Adulting and Money Management 4: The Money that They Owe You

 PayMe.Candle.qkx

Image courtesy of: http://www.luckymojo.com

This article is inspired by several Facebook posts pertaining to the irony that it’s the money lender who feels shame when asking their money back, instead of the other way around. Especially when it comes to following up a late payment.

At first, after a talk with one of my friends, I thought that the main problem lies in assertiveness, or the lack of it. And then I thought that perhaps certain cultures encourage assertiveness, more than others but it really is not the question. I didn’t do the numbers, but it’s clear how what I thought was a cultural aspect in lending money, is actually a very personal choice of each son of a man. That is, the choice whether to “donate” or “collect” the amount of money that was lent.

But I’m getting ahead of myself, because even before a payment could be followed-up, there must have first been a pledge to do so.

I myself have rarely lent money to anyone, perhaps because I give the impression of being riff-raff (hahaha!). But whenever I did, I made sure both parties understood and agreed that the money being exchanged was a loan, and not a gift. And in the case where the money were a gift, I also made that very clear.

Risking to state the obvious, the difference between a loan and a gift is that the former has to be returned to the money lender at a given time, with a given interest rate. The latter is simply to be graciously accepted and appreciated.

Now, the problem with some people is they are easily caught by surprise and instead of thinking twice before lending money, they immediately agree to “giving” something that is to be returned “in the future”, “without haste”. In 98% of these cases, no payback ever takes place.

In the world of adulting, taking time to think before acting is basically lesson number 1. In the more specific town of adulting and money management, this moment for reflection becomes as necessary as breathing. Every cent counts, whether it be a past, present or a future cent of a currency. As thus, lending money means sacrificing having the “cents” today with a guarantee of getting them back in the future. In the case of giving, the former sentence would end after the word “sacrificing” and that would be it.

Personally, what I usually do when asked for a loan is to:

  1. Ask how much they need
  2. How urgent they need it
  3. When can they repay me
  4. How will they procure the money to repay me

If I’m satisfied with the answers to the former questions, I tell them that I’d think about it. Afterwards, I ask myself:

  1. How will lending a certain amount of money affect my budget until it gets repaid?
  2. Will I be alright if I never get to see that money again?

If, after analyzing my own situation, I still choose to lend my money, I make the following very clear when I finally decide to go ahead with the transaction:

  1. I make sure they understand that the money has to be returned
  2. I make sure that we both agree on the date of repayment (with or without interest)
  3. I would make them understand that although I don’t need that money now (and that’s why I can lend it to them), I would need it in the future.
  4. Depending on how much I trust the borrower, I would make him sign an agreement including a clause which mentions a possible collateral

(Are you still wondering why people don’t borrow money from me?)

You might be asking: what if, at the agreed date of repayment, the borrower refuses/cannot/does not return the money?

This is where the importance of assertiveness comes in. Being firm in reclaiming what is his own actually helps achieve the goal. And in the case they still refuse to pay you, then this is where a signed document would be useful.

In some instances, no amount of assertiveness can ever get a borrower to pay up. No matter how many touching, beautiful speeches are delivered, they wouldn’t budge. Because the truth is, the list that I wrote above- it’s just me. In real life, and depending on many other factors, the things I just said would be easier said than done.

So what is best advice I could give? be wise, and before you lend an important amount of money, make sure that your finances are sound enough in case you don’t get it back.

Happy lending!

 

10 Inputs for Rookie Employees (Fresh graduates, I see you!)

As I celebrate 10 years since my first employment, please allow me, dear reader to give unsolicited advice for those who, for the first time are reveling in the wonderful world that is: the workplace.

1- Just how urgent are urgent tasks?

They are pretty urgent. However, a common rookie mistake is to be stressed because their superiors would give them five tasks that are simultaneously labelled as URGENT. The more prepared interns/fresh graduates would pause and actually ask, “Okay, but which of these is the MOST urgent?”. To which the manager would respond, “All of them are equally urgent”. This is a lie. Because even if you, little grasshopper, are a wizard of all sorts and were able to finish all the tasks punctually, your manager CAN NOT POSSIBLY revise them all at the same time.

This is why I would suggest you rather ask, “Which of all these urgent tasks would you like to revise first? Could you give me a deadline for each of them?”. This means that your manager would have to sit down for 5 minutes with you and decide, say, Task 1 should be on his desk in 1 hour, Task 2 to be submitted in 2 hours, Task 3 in 2 hours and a half, etc… And if he refuses to do this, then feel at liberty to prioritize the work yourself.

Tip from my mother: If your manager DID sit down and classify the tasks with you, remember to write him an email confirming what you just talked about. This would be your safeguard against any future “misunderstandings”.

2- Gossiping is One Train You Should Not Hop On

Avoid gossip. Even if you’re only a “listener” and not a “contributor”, do not be around people who gossip. It’s a waste of time and it only brings distraction. Besides, being a “listener” is just as bad as contributing because it means tolerating trash talk about somebody who can’t give his side of the story.

If you want something cleared up, talk to the person face to face. Also, don’t criticize anyone behind their backs unless you’re 100% sure you can repeat the same words in front of them.

Most importantly: Don’t use gossip as a weapon if you’re not sure you can take the fire.

3- Doubts Will Arise

I know 40-year olds who are still not sure what they want to do with their current lives, let alone their future. So be kind to yourself and consider that as a young person starting to explore a new world, it’s only natural to feel doubtful and undecided about things.

NEVER be afraid to take a step back and evaluate your situation. If you feel the need to go back to studying, take a sabbatical, change career directions, or whatever you feel that could make you grow, go for it.

Still, it’s absolutely important that you be clear on your purpose. Ask yourself, “Why am I doing this?” Is it for the money? for personal needs? for professional fulfillment? or for sheer curiosity? Afterwards, ask yourself again, “Would this change be able to sustain me until I get my bearings back?”

4- Is it Wise to Mix Personal and Professional Life by Making Friends at Work?

Personally, I think it matters little whether this is wise or otherwise (pun intended). Human beings are social animals so whether we like it or not, we will always be drawn to gatherings, socializing and eventually consolidating one “favorite” group of people from work. What is wise though, is to choose your work friends prudently.

