Five Types of Goal-Setters

The New Year is coming and you're probably writing down your New Year's Resolution. The popular ones that people usually write about are love, health and diet to make them feel better about themselves, kicking out of a bad habit (smoking, drinking, stealing someone's belongings, etc.), and money (or anything related to it). You want to achieve these goals for the next year and pray to God (or Xenu, if you're that weird Scientology dude/troll I've argued over the internet) that it would happen unlike the previous years (and also the previous year, and the year after that, and also the last year also after that) where it never came to much fruition. Seriously, though, what really is the point of a New Year's resolution?

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For the formality of knowing that you can plan and be miserable by the end of the year knowing that you can't achieve it?

But before we jot down those words, let's evaluate ourselves first if what type of goal-setter we are. Here are the five types of goal-setters:

1. Obstacle Finder

Ever heard anyone (especially yourself) say these lines: "I can't do it because [insert excuse here]", I'm not going to invest my money because the market might go down", "I have lack of knowledge in [insert lack of knowledge here]", I don't have enough [insert money or abstract noun here] so I can't [insert New Year's resolution here]". Chances are you're focusing more on the obstacle rather than the goal, which would result to stupor inactivity that would lead to you not fulfilling your New Year's resolution.

2. Complainer

These are the goal-setters that like to play the blame game. They usually say something like this: "I'm poor because of the government and I can't do anything about it", "Corrupt politicians are the ones making us poor people poorer" while the complainer sits idle all day drinking beer, "I blame it on my parents because I was born poor" and more annoying banters you probably here from the drunk tambays sitting on the wooden bench of the sari-sari store near you. Although I agree that there are some external factors and people that can cause you to be dissuaded in achieving your goals, it all boils down to the internal factor if you'll let all the negativity sink in to your head and making your goals unattainable. Don't listen to the devil inside your head. Fight it.

3. The Goal-Watcher

Us Filipinos really have this habit of commenting "I'm proud to be Filipino!" on websites after knowing one of our kababayans achieved success internationally in singing competitions, sports, and others. Now, I love my country, sing the national anthem as patriotic as possible in the shower, and happy for the success of our kababayans, but adoration and pride-leeching of the success of others to the point where you consider it as your own is, ummm... for the lack of better term and euphemism "pitiful?". Or maybe I should use pathetic? Hey, am I being offensive now? Okay maybe I should stop. The point here is that focus on achieving your own goals rather than others. Manny Pacquiao wins another fight and you feel giddily excited about it, but does that get you closer to your goals? You're just satisfied that your friend who has now a successful business (that was something you wrote in your New Year's resolution also) while you sit there in stupor silence. If your goals relate to that person who found success, then why not use it as a source of inspiration for you to act upon and not just be smiling creepily and be lazy about it.

4. Mr./Ms. Planner

Imagine yourself writing your goals for this 2015 in a sheet of paper. You put down "I'm going to be rich." So you educate yourself in real estate, stock market, and even Forex.You have all that knowledge but you can't do it because [insert reason here]. The problem here is that you have all the plans set out and the sufficient education for you to do it, but you just can't execute it. You're just in the level of planning (hence the name Mr./Ms. Planner if you didn't get it right away). To put it short: Education without Execution! If you change that "without" to "with", then you become (see below).

5. Mr./Ms. Clarity

When you're this type of goal-setter, then, no doubt you have educated and acted on achieving your goals. You have practiced Wisdom not knowledge. Your chances of achieving your goals is higher than those of the other types. You set out a goal of investing one hundred thousand pesos in a year, and you do your best even through the struggles and hardships.

Now, which goal-setter are you? And which goal-setter would you rather be?

Post is inspired by Series 2 of The Wealth Academy.

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Solutions for your Debt

I posted Causes for Heavy Debt, now I'm going to post a dog eating a cat.

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"Helps me human!"

Oh, and solutions for your debt.

