EASY MONEY>VERSUS

Rent Vs. Buy

Oh the immortal conundrum – is it better to rent or buy your house, apartment, or condo unit? Most experts will probably advice you to buy and research has shown that home owners tend to have a higher net worth than renters. But as with many financial decisions, the answer is: it depends.

By Kendrick Chua

The 7 Deadly Sins of Financial Planning

Fear and greed are the two most talked emotions at the heat of the financial crisis. After all, it was the world’s richest man and greatest investor Warren Buffett who famously said these words: “Occasional outbreaks of those two super-contagious diseases, fear and greed, will forever occur in the investment community. The timing of these epidemics is equally unpredictable, both as to duration and degree. Therefore we never try to anticipate the arrival or departure of either. We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

Although they are considered as the cardinal sins of investing, there are still other financial sins we are committing on a regular basis which are oblivious to us and these could cause our financial dreams to crumble.

Envy

An envious person constantly compares himself with others whether it is his salary, financial status, or possessions. Now, envy itself is not bad as long as the emotions are channeled into positive actions. However, it becomes a sin if this person can’t stand others getting ahead of him and if he were to be surpassed, say a friend made a killing at FX trading, he tries to justify why he was able to do so or simply rationalizes it as plain luck. He may congratulate his friend but deep inside, it’s eating him alive. Before he knows it, he is also trying his hand in FX trading with little or no knowledge at all, hoping to have the luck his friend had, but ends up with undesirable results.

Pride

A proud person feels he is superior to everyone. Hubris is how the Greeks call it. He believes he knows more about financial planning than anyone else and would refuse to heed the advice of others and shoots down all other ideas presented to him. Often, this person criticizes even the most respected advisers saying that their theories are flawed And even if he clearly made a mistake, he would never revised his ways for a person inflicted with this sin will never admit he made one.

Lust

The sin lust differs greatly from being in love. Lust is an irrational attachment or commitment to a particular system, investment, or company. A lustful person is head-over-heels over the things cited and would encourage others to also be lustful over them! In early 2000 some people were deeply in love with a particular multi-level-marketing company. Despite the tell-tale signs of it being a pyramiding scheme, they just wouldn’t listen and would continue to plow in money after money in hopes of theirs earnings growing bigger and bigger. Lo and behold, this company eventually closed down and left with the members’ hard-earned money and leaving them broke, broken-hearted, or both

Greed

There is a thin line between being greedy and wanting to earn more money. For instance, if you have constantly parked your cash in conservative time deposits and special depository accounts, your hard-earned money would just be eaten away by inflation. Therefore there is nothing wrong looking for a higher yielding instrument to have a positive net real return on your investments, so don’t consider yourself greedy…not just yet.

It becomes a sin for everyone if the objective is to make the biggest returns at the shortest possible time. High-Yielding Investment Programs (HYIP) and get-rich-quick schemes are example of these. Greedy people follow the herd and invest where everyone else is investing, hoping to make a killing. And when they have made a killing, they’d wish they had invested some more to earn more or they’d hold on longer hoping for another round of easy money.

Anger

Anger, unlike the other deadly sins, always has a recipient. The rage is always directed towards something or someone. Now, anger itself is not a sin when it is manifested occasionally and with valid reason. It becomes one, however, when the anger clouds up our judgment causing us to lose our cool and make irrational decision based on the emotion.

At one point in time of our financial planning process, we have experienced anger in one way or another. A typical example would be investing in mutual funds today only to discover that the net asset value plunges drastically the next day. What do we do? The ordinary angry person will be upset but will stick to the objective and listen to his adviser no matter how painful the loss maybe. The sinful angry one will bail out immediately, fire his adviser, and spend the rest of the day cursing and complaining of how the market is out to get him. He forgets that the market discriminates no one. The anger blinded him, causing him not to see the long-term outlook.

Gluttony

The adage “too much of a good thing becomes bad” is the best description for this sin. Gluttony is the most difficult to discern because of its similarity with greed. Gluttony can exist in different areas simultaneously or one at a time. For instance, gluttons gobble up news information like gobbling food. But like food, gluttons only select the good ones and pig out on these while ignoring the bad. This already leads them to false optimism and hope. In financial planning, we know we have to be realistic about situations and to incorporate the best and worst case scenario into our projections.