In this light, think 50 times over whether it’s worth “hooking” up with an office mate. ‘Nuf said.

5- Honesty Really IS the Best Policy

Be as honest and frank as possible with your direct manager. Even if she isn’t totally honest with you, be transparent with them with whatever issue you have that might affect the quality of your work.

Your manager’s lack of “honesty” could be explained by the fact that some work-related subjects should remain only in the hands of the “upper crust”. I’m not talking about this kind of honesty. Any topic that relates directly to you or your work is a topic you have the right to know about. Similarly, your manager has the right to be informed about anything that could directly affect the accomplishment of the objectives she set for you.

In my case, I opened up to my former supervisor regarding my problem when I get hungry. You might think this is an exaggeration, but “cranky” is an understatement in this case because I would suffer a complete shut down of all my systems: I become a friend of none and an enemy to all, I make bad choices, I start remembering past offenses… try to get the idea of that kind of co-worker.

6- Drop the Delegation Drama

KNOW that it is your manager’s obligation to properly train you for whatever is written under your job description. He should know that whatever mistakes you (or anybody else under his supervision) make would directly reflect on his performance. So if he’s wise, he would adequately teach you everything you need to know to deliver a quality output. If he’s not, he would hoard all the tasks while you sit on the sidelines- that way, the deliverable would be quasi-perfect and he would not risk his attention being called.

One of my former managers was like this. I described the experience in this post.

As a newbie, it would be normal for some time to pass before some major decisions or operations are to be delegated to you. But don’t lose heart: it will come. And the first step towards that direction is to reflect the seal of excellence in every deliverable that bears your name.

7- The Value of Knowing Your Place

When you argue with your boss, LET YOUR OBJECTIVE BE TO BE HEARD and not to win/change his mind/make him side with you. While you’re at it, be as eloquent, as respectful and as precise as you can be when letting yourself be heard.

Trying to get into an argumentative battle with a superior will only leave you badly wounded and demoralized. Think about it: managers have had years and years of “training”, having had more experience in almost any type of arguments in this life. Sometimes, a smile is the best response. This way, you save time which you could use later on for whatever you wish for! PLUS, you save energy and keep your happiness.

8- Commitment Issues

It’s okay for you not to love your job. However, don’t make it an excuse to under perform.

It’s very important to leave a good impression in your job, especially if it’s the first one, and you achieve this by committing to produce the best results you possibly could.

Talking to a friend the other day, we both agreed that nothing is forever. But if we want something to last, there should be a conscious effort from our side to wake up each day and make a decision to get through the day, everyday. Work-wise, it’s the same.

In my opinion, problems could arise the moment your job starts to go against your values. A friend once told me she turned down an offer from a company that manufactures weapons for war. Another one told me that he had to leave his former company because ethically, he didn’t agree with its new strategy. When this happens, thoroughly weigh your options and be realistic about how you’re going to pay the bills and fund your dreams when a regular flow of income gets cut off.

9- Understand Your Contract

Back in France: each time I signed a new contract, an HR personnel was always beside me and ready to answer any questions I might have. Even if I took my sweet time to carefully read the 12-page document, they would patiently wait without interrupting me. They would explain anything, from something as simple as the personal tax deducted each month, to something more complex such as the legislation applicable to my situation.

Even more necessary is for you to understand your paycheck or pay stub. Keep track of your monthly expenses starting with the automatic deductions from your revenues. Don’t forget, you’re “adulting” now!

10- LET GO OF EXPECTATIONS

This final advice is the toughest one I’ve learned, because I’ve known it to be true for quite some time now.

I know it works for everyone who has tried it. However, I just wasn’t able to apply it in my own life. Now that I’ve started to do so, I’m much more fulfilled and happier than ever before.

The key to peace of mind is: not to expect anything. One thing is to bear in mind things like: scheduled meetings, DEADLINES, patterns of behavior and so on… but another thing is to be open-minded enough to ACCEPT THAT EVERYTHING IS SUSCEPTIBLE TO CHANGE. Remember, disappointments only exist because they were pre-determined by an expectation or two. So in this equation, the less we expect, the less we tend to be disappointed!

Adulting and Money Management (3.3): The Money that I Owe

Adulting and Money Management (3.3): The Money that I Owe

On How I Acquired Loans Responsibly

The first time I formally owed money was when I took on a store credit to buy a bed. I was 22 years old and just moved out of my parents’ house.

Needless to say, I was very nervous when I signed the papers. I grew up in a family where borrowing money is a big no-no and I have always been told that it could bring a lot of misery and trouble. I’ve seen families fight, children who cut all contact with parents and even friends who stopped talking to each other because of money lent and borrowed to one another. Because of all that, I was afraid to get any kind of credit and was doubtful about my ability to honor the payments. It didn’t matter that I had a one year contract at work, neither that I had 8 months to pay it off, nor the fact that there was no interest rate applied (the store had a special promotion).

Knowing what I know now, I only wish somebody could’ve told me that:

  1. at some point in life, it would be necessary for me to borrow money,
  2. there are ways to not be enslaved by loans and,
  3. it is possible to live happily with debt, if one borrowed money responsibly.

Resultado de imagen de responsible loan

Image courtesy of: http://mzansilive.co.za/

The importance of taking the time to honestly reflect

So far, no debt has financially strained me to a cracking point. I guess the reason is because I think more than twice before acquiring a loan of any kind. All the scary stories and the horrible experiences I witnessed from peers and friends have served as a starting point in each and every debt decision I’ve ever made.

I usually go by the motto, “If you can’t buy it in cash, you can’t afford it”. So whenever faced with a buying dilemma, first I evaluate the usefulness or the value of what I’m going to buy:

-How long will I use/enjoy the item?

-Will its value increase our decrease over time?

-Can I sell the item if I find it of no use to me in the future?

Secondly, I examine my current financial standing:

-Why can’t I afford it?

-Is it a problem of liquidity (availability of cash or other means of payment), or a matter of really not having enough resources to purchase the item?

-Can I perhaps save for it today and buy it in the future? Or would the item increase in price by the time I have enough money saved?

Lastly, I make sure that paying for such debt would not cause a great dent on my future quality of life. Technically, this could be achieved none other than by sitting in front of a calculator, pen and paper (or a spreadsheet) and start crunching the numbers.

