen to expand their businesses further. To the common Filipino, it would give them an opportunity to take housing and car loans cheaper. This upgrade has triggered a signal to the world that – ‘Hey! The Philippines exists and is now a safe haven for your money!’ This is such a great time to be a Filipino.

– Marvin Germo, RFP – Stock Market expert and investments speaker

“Investment Grade is not an end objective. It is a recognition that a country has graduated from a condition of doubt to a reasonable level of investment risk. The Philippines graduating to that is an expectation this year – the only thing uncertain was when. Fitch’s ratings upgrade to the Philippines is a validation of the core improvement in the country’s international credit and investment status. This upgrade means that the Philippines has to do its homework. It has leveled up in the eyes of the investment community globally. The upgrade actually does not necessarily translate to immediate economic betterment as being investment grade simply means that one can borrow at cheaper rates in the international market. Borrowing is something we do not need to do now as the country is very liquid – both the government and the private sector. Local interest rates are in their historic lows already. What the investment grade is telling us is that ‘we believe in your country to be able to institute the needed structural reforms to translate our trust into productive pursuits.’ Finally, it is important that the two other larger ratings agencies – S&P and Moody’s should affirm the same soon to consolidate and cement this trust.”

– Dr. Alvin P. Ang – Economist and President of the Philippine Economic Society

“Companies that would not otherwise invest in the Philippines as they require investmentgrade status would now do so. Our borrowing costs would also go down. This means more jobs and a stronger economy as money goes towards industries, infrastructure, etc. In the near term the peso is likely to appreciate though, which could pose problems for OFW families.”

– Rizalina Mantaring – President & CEO, Sun Life Philippines

The above views are from the experts; I will post another blog about the views of ordinary Filipinos (who are experts in their own rights) which I solicited through social media.

We are very excited with the nation as a whole and while there is much work to be done, I believe we are in the right path. We must also never forget where all these blessings are coming from and knowing our responsibilities for such blessings, lest all these gains will be for nothing.

Blessed is the nation whose God is the LORD, the people he chose for his inheritance. – Psalm 33:12, NIV

Q & A on Fitch Ratings’ announcement declaring the Philippines Investment Grade, March 27, 2013

From Official Gazette:

http://www.gov.ph/2013/03/27/q-a-on-fitch-ratings-announcement-declaring-the-philippines-investment-grade-march-27-2013/

Q & A on Fitch Ratings’ announcement declaring the Philippines Investment Grade, March 27, 2013

Q: What does an investment-grade rating mean for the Philippines?

A: This investment-grade rating is a seal of good housekeeping and a resounding vote of confidence in the Philippine economy. It is strong affirmation that the Philippines is on the right path toward sustainable and inclusive growth. It also closes the gap between our market rating and our credit rating. This upgrade was achieved due to sound macroeconomic fundamentals, underpinned by good governance reforms as well as the Philippines’ good economic prospects moving forward.

Q: How will this impact the Philippine economy?

A:  We expect to see an increase in investment inflows, as many institutional investors allow the investment of funds in investment-grade countries only.

The upgrade also means lower costs for government debt, thereby freeing more funds for social services, infrastructure and other long-term investments for economic development. It means cheaper and broader sources of funds for both government and corporate borrowers. Domestic and foreign businesses would be more encouraged to increase investments in the country’s productive capacity such as in the manufacturing industry and in agri-business, thus generating more employment.

Q: What was the basis of Fitch Ratings’ decision? What were the main drivers?

A: According to the press release of Fitch Ratings, the following are the key rating drivers for the upgrade of the Philippines’ sovereign ratings:

- The Philippines’ sovereign external balance sheet is considered strong relative to ‘A’ range peers, let alone ‘BB’ and ‘BBB’ category medians. A persistent current account surplus (CAS), underpinned by remittance inflows, has led to the emergence of a net external creditor position worth 12% of GDP by end-2012, up from 6% at end-2010. Remittance inflows were worth 8% of GDP in 2012 and proved resilient even through the shock of the global financial crisis. Fitch expects a rising import bill stemming from strong domestic demand to lead to a narrower CAS and to stabilise the net external creditor position at a strong level through to 2014.

- The Philippine economy has been resilient, expanding 6.6% in 2012 amid a weak global economic backdrop. Strong domestic demand drove this outturn. Fitch expects GDP growth of 5.5% in 2013. The Philippines has experienced stronger and less volatile growth than its ‘BBB’ peers over the past five years.

