To those who read my articles, you might have realized by now that I am not able to reply to comments most of the time unless it is sent to info@colaycofoundation.com.

One good reason is that, sometimes, the person making the comment is not really after a reply but is merely venting.

Moreover, many times, my replies in themselves are too long and would be an article in itself.

Oftentimes, there is no way to answer without eliciting more of the same refusal to believe.

But as time passes, perhaps the window of opportunity presents itself to bring up the reply again based on actual facts.

Two years after might be a good time to reply to a comment made to my second article in a GMANews.TV blog dated April 2008.

“Litong Lito?” distrusted the principles that I have been espousing since 2001.

I am bringing up the issues as they were written in 24 April 2008. It will take several issues to explain them so I will cut them up by subject matter.

This comment arose from a portion of my 22 April 2008 blog:

“Saving Ten Pesos a day or Three Hundred Pesos a month invested prudently can earn you an average annual rate of 12 percent.

At this rate, if you leave your money alone, and just let it “roll” it will compound and grow to a value of PhP 66,600 in 10 years.

Look at what happened here?

Over a period of ten years, you actually saved only PhP 36,000 and it grew to almost double the amount.

If you are able to continue this process for another 10 years, meaning saving another PhP 36,000 over 120 more months, your savings will grow to PhP 273,400, or almost FOUR TIMES more than the total amount of PhP 72,000 you saved over 20 years.”

In the meantime, Litong Lito came up with this reply:

After ten years ... ano na kaya ang mabibili ko sa sampung piso?

Ano po ba ang "inflation rate" ngayon?

Naiisip ko lang po na kung ang makukuha kong tubo kada taon sa investment na papasukin ko ay steady 12 percent at ang "inflation rate" ay steady sa six percent (March 2008 = 6.8 percent), ibig sabihin ang neto ko ay six percent lang.

Ibig sabihin ang 10 peso daily savings ko for 10 years ay aabot nga ng PhP66,600 pero hindi na ito kasing "powerful" ng pera ngayon? Baka after 10 years ang PHP66,600 pesos ay parang barya na lang. Not considering the risks?

If I understand “Litong Lito?” correctly, he is saying that the P66,600 will be practically useless because of inflation. Furthermore, there are risks in the 12 percent p.a. investment to contend with.

My reply to “Litong Lito?”:

1) Note that you assumed inflation at six percent per annum and just to keep the example simple, that is half of the 12 percent per annum that I said you could earn over a period of 10 years.

Thus, to keep at par with the six percent inflation you only need to grow your money to P48,750 by the tenth year.

Therefore, the Php66,600 would still be able to purchase for you 36 percent more goods than if you had just managed to keep in pace with inflation. In other words, you would still have P17,850 left over after buying the same amount of goods with your P48,750 now adjusted for inflation.

2) If you still saved the 10 pesos daily but just kept it in your piggy bank and not invested it, you would have Php36,000 at the end of 10 years with a purchasing power of only about half or Php18,000.

3) If you don’t save the 10 pesos daily, you would have spent it along the way on practically useless things. At the end of 10 years, you would have exactly nothing.

4) On the risks of the investment, I reiterate that all returns are risk-driven.

The same is true with mutual funds and unit investment trust funds (UITF).

Though they are closely supervised by the Securities and Exchange Commission (SEC) and the Bangko Sentral ng Pilipinas (BSP), this type of supervision does not extend to the quality of fund management.

Regulatory bodies are focused on compliance with legal requirements and to ensure that fund managers do not run away with the investors’ money.

Actual performance of the funds are published the daily and may also be seen in selected websites. Thus, the risk of losing part of your investment could happen in the following cases:

• choice of a mutual fund or UITF with poor performance by the appointed fund manager. There are many choices and with a little research and analyses, you can find the right one for you.
  
  
• selling at a time when the Net Asset Value (NAV) is lower than your actual average cost per shape. This is unlikely to happen if you are regularly buying the same shares with the same amount of money, (i.e., you are peso cost averaging). This is why it is important to have a long-term outlook.

Here is a reminder for all would-be fund investors.

It is easy to get into a fund.

But the real challenge is when do you get out?

The idea of maximizing returns is never a practical one.

The best rule in managing your investment is to have a specific target amount you want to achieve at a specific time or date in the future and a specific reason or purpose on how this amount will be spent.

This roadmap will automatically tell you what kind of return you will need and what the attendant risks there are.

This defines your own personal benchmark in deciding when to redeem your shares or when you should put in more investments given prevailing unit prices.

I wish to reiterate that investing is very personal.

The key is knowing what investment instruments suit you best.

Don’t get carried away by tips from kibitzers.

Remember:

1) If you were ready not to even save the 10 pesos daily and will have nothing at the end of 10 years, logic dictates that you should not feel bad if you lost the entire investment and have nothing at the end of 10 years.

But I am saying that it is really unlikely that you will lose the entire investment.

2) Do put your entire savings in one investment; only 10 pesos daily, which was really just an example.

In fact, the lowest investment in a mutual fund is an initial Php 5,000 and Php 1,000 additions thereafter.

After the first Php 5,000 investment, you would have to save 33 pesos daily instead of 10 pesos to reach your Php 1,000 additional investment per month.

If you cannot save 33 pesos daily, then this advice may not be something you can follow.

3) I am assuming that 33 pesos daily savings is something you can afford to invest and then forget. Let it just roll and be amazed what it can grow into in 10 years or longer.

4) Inflation rate went down in the past year and the average for the past five years is about 5.7 percent per annum but in the past two years, if you had taken my advice and chosen the best performing mutual fund, you would have earned 27 percent from April 2008 to March 2010 or about 13 percent per annum.

Note though that the first investment is the required Php 5,000 and Php 1,000 regularly thereafter.

For seven (7) stock or equity mutual funds, the average annual compounded rate of return over the last five (5) years ranges from a low of 8 percent to a high of 14 percent.

Note that this average already takes into account the horrible performance in 2008 where the stock market dropped by more than 50 percent.

I will continue with replies to “Litong Lito?” comments related to his real estate investment in Part 2 of 3 soon.

Thank you for your patience.

These coming months will be especially difficult for our country.

We have the El Niño drying up our water sources and creating havoc on our agriculture.

Campaigns and the elections will create a lot of stress in trying to discern who is best for our country and our respective communities.

The bright side of things is that whatever the result, for as long as the elections are conducted and concluded credibly, our economic future will be very bright.

However, if there is a failure of elections caused by the untested automated system, what will surely follow is a chaotic economic and social environment.

More jobs will be lost and each one will have to keep struggling to keep whole until better times come.

Yes, better times will come and we want to look ahead with this sort of parable of HOPE that someone shared with me.

The story has to do with the pear tree in a country, which had four weather seasons, namely, winter, spring, summer and autumn.

There was a man who had four sons whom he wanted to teach not to judge things too quickly.

He sent each of them on a mission to go and look at a pear tree that was far away.

The first son went in the winter, the second in the spring, the third in the summer and the youngest in the fall or autumn.

When they had all gone and arrived, he called them together to describe to him what they saw.

The first son said that the tree was ugly, bent, and twisted.

The second son said that the tree was covered by green buds and was full of promise.

The third son disagreed and said the tree was full of sweet smelling blossoms that smelled so sweet and looked so beautiful.

The last son said that he saw the tree full of ripe fruit ready to be picked and full of life and fulfillment.

The father explained to them that all of them were right because each of them saw the tree in only one and different season of life.

He told them that you couldn’t judge a tree by only one season of life.

The essence of what it is can only be measured at the end after completing all the seasons.

Therefore, if you give up on the tree during winter, you will miss the promise of spring, the beauty of summer, and the fulfillment of autumn.

We can apply this parable to our financial life where there are also these four seasons.

We are still probably in the winter of our financial options.

It has been very difficult for everybody whether an ordinary income-earner or a person with substantial wealth.

In fact, we have seen some take the radical solution in ending their lives simply because they are incapable of seeing farther than winter.

Just as sure as night and day, spring will follow winter.

The challenge though is that it is difficult to predict when each season will end.

It is especially most difficult to accept that “autumn” when all the big profits can be made will end.

Fortunately though, in the financial world, there can be little season cycles within the big season.

There will always be chances to save, invest and earn.

Every asset class has its time.

The challenge is to know which asset class rules in a given season.

This is why I always advise people to choose the right investment option only after making their personal financial plan based on their Personal Statement of Assets and Liabilities (SAL) and Personal Income and Expense Statement (PIES).

Mutual funds (MF) or Unit Investment Trust Funds (UITF) are usually right for most people because you need not invest all your savings in it.

It is also a long-term investment using savings that you can practically “forget.”

Just choose the best MF or UITF that will fit your objectives.

MF range from P5,000 minimum investment and UITF from P10,000 minimum investment.

Invest a small amount in it regularly, preferably monthly whether the market is up or down.

In this way, you will be averaging your cost over the years.

You do not have the look at it too often.

If you are buying regularly, your average cost will surprise you over the years.

Of course, the rule is always to buy low (during winter) and sell high (during summer and autumn).

But we cannot always be checking the market, unless it is our job.

MF and UITF managers know the seasons within the seasons and they will make their funds grow accordingly.

Don’t let the pain of one season destroy the joy of all the rest.

Do not judge life by one difficult season.

We still have the rest of our life still ahead of us.

For those interested in our Pisobilities Seminar on Saturday March 20 2-4pm, please call 6373731 or 6373741. For email inquiries, info@colaycofoundation.com.

Marami na po akong nadidinig tungkol sa Forex trading. May nakausap na po ako na mga agents and traders coming from different investment houses. And their promises are huge income in dollars and fast ROI.

For an investment of $5,000 or Php 230,000 pwede ka nang mag start as investor and pwede nang kumita in dollars. Non taxable ang profit.

My questions are:
1. Safe po ba na pumasok sa Forex trading?
2. Ano po ba ang mga risks na pwedeng mangyari?
3. Is it a stable business venture?
4. Bakit po sya non taxable ang profit?
5. Legal po ba na business ito?
6. Advisable po ba ang business na ito sa may mga small capital lang like Php 250,000?