When choosing a creditor, go with the one who offers the best terms of payment FOR YOU

You might ask, “How is it even possible to have a debt and live comfortably?”. It IS possible.

The first condition certainly would be to not overwhelm yourself with loans. Borrow only the amount that you are able to return.

Equally important is that this could be achieved if you invest time and effort in searching for a creditor whose terms of payments suit your situation.

Below, I’ve made a list of the most important purchases I’ve made on credit. All of them have one thing in common: I got them at 0% interest rate. This is where the time and effort came in: once I set my mind to getting something extra-special that needs a financial sacrifice (debts make you sacrifice your future purchasing capacity), I start browsing the market (virtually and physically) for different kinds of offer. Personally, I prefer to go to a physical store and talk to the salesperson. I’ve always gotten the best deals through one-on-one negotiations.

Some stores give you the option to determine how many installments (usually in months) you need to pay the credit off. In these cases, I always chose the least possible. The soonest I can get out of the debt, the better.

Past credits to stores:

  1. Bed: 8 months
  2. Thermomix: 3 months
  3. Wedding earrings: 3 months
  4. House appliances (dishwasher, refrigerator and microwave oven): 4 months

Credit card debts (payable 3 months after purchase):

  1. Plane tickets
  2. Hotel reservations

Outstanding debt:

  1. Student Loan

The role of emergency savings

It’s important for me to briefly discuss something about my outstanding debt.

As I’ve said, I don’t pay interest for this loan. So every month, a flat rate gets deducted from my bank account. This would go on until the principal amount has been paid off; and according to the terms I signed, it would still take some time before I see that day arrive. This is to say that the greatest risk I face is the suspension of my steady revenue flow before fully paying the loan; in my case, it will be unemployment.

Truth be told, I actually faced this situation not long ago. I lost my job, but luckily I was eligible to receive unemployment allowance. However that too, was a limited source of income. So when it got depleted, I had to tap my savings- my emergency savings. I had to set aside such amount that would allow for one whole year of payment for this loan while I search for a job. (I simply decided that it would take me one more year before getting back to work.)

Fortunately I am now back to having a salaried employment, and it didn’t take me one year!

Resultado de imagen de responsible debt

Image courtesy of: https://www.agingcare.com

So now, until that debt gets paid off, I consider each monthly installment just as I budget fixed household costs (ie: rent, electricity, water, food, etc…), like what my friend Edward mentioned in this post. At the same time, I exert a conscious effort to increase my savings, especially my emergency savings.

I am aware that most people’s idea of having emergency savings is for it to be used during a health crisis, a natural calamity or the death of a loved one. But emergency savings also have to cover whatever household needs there are when the regular flow of income is interrupted, or reduced.

DO NOT TAKE UP LOANS FOR THINGS YOU DON’T REALLY NEED

Half a year after having a regular job with a stable salary deposited in my bank account, I also started to receive letters from the bank informing that I have automatically secured a 3,000-Euro loan! I also got an instant approval to avail a “golden” credit card from the same bank. To top it all, my husband also got the same letters!

We just threw those in the garbage.

My husband and I could’ve enjoyed the “easy” money back then. But we decided to be frugal and live within our real means.

On Personal Loans

My attitude towards personal loans is even more strict and rigorous than with the formal ones. As far as relationships go, I try very hard not to let money get in the way. Actually, the best way to preserve a relationship is to set money matters aside. But when times get tough, to whom would one go for help? To a friend or family member, right?

In my limited experience on personal loans, I’ve always carefully chosen the people who I plan to borrow money from. They should be financially comfortable enough to lend the amount I will ask, without having to sacrifice their quality of living. They should also be people I greatly trust and who trust me equally. Additionally, I choose those who I believe are unafraid to call my attention in case I forget to pay, or give them the incorrect amount.

It’s very important to be clear that the money being passed from one person to another is eventually going to be returned the other way around. If you’re lucky to have a friend or family member who would insist that the money be a gift instead of a loan, then enjoy! Otherwise, be clear on the terms of payment: interest rate, installments, “deadline”, and so forth. Trust me, it’s not worth losing a loved one over money.

Responsible borrowing

Acquiring loans responsibly takes a lot of time and effort, just like any other “adulting” activity. Although compared with other “adulting” decisions, this will cause a direct and immediate effect on your quality of life in the near future- once the payments set in.

It would seem boring and tiresome but it’s worth thinking more than twice before deciding to take up a loan. Then once the decision has been made, it becomes even more important to take a moment to search for the most suitable creditor and to plan your new budget considering the periodic installments.

Borrowing responsibly also means being prepared for various risks that might mean having difficulty in making the payments (such as being unemployed). For this reason, it’s important to factor in an additional amount in one’s emergency savings when preparing the new budget.

One risk worth remembering is the temptation of acquiring an “easy” loan with seemingly “comfortable” terms and conditions. I have never heard of anybody live comfortably with a loan that was used for something they didn’t really need.

Lastly, responsible borrowing entails mixing personal and financial affairs the least possible. Though when inevitable, another round of reflection, research and budgeting has to be made, all in order to be able to live happily even when indebted.

Resultado de imagen de responsible borrowing

Image courtesy of: http://www.smartcampaign.org/

Adulting and Money Management (3.2): The Money That I Owe by guest blogger Gino

Foreword by Colorfulifesite admin:

Gino’s experience differs a lot from that of Edward, not only because of the generational gap but because of the way the former decided to approach his debt dilemma. The fact that he has not had time to save enough money to be considered “financially stable” is a great factor in his decision to pay his debts with another loan. Now normally, people are advised against this because as you might already guess, it does pose a risk of entering into a debt cycle from where it could then be very hard to exit. It takes discipline, focus and great will power to not fall into a credit trap. Most importantly, Gino did not only take another loan to pay his initial debt- he also made it a point to earn additional money from various sources of income. But I don’t want to get ahead of myself. Dear reader, learn and enjoy!

***

Karessa asked me why I volunteered to be a guest blogger in Colorfulifesite Blog. The truth is I’m really eager to inform people about how I somehow recovered (slowly) and survived from my personal financial crisis. I would also like to share my experience, in case it could give them options on how to solve their debts.