1) Create your Budget and STRICTLY follow it - "Well, duh. This is so freaking obvious." It might be but some people still lack the sense that seems common to you, imaginary-character-that-I-just-made-up-in-my-head. Don't go all spending your money the moment your pay day comes. Manage your money first so you won't have any problems in the future. If you don't, there's a high chance you will borrow money from a friend or get a loan because of lack of management. May I suggest having a jar system.

2) Simplify Your Lifestyle - spend below your needs. If you can't save some money anymore, try eliminating those expenses that are considered wants. Yes, daily visitations to J. Co. or Starbucks is wants. If you have needs that affect your savings, better find a cheaper alternative. You can survive without buying a sack of Ganador rice. 

3) Pay Off High Interest Rates - if you have multiple loans and debts, I suggest you pay off the ones that take a high interest charge like credit card debt. The reason is because high interest debts (or any interests for that matter) compound over time which reallllllllllllyyyyyy is a pain in the butt if it increases.

4) Don't Pay the Minimum - Speaking of credit card debt (or any other debt with interest for that matter,) don't pay the minimum, pay as high as you can. You're just going to prolong your debt if you don't which, again, compounds. This avoids the compounding interest that is working against you.

5) Stop Bringing Big Cash - imagine yourself walking in SM and you have Php 10,000 fresh from your ATM. You saw something that catches your eyes and you have the tendency to buy that thing. You will start reasoning with yourself that "it's okay I can earn the money again." So you bought it. Then, you came across your favorite restaurant. That little voice in your head then tells you to "go eat, you have lots of cash anyway." What you are not realizing is that you just disrupted your budget (if you have a budget) and bought things that you didn't plan to buy. If you have a small amount of money in your pocket, you would think twice in buying stuff.

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Causes of Heavy Debt

A lot of people don't realize these symptoms that can cause heavy debt. Sometimes, they do realize it but they just don't know any other way for their finances. Let's check if you have some of the dreaded symptoms of Heavy Debtitis.

1) Spend More than They Earn - a lot of people have the lifestyle of the rich but the salary of the poor. Too much nightlife,

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Not pictured: Social Interaction

eating out all the time, money for their sugar daddy/mommy, and going on a trip without a definite budget are just a number of the many reasons why people fall into heavy debt.

2) No Emergency Fund - I have already talked about emergency fund before here and here so I won't elaborate further more. What I will elaborate is how people fall into the debt trap without this fund.

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It's also a good trap for bears

When emergencies happen, most people's solution is getting a loan, and this is an emergency so it's not really something you have prepared. So, of course, your budget gets disrupted (IF you have a budget to begin with).

3) Instant Gratification - you know that feeling after you got your paycheck for the month and you decide to buy something, like a camera, smartphone, or lots and lots of chocolate as a reward for your hard work and you forgot (or not even thinking) that you have a problem to face in the future like healthcare when you're old, or tuition for the kids in college, or a retirement fund. Yeah, this is what I mean.

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Can't really blame you on the chocolate part

4) In Search for Recognition and Fame - you know that friend whose always buying new stuff like that new laptop he/she always brings, five smartphones which he/she just only uses one, that expensive iPad that has all the not free apps (also including the blender app for his/her milk shake),

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It's for bringing all the boys in the yard.

always going out of town even if he/she has no money, buys everyone food, throws a party every week just so he/she could feel important in the crowd. Everyone drools at this guy/gal. He/She looks well off. What you're not seeing is the underlying horrible debt that they're facing.

5) Compounding Interest is Working Against You - let me give you a brief definition of compounding interest first (I don't want to mash you with a lot of jargon). Compounding interest is the interest added to the principal of a deposit, investment or loan so that the added interest also earns interest from then on. If you invest this will work WITH you. If, however, you will get a loan, not pay your credit card debt for a long time, then Compounding Interest is your ENEMY! I'll show you an illustration using the power of 72 invented by my dear old friend Albert Einstein which determines the year your money doubles (if working with you) or divides into half (if working against you).