This is a good example of the makings of a scam that promises big and fast profits.

Forex trading is a highly risky and volatile business.

This is best left to professional and institutional investors with large investible funds (generally in the millions and hundreds of millions).

This is not for the small investor to indulge in.

By its very nature, it is a trading game not investing in the true sense of the word.

It is also impossible for any trader or broker engaged in forex trading to guarantee profits to an individual investor at any time.

Nobody can really forecast currencies or any commodity trading.

Maybe, you can guess the movements a few times but never consistently on the long term.

You can make money a few times but could lose it and more over the long term.

In addition, if you are just an investor and not the actual trader, you will have to trust the institution and its traders who trade for you.

The pseudo ones actually choose who to give the profits to, usually the new investors, to further encourage them to bring in new clients.

Definitely, if you enter currency trading, you will actually be gambling with your savings.

So if any agent promises any profits, be assured that it is a scam.

These agents are there only to solicit new clients and earn their commissions. They are not there to serve your interest.

The $5,000 or Php 250,000 is a lot of money and if it is all you have, you should put it in a business or investment that you really understand.

More likely, the agent is not really explaining to you that your $5,000 is not your total exposure.

Currency trading takes a lot of time to learn and experience to be able to be reasonably conversant with it.

To do actual trading yourself will require more extensive studies and licensing as well.

Currency trading can be legal.

It depends on whether the company has the necessary license from the Bangko Sentral and the SEC.

You should ask them why the profit is non-taxable. In fact, you should quiz them carefully before even considering them.

There are many other options if you want to invest.

Don't be lured by quick returns and fast bucks.

Remember my advice. “The best way to get rich quick is to get rich slow. In investing, slow is fast.”

Happy New Year to all!

At the end and at the beginning of the year, people are more aware of the need to change our ways. This email will require three parts so I hope you will follow the replies in the next issues.

“I got to read your article in the GMA news TV blogger section... I have been searching for a financial adviser for some time now...I believe I need one because I can't seem to really get a grip on my money.

I spend so much that I have maxed out my credit cards (there's two of them) and I have a personal loan. I've gotten myself out of my financial mess before and just when all was doing fine, I'm back in this messy game of debts.

I am a fan of some US financial advisers and I try to do what they say which is why I got myself out of debt also before. I have started saving automatically via our company's coop that automatically deducts my advised amount every payday. I've set up a checking account and a savings account as well.

Unfortunately, it's only the coop savings that is intact right now and I now believe I know the answer...If money is easily accessible to me, I tend to find ways to spend withdraw and spend them. That is why the coop money is hard to spend – it takes time and a lot of paper work to withdraw it so I lose heart to do so.

With this realization, I know that if I am to save, I should do it automatically and it must be in a place that is not as accessible as a savings or even checking account. And that someone whom I can trust so that I don’t backslide must monitor me.

I am drowning in credit card and personal loan mistakes I have made which affect my daily expenses, my daughter's education college plan and my life insurance payments and all these are starting to affect my relationship with my husband...I want to fix my financial mess and save and even invest later on...but I need someone to help me...

I am a manager in a top company and I earn a good salary but it still doesn't seem enough. I hope you could help me (or refer someone who could help me with step 1 all the way to financial wellness) because I am seriously in need of it...”

My reply:

Thank you for trusting us enough to explain your situation. You have gotten out of debt before so obviously, you can be a determined and disciplined person, if you want to be.

As with many other persons, success probably made it is easy for you to find excuses and backslide believing that you can get out of problems should these crop up again.

Your favorite US financial advisers are very good financial advisers and following their advice got you started on the right path.
When you read and listen to them today, they do not say anything different from the first time that you encountered them because their principles are solid and will not change.

You need to review what you did before and what has changed that made you forget the principles that you were following.

You mentioned that automatic deductions to be invested in your company coop prevent you from spending because it is not easily accessible. This seems to show that the items you were spending for were not really that important. If the expenses were so important, then, no matter how difficult, you would get your coop money.

A personal loan of P90k also requires documentation and yet you availed of it. There must have been a special reason unless that was done through a credit card as well which made it so easy.

You know the principles and yet you seemed to have forgotten them when you were not longer in debt. While you could have a financial adviser, a real one will not/should not hold your money for you.

Perhaps, it is best to solve your problem with your whole family involved including your child if possible so she can understand the need to cut down on expenses.

We suggest that you sit down with your husband and put everything down in writing. As we always remind people, money is a family matter. And when the family is involved, solutions to money problems readily present themselves and become relatively doable.

Review all your "mistakes" by examining exactly where the money went and then seriously begin to establish financial goals with specific time lines. It's time to really execute your own purpose-driven saving & investing.

It is imperative though that you first prepare your latest family Statement of Assets and Liabilities and your Personal Income and Expense Statement. These will be your baseline for moving forward to instituting your own wealth generation program.

For now, consider “investing in debt” right away. You should start preparing yourself to the possibility of selling all your assets that are not really that important to generate the cash and pay off all your debts starting with the credit cards.

When you finally are able to grow out of debt, you will have that much more free cash to invest for your future.

Write down your new budget. Follow the principle: Income minus Savings equals Expenses.

At the moment your “Savings” are paying off your debts but when these are paid off, you should really actually save the amounts.

Live within the balance by cutting down on your WANTS and strictly spending only on NEEDs until your debts are fully paid.

If you do not know how to make these Statement of Assets and Liabilities (SAL) and Personal Income and Expense Statements (PIES) budget, you can study our publications, which teach you step by step how to do these.

Besides your US financial advisers, you might want to check on my books that give the same principles but for the Filipino audience and our website, www.colaycofoundation.com.

In the final analysis, you can get out of your financial problems again. However, do not make this a habit.

What you are losing in the process is the time to be able to prepare for your future. You are giving yourself very temporary “pleasures.”

In fact, just after a few weeks after spending, you already have pain and worry because you are unable to pay for your credit card bill.
You have a very good job but you will not have it forever. Use the time you have left to save for your future because you will need it.

In the end, your success is really all up to you.

I would like to add my comment to other emails with similar requests for financial advice.

When you look for a Financial Advisor, I will always ask you to study, not just read, my books first.

For the amount of information you will get, the books are well worth the price. In addition, if you write or visit Colayco Foundation for Education (CFE), we offer you all the options that we know to be good and provide you the names and websites you can visit and study.

Our books, in particular "Making Your Money Work" will be really helpful for choosing the options.

It is not only a matter of knowing how to compute, it is important to understand the principles that go into personal financial planning. You need to understand the principles that are important to move forward.

Remember that when you talk to a Financial Adviser, you will also need to openly show all your SAL and PIES details for them to help you. There will also be a fee unless you go to one who is actually an agent of an insurance or investment company trying to sell you his options.

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BONUS FOR READERS WITH AN OFW FAMILY OR RELATIVE

Visit our office to receive a free copy of the Pisobilities Handbook. Unit 805 8th Flr. Citystate Centre Condominium, 709 Shaw Boulevard, Pasig City. Good while supply lasts.

By all accounts, 2010 promises to be a better year than 2009. Most economists see it as the beginning of an economic recovery although the recovery curve is not seen steep as have been in past periods of economic recovery.

In other words, it will be better but do not expect anything dramatic. Interest rates will improve a little for those with money in fixed securities.

Banks will be more eager to lend but will not really bring down interest rates that significantly. Inflation will still be low and single digit. For ordinary people, financial life will continue to be a struggle.

For those with an open mind, whatever the condition of the economy, opportunities abound for an “active income” entrepreneur.

Goods and services that offer convenience to the buying public will always be in great demand.

Most households today run on multiple income earners. Anything that will provide them time to devote for additional income or spend for much needed rest will have a ready market.

Look for these opportunities right in your own communities.

In particular, the election brings a lot of additional business opportunities in services and products to be used for the elections.

The entrepreneur must always focus on proper execution, meaning performing according to expectation.

Unfortunately, though proper execution is essential, it is not enough.

The further challenge is to execute within budget. Unless, capital is readily available, going for market share at all costs is not sustainable.

There is no point in continuously producing at a loss particularly when capital is scarce. After this is achieved, the next biggest hurdle is being able to collect.

Our markets, particularly the seasonal ones (e.g. Christmas or election-related businesses) are notoriously bad payors.

Buyers here get away with not paying because there are just too many eager beavers to sell. Keep in mind that selling is not the same as doing business. Doing business means producing, selling, and collecting at a profit year in and year out.

Cash generation and positive cash flow is the most important factor for success. This is particularly true for start-ups when the businesses still have no cash or asset reserves to draw from.

Businesses, even when unprofitable in accounting terms, are able to survive for as long as cash flows are available to fund day-to-day expenses for production and sales.

This is where the entrepreneur’s reputation as reliable and trustworthy comes into play.

For example, getting your supplies on long credit terms and being able to collect sooner on your sales provide the best guarantee for survival and an eventual turn-around.

The ability to ensure positive cash flow stems from real knowledge about the business, i.e., having a product or service that is regularly bought by a sufficiently large and paying market, and, the entrepreneur’s capability to maintain quality and price of his product.


For a “passive” income entrepreneur, there will be similar opportunities. I always encourage every Filipino to be a passive entrepreneur.

Make your money work for you. You need to save but your savings that you do not grow may not be of great help to you.

The opportunities in the past have always been limited for those with small savings.

In 2010 however, we can look forward to options with less risk for as little as P500 savings for investment. We are working on making these financial products available to the growing small investors community of the One Wealthy Nation (OWN).

OWN is a community of savers and investors dedicated to grow their wealth. OWN is dedicated to provide its members two critical aspects in growing wealth, namely, information and fulfillment systems.

Relevant and accurate information on current and new investment products as well as tips on how to cut expenses and how to save and invest will be provided.

Through text-messaging and the internet, OWN members can invest surprisingly affordable amounts in various pooled funds (i.e. mutual funds, UITFs, etc.) and other legitimate investment products.

OWN is effectively each member’s own Specialty Mall to reach his financial goals.