- Improvements in fiscal management begun under President Arroyo have made general government debt dynamics more resilient to shocks. Strong economic growth and moderate budget deficits have brought the general government (GG) debt/GDP ratio in line with the ‘BBB’ median. The sovereign has taken advantage of generally favourable funding conditions to lengthen the average maturity of GG debt to 10.7 years by end-2012 from 6.6 years at end-2008. The foreign currency share of GG debt has fallen to 47% from 53% over the same period.

- Favourable macroeconomic outturns have been supported in Fitch’s view by a strong policy-making framework. Bangko Sentral ng Pilipinas’ (BSP) inflation management track record and proactive use of macro-prudential measures to limit the potential emergence of macroeconomic and financial imbalances is supportive of the credit profile. Inflation has been in line with ‘BBB’ peers on average over the past five years.

- Governance standards, as measured in international indices such as the World Bank’s framework, remain weaker than ‘BBB’ range norms but are not inconsistent with a ‘BBB-’ rating as a number of sovereigns in this rating category fare worse than the Philippines. Governance reform has been a centrepiece of the Aquino administration’s policy efforts. Entrenching these reforms by 2016 is a policy priority of the government.

- The Philippines’ average income is low (USD2,600 versus ‘BBB’ range median of USD10,300 in 2012), although this measure does not account directly for the significant support to living standards from remittance inflows. The country’s level of human development (as measured in the United Nations Development Programme’s index) is less of an outlier against ‘BBB’ range peers.

- The Philippines had a low fiscal revenue take of 18.3% of GDP in 2012, compared with a ‘BBB’ range median of 32.3%. This limits the fiscal scope to achieve the government’s ambition of raising public investment. The recent introduction of a “sin tax”, against stiff political opposition, will likely lead to some increment in revenues and underlines the administration’s commitment to strengthening the revenue base.

Q: Moving forward, how do we expect government policy and government action to change in response to the credit rating upgrade?

A:  While we expect an investment grade rating to open new opportunities for the Philippines, it also poses a challenge to all of us to maintain it. Hence, the Philippine government will continue to focus on sustaining the progress that we have achieved both in terms of economic growth and institutionalizing good-governance reforms. We will preserve all the factors that made this investment-grade rating possible—low and stable inflation, favorable interest rates and a sound banking system, a sustainable fiscal position, and a strong external position. Most of all, the platform of good governance which has made such progress possible, will continue and are irreversible. Foreign and local businesses can rely on a government that will continue to be transparent, effective, and responsive.

Philippines Now Investment Grade

From Phil.Star March 28 by Prinz magtulis

Noy on first-ever rating: Asia’s laggard taking off

MANILA, Philippines - What it means for Phl: An investment grade rating means the Philippines has a strong ability to meet its financial commitments fully and on time.

While credit ratings do not indicate investment merit, credit risk is one of the factors taken into consideration by businessmen. An investment grade sends a message that the Philippines is a safe place for investments, including big-ticket ones that generate much-needed employment.

Borrowing costs will also go down for debtor nations seen as unlikely to default. The Philippines, whose debt payments eat up the largest chunk of the annual national budget, can then channel savings to development efforts and improvement of basic services.

More investments, more jobs, and more funds for social services are expected after the country bagged yesterday its first-ever investment grade rating.

Debt watcher Fitch Ratings lifted the country’s credit rating to BBB- from BB+, with a stable outlook, less than a month after its team visited the Philippines for a diligence review of the country’s macro fundamentals.

New York-based Fitch made the move ahead of its rivals Moody’s Investors Service and Standard & Poor’s Ratings Service.

Both agencies put the Philippines one notch below the coveted status, with S&P having a “positive” outlook.

President Aquino welcomed the credit upgrade yesterday, saying it represented the “reclamation of our national pride” and showed that “the perennial laggard of Asia is taking off.”

“This means much more than lower interest rates on our debt and more investors buying our securities,” Aquino said in a statement. “Greater access to low-cost funds gives us more fiscal space to sustain and further improve on social protection, defense, and economic stimulus, among others.”

He said more investments and jobs would foster “a virtuous cycle of growth, empowerment, and inclusiveness that will redound to the benefit of Filipinos across all sectors of society.”