Resultado de imagen de debt

Image courtesy of: http://www.fitslimstrong.com/

The Backstory:

Several years ago, my friends and I set up a corporation. It was the first business venture of my life. Needless to say, I was new to the corporate world and had not even the fundamental knowledge of things. I just took the opportunity. It was a “strike while the iron is hot” kind of thing. I was excited and impulsive at the same time that I didn’t even bother to educate myself, believing that I could learn along the way. Likewise, I joined the business world without any “financial muscle” because supposedly my contribution would be my skills. (Actually, the majority of the founders didn’t have money to invest. All we had were our Information Technology or IT skills.) This was why we needed an investor to sustain the various costs of this venture: marketing expenses, logistics, employees, and so forth.

One of the founding members met a potential financier who we all thought was an angel investor. After me and my friends agreed on his participation, he gave us a big amount of money as seed funds. We divided the financial responsibility and assigned each one an amount to be paid to the angel investor when the time came. All along, we believed that we would pay him back upon the success of the company’s project. After the papers were signed, the corporation became a legitimate one.

Unfortunately, things eventually started to go downhill due to the company’s internal issues. These issues imploded up to a point where I had to personally borrow money from loan sharks just so I could pay our employees’ salaries. I was confident I could pay the loan sharks, but little did I know that a deeper financial trouble was about to blow up in our faces:

What we thought was an angel investment was actually not. It turns out we signed a document stating that he was loaning money to the corporation, not investing! Furthermore, the terms stated that the loan should be paid within a year.

To top this all off, I have acquired credit card bills as well as other personal debts to settle.

Resultado de imagen de loan shark

Image courtesy of: https://es.123rf.com

Thankfully, the debt to the “investor” was cleared by the person who invited him to the corporation. Still, I found myself looking at an important financial dent.

The Debt Story:

I had to start getting rid of the accumulated debt I still have. So what I did was that I sold everything I could and pawned some of my belongings. That gave me some “starting money” to do something about my debts.

Resultado de imagen de debt

Image courtesy of: http://www.kiplinger.com/

Likewise, I returned to my parents’ house to save on rent and started recycling some things, like my old computer. Most importantly, I got help from my family in getting a loan to pay the loan sharks. My mom helped me get loan from cooperatives (Credit Unions) that give a lesser interest rate and a longer period payment plan. Loan sharks’ conditions of payment were tougher than a bank’s, so it was of my great interest to get them off my case as soon as possible. That’s the bad thing about getting a loan that doesn’t require any type of verification such as tax declaration, employment record, etc… Anyway I paid a big part of my debt through those cooperatives.

According to Investopedia,

A credit union is a member-owned financial co-operative. These institutions are created and operated by their members and profits are shared amongst the owners.

… (They) represent an alternative to banks and possible solutions to common complaints about traditional banking institutions… (It is) a savings and loan entity formed by a group of people who share some common characteristics, such as a profession or geographic location. The members of the group pool their money to provide loans and demand deposit accounts to other members. Credit unions are not-for-profit entities that are owned and founded by their members; they function as democracies, with each member having a say in how the credit union is run.

As a matter of fact, we borrowed from 3 credit unions. On 2 of them, my mom was the account holder while the other one is under my younger brother’s name. I did this because they were the only ones who were qualified to apply for a loan.

Part of the money I used to pay the cooperatives was earned through online jobs. I had to work double shifts and with multiple employers. All of these, without counting other jobs, so all in all that required me to work for 10-16 hours a day. I went on getting local contracted jobs too, like designing small business solutions for small enterprises. The pay was small but at least I got something, rather than nothing. (It also helped me build more contacts.)

As I mentioned before, I got some money came from pawning and selling my belongings. Some proceeds from the sold stuff were used to get along with my everyday life. I’m not even talking about spending for leisure; I meant something more commonplace like buying food and paying for fare. This money also allowed me to pay some of my other personal, smaller debts.

Then my father said he will pay some of my debt from one of my mom’s cooperative account and I can pay him whenever I could, without interest. I was relieved!

After that, I got a chance to enroll in an MBA course to educate myself on how to properly run a business. While I was in school I kept on accepting online work and working for local clients mostly to pay my school tuition, my dad, my mom and my brother. To this day I’m still not 100% clear of my debt but it’s more manageable compared to what had happened to me few years back.

-The End-

Colorfulifesite’s Note: Gino has long since learned his lesson regarding the need to be financially literate and equipped before entering a business venture. He is currently a Managing Partner at a couple of startups focused on helping small enterprises get the best adapted business solutions.

Sources:

  1. Credit Unions, Investopedia, available at: http://www.investopedia.com/articles/pf/08/credit-union.asp

“One cannot and must not try to erase the past merely because it does not fit the present”- Golda Meir

Two things came to my mind upon reading Meir’s words:

  1. The past as we know it, has been documented and told by those who were “left standing” long enough. Others would simply say that “history is written by winners”.
  2. The only permanent thing in this world is change, so why shouldn’t we expect history to change as well? I’m not saying that it’s right, I’m saying it’s how things are.

On February 1944, George Orwell wrote a piece on how history is written by the winners. In it he stated that should his side win the war, they would tell fewer lies than their adversaries. Because the reality, as a TV show protagonist once said is that, “Truth is a battle of perceptions.”

Orwell further added that he would choose the most verifiable among the millions of instances which must be available. But wouldn’t the process of verification also be subject to the particular point of view of those participating in it?

The problem with the past as we know it is that no matter how many “facts” and “objective” measurements we are presented with (eg: the fact that a country had been under martial law, and the number of people who disappeared during the same period), they will always be laced with human perception. Such perspective will always try to slip past our critical and analytical minds, to reach our hearts and stir equally human feelings of either affinity or disdain to the initial observation.

The humanity in us easily makes us forget about the numbers, the facts, the objectivity of the past as we know it. And that is how we end up fighting and sometimes even insulting others- not to establish a fact, but to prove that we are right: that what we feel is THE legitimate and correct feeling, that what we believe is THE thing to believe in… within the uncontrolled realm of social media*, the famous “keyboard warriors” make it seem that suggestion outside of what others perceive is a lie, an idea forced through bribery or worse, a mere invention of creative minds.