OWN envisions a Philippines and Filipinos Wealthy in Spirit, Money, Intellect, Life (Health) and the Environment (Smile).

For more information, please visit www.onewealthynation.com.

As an OWN member, you will receive information to deepen your understanding of personal finance and more options to invest even small amounts, as we grow the OWN community.

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A BLESSED CHRISTMAS TO ALL!

We celebrate another remembrance of the birth of our Lord Jesus Christ. He is truly the reason for this season. For those of us who can, let us celebrate His birthday together with family. For those who are obligated by responsibility to be away from home, let us be grateful for the opportunity to provide for our future. Let us focus on creating the options to celebrate future Christmases with our loved ones. This is what we, at the Colayco Foundation, want for all of us.

Spiritual and inspirational articles abound to lift up our lives. What I noticed though is that we tend to compartmentalize our lives.

In particular, our financial lives are considered by most as separate from their spiritual and intellectual activities. The fact is that all of these are intertwined.

Since I have focused my advocacy on teaching personal financial management, I frequently interpret these inspirational principles in the light of our financial lives.

Borrowed from Mac Anderson’s “The Nature of Success,” Mr. Anderson talks about a lesson he learned from a friend’s grandmother.

Mac was having such a rough week and his friend shared with him what his grandmother told him to always remember: ‘Inch by inch, life's a cinch. Yard by yard, life is hard.’”

Mac took the line to heart and took out a piece of paper and listed all the things he had to do in the next three days.

As he finished each task, he crossed it out from the list. Three days later, he crossed out the last task left on the list. He felt great!

As Mac explains, “…Success doesn't come cascading like Niagara Falls; it comes one drop at a time through short-term, realistic goals. If you believe you can do something (the goals are realistic), you're likely to be highly motivated. If, however, you think you can't (because the goals are unrealistic) your motivation level falls greatly…”

The same principle applies in each one’s personal financial life.

I keep emphasizing the same principle as explained in “Making Your Money Work”. THE QUICKEST WAY TO GET RICH QUICK IS TO GET RICH SLOW.

Unfortunately, more people prefer to get rich the easy way and as fast as possible.

They want to enjoy the money they believe they will be getting very quickly. This is why scams continue to proliferate and fool so many people.

Scams give promises of bigger than normal income every month or even everyday, in some cases.

It is so easy to want to believe when the first thought that should come to mind is if the promise is even realistic. If it is not, then why even be motivated to believe in it.

This is when the next part of the scam comes in. They give the names of people who have already invested and are already receiving the returns.

When you check with these people if the claim is true and they confirm, the inevitable follows. You end up investing and sad to say, the “Get Rick Quick” becomes “Lose Everything.”

In some cases, at the start, the money does come in as expected. As the money comes in though, it is almost automatic that the money is spent in frivolous WANTS.

After all, more money is expected to come in regularly so why not enjoy.

Some scams last for years and at the end of it all, the scammer tells the investor that the investor got his money back anyway through the regular interest paid.

That is true but it has all been spent. At the end, the Investment is all gone and even the WANTS purchased are no longer important.
In a real investment with realistic long-term goals, the returns come in, reinvested (compounding principle) and kept intact. At the end of the period, both the investment and the earnings are kept safe.

Now, while you are doing the foregoing, remember what author Swami Avadhutananda says about Two Days We Should Not Worry.

It is really very important to understand not only for the actual lesson stated but also for the implications in one’s financial life. It goes this way.

“There are two days in every week about which we should not worry, two days which should be kept free from fear and apprehension.

One of these days is Yesterday with all its mistakes and cares, its faults and blunders, its aches and pains.

Yesterday has passed forever beyond our control.

All the money in the world cannot bring back Yesterday.

We cannot undo a single act we performed; we cannot erase a single word we said.

Yesterday is gone forever.

The other day we should not worry about is Tomorrow with all its possible adversities, its burdens, its large promise and its poor performance;

Tomorrow is also beyond our immediate control. Tomorrow's sun will rise, either in splendor or behind a mask of clouds, but it will rise.

Until it does, we have no stake in Tomorrow, for it is yet to be born.

This leaves only one day, Today.

Any person can fight the battle of just one day.

It is when you and I add the burdens of those two awful eternities

Yesterday and Tomorrow that we break down.

It is not the experience of Today that drives a person mad, it is the remorse or bitterness of something which happened Yesterday and the dread of what Tomorrow may bring.

Let us, therefore, Live but one day at a time.”

This should not be interpreted to mean that we should live day to day without planning for tomorrow.

On the contrary, the author simply says that though we cannot change the past, we should and do learn from it.

With these lessons, we can plan for our future but act without worrying. Failure should not be feared for it is merely a temporary event.

If we are to analyze it, living one day at a time simply means make the most of today. This supports my basic principle that each person should be preparing for his retirement every day.

Otherwise, as he grows older, he will precisely be dreading Tomorrow if he did not prepare.

And as he starts worrying that he is not prepared, he will feel all the regret that he did not make use of the time when he was younger.

All it takes is an amount set aside daily and invested on a long-term basis without touching the earnings.

Even during these difficult times, keep saving 20 percent of your income. Live within the 80 percent.

Invest your savings regularly in well-managed funds for at least 5 years.

But in doing so, make sure that you set an absolute amount as your goal for specific time periods.

This way, you will have a clear basis for determining how much your investments must yield every year (annual rate of return).

This then will be your guide in deciding when to liquefy part or all of your investments in the process of monitoring the progress of your investments.

It is easy enough to get into an investment. But the real challenge is knowing when to get out.

The typical mistake is to invest with no specific money goal except to maximize growth. They invest based on unreasonable expectations and not on achieving a specific amount for a specific purpose at a certain future date.

These are the investors who are able to buy low but end up selling lower because they panic when prices dive unexpectedly.

More often than not, they could have sold high but did not, because they assumed that they there is still room for additional gain.

The day right after Ondoy, I was interviewed on television and radio and one of the questions asked was “How do you start from nothing?”

For those who never had anything, this is a common question. My answer has been and will always be that you first have to find a job.

We were all born with nothing but our parents provided us with the food, love, shelter, and education that allowed us to grow through our childhood.

As grown-ups, we cannot depend on anyone but ourselves.

We need to find a job that will allow us to provide for all the necessities. Only when we have some kind of salary can we start from nothing.

Many of those hit by Ondoy and then Pepeng still have jobs.

It is just that they lost part of their savings. Houses, furniture, equipment, car etc. are savings if these do not cause them to spend.

If they kept cash and jewelry in their house, the cash and jewelry could have been swept away by the floods. If they had invested in special décor, cars and other items believing these could be resold and considered savings, they lost those too.

If they had unused clothes and other items, those were all lost too.

The lesson learned here is to be always mindful of what we buy. Buy only those things (real assets) that we need and will use.

There are loans available from Social Security System (SSS) and the Government Service Insurance System (GSIS).

Having these special benefits are real reasons why each Filipino should be a member of either organization.

However, perhaps the loans available from SSS and GSIS will not be enough for those who lost so much.

Those who have credit cards will be very much tempted to use their cards because they will have very real needs immediately.

It is therefore a good time to remind all credit card users that your credit card statements will surely come on time even if there are floods and typhoons.

If you do not pay on due date, you will be charged with interest and penalties and your card could be cancelled.

If you pay only the minimum amount so that your credit card is not cancelled, you will also be charged for interest and penalties.

If you continue to use your credit card after having paid the minimum, you will be charged interest and penalties on the new amounts that you charge to your credit card. You might think this is unfair but it is the rule so it is better to know it.

Therefore, my advise to you is:

1) Use your credit card only if you can pay for your entire balance on due date.

2) If you know you cannot pay for the entire balance, it is better to borrow from your family, friends and bosses before your use your credit card. Or use what you borrowed to pay off the entire balance of your card.

3) If those you borrowed from charge you interest, just negotiate that the interest is not higher than what the credit card will charge which is anywhere from 3-4 percent per month. Hopefully, they will give due consideration to the uncontrollable catastrophe that has hurt everyone and reduce your cost of borrowing.

4) If you used your credit card and cannot borrow to pay for your balance, it is better to cut the card and immediately return it to the credit card company. Do not be tempted to use it at all. Better still, as you surrender your credit card, negotiate with the credit card company for a reduced interest rate and fixed amortization schedule. When you actually complete your amortization payments, you will have effectively invested in debt, earning the interest rate that you would have paid had you continued using your credit card.

Even if you cannot think of saving at the moment, do yourself a favor and register as a member of One Wealthy Nation (www.onewealthynation.com).


You will receive many tips on how to reduce your expenses and how to eventually save.

It’s free and you have nothing to lose and everything to gain with information and mechanisms to make investing easier even with smaller amounts. You can do this wherever you are in the world. It is still under construction but there are activities that are already functional.

To start again requires the same procedure as I have always been teaching.

It will be more difficult for those who have enjoyed luxury in the past.

There will have to be a change in lifestyle. The greater you lost, the more drastic the change will have to be.

You have to make a new Statement of Assets and Liabilities (SAL) and Personal Income and Expense Statement (PIES) to understand where you are after this tragic setback.

From these SAL and PIES, you need to update your personal financial objective and plans.

In taking time to complete your inventory of assets and liabilities, you may be surprised to discover that you have assets that you do not use nor need that have value and can be sold. You may even end up with more capital than you ever imagined.

As they say, sometimes if you look hard enough, you may find gold in the rubble. You can check this out in www.colaycofoundation.com and my books.

The main principle remains “Pay Yourself First.”

This means that no matter how difficult, you need to set aside a percentage of your earnings – 10-20 percent – as savings. This may mean that you will really have to strictly limit your expenses to Needs and Wants.

Ondoy made sure that we accept the reality that we all will undergo emergencies and that we should set aside savings precisely to tide us over when such things hit us.

Next is the need to be able to invest this to grow over the years at an average rate of two to four percent over the long-term average inflation rate. You can do this a little at a time.

Finally, I am sure you are already sharing like most Filipinos are.