MAY PERA KA BA? by Jason Lo

(jaysonlo.tumblr.com))

I am a businessman and I made my first million at the age of 22. Akala ko noon, ang pinaka-importante sa buhay ay ang maging successful sa career o sa negosyo kaya naman ginawa ko ang lahat upang umangat ako. Marami na akong nasubukang iba’t ibang negosyo, mula sa trading, manufacturing, kiosks, at direct selling. Hanggang sa pinasok ko ang restaurant business at doon nga nawala ang lahat… Sa edad na 30, naubos lahat ang ipon naming mag-asawa at nagka utang-utang pa nga. Kasama ang ilang business partners, nawalan kami ng ten million pesos at nagkaroon pa ng utang na 2.5 million pesos. Ngunit noong December 2010, through God’s grace, nabayaran namin ang aming pagkakautang.

 Ang nangyari sa amin ay nakatulong upang maging mas mapagkumbaba ako at mapagtantong mayroon akong mga limitasyon; at ngayon ngang alam ko na ang aking mga limitasyon, nakabuo ako ng mas makatotohanang strategy para sa aking personal at financial growth. Tandaan na ang personal finance ay 80% Behavior at 20% Knowledge.

Naranasan ko na ang mga ups and downs sa buhay. Ang isang sign ng taong marunong sa pera ay iyon ngang taong marunong mag-adjust sa sitwasyon; iyong marunong magtipid sa oras na nag-uumpaw ang biyaya at marunong magsikip ng sinturon kapag oras ng kagipitan. Hayaan mong bigyan ko kayo ng tips kung ano ang maaari ninyong gawin para matuto at unti-unti kayong makapag-adjust at nang ang inyong pera ay hindi lang maging sakto o sapat – hayaan itong maging siksik, liglig at umaapaw!

1) Gumawa ng Budget

Magplano at isulat mo ito. Kapag hindi mo ‘yan isinulat, para ka lamang nagsulat sa tubig. Kung ang mga kumpanya nga ay mayroong financial statement, maaari tayong matuto sa kanilang gawi.

Gumawa ka ng budget at mas maigi kung kasama si mister. Sa totoo lang, kailangan ninyong pag-awayan ang budget niyo. Alamin kung ano ba talaga ang inyong needs and wants; baka kay mister, ang pakikipag-inuman sa barkada is a need and kay misis, ang shopping naman ay need. Pag-awayan niyo na ang budget niyo dahil mas maganda na mag-away ng isang beses imbes na mag-away kayo araw-araw kapag kinapos na sa pera.

Ang paggawa ng budget ay hindi natatapos sa isang upuan. Maaaring abutin nga ng ilang buwan bago niyo talagang magawa o mabuo ang tamang budget para sa inyong pamilya; kaya naman maiging pag-usapan ninyo itong mag-asawa at least once a week sa loob ng dalawang buwan at matapos nito, maaaring pag-usapan niyo ito kada buwan kung magkakaroon ba ng adjustments o kung ano pa man.

Ang budget nga ay maituturing natin bilang isang mapa at kailangan ngang isulat mo muna kung saan ba dapat mapunta ang iyong pera bago mo pa ito makuha. Isama mo ang perang itatabi mo at ang perang ilalabas kahit na ba ang mga binabayaran mo kada taon tulad na lamang ng insurance kung mayroon ka man. Tandaan, isulat mo iyan!

2) Maghanap ng Extrang Pagkakakitaan

Maghanap ng maaaring maging sideline na business. Magsimula lamang sa maliit para hindi ka mabigla. Pwedeng magtinda ka ng mga pagkain o di kaya mag-buy and sell. Lalo na nga kung Pasko, maaari kang magbenta ng mga gift items, imitation perfume, slippers at iba pang bagay na in ngayon.

 O di kaya, tumungo ka sa iyong silid at tingnan mo ano nga ba ang mga bagay na hindi mo na ginagamit baka naman maaari mo pa itong ibenta! Ang tawag nga diyan sa corporate world ayliquidation. Magbenta kayo ng magbenta ng mga gamit na hindi niyo kailangan hanggang matakot na ang mga anak niyo na sila na ang susunod.

3) Bawasan ang Gastos

 Ito nga ang sinasabing formula kung nais mong maging financially free: “Spend less than you earn, and do it for a long time, then you can be financially free.” (Gumastos ng mababa pa sa iyong kinikita at gawin ito ng matagal at ikaw nga ay magiging financially free)

Ang mga tunay na milyonaryo na walang utang ay hindi magarbo kagaya ng ating iniisip.

Bihira nga silang bumili ng bagong sasakyan at mas gugustuhin pa ang mga second hand na sasakyan. Bakit ‘ka mo? Dahil ang bagong sasakyan, sa oras na ilabas mo ito sa casa, babagsak na agad ang halaga nito ng halos 20% dahil nagamit mo na. Ang tawag diyan ay depreciation.