Isn’t it sad? that instead of enriching ourselves in debate and trying to learn from an opposing perspective, our discussions on socio-econo-politic and especially in historic topics end up tallying who’s right and who’s wrong?

However, going back to erasing the past to fit the present…

On the one hand, I don’t agree it cannot be done. As a matter of fact, even if what already occurred can’t be undone, those living in the present can still modify data and information bit by bit until the desired effect is achieved. Even in those cases when data can be maintained intact, the interpretation of the said information can still be subject to the analyst’s own thinking (or agenda). So yes, this CAN be done.

On the other hand, no matter how improper it is to erase or alter the past as we know it, well, who doesn’t do it? the human mind is feeble and highly suggestive, while the soul can harbor various motives as well. And so no matter how many registered facts there are, no matter how many recorded events are available, people will always choose to believe what is convenient for them. So, even if it MUST NOT be done, human beings will always serve their best interest at the end of the day and overlook this little misdeed. (In fact, who’s to say that Meir was not guilty of this type of act?)

Dear reader, you might not notice it now but allow me to save you time: everything boils down to resource allocation. 

The “winners” who will proceed to write the story– ultimately turning into history- possess the power to influence which portions of the society get what percentage of resources. These could be time, money, attention, alliances, exposure, etc…

A very good example of this is the passing of the Spanish “Historical Memory Act”. Without embarking on a discussion of its relevance or utility, suffice it to say that this law was able to channel Spain’s limited resources into sectors which would otherwise be left in a state of disremembrance. (Some examples are: the identification and eventual exhumation of common graveyards, granting the Spanish nationality to families of the exiled and the removal of any symbol commemorating the military uprising.)

Due to the very nature of history (or the past as we know it), different interest groups will always resort to revisionism to establish their own version of truth.

This is what’s currently happening in the Philippines, where young Filipinos are being taught that the Marcos regime of dictatorship was the most glorious period of the country. Once again, it simply boils down to resource allocation; this time the resource being a seat in the political arena. For why else would these parties bother to convince a whole generation about the goodness of the former dictator, if not to reinstall his family and allies back to the Philippine politics?

The lesson I gather from this reflection is that we must be very vigilant of the kind of past being insisted as “what really happened”. We cannot and must not change the past what about the rest? we don’t hold anybody’s deeds and desires but our own. Yet, we can exert a small leverage in our communities even as we are neither historians nor big influencers.

Starting with ourselves, we should never lose sight of our past: the past as we were told, and the past as it is currently being recounted. Let us be indefatigable seekers of information, and let us be annoyingly non-conformists with the kind of facts lain before us.

More importantly, let us take ownership of that history. Let’s make it ours: just as we find ourselves to be part of a family, let us also make ourselves part of a town, a country, a global community.

With the knowledge that we have, we can then proceed to inquire, debate and refute any efforts of revisionism that we feel is not right.

Finally, let us exert a massive effort as a community, to reach out to the children- our future. Not only must we pass on to them the gathered knowledge that we have. We must also teach them how to collect the necessary information, where to get it, what questions to ask, to whom they should ask, how they should ask and to never be afraid to politely discuss anything that doesn’t satisfy them.

Golda Meir was a diplomat, politician and the fifth Prime Minister of Israel. Not wanting to question neither her sincerity nor her intentions for uttering those words, it is obvious that she has every interest in wanting to preserve the historical memory from her ancestors. But she was not alone in this task. Ever since the post-war period, every awareness creation effort has been made so that this dark chapter in human history will never be forgotten. And it must be said that this kind of tenacity is admirable, considering how many generations have passed and nobody has ever questioned the integrity of records about the violent pursuit of the Jewish community.

The past of her people, as well as her very own, made her understand the importance of preserving history: to learn from the past as we know it, allowing for hope in the achievement of a greater future.

 

* Social media is a fantastic platform for knowledge-distribution and idea-sharing initiatives.

Sources:

  1. The Economist quotes, available at: https://goo.gl/vWzDx3
  2. “History is Written by the Winners”, by George Orwell, available at: http://alexpeak.com/twr/hiwbtw/
  3. “All People are Living Histories- which is why History matters”, by Penelope J. Corfield, available at: http://www.history.ac.uk/makinghistory/resources/articles/why_history_matters.html
  4. “The Face that Launched a Thousand MiGs”, The Guardian, available at: https://www.theguardian.com/books/2008/aug/16/biography.politics

 

What’s on a reader’s mind (2)

A very dear reader from Canada wishes to share his experience in “adulting” and money management.

However, before I move on to divulge his wise words, let me first mention how I have never met anybody online as kind and as frank as Mr. Edward Hillyer. We met in Facebook. We have a common friend who used to actively publish politically-flavored posts in his wall. It was in the comments’ section where we started out politely arguing about the different topics we enjoy. Now I believe that I may proudly say that we are friends… friends in the sense that I would seek his advice, and he would generously give it; friends in the sense that he would tell me nice stories about his childhood and his family, and I would ask him for more similar anecdotes.

I used to be reluctant in having a social media life but with a great discovery like Edward, I believe it’s worth all the trouble of meeting the weird and creepy people that roam around the internet.

I thank this dear friend for supporting my blog through actively participating in its Facebook page, as well as in my personal page.

I truly hope that you can learn as much from him as I do.

Thank you, Edward!

(The following comment originally appeared in the Colorfulifesite Blog’s Facebook page, dating 6th of February, 2017.)

My first comment on adulating [sic]* and money: If you have ever had a credit card, you will have noticed how a little here and a little there, (ten dollars for a pair on sunglasses, 20 dollars for a new top) will cause your receive your credit card bill with shock. How could just a few dollars here and a few dollars there add up to such a large bill? On the door to my father’s office was a quote ‘It all adds up’. You see this in your credit card bill that shocks you each month. This is the reality, it all (even small amounts) add up. With this knowledge as a given, why not be smart? It 2 +4 = 6, then 4 + 2 also = 6. This information is reversible. If you save a few dollars here, and a few dollars there, IT ALL ADDS UP, just as spending does on your credit card. This is a given. If you save money in your daily life, it will add up.