Continue sharing…if you don’t have money, share your time and your ideas on how to help others. Be involved.

Believe Ralph Waldo Emerson when he said “It is one of the most beautiful compensations of this life that no man can sincerely try to help another without helping himself.”

For questions or more information, please write info@colaycofoundation.com.

The floods of Typhoon Ondoy were extremely devastating. This time, Ondoy did not choose only the poor and marginalized. For the first time, even exclusive villages were flooded. In many cases, both personal and household items were swept away by the flood.

For most, even if the items are still there, they are no longer usable or cannot even be repaired. So many thought they were going to die and being alive seems to be the greatest blessing of the day.

The response to help each other was also overwhelming.

Neighbors opened their homes to strangers who needed a second or third floor or even a roof to evacuate to. The sharing of money and food is awesome as we see so many people in the supermarkets buying boxes and boxes of foodstuffs not for themselves but to give away.

Soon, the reality of having been caught unprepared for much needed expenses to repair homes, offices, buildings, factories, cars, etc. will settle in.

Nobody wants to suffer and certainly nobody wants to be caught unprepared when natural calamities strike our homes and communities. We know these things happen and that they happen with regularity. They are a fact of life and we must accept it and do something about it.

And yet, why do so many of us always get caught unprepared? We seem to think that when these calamities strike, we will be spared and that it is the others that will bear the brunt of the problem. It’s never us.

We grieve for the victims of Ondoy especially those who had family who lost their lives. Losing them is trial enough but for those who lost their breadwinner, moving forward will be so much more difficult. There are several financial reminders needed while the lessons are fresh in our minds.

Reminder on Insurance


Ondoy’s devastation should remind us to take a second look at the importance of insurance. Those who have family dependent on them should taking life insurance to somehow lessen the pain of their loss. Term insurance does not cost very much. Another is property insurance, specifically for our home, its contents and our cars.

For house insurance, the most common perils that you should cover are fire, typhoon, and earthquake.

Fire, in particular, can render one completely devastated because, most of the time, you can lose almost everything permanently including your memories (pictures and mementos). But the floods of Ondoy reminded us that floods can be just as devastating as fire. If you had insurance against typhoon, the losses you incurred with the floods would have been covered.

Whether or not you own your house, you can consider covering it with insurance. As always, you do not want to claim on insurance and it is difficult to spend on premium payments because you might feel that you are throwing away money for nothing. After all, you do not get any part of your premium payment back. These premium payments are one hundred percent expenses. However, if you can afford it, it is better to be protected.

If you don’t own your house, you can cover the contents of your house like furniture, equipment and personal effect. If you do own your house, you should be covered as well for the house itself.

Coverage means that if the items covered are damaged by the perils covered, the insurance company pays. While you do not really recover the real things that matter after a fire or typhoon or earthquake, at least the insurance payment will help you buy back some of it and replace to a great extent the physical assets damaged or lost.

Word of caution though, read the fine print in your insurance document to make sure you are really covered for what you want.

Car insurance has many types of coverage. The most common are for third party liability, theft, and own damage. Insurance coverage for the devastation type by Ondoy must specifically be defined in the policy acquired. As a minimum, it should cover the cost of restoring your car damaged by floods or typhoons.

Car accidents can be painful physically to the people involved. It also involves a lot of reporting, documentation with the police and other authorities. However, it becomes even more troublesome it you are not insured. If you own a car, insurance is one of the required costs of ownership.

Reminder: Set up cash reserves for personal emergencies


One of the very first rules about money management is to pay yourself first so that you can set aside at least six months salary or earnings precisely to cover emergencies. For most income earners, it takes years to build up a six-month cash reserves. If you save ten percent of your monthly earnings, it will take you five (5) years to accumulate six months cash reserves for emergencies.

Practically speaking though, there are faster ways to accumulate this goal.

For those who did not lose all their assets in the flood, one way is to dispose of some assets we may have acquired and which we do not really get to use today. I am sure, most of us have some idle assets that we can sell and convert to cash now. Look around you. Make an inventory of things like appliances we have more than what we need, e.g. an extra TV, radio, excess furniture, clothes, gadgets, electronic “toys”, etc.

Have a good look at these possessions and choose what you can afford to dispose of now. Chances are, losing some of these assets will not diminish or hurt your present lifestyle. Selling theses assets will most certainly contribute to building up cash reserves for emergencies right away.

Get started and build your personal cash reserve now! Do not procrastinate. One of these days, it may be too late and you will no longer be able to recover from your emergency losses.

Check our websites www.colaycofoundation.com and now www.onewealthynation.com to help you get started.

I received this comment from “Boy Kamote” on a previous blog when I wrote about how we should teach our children about money.

“Sir sa mga nasabi o nabangit po ninyo ay sang ayon po ako..sa mga may kaya at panggitnang klasipikasyon na mga magulang ay maari nga nilang ipasunod sa kanilang mga anak... paano nakapagtatabi ang isang tao para sa ibang bagay kung hindi naman sasapat sa isa man lang....yun kalidad na bibilin sa palagay niyo po ba makapamili pa kung alin ang maganda at mura.matibay at may pangalan...paano magiging wise ang isang bata sa pamimili kung hindi niya nga kayang bilhin..o ang dungisin ay papasok sa isang mall nanglilimahid sa dumi at amoy siya bay papasukin hindi diba..alam ko poy kagalang galang at matalino, eh ito po lamang ay isang opinyon sa isang sabihin natin na di naman tayo pantay ng antas ng talino at pamumuhay…paano naman po ang mga magulang na ala man lang pera na maipapakitang ehemplo sa kanilang mga anak....yung mga anak na ala pa sa tamang edad ay naghahanapbuhay na para kumita. Kung ikaw na magulang ng ganun bata ano sasabihin mo pa ba o ipapaaral sa kanila ang mga sinasabi mo…baka sagutin ka ng wag mo akong pakialaman...buti sana kung sobra o sapat ang kinikita pero hindi eh salat na salat pa para sa sikmura...nakalungkot man pong isipin yan ay isang bantad na katotohanan…ano ba ang dapat na isaisip pag ikaw ay may pera para sa isang simple at mahirap na magulang...di ba’t ang mapakain mo ang iyong pamilya ng may lasa lasang pagkain…at pag sila’y nas hapag na ng kainan ang masilayan mo silang masaya habang ninanamnam ang konting biyaya na napagsasaluhan…ano ba ang pakiramdam di ba’t nakapagpagaan ng kalooban di bale ng ala kang naitabi at masasabi mo sa iyong sarili na bahala na bukas at sanay palarin na naman na makahanap ng pera para may maipangtustos sa pang araw-araw...”

Related to this same article is a comment from “Sam” who says: “The best lesson you’ll give your child is about sharing money. Command it, not money commanding you!”

Boy Kamote is right that the advice I give are really for people who are earning some money. This is my chosen advocacy because of my life experiences that I can share. It is what I know best so I choose to share this.

But more than this, my advocacy calls for the elimination of a “mindset of entitlement.” This is the attitude that makes people believe that they have the right to demand “help” from the government, their communities and their churches without having to work for it and thus deserve it. They grow up with the misplaced value that money is given, not earned.

What Sam said is also correct.

However, we can only share what we have. Otherwise, we will not be sharing anything worthwhile.

This is where I come from. We need to teach everyone about the need to earn, save, make your savings grow, and share the savings they have grown with others.

I teach that as long as we are earning some regular income, we can save.

The savings may be minimal but if we have the discipline and determination, we can aspire for greater savings over time.

After all, we have so many examples of people who rose from almost nothing into very successful people.

I agree that some people are so poor that they cannot even buy food for their children.

Such cases are very complex and there are people who choose to help in working on advocacies related to this. Let me just say that for those who have not enough, they still have their intellect and will.

Money and all things material are mere creation from ideas.

For as long as we are alive, we can think and create good things for us, provided we have the right mindset, the will to improve our lives.

I agree that it is natural that we want to be able to give the best food, shelter, clothing, and everything that our family needs.

I agree that if we have nothing, it is tempting to give them a moment of joy and forget about tomorrow.

But I don’t agree that we should give or spend without thinking of tomorrow. It is an obligation not only to provide but also to leave something for tomorrow.

“Bahala na” is the worst mindset to live by!

There are people who have risen from the poorest of the poor and made something of themselves.

If we go by the thinking of Boy Kamote, that is not possible. But it does happen so it is not just a matter of money; it is an attitude and mindset inculcated in the children.

I think that the parents or guardians of such children taught them good VALUES from the time they were small.

Values most important are respect, honesty, integrity, resourcefulness, sincerity, discipline, determination, decisiveness, sharing and others.

If my child were to reply to me in a manner like “wag mo akong pakialaman...buti sana kung sobra o sapat ang kinikita pero hindi eh salat na salat pa para sa sikmura,” I think I would consider myself a failure in teaching my child many of the said virtues.

Since Boy Kamote wrote in Tagalog, here is a Tagalog translation:

Tama si Boy Kamote na talaga namang para nga sa mga kumikita ng pera ang mga payo ko.

Ito ang pinili kong adbokasiya dahil na rin sa aking mga karanasan. Ito ang alam ko nang husto kaya’t ito ang pinili kong ibahagi.

Mas mahalaga ay ang aking adbokasiya na dapat ibasura natin ang pananaw na may utang sa atin ang ating gobiyerno at ating komunidad kung kaya dapat sila ay mag bigay ng tulong kung tayo ang may pangangailangan.

Itama natin itong pananaw na ito sa isang saloobin na ang tulong galing kaninoman ay dapat karapat-dapat sa tumatanggap.

Tumpak rin ang sinabi ni Sam.

Ngunit, maari lang nating ibahagi ang meron tayo. Kailangan nating turuan ang lahat tungkol sa pangangailangang kumita, mag-ipon, magpalago ng naipon, at magbahagi ng biyaya sa kapwa.

Lagi kong sinasabi na hangga’t kumikita tayo, maari tayong mag-ipon. Maaring maliit lamang ang ipon ngunit sa tulong ng disiplina at determinasyon, tiyak na lalago ang ipon. Sa katunayan, napakaraming tao na ang nagtagumpay bagama’t nagsimula sa wala.