The power of 72 

The Power = 72

The example interest rate per annum = 60%

Your sample money = Php 100,000

72 / 60  = 1.2 years is when your money becomes half

so Php 100,000 after 1.2 year = Php 50,000

Php 50,000 after another 1.2 year = Php 25,000

Another 1.2 year and you would probably give your money a eulogy.

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"I remembered the days when my money was 100,000, but debt took his life."

6) Believe Debt is the ONLY Solution - this is a problem with a lot people who aren't financially educated. Can't buy food for your family? Solution: UTANG! Son was hospitalized because of an accident? Solution: UTANG! Can't pay children's college tuition fee because of unpreparedness? Solution: UTANG! Electric Bills are overdue? Solution: UTANG! And then the heavy debts bury you 6 feet below the ground.

If you have these problems, I suggest you consult yourself first (no, not a financial adviser). I believe that the best financial adviser is YOU. Evaluate yourself first and avoid these problems.  I'll post Solutions in another post.

Post was inspired by Series 7 of Wealth Academy's Debt Management. A seminar for mindsetting people to avoid debt and solving debt.

Want to attend the seminar? Know first about the company here and my realizations here after I attended the first seminar.

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5 Things to Have Before Investing

I know I told you in a last post that I'm going to teach you on how to invest; but before you do that, let's talk about the prerequisites of investing first.

1) Healthcare and Life Insurance - basically, this is for security purposes in case something happens to you. Know that this is not for you but for your family. You invested and suddenly died, your investment becomes funds for your funeral, paying off estate taxes, any existing debts, and other expenses that your family will face. If you have insurance as back up, your investment can be passed on to your family without them worrying about the high estate tax to get your investment. You get sick or hospitalized, your healthcare will come running for you to help.

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"Thanks healthcare and life insurance"

"No problem, bud. Just pay on time or will give you a fee if you don't."

And we know how expensive hospital bills are, especially if you live in a country where there is no free healthcare (at least the taxes aren't really high in the Philippines unlike some country with 50 States).

2) Emergency Funds - I have mentioned Emergency Funds in my previous post here and here. You probably get the idea based only on its name. If you don't, I'll give you a hint: It's for EMERGENCIES.

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Mind Blown!

Save up to 3-6 months worth of your monthly salary. In case emergencies do happen, you already have the money to pay and not use your investment as collateral. It just simply avoids put and take and your investment can enjoy the power of compounding interest.

3) A Goal - if you are one of many people that'll say "I'm going to invest because my money grows" then I'll ask you this question: "Your growing money for what?"

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"To grow even more money, me boy!"

A goal might sound obvious but there is amazingly a lot of people who invest that don't have a goal in mind. They just invest so their money can grow and think about their goals later on. The goal post is there, try and hit it.

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"I'm just here for decoration."

This also helps to avoid redeeming your money from anything that you just come up on a whim that you'd like to buy.

4) Zero Debt - if you have any existing debts my advice to you is simple: DON'T INVEST, YET! Better eliminate all of your debts first because if you have debts that gain interest over time, it will be a problem for you to pay it off and you'll have no choice but to take your investment out. "What if I have debts that have no interest?" Eliminate that also. You usually get that from friends or a 0% interest promo from some company or government agency like SSS's Calamity Loan. But of course, those with interest rate should be prioritized first. And I'm going to be biblical here: Romans 13:8 Let no debt remain outstanding, except the continuing debt to love one another, for he who loves his fellowman has fulfilled the law.

5) A Saver's Mindset - probably should have put this in the number one list, but I didn't really specify that this is in the order of importance, but, you know, this is really important than the others since it's going to involve your thoughts and emotions that lurks in the inner dwellings of your mind.

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The inner machinations of your mind are an enigma.