Another thing about gluttons is that they want to have as many different investments as possible and the more complex it sounds, the better it is. They hoard up on these investments which they hardly understand and most don’t fit any of their financial objectives at all. They simply want to have them. While it is suggested in prudent financial planning to diversify your holdings, again, too much diversification can be dangerous to one’s financial health and it may be wise to remove some of the eggs from those baskets before they crack, not hatch.

Sloth

Sloth by far is the most dangerous sin of all and why wouldn’t it be? Sloth causes people to ignore their financial future all along. They couldn’t care less about the uncertainty of the future. They find it a big hassle to start setting up a budgeting system to manage their personal expenditures or they find the needs analysis survey done by their life underwriter too complex to start reviewing. Slothful people can come up with every reason to justify their slothfulness. Another reason why this sin is the deadliest is that it not only jeopardizes your personal financial dreams but the dreams of your love ones as well.

However, don’t be deceived. Sloth can disguise itself and attack us differently. Doing little research on a particular investment or company we want to invest in because of too much work is one example. Not participating actively enough in our financial program because we feel our adviser is more qualified to do is also another sign of sloth.

The scenarios presented above are very prevalent and we have to admit that all of us are sinners. However, despite that financial salvation can still be achieved. Here’s how:

1. Know which sin or sins you are committing now. It is important to note that if those sins are not addressed immediately, other sins will gradually manifest themselves. It’s the case of a sin leading to another sin.

2. Accept the fact that we all don’t have the same risk profile. Others may have a higher-level of risk tolerance and therefore may have invested in instruments that generate higher yields.

3. Learn to filter the noise from the useful information. Not all information is applicable to all. React only to the news that are relevant to you and calm your heart first before making any decision. Do not make any move at the heat of the emotions.

4. Don’t be too attached to a particular theory, system, or investment and don’t be enamored by financial gurus. Always keep an open mind and accept that others have their own flaws and yours is not an exception. Learn to be flexible too.

5. Regularly evaluate your financial plan with your adviser and make sure the fund allocations are diversified enough to let you achieve your financial goals. And if you still can’t resist speculate investing, invest only the money you can afford to lose. That way, you won’t be devastated in case this fund goes ka-poof!

The seven deadly sins do not discriminate in a bullish economy or a bearish one. Sins will be committed in either situation. Mustering the steps above may take time but don’t get frustrated. The key here is the less sin we commit, the better it is for us and our loved ones. In the end, we can all hold on to the promise of prosperity by the Lord and surely, we will reach our financial paradise someday.

Sloth by far is the most dangerous sin of all and why wouldn’t it be? Sloth causes people to ignore their financial future all along.

Author

Kendrick Chua started his career as a life insurance underwriter and licensed mutual fund representative for one of the leading financial institutions in the country three years ago. He also contributes to Income-Tacts (www.income-tacts.com), a fast-growing financial e-group that has close to two thousand members. A marketing management graduate from De La Salle University in 2005, he has always shown strong interest and enthusiasm in financial planning and investment management. Comments and suggestions may be sent to drickchua99@gmail.com.

There are unique financial challenges faced by women, but the savvy ones have develop ways to take control and build a bright future for themselves and their family
By Amabella Jimenez

Women hold the key to many financial decisions. They are more likely to manage household finances, make most of the choices about purchases, and even decide on investments.” Yet, according to various statistics, they are at the losing end in the financial equation.

Women live longer than men by an average of seven years and need 20% more for retirement. They earn on average 25% less than men. They save less than men do for retirement since they take off from work for around 11 more years than men, to raise children or look after aging parents.

Continue Reading

By Lynda C. Corpuz

Nurse Cristina Rotor, 27, spent about P8,000 buying holiday gifts for her grandchildren, friends, parents, and boyfriend (plus his parents and brother). Call center agent, Russell Macahilas, 31, meanwhile, spent on an appliance showcase of 32” TV, component, and refrigerator. The price: about P50,000 to P100,000 – all spent for her Christmas last year.