This was my reply, dating 8th February 2017:

Thank you for this simple yet monstrous truth, Edward. My personal experience with credit cards is quite nil because having been raised in a frugal household; we have always tried to avoid expenses (present and future). We only borrowed money if we didn’t have any other option at all. But I had a similar experience with my day to day life before my husband and I got married. We had good jobs and were living in the city center. So the temptation to get a beer here, have a bite there, etc… was always near. And we would usually give in to the “little” ones, until we realized that the 3x a week trips to have tapas at 2 EUR a glass of beer (we would end up having 3-4 glasses each) would sum up to 192 EUR a month! Imagine how much that would be in a year! So we started to save small coins and also stopped eating out too much. This was one of the ways we were able to save for our wedding (for my part, I was able to save for my dress, shoes, earrings and head accessory). Yes, we’re proud to say that we financed that marvelous celebration of our lives!

In a reply to one of my posts, (this time, in my personal Facebook page dating 22nd February 2017), Edward recounted an advice given to him by his father. Honestly speaking, I wasn’t prepared to be blinded by the light.

I joined Les Grands Ballets Canadiens at 17 years old as an apprentice. I was paid half the salary of a corps de ballet dancer ($75.00 a week). I managed on that fine. It was tight, but I did it. However, after three months with the company, they tore up my old apprentice contract and gave me a corps de ballets contract. I wrote to my father with excitement. ‘My salary has more than doubled. I now earn $155.00 a week!’ My father expressed his pleasure but mentioned… ‘If you got by on $75.00 a week, this means you could now save one whole salary each week.’ What a brilliant observation. However I did not follow his advice. I adjusted my standard of living to my larger salary. I had not ‘adulted’ yet. In youth, there is a tendency to spend all the money we have before our next pay day. It really does not matter what the salary is, we will be out of money by pay day. I was poor, then rich, then poor, then rich, then very, very poor, and now I am financially independent. Like others, I have been through it all. And, I learned from it all. When the endless value of money is recognized, we will prefer the money (security) to the fancy shirt, the latest shoes, the newest gadget and the expensive restaurant. I used to live in a three story house on two acres of land with a swimming pool and three cars for two people. Clearly I had far more than I needed. What do two people do with an acre of land each? Why would two people need three cars? Why would two people need three stories? I was working two jobs and was sick with the work. I felt I needed to reward myself for working myself to the bone. How very stupid of me. I earned $90,000 a year and was always broke before pay day! Now, I have no car, no smart phone, no cell phone, no television, no house, no iPad, no IPod, no MP3 player and no cell phone. What do I have? financial security and peace of mind. The value of this is far greater to me than any material thing.

*Edward’s computer would automatically and stubbornly replace the term “adulting” with “adulating”, and so he spent the whole time with the latter word. Colorfulifesite edited the rest of the typos.

-The End-

Don’t hesitate to comment on Edward’s ideas, or share your own experiences in “adulting” and money management!

Remember that you can write to: colorfulife@outlook.es, or use the Comments’ Section below, or you could also use this blogsite’s Contact Page to tell us your stories. Thank you!

Adulting and Money Management 2: “Hooray, I have money! now what?”

To read the first part of the Adulting and Money Management Series, click here.

Money management becomes tricky as we grow older. To prove my point, try to remember when you were younger and you used to be so determined and focused to save whatever money you had. It could be to buy “that shirt”, “that book”, “that pair of shoes”, or even just to “put it in the bank”.

Didn’t you use to scrimp on buying snacks at school? didn’t you keep those envelopes containing cash- from your godparents- so you wouldn’t be tempted to use it? didn’t you try to outsmart your parents, siblings, or other family members to cover some of your expenses so that you could have more money, faster?

By the time we enter into adulthood, we start to be distracted from goals such as saving money or even increasing our income… There are just so many nice things to buy, a lot of delicious new food to taste, and look at all those places where we could travel- am I right?

Imagen relacionada

Image courtesy of: http://www.jocelynrish.com/

I don’t have the capacity to address all the above-mentioned concerns. However today, in the name of “adulting”, allow me to shine a spotlight on investment as an alternative to increase the money you have saved. And as a possible choice for investment, this post will also include a short discussion about Mutual Funds.

The completion of this second part of the Adulting and Money Management Series would not be possible without the very dependable Mr. Arnel Martil. His professional aid/opinion/words/common sense/truthslaps have truly made this post not only satisfactory, but also very beneficial to the reader.

Thank you very much, Arnel for your help!

-*-

Colorfulifesite (C): Arnel, what’s the difference between saving and investing? Which would you say is more important between the two? For instance, let’s say that I just received an inheritance or a huge bonus. Which should be my priority?

Arnel (A): The big difference between savings and investments is time.

Savings is usually money you set aside for short-term goals.

One reason you might want to save now is so you have some money to invest later. Money deposited into a savings account is usually very safe but would only earn a small amount of money in return. Another great thing about a savings account is you can get your money out of the account whenever you want.

When you say saving, you are just putting your money in a bank or as a reserve. It’s as if you’re hiding it under your pillow. It is a “parking place” where the “principal” or the amount you’ve saved is safe; it provides money for short term goals as well as emergencies.

By investing, you allow your money to grow. 

It accumulates money for long-term goals. You could lose your principal, but you have the opportunity to earn more money.

When you invest, you set your money aside for future income, benefit or profit to meet long-term goals. When you invest your money, there is no guarantee that your money will grow or increase. The earnings or losses from investments are usually more than what you would make or lose in a savings account. Investors recognize that it usually takes a long time to earn the big bucks, so most of the time they are in it for the long haul.

C: What would you say is the NUMBER ONE enemy of the people who are currently saving money? What’s the most effective technique you’ve applied to make sure you or your family could save?

A: Inflation is one of the downsides if we rely only on saving. It is an increase in price that makes a “market baskets” of goods and services more expensive over time- a silent killer of your finances. (Note: inflation reduces the value of your money because with the same amount, it can purchase less goods and services than before.)