Internally, your emotions will be the one that you have to look out for, because all logic and reason disappear when that starts infecting your brain. And do not correct my choice of words. Your emotions can trigger bad habits that'll leave you emptying your pockets like shopping when your depressed as an example. Practice frugality and thriftiness. Make a point that after getting your salary, commission, royalty, or blood money you go save 20% of it.

I hope this helps! :)

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Why Your Savings Account is not Safe for Your Long Term Goals

I'll ask you this: Do you have dreams in the future? Like a car, a house, proper education for your kids in college, travel around the world, or a helicopter equipped with laser cannons and gatling guns.

Now, unless you won your dreams in a contest or someone really generous gave it to you, you will never get it instantly. You'll probably have to wait for years before you get the amount of money for your dreams. A lot of people would actually save that money in a savings account because it's "safer" than putting it in investments. I would agree that it is safe to put your money in a savings account ONLY if it's for your short-term goals (like a year or less). Now for long-term (5 years and more) and medium-term goals (3-5 years), and (I can't emphasize this enough) YOU WILL LOSE MONEY!

But why?

Well, subheader. I will tell you two enemies that will stand and hinder your finances.

First Enemy: Taxation

If you have a savings account, you are well aware of the 20% withholding tax looming in your bank account. If you don't have a savings account, seriously? You don't have one? Go get one now!

Of course, your savings account has interest (depends on the bank but it's usually around 1% or less) but that interest is deducted by that 20%. I'll show you an illustration which will involve me doing what I'm allergic in doing: MATH.

For example, you have Php 100,000 for your son's college tuition who's still in grade 6 and you put in a savings account with 1% interest per annum (for examples sake).

Php 100,000 x .01 = 1000

You have earned 1,000 pesos. Now let's tax it.
Php 1000 x .20 = 200
Php 1000 - 200 = 800
Php 100,000 + 800 = 100,800
That's what you've earned. Next comes the worst enemy of all.

Second Enemy: Inflation

Inflation (if you forgot about your Taxation class in college and Economics class in high school) is the increase of prices of goods and services in a given economy for a period of time. Basically the one responsible for the increase of prices in your favorite restaurant, why rice gets expensive over the years, and why a liter of coke 5 years ago was just 22 pesos but now it's 27.

How does this affect me?
Well, sub-header, if you must insist. I have to do MATH again.

Let's use Php 100,000 again, but this time with the inflation rate of 6% a year (based on the estimate of the Philippine's inflation rate for the last 10 years).

Php 100,000 x .06 = 6,000
Php 100,000 + 6,000 = 106,000
Now let's pair it with your money in your bank account.
Money in the bank after a year = Php 100,800
Money value of 100,000 after a year = Php 106,000

There is a large amount of discrepancy between the two in just a year. Your money's purchasing power (the value of a sum of money) lowers, and whatever you can buy with your 100,000 last year cannot be purchased this year.

If for example you want to buy a car but your money isn't enough yet so you save it for five years in the bank. What would happen in five years? (I have to do MATH again... sheesh.)

I'll just simplify the equation for this one so I won't include the deduction of tax.

1%-6%= -5%

Php 100,000 x -5% = -5,000
Php 100,000 - 5000 = 95,000 Purchasing power of your money in the first year.

Php 95,000 x -5% = -4,750
Php 95,000 - 4750 = 90,250 Purchasing power of your money in the second year.

Php 90,250 x -5% = -4,511
Php 90,250 - 4513 = 85,737 Purchasing power of your money in the third year

Php 85,737 x -5% = -4,287
Php 85,737 - 4,287 = 81,450 Purchasing power of your money in the fourth year

Php 81,450 x -5% =  -4,073
Php 81,450 - 4,073 = 77,377 Purchasing power of your money in the fifth year

Your money's purchasing power is deducted and won't be of no use for that new car that you really want, your kid's college education, your dream house, or that helicopter with laser cannons and gatling guns.

But what should I do?

Don't worry sub-header. There's a way. It's called INVESTMENT. On my next post I'll tell you about how to invest.

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