Cristina and Russell say that though they spent that much for 2007 holidays, it was a planned spending for them. How about you? Have you already set aside a budget for this Yuletide season? Or are you guilty of the following holiday spending mistakes?

Holiday hangover: You get “blind’ during the holidays. With the 13th, 14th, and whatever bonuses you receive during the end of the year, you somehow get lost with how much money you’re receiving. That financial blindness you’re having can be attributed to the misconception of the more you spend, the more you make people happy (by giving them gifts they probably don’t like in the first place).

Holiday check: Draw a holiday budget. Even Santa Claus keeps a list of what to give to those who are nice all year round (all right, Santa Claus may not true, but his gift-giving list is). Having such list will help you track of what you should buy (and for how many) versus what you would actually spend when you hit the mall, check a holiday bazaar, or brave your way to 168 in Divisoria.

Holiday hangover: You’re having “holiday guilt.” You just thought your homemade chocolate chip cookies suck and not suitable as giveaway or you think you should give a more expensive gift to your Mom because you’re closer to her than to your Dad, or you got an unexpected present from your grumpy boss or an office enemy. Such situations, among others, could put you on the spot and lead you to overspend, as you don’t want to deal with such holiday guilt.

Holiday check: Be guilt free. It’s always said that it’s the thought that counts, but at times, we overspend so as to please everybody this holiday season. But think of the global financial crunch, surely those you love (and are wishing to receive gifts from you) are also in the savings mode, and would probably not to expect much this so-called difficult time.

Holiday hangover: You procrastinate. True, there are mall-wide sales all year round, and you probably bought in advanced some of your Christmas giveaways from these, but you’ve been putting off sending those gifts, say, to your relatives in the province or in abroad.

Holiday check: Shop early, wrap fast, and send those gifts on time. The more you shop late, the more you have to content with overpriced items and deal with the throng of late holiday-shoppers like you. Also, send those gifts to faraway recipients before the Yuletide rush, or end up paying more for the shipping cost. While this country follows holiday economics (where public holidays are moved to the nearest weekend), Christmas is that one holiday that’s fixed here, so that should keep you in track to spread the holiday cheer on time.

As for Cristina and Russell, they will not have to deal with such holiday blunders, for they are keen not to spend that much, compared to what they spent last year.

For Cristina, she’s not sure if she’s going to spend that much again this season. “Because whenever I hit the mall and I see something that I know is ‘perfect’ for a particular person, I buy it right away, and that serves as my holiday gift,” she shares. But she’s sure she would still spend on toys, clothes, bags (for her), among other things.

For Russell, she says she will not spend that much anymore, or get anything that is too expensive. “I’m now saving for some travel options,” she ends.

If you have the money but not the time or expertise to manage it, turn to a wealth manager
By Tina Arceo-Dumlao

One reason why the rich get richer is that they know what to do with their money, thanks to access to all kinds of information and advice to guide their financial decisions. They pick the brains of consultants, exchange notes with colleagues, surf the Internet or watch business news to keep abreast of the volatile movements in the financial markets.

And in exchange for the commitment to deposit a chunk of their money for some time, foreign and local banks are willing to be yet another source of useful information, even taking on the role of primary financial adviser and estate planner of these moneyed individuals.

These are all part of the wealth management programs offered by a growing number of banks in the Philippines who realize that there is a burgeoning group of Filipinos who have the cash and want to get more out of their investments than just a measly monthly interest.

Banks are exerting extra effort to go after this market because these clients represent a steady deposit base and an elite list that are more likely to patronize their other banking products, such as business loans and even platinum credit cards, with low or even no risk of running away from their obligations.

Competition is predictably stiff and like suitors after the belle of the ball, they woo these high net-worth clients through services and perks, such as concert tickets, movie passes, invitations to members-only events, and a plush, quiet area where they can do their transactions in private. In the end, these cash-flush Filipinos go to those banks where they feel they can get the most for their money.

Now if you think wealth management services are just for the ultra-rich, think again. The minimum entry, while steep for most Filipinos, is certainly attainable for the upper-middle class. If you’re looking for professional financial advisors who can give you more personalized service and access to more sophisticated investments, consider these major players.