For us to beat inflation, we should invest in investment vehicles like bonds, stocks, mutual fund, UITF or Unit Investment Trust Fund* (see Glossary at the end of the article for more information on terms with asterisks), or real estate. As an adviser, we do not discourage saving money in a bank account because you can recover and use that money 24/7 in case of an emergency. But if you want something for long term, like if you are planning for future education or personal retirement, invest in a vehicle that allows your money to grow if done right… annual returns of 50% is possible.

Regarding saving techniques, it really depends on the person’s budget; it should be such that his lifestyle wouldn’t be compromised. 

C: The most typical advice is the 20-60-20 rule, where 20% of a person’s income should go to savings and investment, 60% on essential expenses and 20% on discretionary expenses a.k.a. wants, rather than needs. (For some insight on budgeting and saving, see Colorfulifesite Blog’s post on making ends meet, here and proving that you could save, here.)

A: Just remember that the bottom line is saving for your future.

C: Suppose I’m now ready to invest- will it make sense for me to borrow the money I would put in the investment vehicle of my choice?

A: As an adviser I would say, before you decide to invest, you should settle your debts first.

You must start paying off the ones with small interest, and little by little, proceed by paying loans with bigger interest. The reason for this is you might have difficulties if you prioritize the debts with bigger interest, because there’s a tendency it might be too much for you and it could lead to you not being able to continue paying.

Once the debt is settled, you can then start to save and invest.

C: In my opinion, borrowing money can be a useful tool for money management. But it can also spell disaster for anyone who misuses it. Under the context of making your money grow, I believe that it only makes sense to take a loan when:

You are 100% sure that you could pay it off, interest plus principal, without sacrificing neither your current lifestyle nor your future prospects. (More of this on this series’ next post!)

A: You can be financially independent at any income level, but one should develop a certain behavior and discipline when saving and not to spend too much. However big your monthly salary is, even at 100 thousand per month, if your mentality is all about spending and spending, the end result will be an impoverished you.

C: Now, I noticed that mutual funds have been “a thing” for quite some time. What can you tell us about it?

A: Mutual funds are pooled investments which everyone can participate in. In the Philippines, it could be with capital as little as Php 5,000.00 (Colorfulifesite advises for you to consult your bank or financial adviser for the minimum capital requirements in your country).

It is a good investment option because they do not require much effort and time compared to others (e.g stocks, one’s own business). A professional fund manager handles your mutual fund. All you need to do is put in the money. In a mutual fund, you will become an investor, part-owner or shareholder of blue chips- nationally recognized, well-established and financially sound companies- where a mutual fund company has invested in.

Where I work, or in any mutual fund, historically in 5 years’ time, investment has been seen to double.

That’s why, we advice to lock in 5 years if people want to invest in a mutual fund.

C: I guess the time has come for me to share my own investment experience. You see, I invested a little money that I had before. Just like in a mutual fund, I was asked to lock my capital for a minimum of 5 years. I could put in more money, but I couldn’t withdraw it until after that period. However, when time came for me to recover my investment, I simply got the capital back! I was told by my adviser that it was due to the financial crisis. Now, what was I supposed to do with that? Of course I was happy I got the whole of my capital back, that I didn’t lose any money. But what a waste! I could’ve invested it in another product and at least earn 5% from it.

A: Maybe the investment you did at that time had an insurance added-on.

There is a product called a VUL** or Variable Universal Life Insurance where, aside from saving for your future your principal earns interest and it offers protection. It’s a sort of 2 in 1 product: life insurance ***plus mutual fund.

It is also a good investment since the money you save will grow and accumulate. The advantage of investing in any VUL products is it offers insurance or life protection, so in case the family breadwinner or the income generator has suddenly run out of time, his remaining family members would not suffer.

May I ask which company you invested in? How come the result was only a break even after 5 years?

C: The truth is, I remember which company it was, but I don’t remember the conditions. I think the problem was, I didn’t take it too seriously at that time… (facepalm)

A: Before you choose any type of investment, you must first do a background check of the company: their historical performances, how many years have then been operating- is it at least 10 years or 20 years?- so you could avoid scams. There’s no investment where you could earn money speedily, like let’s say, double your money in 2-4 weeks. There is an investment principle where we are advised to apply the RULE of 72****.

C: What can you say about my experience? Or worse, what can you say to those who lost money in their investments? Undeniably, many people are afraid of investing, and are afraid of the term “finance”, due to the crisis that hit us…  

A: As an adviser, I would say that before entering any investment scheme like stocks, mutual fund or UITF, you should first build the foundation of your investment by securing a life insurance, because the return on the investment tools I’ve mentioned is not guaranteed… In the case where a person secures a life insurance, if something happens or let’s say he or she will be “taken out of the picture”, there’s assurance for the surviving family members or beneficiaries that they wouldn’t be burdened or worried about how to go on with their financial life.

Life insurance could also help pay loans and other liabilities. It could be used to fund obligations like college education, car loan, house or lot… at least there will be money to pay them off. If the insured breadwinner dies, at least there will be resources to supply his surviving family’s needs.

C: That is a very interesting concept you introduced there, Arnel. In fact, an article I read explained it like this: When you don’t have assets built up (as young people do in their early-work life), you are most vulnerable. In case of an emergency, your family will have nothing to fall back on. So a life insurance is a good way to provide financial protection to your family even in your absence.

In another article, I learned that one of the wealth-building strategies we didn’t know about is to incorporate the use of whole life insurance as a strong basis for a solid investment plan. In fact, Investopedia defines this just the way you explained it:

Whole life insurance is a contract with premiums that includes insurance and investment components. The insurance component pays a predetermined amount when the insured individual dies. The investment component builds an accumulated cash value the insured individual can borrow against or withdraw.

A: If your investment of choice includes an insurance feature, it’s hard to say that you end up “losing” or “earning less”. There’s a guaranteed face amount***** or insurance amount in case of death, plus you can avail of riders****** or additional benefits like critical illness, hospital expenses and disability benefits. You could benefit from it in the long run.

C: Going back to my mishap… Needless to say, my experience made me afraid to invest again. So I just keep my money in a bank. However, it does make sense to also invest some of it especially if I were to increase the value of my money.

What are my other options? I’ve thought about bonds and stock options. But the truth is I know nothing! What advice could you give me?

A: All investments involve taking risk. It’s important that when you go into any investment in stocks, bonds or mutual funds you have a full understanding that you could lose some or all of your money in any one investment. There is really risk in investment, and there’s no guarantee.