Totoong may mga taong lubos ang karukhaan na kahit pagkain na lamang ay hindi nila maipagkaloob sa mga anak.

Masalimuot ang mga kasong ganito at may mga tao at ibang grupo na nagtataguyod ng mga adbokasiyang kaugnay dito.

Ngunit tandaan na bagama’t kapos sa pera, may taglay pa rin tayong karunungan at pagpapasya.

Ang pera at mga materyal na bagay ay pawang mga likha lamang ng karunungan at ideya. Hangga’t tayo’y nabubuhay, maari tayong mag-isip at lumikha ng mga bagay na ikabubuti natin, basta’t may tamang pag-iisip (mindset), at ang kagustuhan o pagpapasya (will) na paunlarin ang ating buhay.

Sumasang-ayon ako na likas lamang na maghangad ng pinakamainam na pagkain, tirahan, damit at iba pang pangangailangan para sa pamilya.

Nauunawaan ko rin na kapag tayo’y kapos, natutukso tayong piliin ang panandaliang ginhawa at kalimutan ang pangangailangan sa kinabukasan.

Ngunit hindi tayo dapat gumastos nang hindi iniisip ang ating kinabukasan. Obligasyon natin na mag-iwan para sa kinabukasan!

Wala tayong mararating kung ipinagkakatiwala ang ating kinabukasan sa “Bahala na”!

May mga taong nagtagumpay bagama’t nanggaling sa labis-labis na kahirapan.

Kung paparisan ang pag-iisip ni Boy Kamote, hindi posible ang ganitong tagumpay.

Dahil marami na ang umasenso mula sa kahirapan, masasabing hindi lamang pera ang kailangan, napakahalaga rin ng tamang pag-iisip (mindset) at pagpapasya (will) na naituro sa mga bata.

Sa tingin ko, ang mga umasenso mula sa kahirapan ay iyong mga naturuan ng tamang pagpapahalaga (values) habang sila’y bata pa. Ang mga mahahalagang maituturo sa mga bata ay ang: paggalang, katapatan, integridad, pagiging maparaan, sinseridad, disiplina, determinasyon, maagap na pagpapasya, pagbabahagi at iba pa.

Kapag sinagot ako ng aking anak ng “wag mo akong pakialaman...buti sana kung sobra o sapat ang kinikita pero hindi eh salat na salat pa para sa sikmura”, sa tingin ko’y nabigo akong ituro sa kaniya ang mga tamang pagpapahalaga.

Nagpapatuloy ng libreng seminar na itinataguyod ng CFE, SM Malls, PLDT, Universal Motors UrVan, KSK Coop at iba pa tuwing Sabado, 4-6pm, sa: Sept. 26 SM Marilao, Oct 3 – SMCity Pampanga; SM Lucena Oct 17; SM Baguio – Oct 24.

Sa mga nangangailangan ng mas malalim na pagsusuri ng kanilang kalagayang pinansyal at ng mga legal na retail investment options, mayroon kaming mga seminar para sa inyo. Mangyari lang tumawag kay Ms. Grace sa 637-3741 o 6373731.

In deference to a momentous event in our history, in behalf of my family and all Filipinos, I dedicate this blog solely to pay tribute to our Cory. She is indeed the moral president and leader of the Filipino people for all times.

Cory is no coincidence in our lives. A prayer written in an ancient language suggests that Cory was a promise from the ages.

Allow me to share this text message from Vicente Chuidian:

“These lines from an ancient prayer of a language spoken before Christ symbolizes Cory’s sacrifice:

“I put on yellow garments and moved from home into homelessness.”

“kasayani vathani acchadetva agarasma anagariyam pabbajim”

The color yellow of Cory indeed takes on an even deeper meaning for us all…

The Taoist philospher, Lao-tzu so aptly described Cory’s life and the lessons we ought to learn from her:

“I have three treasures. Guard and keep them:
The first is deep love,
The second is frugality,
And the third is not to dare to be ahead of the world.
Because of deep love, one is courageous.
Because of frugality, one is generous.
Because of not daring to be ahead of the world, one becomes the leader of the world.”

-- Lao-tzu, The Way of Lao-tzu

As we mourn and celebrate the Gift of Cory, let us pray that each of us finds these treasures that Cory showed us in her lifetime.

For to create a Filipino nation, we must first have a measure of these within ourselves.

Maraming, maraming salamat po, pangulong Cory!

When do you start teaching a child about money? As soon as they understand that they can use the money to buy the things they want. When they show some interest, you can start teaching them how to handle it wisely. The simple lessons you teach today will give your child a good base in financial literacy. Let’s start with lessons for the youngest children who are ready.

Lesson 1: Explain our monetary system

Very young children logically believe that metal is better than paper and more paper is better than less paper. Thus, they might think that a 10 peso coin is better than a P20 bill and that three P20 bills are better than one P100 bill. It would be good to practice their understanding as a game. It will be very interesting to them especially if there is a small simple prize for the winner.

Lesson 2: Give your child an allowance

An allowance gives your child the first idea about finance. With the allowance money, your child can begin saving and budgeting for the things he/she wants.

The amount you give depends on your budget. However, if your budget is unlimited, be sure you give an amount that is reasonable for his/her age and not too much. In fact, it seems that children who receive too much allowance end up being spoiled. In our case, we gave an amount based on the grade level of our children. I am told that more parents give an amount based on the age of the child, which sounds more logical, on hindsight.

Some parents pay extra money to their children to do special chores around the house. This is also a good idea provided these are chores that are not normally expected of children. For example, children are expected to fix at least their beds and their personal things so they should not be paid to do this. If you decide to pay for chores, try to estimate the amount that your child will be getting in one week with both the chores and the allowance.

To come up with the right amount, decide what your child has to pay out of his/her own money and add at least another 20 per cent that will go into savings.

For example, if you think that your 3-year-old child can handle an allowance of P30 per week (based on an arbitrary P10 per week per year of age), you could give the whole P30 outright or you could give only P15 per week (P5 per week per year of age) and offer chores that he/she can do daily at say P5 per chore. If the child does the chore daily, he/she could get P55 per week.

With the start of school, some parents may choose to reward good studying habits and/or good grades with money. There are different thoughts to whether this is good or bad. Each parent knows what is best for his/her child. You can adjust your budget accordingly if you include this parameter.

When you have decided on the amount to give and the way you want your child to get it, you have to do the following:

1) Sit down with your child

o Explain how he will get the money (allowance and chores)
o How you expect him/her to use the money
o How at least 20 per cent should go into savings that he/she cannot touch because you will invest it together to make it grow.
o If your child already understands written numbers, it is best to put everything in writing
o Agree on the date you will review with him/her what happened. Encircle the pertinent dates in his room calendar so he/she knows when each event happens.

2) Give your child his/her allowance and payment for chores on the same day each week.

3) If you can afford it, you may want to give a prize such as money bonus to reward your child for handling his/her allowance well. An agreement in writing from the start will certainly help the child understand his/her success or failure.

4) Be sure to follow your calendar of events strictly but at the same time, don’t make a big issue of it. Make it a fun learning process. Your child might either become a miser or too scared if you overdo it either way.


Lesson 3: Start with a Piggy bank

Choose a piggy bank that makes it exciting to save. There are so many gimmicks in this area available in toy stores. Keep the piggy bank in an area where your child can see it but cannot play with it to prevent accidental losses. At the same time, it is good that you have an idea of how much has already been deposited in the piggy bank. When the amount reaches an amount, say P1,000 you can make an event of opening it and counting the money with a lot of fanfare.

Lesson 4: Open a bank account

If your child knows how to count and add, you can actually, bring him/her to the bank to open an account. This may be the right time to let him/her know that his/her Ninong or Ninang or some relative gave him/her some money as a baptism gift. Let him/her learn how savings accounts work, and he/she will enjoy trips to the bank to make deposits.

Choose a bank that has programs providing activities and incentives designed to help children learn financial basics. Here are some ways to give more savings tips to your child.

1) Show him how the interest compounds by explaining the “free money” that goes into the account.
2) If you can afford it, offer to match the interest that he/she earns every month.
3) If your child has a special want that can be covered by his/her savings, withdraw the amount from the account before actually buying it. This way he/she knows that the money is there anytime he/she wants it. Make sure though that he/she realizes the reduction in interest and savings because of that withdrawal.
4) Withdraw some money every month to give to charity to teach your child the value of sharing. Explain that in this situation, the loss of interest income is not important because of the help he/she is giving.

Lesson 5: Set some targets

It is very difficult for children to set targets especially for savings. This is particularly true for families who are obviously not wanting for money. There should still be budgets made whether you need it or not if you want to teach your child the value of saving. You need not show your child the entire budget, just show him/her the limits of what you can spend for his/her needs and wants, Explain to him/her that the other amounts will have to come from his/her savings.

When your child receives money gifts, you want him/her to save it, but he/she would rather spend it. Here are some suggestions:

1) Discuss with your child what he/she wants to do with the money and give suggestions always including the benefit of savings for the future. But the final decision should be truly acceptable to him/her.

2) Show how he/she can divide up the money gift for different purposes. Always include a small amount for charity and a small amount to spend right away depending on your child’s personality.

3) Agree on his/her targets to be saved each day, week or month to reach the target/s. This is a good time to teach your older child the difference between short-term and long-term goals. However, you should not expect your young child to set long-term goals.
4) Have a picture of the item that your child wants in his/her target chart or on his/her piggybank. Clearly show how long it will take to reach the target based on the agreed daily, or weekly or monthly savings.

5) If your child does not reach his goal, don’t lose hope. Just keep trying. Children are very smart. Even when you think they are not listening or absorbing anything, they are. You will just be surprised one day that your child has learned to become a disciplined saver.

Lesson 6: Children have to learn from example

There are temptations everywhere…advertisements, pressure from friends, offers in malls/playgrounds. Our children are constantly tempted to spend money but unfortunately, they do not have any ability to know how to spend wisely. Your child is completely dependent on you to make good buying decisions.