Kagaya ng magagarang sasakyan ay huwag ka ring magpadala sa mga latest gadgets na inilalabas. Lahat nga ng mga bagong gadgets na iyan ay bababa ang value sa loob lamang ng ilang buwan. Naalala ko nga nang unang lumabas ang iPad ay nagkakahalaga ito ng P45,000; pero makalipas lamang ang ilang buwan ay bumaba na ang presyo nito sa P26,000. Kung ilalagay mo sa banko ang P26,000 mo ng 10 taon ng may 1% rate per annum, hindi ito aabot ng P45,000. Be patient! Huwag magpadalos-dalos sa mga desisyon!

4) Ipunin ang Pera

Sabi nga sa Bibliya, “He who gathers little by little makes it grow.” Kaya naman mabuting ipunin mo ang, at least, 10% ng iyong kinikita.

Mahalagang magkaroon ka ng emergency fund. Ang emergency fund ay dapat katumbas ng 6-8 buwan ng iyong living expenses at nakatabi lamang ito sa bangko. Kapag ang living expenses mo ay P25, 000 a month, sa loob nga ng 6 na buwan ay kakailanganin mo ng P150,000  na emergency fund.

Bakit nga ba natin kailangan ng emergency fund? Hango nga sa salitang emergency, ito ay makatutulong upang hindi kayo mabigla sa mga gastusin, halimbawa na lamang na magkasakit at ma-ospital ang inyong anak. Hindi ba’t medyo malaki ang gastos? Ano ang gagawin natin? Ang madalas na ginagawa natin ay mangungutang tayo sa kaibigan o kamag-anak pero kung may emergency fund ka, doon mo na kukunin ang gagastusin sa ospital.

O di kaya kapag nawalan ng trabaho si mister ng ilang buwan, saan kayo kukuha ng pera? Tama, sa emergency fund. May 6 months ka pa bago maubusan ng pondo at sapat na itong panahon upang makapaghanap muli ng trabaho si mister. Buuin muna ang inyong emergency fund bago niyo bilhin ang anumang luho niyo para sa oras ng kagipitan, mayroong maayos na makakapitan.

5) Kumawala sa Utang

Sinasabi ngang getting out of debt is a test of character. At kung mapapasa mo nga ang test na ito, mas mapagkakatiwalaan mo ang iyong sarili at gayun din naman, mas madali mong makukuha ang tiwala ng iba; at syempre, kapag pinagkakatiwalaan ka na ng tao, madali nang mag-negosyo. 

Nagawa nga namin ng asawa ko na bayaran ang aming P2.5 million na utang sa loob ng dalawang taon. Sa totoo lang, hindi ko alam kung paano namin ito nagawa. Tuwing magkakaroon kami ng additional income, nagbabayad kami para sa aming utang maging malaki o maliit man ang aming hulog. Mayroon nga kaming walong credit cards noon at lahat nga iyon ay may utang. Nang nagbigay nga ako ng speech sa harap ng 300 katao noong December 2010, itinaas ko ang huli kong unpaid credit card at sinabi ko ngang, “this is plastic surgery.” Ginupit ko ito sa harapan at sumigaw ako ng FREEDOM. Ang makawala sa pagkakautang ang isa sa pinakamasarap na maaari mong maramdaman.

Hindi ko na sinama ang tungkol sa investing dahil iba na ang paksang ito. Pero sa oras na matapos o masunod mo na ang mga nasasaad dito, ay maaaring mag-simula ka na sa pag-iinvest.

Ang huling maipapayo ko sa inyo ay maiging ibahagi ninyo ang inyong pera. Itabi na ang 10% ng inyong income para sa tithes. Magbigay sa simbahan o di kaya sa isang organisasyon na maaaring nangangailangan nito. Tandaan mo na “It is more blessed to give than to receive”)

What is Mutual Fund?

What is a Mutual Fund?Posted on November 14, 2012  MF Phils.net

Have you ever thought of investing in the stock market? Perhaps investing in currency and real estate? How about gold and precious metals? But like most of us, employees, we do not have the time, resources and knowledge on how to invest in these things.. This is where mutual funds come in…

A mutual fund is a pool of money, from small investors such as yourself and I. Hence called a fund. This fund, will be managed by able financial managers and invests it in whatever instrument they see fit, to make you profit. You do not have to worry whether you made the right or wrong investment decision. Let the manager do and worry about all those things for you. All you have to do is let them handle your money.