HSBC Premier
HSBC is one of the first foreign banks to offer wealth management programs in the Philippines, thus it has been able to attract a lot of high net-worth individuals to its fold. For a deposit of P4 million, you can get access to a suite of benefits that the bank claims are among the best in its class.

For instance, clients of HSBC Premier (www.hsbcpremier.com.ph) do their business in specially designed HSBC Premier Centers that are separate from the regular banking offices. These centers are designed for lounging so clients get access to the Internet, newspapers, and magazines, and are served freshly brewed coffee. And they are attended to by their own relationship manager in meeting offices where privacy is king.

Their designated relationship manager also helps clients draw up a financial plan to maximize the return on their investments depending on their risk appetite and investment objectives. Some clients, for instance, may want to invest more in high-risk stocks rather than fixed-income securities. They may even want to explore opportunities to invest in securities abroad. Whatever their decision, the relationship manager is there to advice or execute their request.

What’s more, if you are an HSBC Premier client, you are recognized for your special status not only in the Philippines but also in over 250 HSBC Premier centers in over 30 countries. You only need to show your card to get the attention you deserve (and are paying for).

Aside from investment services, HSBC also offers special packages for Premier clients such as special concerts and even Ikebana classes and wine tasting sessions. The key, HSBC says, is to provide a combination of services that even people with already a lot of money are still looking for.

Standard Chartered Bank Priority Banking
Standard Chartered’s Priority Banking centers were already eye-catching with their modern interiors, suite of amenities, and hotel-like services. But StanChart further improved on the look and the services through the years. And the four centers in Alabang, Makati, Ortigas, and Cebu are doing their share in reeling customers in.

But wealth management services involve more than just providing elegant surroundings, explains Abigail del Rosario, general manager for customer experience of StanChart. She says that wealth management is really more about providing clients with the best in financial management services.

For a minimum deposit of P2.5 million or $50,000, you can get access to StanChart’s services, such as investment advice through newsletters and through highly-trained advisers. “Our investment people undergo a lot of training to make sure that they give good financial advice,” Abigail says.

Aside from advice, you as a Priority Banking client (www.standardchartered.com/ph) also get a prequalified SCB Gold Card, a customized checkbook wallet if you have a checking account, a welcome gift, invitation to special sales and seminars for you and your family, access to talks on investment and economic briefings, and even free company advertisements in the Priority Banking newsletter.

And since everybody loves a discount (even multi-millionaires), you are accorded special price promotions in hotels, resorts, furniture shops, boutiques, and spas, to name a few, all in keeping with the unique lifestyle of the rich and famous.

And in recognition of the mobile lifestyle of top executives and high net-worth individuals, StanChart Priority Banking clients here get access to Priority Banking centers worldwide to ensure seamless service.

Citibank CitiGold Wealth Management
Citibank is focused on helping clients achieve their financial goals and aspirations and for a minimum deposit of P4 million or $80,000, Citigold clients can get all that and more. For Citibank, wealth management involves a careful blend of thorough planning, realistic goal setting, appropriate financial products, informed decisions, and ongoing performance monitoring and evaluation.

One of the key components of Citigold’s (www.citibank.com.ph)approach to wealth management is the Citigold Wealth Planner, a financial needs analysis tool developed exclusively for Citigold clients.

“We use it to assess the overall financial situation, including where they are now and where they want to go. With that assessment, we can recommend the appropriate financial strategy to help them achieve their goals,” says Aneth Lim, head of Citibank’s public relations and communications department.

As a Citigold client, you also have access to a wealth management team that prepares your customized financial plan, assist in reviewing your portfolio, and facilitate the wealth planning session.

In keeping with the 24/7 lifestyle, a Citigold Phone Executive is on hand for round-the-clock assistance from your home and office. You also have full day and night access to your accounts via telephone, ATM, or the Internet. You may also choose to enroll in Citibank Alerts to receive free text messages or e-mail alerts on bank and credit card movements as well as news on financial markets.

You also enjoy Citibank Global Access which lets allows you to make emergency cash withdrawals of up to $2,000 when traveling abroad, and gives preferential rates on foreign currency exchange and access to Citigold lounge areas and meeting rooms in over 250 Citigold centers in 12 Asia Pacific countries.