Of course, unfortunately, there are parents who themselves do not know how to save and/or are not wise spenders. If you are this type of parent, it would be best if you first learn to save by reading my two books and workbook, “Wealth Within Your Reach”, “Making Your Money Work” and Pera Palaguin Workbook” before attempting to teach your child.

Here are ways to help your child more conscious of saving/spending:

1) Try not to make a habit of going malling/shopping as a weekend past time. This just opens your child to more temptation. Try to make it just as exciting to stay at home to play games, go to the park, swim, etc.

2) If possible, set only one day a month for malling/shopping with your child. Make sure you always include the bookstore for this event. Have your child plan for this event a week before the event. Hopefully, you can encourage your child to keep within the budget and to save up for something h/she really wants rather than buy something on impulse.

3) Many times, a child becomes very insistent on buying something not wise or unplanned for. You must learn to say no. Warn him/her beforehand that he/she will not get what he/she wants each time. Also, going shopping/malling does not mean that he/she has to buy something.

4) If your child really wants an item that he/she cannot afford, let him/her try it on and put it on a wish list for gifts that you can ask your friends/relatives to give for special occasions.

5) Make it fun to compare items based on price and quality. Teach him/her how to find the prices of items. Show him/her how you decide to buy one brand over the other.

6) Don’t always demand perfection from your child. If he/she insists on buying something that you know will break quickly or is not like what it says in the advertisement, let him learn his lesson.

Finally, keep this entire exercise light. It sounds so scary because it is condensed in a few pages. It will be even more difficult for your child if you are uptight. Remember, you have many years to do all these. Lighten up! Both you and your child will be happy with this shared experience.

For those in the Philippines, microfinance is available to help you start or grow your business.

Microfinance helps in the growth of “small or micro enterprises” because it lends relatively small amounts to small businessmen. In truth, an important way to grow a business is to use leverage properly. Thanks to the support of the Bangko Sentral ng Pilipinas (BSP), your small business now has a source for borrowing to support your cash flow needs.

The key rules and features in using microfinance are:

1) You should clearly understand and accept that a loan is actually using other people’s money. Therefore, it is important to pay back in accordance with the loan agreement.

2) Properly analyze your business’ capability to pay back the loan principal and interest.

3) Carefully study and manage your business cash flow to ensure that your cash inflow can really cover your loan repayment schedule and still leave some cash for your other operational needs.

4) When you meet the terms of agreement on your loan by paying on time, you establish good credit standing. This allows you to be able to borrow more in the future should you need to grow your business further.

5) In the very successful microfinance operations, borrowers in good standing are able to accumulate forced savings and earn insurance coverage, all coming from their loan repayments.

Microfinancing does not require collateral. However, in most cases, aside from your signature, you need the endorsement and guarantee of four of your friends. In this way, the loan is really not just yours alone but your guarantors as well. If you cannot pay, your guarantors will have to answer for your debt. Thus, your guarantors will be sure to support you and pressure you to ensure payment.

According to Monetary Board Resolution No. 40, microfinancing loans are small unsecured loans with no need for collateral. The amounts are normally Php2,000 to Php5,000 and could be more but not higher than Php 150,000. The loan can be paid daily, weekly, bi-monthly or monthly. The interest cannot be lower than market rate and should be fair. This is unlike the “five-six” lenders where the interest rate is exorbitantly high. Thus, Microfinancing can really help you if you are starting a business or if you need more capital. You just have to be able to repay the loan with your regular earnings.

The microfinance loan can be used as the start-up capital for different businesses. It can be used as equity for sari-sari stores, different “buy and sell” businesses, handicrafts or small manufacturing (rug-making, basket-making, etc.); services like tricycle operation, barber/parlor shop, repair shop; or food production/processing like meat processing, candy-making, bakery and any other types of small business. You could say in fact that it can apply to any kind of business you can think of.

How to start on microfinance

The first decision you have to make before even thinking of microfinancing is the business that you will put up. Remember, your business should be dependent on what your “passion” is, meaning something that you are have the expertise for and enjoy doing. It should be an activity that, as you work, you are actually having fun. Your business should be something that fits your environment. It must clearly address a regular need in the community you are in. For example, if your community does not have a place for having a haircut and you know how to give haircuts, you could put up a barber/parlor shop. Or if your village does not have a “convenience store”, you might consider putting one up.

Once your have your business, you need to understand the various conditions for borrowing from a microfinancing institution. Study the terms and analyze if these can support the operational and financial needs of the business and more importantly, if the loan can be paid back by your business.

• loan amount (for example: Php 3,000 or Php 15,000)
• program beneficiaries (for example: housing, small trading/buy and sell, agri-business, services; existing business over one year or group of businessmen)
• interest rate and fees terms of payment (how long? 4 months or 6 months. when payable: weekly o or monthly)
• collateral/security (to be guaranteed by a friend, associate, relative or contract of payment commitment, etc)
Because of microfinance, small businesses are given the opportunity to start. Used properly, it can make your business grow and provide livelihood to many.

If you think about it, microfinancing is not new. There have been many people and companies in the past who went out of their way to lend small businesses and yet, most of them failed to collect and ended up closing down the lending window. So why is microfinancing successful today? What changed?

There are three main changes as I see it and not necessarily in this order.

1) There is always at least one co-borrower involved in any microfinance loan. There is pressure on the borrower to make good on his re-payment because his co-borrower will be penalized just as much as he will be if he doesn’t. The co-borrower will also exert all his effort to make sure the main borrower pays so that he will not be financially affected. This co-borrower approach capitalizes on “peer pressure” such that there is that additional “moral” or relationship pressure on the borrower to make good in paying his debt obligation. In the Asian setting, particularly among underdeveloped economies, “face value” is a very strong influence on individuals to live up to their responsibilities.

2) The seminar on values formation before the funds are released is a very important factor too. It is normal for a borrower to think that borrowed money is his money. Thus the motivation to pay is somewhat negated. Others have a worse mindset. They rationalize that the lender is rich precisely because he can afford to lend. The thinking extends further that if he is rich, he can also afford not to be paid. Values formation makes the borrower realize that regardless of the financial situation of the lender, paying back a loan according to the agreement is an obligation that must be fulfilled. Otherwise, the lender may not be able to continue lending and thus no longer able to help many others.

3) The involvement of the Bangko Sentral ng Pilipinas helps to increase the number of lenders and thus increase the funds available for microfinance loans.
Because of these developments, billions of pesos have been made available to all regions of our society. The experience has been outstanding! Collection rate has registered to almost 98%, proving that, given ample planning and training, the ordinary Filipino is a responsible entrepreneur.
Come to our free seminars from 4-6pm on Saturdays sponsored by CFE, SM Malls, PLDT, Universal Motors UrVan, KSK Coop and others. The participation and feedback are impressive. For July:

July 4 – SM Batangas City
July 18 – SM Molino
July 25 – SM Dasmariñas

Mr. J.M. (I am not sure he wants to have his name published) was kind enough to write me on info@colaycofoundation with his findings. And his email said:

“I am very fond of Mr. Colayco's Blog at GMANews.TV, and I was reading this particular topic "Financial Literacy is not about Numbers" posted last May 13, 2008. And I would like to bring your attention to Paragraph 17 of the said article that reads:

"But let us just say for the sake of argument that you are not able to get 20% per annum and that you are not disciplined enough to save monthly for 40 years. If you still saved your P10 per day (something you normally throw away for unnecessary expenses) for 17 months until it your savings reaches P5,000, invested at say 15% p.a. and added P1,000 every 3 months (the time it takes you to save the amount at P10 per day) you will still end up with around P7.6 Million at the end of 20 years. You might not find this amount exciting but it certainly beats nothing. Note too that the amount you actually put aside in 40 years is only P159,100."

I did my own computation to better understand what Mr. Colayco meant about "Time and Compounding. Let's put it to good use", and I did not get the 7.6 million at the end of 20 years. Wondering where I went wrong, I investigated further, re-reading the article for the n time and came to the conclusion that it should not have read "at the end of 20 years", but rather "at the end of 40 years". On the other hand, when I computed for 40 years, I did not get 7.6 million at the end of 40 years, instead 12.04 million. Even if I deducted the mandatory 20% Withholding tax from the 12.04 million, it's still not 7.6 million. Below are my computations for your perusal. I would appreciate if you can take a look at it and send me your thoughts and feedback. I would like to know where I did wrong in my computation.

Furthermore, the actual amount place aside in 40 years should have been 164,000 as the 159,100 did not consider the initial 5,000 investment.