Benefits of Mutual Funds

Mutual funds have many benefits.

#1 – Tax

Profits from mutual funds are tax exempt. Mainly because the managers are already taxed when they invest your money. So as to prevent double tax, the mutual fund profits that you receive are “net” which means, you get all the profit. Tax free!

#2 – Saves Time

If you have tried to manage a rental property, you will have a lot of headaches managing the tenants. On a stock market recession, you might lose sleep. In investing in mutual funds, all the stress are passed on to the managers. Since they are good at what they do, you can rest assured that they will do anything to make a profit for you. And I’m sure they have a good night sleep even on bear markets.

#3 – Saves Energy

If you invest in mutual funds today, you’ll realize that transactions are very easy. You can deposit or withdraw more money into your portfolio by a click of a button. Most mutual funds now are done online.

#4 – Vast Array of Products to Choose From

Mutual funds are like glorified candy shop. They have different flavors for different walks of life. Equity funds for the risk takers and bond funds for the secure elder. There are different kinds of mutual funds that you can pick and choose to your preference.

#5 – Affordable Investment

You can get started in investing in mutual funds for as low as P5,000. The good thing about affordable investment is that, ordinary people can start investing early and continuously because of low investment required.

How do you profit from Mutual Funds?

When you invest in mutual fund, you’ll be given a particular amount of sharescorresponding to the amount of money you invested. These shares have prices. You earn money if your share increase in value. And you lock in your profits if you sell your shares.

What’s the use of life insurance?

Excerpt from an article-MF Phils.net

Ask yourself this, what’s the use of life insurance? How much do you need? How does one grows out of needing a life insurance?

A Family Of  Five

To clearly explain how I think about life insurance and the type of insurance, consider a scenario of a family of 5.

1.      The Father – The breadwinner. Takes home P25,000 per month of income.

2.      The Mother – A housewife. Does a little part time here and there but mostly focuses on the hose. Earns around P5,000 a month of extra side job.

3.      The College First Son – A son in college taking up engineering.

4.      The Highschool Daughter – A daughter graduating in highschool.

5.      The Baby – a year old baby.

The household has a combined income of P30,000. And let’s say that the family has a monthly expense of P25,000. They have a savings of P5,000. (Everything is for illustration purposes.)

Now to clearly illustrate my point. Which of them needs an insurance? Do all of them needs an insurance?

Not all people has the money to buy an insurance. Like our example family. They only have P5,000 of savings every month that they could put in to insurance (or investments).

They still need to allot money to invest in mutual funds if they want to retire happily. Investing lesser amount would only mean they will need to work far more years before they can retire.

The Father Died

Now let’s say the Father died. The income of P25,000 per month GONE! The family is in trouble. The kids will need to get out of school to work. Mother would need to work. Baby would be neglected for the lack of time. Everything would be a lot harder for the family. The mother can’t pay the estate tax. Funeral service costs, they need to borrow, digging the family in more debt.

Life insurance protect us from this situation. If you are the father, you protect your loved ones from this kind of situation, shall come the time for you to part from this world. This is the best example of life insurance at work for the right person.

Consider that the father used the remaining P5,000 savings to his life insurance. Neglecting to buy all other family member their own life insurance. When its time for the father to die, they’ll be well taken care of financially. There would probably more money left for a few years of college for the kids before they can get a job and help their mother. Life is easier.

How Much Insurance Should I Get?

Let’s go back the the family example. If we are asked how much The Father should get as an insurance, how much would you suggest? You can go crazy and say P10M and the family would live happily ever after. But the cost of that would be insane for a household income like that. Remember that you, have a finite resource (money). Get only the least amount, cheapest amount that you could get that will still get the job done.

So how much is it? The 2 kids one in college and 2nd going into college. If you’re the father you want to provide the schooling for them. And probably for the baby too. You want to insure yourself that the money they would get, would be enough for their expenses and will get them to graduate. So you would have to compute how much money they would spend in expenses plus the money they would spend for school up to the point they graduate plus estate tax plus the funeral cost for yourself. That is how much you should cover.

How much insurance to cover:

expenses of the family + expenses of the kids up to graduation + funeral expenses + estate tax

But you could go cheaper than that. Keep in mind that the son is already in college. Maybe you want to make him graduate and give him a year or two to find a job. After that, they’ll be well off and you have done your job. In this case, your insurance cost is much lesser. And the first born son would provide for the family, keep his sister in college until the sister is able to help too.