It is often said that the greater the risk, the greater the potential reward in investing, but taking on unnecessary risk is often avoidable. An investor’s best alternative to protect themselves against risk is by spreading their money among various investments, hoping that if one investment loses money, the other investments will make up for those losses. This strategy, called “diversification” which can be neatly summed up as, “Don’t put all your eggs in one basket.”

Once you’ve saved money for investing, consider carefully all your options and think about what diversification strategy makes sense for you.

Diversification can’t guarantee that your investments won’t suffer if the market drops. But it can improve the chances that you won’t lose money, or that if you do, it won’t be as much as if you weren’t diversified.

Just don’t put “all your eggs” in a bank because imagine if you have 2 million Philipine Pesos (Php) saved in a bank then all of a sudden, it gets bankrupt. Take note that the maximum loss that could be covered by banks in the Philippines is 5oo thousand pesos…

Or suppose that a depositor has millions of money in a bank during times of economic and financial uncertainties. Imagine if the bank discovered that the depositor died- accounts will automatically be frozen, no cash withdrawal could be done and to top it all, the money is subject for estate tax. 

I must say that it would be the main difference between investing in a bank or in a financial services company like where I work (he he): one advantage about investing in a financial services firm is that the client has the possibility to choose that all proceeds may be free from whithholding and estate taxes. Unlike in banks, where the gains an investor acquires are subject to those two taxes, aside from the “normal” ones the government would require.

This is not to discredit banks, but just to put things in perspective with your readers.

C: Let’s say I finally dare to invest in mutual funds. Should I also diversify according to my objectives? For instance, I want to save for a down payment to buy a house? Or I’m thinking of saving for my son’s college education? That’s already 2 objectives.

Won’t I end up paying more than I should, or in other words: won’t I end up earning less than I could? 

A: The answer depends on when you will need the money, your goals, and if you will be able to sleep at night if you purchase a risky investment where you could lose your principal.

For instance, if you are saving for retirement, and you have 35 years before you retire, you may want to consider riskier investment products, knowing that if you stick to only the “savings” products or to less risky investment products, your money will grow too slowly—or, given inflation and taxes, you may lose the purchasing power of your money. A frequent mistake people make is putting money they will not need for a very long time in investments that pay a low amount of interest.

On the other hand, if you are saving for a short-term goal, five years or less, you don’t want to choose risky investments, because when it’s time to sell, you may have to take a loss. Since investments often move up and down in value rapidly, you want to make sure that you can wait and sell at the best possible time.

Time is money.

As we would say in my company, “The best time to invest was yesterday, the next best time is today. And the worst time is tomorrow. Because sometimes tomorrow becomes never.”

-The End-

Mr. Martil is a financial adviser in a leading international financial services company. He is a loving husband and father to his family. Likewise, you were able to witness what a kind and reliable friend he is- generous enough to spend time with Colorfulifesite Blog and answer some of the very basic questions about investment and mutual funds.

Glossary:

*UITF- Unit Investment Trust Funds (UITFs) are ready-made investments that allow the pooling of funds from different investors with similar investment objectives. These funds are managed by professional fund managers and are invested in various financial instruments such as money market securities, bonds and equities, which are normally available to bigger investors only. (Source: http://www.bdo.com.ph)

**VUL-Variable universal life insurance (VUL) is a form of cash-value life insurancethat offers both a death benefit and an investment feature. (Source: http://www.investopedia.com)

It is a life insurance policy that combines the features of variable life insurance and universal life insurance. Where the former constitutes a fixed premium insurance policy that provides a return based on the income performance of an investment portfolio. While the latter combines the benefits of an adjustable premium, adjustable coverage term life insurance, and a savings account. (Source: http://www.businessdictionary.com)

***Life insurance- Insurance cover that serves two major purposes: (1) to substitute for the insured’s income if he or she dies, and (2) to qualify the insured for favorable tax treatment. The policy holders buy insurance cover from an insurance company, and pay specific periodic amounts (premiums) for the term (duration or life) of the policy. If the insured dies before the this term is completed, a guaranteed sum (the face amount of the policy) is paid to one or more named beneficiaries. If the insured survives the term then, depending on the type of the policy, he or she may receive the full or a part of the face amount of the policy. (Souce: http://www.businessdictionary.com)

****Rule of 72- The “rule of 72” is a simplified way to calculate how long an investment takes to double, given a fixed annual rate of interest. You divide 72 by the annual rate of return you receive on your investments, and that number is a rough estimate of years it takes to double your money. For example, $1 invested at 10% takes 7.2 years (72 divided by 10) to turn into $2. (Source: http://www.usatoday.com)

*****Face amount- Sum of money for which an insurance cover is obtained, usually shown on the top sheet (face) of the policy. In life insurance, face amount is the sum paid on the policy’s maturity date, on the death of the insured, or (if the policy terms permit) on his or her total disability. (Source: http://www.businessdictionary.com)

******Riders- Additional clause, document, or slip of paper that adds, alters, amends, or removes the provisions of an associated or attached agreement or contract (such as an insurance policy) or a negotiable instrument. (Source: ww.businessdictionary.com)

Sources:

  1. Investopedia
  2. Business Dictionary
  3. “How Do You Make Money from UITF Investing?”, by Fitz, Ready to Be Rich Blogsite, available at: https://fitzvillafuerte.com/how-do-you-make-money-from-uitf-investing.html
  4. Unit Investment Trust Funds, available at BDO website: https://www.bdo.com.ph/personal/trust-and-investments/unit-investment-trust-funds
  5. “Doubling Your Money: The Rule of 72”, by Wes Moss, Advice IQ, USA Today, available at: http://www.usatoday.com/story/money/personalfinance/2015/04/25/adviceiq-doubling-your-money/26339307/
  6. “The #1 Wealth Building Strategy You Don’t Know About”, by Paradigmlife Blogsite, available at: http://paradigmlife.net/blog/the-1-wealth-building-strategy/
  7. “Are You Building a Strong Foundation for Creating Wealth?”, available at: http://www.firstpost.com/investing/are-you-building-a-strong-foundation-for-creating-wealth-2682980.html