10 per day
17 months
5000 initial savings
15% annual interest rate

Add'l Invest Begin Bal Interest Ending Bal Add'l Invest Begin Bal Interest Ending Bal
1 5,000.00 62.50 5,062.50 1 113,935.37 1,424.19 115,359.56
2 5,062.50 63.28 5,125.78 2 115,359.56 1,441.99 116,801.55
3 1000 6,125.78 76.57 6,202.35 3 1000 117,801.55 1,472.52 119,274.07
4 6,202.35 77.53 6,279.88 4 119,274.07 1,490.93 120,765.00
5 6,279.88 78.50 6,358.38 5 120,765.00 1,509.56 122,274.56
6 1000 7,358.38 91.98 7,450.36 6 1000 123,274.56 1,540.93 124,815.49
7 7,450.36 93.13 7,543.49 7 124,815.49 1,560.19 126,375.69
8 7,543.49 94.29 7,637.78 8 126,375.69 1,579.70 127,955.38
9 1000 8,637.78 107.97 8,745.76 9 1000 128,955.38 1,611.94 130,567.33
10 8,745.76 109.32 8,855.08 10 130,567.33 1,632.09 132,199.42
11 8,855.08 110.69 8,965.77 11 132,199.42 1,652.49 133,851.91
12 1000 9,965.77 124.57 10,090.34 12 1000 134,851.91 1,685.65 136,537.56
1 10,090.34 126.13 10,216.47 1 136,537.56 1,706.72 138,244.28
2 10,216.47 127.71 10,344.17 2 138,244.28 1,728.05 139,972.33
3 1000 11,344.17 141.80 11,485.98 3 1000 140,972.33 1,762.15 142,734.49
4 11,485.98 143.57 11,629.55 4 142,734.49 1,784.18 144,518.67
5 11,629.55 145.37 11,774.92 5 144,518.67 1,806.48 146,325.15
6 1000 12,774.92 159.69 12,934.61 6 1000 147,325.15 1,841.56 149,166.71
7 12,934.61 161.68 13,096.29 7 149,166.71 1,864.58 151,031.30
8 13,096.29 163.70 13,259.99 8 151,031.30 1,887.89 152,919.19
9 1000 14,259.99 178.25 14,438.24 9 1000 153,919.19 1,923.99 155,843.18
10 14,438.24 180.48 14,618.72 10 155,843.18 1,948.04 157,791.22
11 14,618.72 182.73 14,801.46 11 157,791.22 1,972.39 159,763.61
12 1000 15,801.46 197.52 15,998.97 12 1000 160,763.61 2,009.55 162,773.15
1 15,998.97 199.99 16,198.96 1 162,773.15 2,034.66 164,807.82
2 16,198.96 202.49 16,401.45 2 164,807.82 2,060.10 166,867.92
3 1000 17,401.45 217.52 17,618.97 3 1000 167,867.92 2,098.35 169,966.27
4 17,618.97 220.24 17,839.20 4 169,966.27 2,124.58 172,090.84
5 17,839.20 222.99 18,062.19 5 172,090.84 2,151.14 174,241.98
6 1000 19,062.19 238.28 19,300.47 6 1000 175,241.98 2,190.52 177,432.50
7 19,300.47 241.26 19,541.73 7 177,432.50 2,217.91 179,650.41
8 19,541.73 244.27 19,786.00 8 179,650.41 2,245.63 181,896.04
9 1000 20,786.00 259.82 21,045.82 9 1000 182,896.04 2,286.20 185,182.24
10 21,045.82 263.07 21,308.90 10 185,182.24 2,314.78 187,497.02
11 21,308.90 266.36 21,575.26 11 187,497.02 2,343.71 189,840.73
12 1000 22,575.26 282.19 22,857.45 12 1000 190,840.73 2,385.51 193,226.24
1 22,857.45 285.72 23,143.17 1 193,226.24 2,415.33 195,641.57
2 23,143.17 289.29 23,432.46 2 195,641.57 2,445.52 198,087.09
3 1000 24,432.46 305.41 24,737.86 3 1000 199,087.09 2,488.59 201,575.68
4 24,737.86 309.22 25,047.08 4 201,575.68 2,519.70 204,095.37
5 25,047.08 313.09 25,360.17 5 204,095.37 2,551.19 206,646.57
6 1000 26,360.17 329.50 26,689.67 6 1000 207,646.57 2,595.58 210,242.15
7 26,689.67 333.62 27,023.30 7 210,242.15 2,628.03 212,870.17
8 27,023.30 337.79 27,361.09 8 212,870.17 2,660.88 215,531.05
9 1000 28,361.09 354.51 28,715.60 9 1000 216,531.05 2,706.64 219,237.69
10 28,715.60 358.95 29,074.55 10 219,237.69 2,740.47 221,978.16
11 29,074.55 363.43 29,437.98 11 221,978.16 2,774.73 224,752.89
12 1000 30,437.98 380.47 30,818.45 12 1000 225,752.89 2,821.91 228,574.80
1 30,818.45 385.23 31,203.68 1 228,574.80 2,857.18 231,431.98
2 31,203.68 390.05 31,593.73 2 231,431.98 2,892.90 234,324.88
3 1000 32,593.73 407.42 33,001.15 3 1000 235,324.88 2,941.56 238,266.44
4 33,001.15 412.51 33,413.66 4 238,266.44 2,978.33 241,244.78
5 33,413.66 417.67 33,831.34 5 241,244.78 3,015.56 244,260.33
6 1000 34,831.34 435.39 35,266.73 6 1000 245,260.33 3,065.75 248,326.09
7 35,266.73 440.83 35,707.56 7 248,326.09 3,104.08 251,430.16
8 35,707.56 446.34 36,153.91 8 251,430.16 3,142.88 254,573.04
9 1000 37,153.91 464.42 37,618.33 9 1000 255,573.04 3,194.66 258,767.71
10 37,618.33 470.23 38,088.56 10 258,767.71 3,234.60 262,002.30
11 38,088.56 476.11 38,564.67 11 262,002.30 3,275.03 265,277.33
12 1000 39,564.67 494.56 40,059.22 12 1000 266,277.33 3,328.47 269,605.80
1 40,059.22 500.74 40,559.96 1 269,605.80 3,370.07 272,975.87
2 40,559.96 507.00 41,066.96 2 272,975.87 3,412.20 276,388.07
3 1000 42,066.96 525.84 42,592.80 3 1000 277,388.07 3,467.35 280,855.42
4 42,592.80 532.41 43,125.21 4 280,855.42 3,510.69 284,366.11
5 43,125.21 539.07 43,664.28 5 284,366.11 3,554.58 287,920.69
6 1000 44,664.28 558.30 45,222.58 6 1000 288,920.69 3,611.51 292,532.20
7 45,222.58 565.28 45,787.86 7 292,532.20 3,656.65 296,188.85
8 45,787.86 572.35 46,360.21 8 296,188.85 3,702.36 299,891.21
9 1000 47,360.21 592.00 47,952.21 9 1000 300,891.21 3,761.14 304,652.35
10 47,952.21 599.40 48,551.62 10 304,652.35 3,808.15 308,460.50
11 48,551.62 606.90 49,158.51 11 308,460.50 3,855.76 312,316.26
12 1000 50,158.51 626.98 50,785.49 12 1000 313,316.26 3,916.45 317,232.71
1 50,785.49 634.82 51,420.31 1 317,232.71 3,965.41 321,198.12
2 51,420.31 642.75 52,063.06 2 321,198.12 4,014.98 325,213.10
3 1000 53,063.06 663.29 53,726.35 3 1000 326,213.10 4,077.66 330,290.76
4 53,726.35 671.58 54,397.93 4 330,290.76 4,128.63 334,419.40
5 54,397.93 679.97 55,077.91 5 334,419.40 4,180.24 338,599.64
6 1000 56,077.91 700.97 56,778.88 6 1000 339,599.64 4,245.00 343,844.63
7 56,778.88 709.74 57,488.62 7 343,844.63 4,298.06 348,142.69
8 57,488.62 718.61 58,207.22 8 348,142.69 4,351.78 352,494.48
9 1000 59,207.22 740.09 59,947.31 9 1000 353,494.48 4,418.68 357,913.16
10 59,947.31 749.34 60,696.66 10 357,913.16 4,473.91 362,387.07
11 60,696.66 758.71 61,455.36 11 362,387.07 4,529.84 366,916.91
12 1000 62,455.36 780.69 63,236.06 12 1000 367,916.91 4,598.96 372,515.87
1 63,236.06 790.45 64,026.51 1 372,515.87 4,656.45 377,172.32
2 64,026.51 800.33 64,826.84 2 377,172.32 4,714.65 381,886.97
3 1000 65,826.84 822.84 66,649.67 3 1000 382,886.97 4,786.09 387,673.06
4 66,649.67 833.12 67,482.79 4 387,673.06 4,845.91 392,518.97
5 67,482.79 843.53 68,326.33 5 392,518.97 4,906.49 397,425.46
6 1000 69,326.33 866.58 70,192.91 6 1000 398,425.46 4,980.32 403,405.78
7 70,192.91 877.41 71,070.32 7 403,405.78 5,042.57 408,448.35
8 71,070.32 888.38 71,958.70 8 408,448.35 5,105.60 413,553.96
9 1000 72,958.70 911.98 73,870.68 9 1000 414,553.96 5,181.92 419,735.88
10 73,870.68 923.38 74,794.07 10 419,735.88 5,246.70 424,982.58
11 74,794.07 934.93 75,728.99 11 424,982.58 5,312.28 430,294.86
12 1000 76,728.99 959.11 77,688.10 12 1000 431,294.86 5,391.19 436,686.05
1 77,688.10 971.10 78,659.21 1 436,686.05 5,458.58 442,144.62
2 78,659.21 983.24 79,642.45 2 442,144.62 5,526.81 447,671.43
3 1000 80,642.45 1,008.03 81,650.48 3 1000 448,671.43 5,608.39 454,279.82
4 81,650.48 1,020.63 82,671.11 4 454,279.82 5,678.50 459,958.32
5 82,671.11 1,033.39 83,704.50 5 459,958.32 5,749.48 465,707.80
6 1000 84,704.50 1,058.81 85,763.30 6 1000 466,707.80 5,833.85 472,541.65
7 85,763.30 1,072.04 86,835.34 7 472,541.65 5,906.77 478,448.42
8 86,835.34 1,085.44 87,920.78 8 478,448.42 5,980.61 484,429.02
9 1000 88,920.78 1,111.51 90,032.29 9 1000 485,429.02 6,067.86 491,496.89
10 90,032.29 1,125.40 91,157.70 10 491,496.89 6,143.71 497,640.60
11 91,157.70 1,139.47 92,297.17 11 497,640.60 6,220.51 503,861.11
12 1000 93,297.17 1,166.21 94,463.38 12 1000 504,861.11 6,310.76 511,171.87
1 94,463.38 1,180.79 95,644.18 1 511,171.87 6,389.65 517,561.52
2 95,644.18 1,195.55 96,839.73 2 517,561.52 6,469.52 524,031.04
3 1000 97,839.73 1,223.00 99,062.73 3 1000 525,031.04 6,562.89 531,593.92
4 99,062.73 1,238.28 100,301.01 4 531,593.92 6,644.92 538,238.85
5 100,301.01 1,253.76 101,554.77 5 538,238.85 6,727.99 544,966.83
6 1000 102,554.77 1,281.93 103,836.71 6 1000 545,966.83 6,824.59 552,791.42
7 103,836.71 1,297.96 105,134.67 7 552,791.42 6,909.89 559,701.31
8 105,134.67 1,314.18 106,448.85 8 559,701.31 6,996.27 566,697.58
9 1000 107,448.85 1,343.11 108,791.96 9 1000 567,697.58 7,096.22 574,793.80
10 108,791.96 1,359.90 110,151.86 10 574,793.80 7,184.92 581,978.72
11 110,151.86 1,376.90 111,528.76 11 581,978.72 7,274.73 589,253.46
12 1000 112,528.76 1,406.61 113,935.37 12 1000 590,253.46 7,378.17 597,631.62


Dear Mr. J.M.

Thank you very much for bringing up the error and I really appreciate your feedback.

1. The error was in that, instead of the P5,000 initial investment, I used P1,700. For some reason, I multiplied 17 months with 100 (must be one of those senior moments). No explanation except pure sloppy computing. I also computed based on 40 years not 20. That "20 years" is pure typo. I must have done it late at night when I was sort of sleepy. My deepest apologies.
2. You were also right about the P159,100 number. Again, I missed out on the first P5,000 investment.
3. Re investment that yield 15%to 20%: Phil Equity Mutual Fund up to 2007 averaged 22% annual compounded rate. This was good for a 15-year period (1993 thru 2007). If you include 2008, average annual compounded rate dropped to 13.5% due to extraordinary losses of about 37% in 2008.
4. 15% to 20% is an achievable target for mutual funds provided you invest for at least 10 years and employ cost-averaging technique in investing. Note that there is no guarantee. However, with proper investment, goal setting and planning, one would know when to buy and/or sell his investments so that he could average out anywhere from 12 to 20%.

In summary, again I apologize for my mistake and really thank you for keeping us on our toes. Its readers like you who keep us going and further sharpen our skills in the long term.

In another email, we sent you a list of investment options that you might want to investigate.

Prosperous regards,
FJC

I received an email asking if there are any schools or special courses that need be taken when one wants to be a Financial Adviser/Planner. The writer would like to help friends, family and other people in becoming financially independent. He has a mathematics degree, is an active saver and investor.
Wikipedia defines a financial advisor as follows:

“A financial advisor is a professional who renders investment advice and financial planning services to individuals and businesses. Ideally, the financial advisor helps the client maintain the desired balance of investment income, capital gains, and acceptable level of risk by using proper asset allocation. Financial advisers use stocks, bonds, mutual funds, REITS, options, futures, notes and insurance products to meet the needs of their clients. Many financial advisers receive a commission payment for the various financial products that they broker, although "fee-based" planning is becoming increasingly popular in the financial services industry.”

In advanced countries, there are courses and/or degrees to earn a title that pertains to being a “Financial Adviser/Planner or Wealth Manager”. In fact, a number of universities and specialized colleges in Europe, North America and Singapore offer specialized degree courses in Wealth Management. In most cases, they have working arrangements with established financial institutions that offer private banking services.

In the Philippines, there are no such degrees or formal diplomas offered. To be sure, there are lawyers and accountants who specialize in tax, securities and estate management. These experts do provide specific technical and legal advice to high net worth individuals as well as companies. Technically, these fields of expertise are part of wealth management. But they are not, as the above Wikipedia definition goes on what constitutes financial advisory services.

Thus, in our current environment, one who has the necessary background and experience to give advice on financial matters based on his formal degree, financial management expertise and investing experience is generally accepted as a financial adviser. In most cases he is capable of providing good information and assistance on how to grow one’s wealth. In truth though, a Financial Adviser’s role can be more complicated depending on the level of wealth the person asking advice has.

Most financial advisers/planners here do not have sufficient background to give advice on all aspects of financial matters. Furthermore, a good number of these advisers/planners represent specific financial institutions with their own financial products. Real financial advisory service has to be value-based, that is, taking into account personal values first before financial strategies get defined.

I believe that taking seminars and special courses available in good schools are good in giving one some basic background. However, what counts most is real emersion in various aspects of finance/economics/entrepreneurship and knowing the various investment options (as well as their tax and legal implications) available at any one time to give proper advice. Taking tests to give one a certificate is not bad but getting a certificate does not automatically make one the advisory expert that the certificate may claim. Learning the principles without the actual practice and experience is certainly not enough.

Other important matters are to know who and where to ask for reliable up-to-date information and advice on different aspects of finance. One gains this through networking and experience. This is particularly true today as we find ourselves in the midst of an unprecedented global financial crisis. Old and current investing parameters seem to have been overhauled overnight. In the management of one’s personal financial plan, the personal condition, such as age, social standing, lifestyle, financial condition and risk-taking ability of the person can be quite diverse.

Generally, all legitimate investment instruments are good and based on sound financial principles. What is really needed though is for the individual to know what is suitable to him given his particular financial situation. Thus, financial advice will only be meaningful if it is unique to a particular person. Each person will need to define and articulate his financial goals in all short, medium and long term investing horizons. He will need to structure his own personal finance and investment strategy based on his defined goals. The role of the financial adviser is to assist his client precisely to draw up his own personal financial goals and strategies. He must also be available to guide his client along regular reviews and again assist him, as changes may need to be made.

The responsibility of a financial adviser is not to be taken lightly. To do his clients right, he must be thoroughly prepared and updated at all times. The challenge to the financial adviser is how to do provide independent quality advisory services and be appropriately financially compensated. How should a financial adviser charge his clients? Through professional fees plus commission, or through pure fees only?

Here is the last word from Wikipedia:

A further distinction should be made between "fee-based", i.e., they charge fees and collect commissions, and "fee-only" advisers. “Fee-only advisors” receive 100% of their compensation directly from their clients and have no conflicts between their own interests and those of clients created by commissions or referral fees paid by other product or service providers.

At the Colayco Foundation, we are trying to teach income earners to be financially literate and not to depend solely on financial consultants who could be pushing financial products they may represent. We are also always evaluating specialized courses for would-be independent financial advisors. You can always contact us if you have questions regarding this at info@colaycofoundation.com.

I have received many inquiries about cooperatives leading me to believe that there is some interest to know more about it on a technical basis. By the very word, we already know that a cooperative involves the cooperation of people towards a common goal. But as we also know, many join groups without fully understanding what they are joining. They are just brought in by friends and relatives who, most of the time do not also know the most important matters regarding the cooperative.

In my view, “cooperativism” is one of the highest forms of effective leverage. Cooperatives provide their members strength in numbers. They pool resources of their varied memberships and they provide a ready venue for exchange of ideas and skills. More importantly, in coming together for a common cause, cooperatives increase the intellectual capital of the members thus providing opportunities where none existed. Opportunities are indeed created when cooperatives perform and live up to their real mission. In short, the cooperative as a movement is truly the only practical tool to achieve unit of purpose and thus secure the “Power of One”

“The Power Of One can lead to changes for the benefit of the many.
But these changes come from the many, only if they come together, to form
that which is invincible, the Power Of One…”
Anonymous

It is one of the blessings that we can enjoy. Recently, the new Cooperative Code was enacted. From all indications, it is even better than the present code in force. The rules for regulation are presently “work in progress” and should be released very shortly. For now , here is a primer on the existing Cooperative Code governing cooperatives in the Philippines.

The Cooperative Development Authority (CDA) is a government body that supervises cooperatives. Their official definition is: “A cooperative is a duly registered association of persons, with a common bond of interest who have voluntarily joined together to achieve a lawful common social or economic and making equitable contributions to the capital required and accepting a fair share of the risks and benefits of the undertaking in accordance with universally acceptable cooperative principles.”

Cooperatives may fall under any of the following types:

1. Credit Cooperative – promotes thrift and savings among its members and creates fund in order to grant loans for productive and provident purposes.

2. Consumer Cooperative – procures and distributes commodities to members and non-members.

3. Producers Cooperative – undertakes joint production, whether agricultural or industrial.

4. Marketing Cooperative – engages in the supply of production inputs to members, markets their products.

5. Service Cooperative – engages in medical and dental care, hospitalization, transportation, insurance, housing, labor, electric light and power, communication and other services.

6. Multi-purpose Cooperative – combines two or more of the business activities of these different types of cooperatives.


The following principles govern Cooperatives:

1. Membership in a cooperative is voluntary and available to all individuals regardless of their social, political, racial or religious background or beliefs.


2. Cooperatives are democratic organizations administered by persons elected or appointed in a manner agreed upon by members.

3. Members contribute equitably to and control the capital of their cooperative. At least part of that capital is usually common property of the cooperative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes:

- developing their cooperative, possibly by setting up reserves, part of which at least would be divisible and benefiting members in proportion to their transactions with the cooperative,
- supporting other activities as approved by the membership.

4. Cooperatives are autonomous, self-help organizations controlled by its members. If they enter into agreements with other organizations (including government) or raise capital from external sources, they do so on terms that ensure democratic control by the members and maintain their cooperative independence.

5. Cooperatives provide training and education for their members, elected representatives, managers and employees so they can contribute effectively to the development of their cooperatives. They inform the general public, particularly young people and opinion leaders about the nature and benefits of cooperation.

6. Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional and international structures.

7. Cooperatives work for the sustainable development of their communities through policies approved by their members.

It might interest you to know that there is a Kapatiran sa Kasaganaan Service and Multipurpose Cooperative (KsK Coop). KsK Coop’s Investment Strategy:

• Achieve critical mass of members, initially 2,000 to 4,000 members

• Continuous trainings and seminars on the fundamentals of financial independence

• Acquire established and profitable businesses that, aside from dividends that can be earned by the members, can also be a source of employment as long as the coop member or his/her family (sibling) is qualified for employment

• Put up a KsK Coop Bank for the service and benefit of the coop members for their deposits, loans, remittances and micro-financing needs.

• Collective investment of the coop in financial instruments for better yield or returns not available if pursued individually at smaller amounts


• Provide seed funding for coop members with sound businesses or projects


FOR MORE INFORMATION VISIT: http://www.kskcoop.com or write us at info@colaycofoundation.com