Since my wife and I were late during the first day of the Truly Rich Financial Coaching Program, we wanted to make the most of the seminar by being early on the second day. Before 8AM, we were already on our way to Valle Verde Country Club. Since it was a Saturday, there was not much traffic jam and we arrived a little around 8:15AM. Thinking that we were early, my wife and I sat on one of the benches outside the room. I saw the room where we had the seminar yesterday and noticed that some people were already preparing the place. I thought to myself, maybe in no time they’d be done preparing the place and we will be sitting comfortably inside the room. After a few minutes, brother Bo arrived with his usual winning smile. He saw us and invited us to go inside. Thinking that he was going to where the waiters were preparing, we hesitated a bit. Only when he entered the OTHER room beside it did we realize that we were looking at the wrong room. When we followed Bo and entered the room, there were already many people inside, some of them having a great time drinking their morning coffee. I couldn’t keep from laughing at myself for thinking and being proud that we were the early birds for the day. 🙂
Basic Foundation of Financial Planning
The first speaker was Noel Arandilla, from International Marketing Group (IMG). He talked about the basic foundation of financial planning. He shared some tips to having better finances like increasing your cash flow, building long term asset allocation, how to compute the right amount of insurance that you need, and more.
I learned that there are only two things you can use to generate cash flow: time and money. We all have 24 hours in a day. But how you use your time determines whether you become rich or poor. For most people, the only time available to become rich is after work or during weekends, that is – spare time. It is very important to utilize the spare time that you have in money-making generating activities and not waste it on watching TV, sleeping, gossiping, and more.
Noel also shared that a person normally starts out in life with very little or no money but with lots of responsibilities. For example, he has to help his parents with household chores, he may need to send his younger bother or sister to school, or earn a living to help with the family’s finances . After a few years of getting his paycheck, the typical person would earn a little bit more each year while his responsibility gradually decreases. Once he reaches retirement age, all of his kids have probably graduated by then, hence he would have minimal responsibility. At this stage, he’s supposed to have money working for him to fully enjoy the remaining years of his life. That is the purpose of financial planning.
Be the Bank!
May I tell you a little secret? Do you know how the bank earns money? Let me illustrate the answer by using an example. After spending 2 years as an OFW, you have a little extra cash that you don’t really expect to use for the next 30 years. Let’s say you have 100,000 pesos in total. Now, being a saver, you deposited the whole 100,000 pesos into a time-deposit account at 5% annual interest for 30 years. Right after you left the bank, a business man came in, asked the banker for a loan of 100,000 pesos payable in 30 years at 15% annual interest. The banker than says “OK”, took the 100,000 pesos from your time-deposit and gave it to the business man. After 30 years, the bank’s 100,000 pesos loaned to the businessman has already earned around 6.4 million pesos including interest, while your 100,000 pesos invested in time-deposit earned only about 400,000 pesos. When you claim your time-deposit earnings, the bank give’s you the 400,000 pesos, then keeps the remaining 6 million as profit. I’d love to be bank! 🙂
How you’re losing money from your savings account
In the Philippines, most people still invest by saving their money into banks over a long period of time. The bad news is this. Banks are offering very minimal interest rate on savings and time deposits. With less than 1% annual interest rate on your savings account, what future does your money hold? Counting average inflation of 7% per year, you are actually losing money at the rate of -6%. This is because of inflation. Inflation is the effect of steadily appreciating prices of goods. For example, your 100 pesos can buy 5 loaves of bread 20 years ago. But today, the same 100 pesos could NOT even buy 1 loaf of bread. The same thing is happening, when people say “if only I bought that piece of land 20 years ago, today, I would already be a millionaire!”
Start early. Invest your money for the long term.
I love the way Noel spoke about ordinary experiences and making them as great examples of interesting financial decisions. For example, you get your 13th and 14th month bonus today worth around 40,000 pesos. The question is, would you save and invest it on a mutual fund at 10% average interest rate? Or would you buy another NEW mobile phone? For some, the answer is simple – buy a mobile phone for “pogi” (handsome) points. For others, they would hesitate quite a bit but eventually give in, saying “I’ll just invest my next year’s 13th and 14th month bonus. For now, I’ll buy myself a gift. I deserve it. My brand new cellphone, here I come!” For those a little bit financially savvy, they might invest it through mutual funds, or stocks, potentially earning even better average annual returns around 15 – 20%. For most people, it is hard to invest because earning an interest over a long period of time is NOT tangible RIGHT NOW and you need time to make it work. The delusion of instant gratification is the enemy of long-term investing.
Money is flowing
The second speaker is also from IMG. He shared his personal observation about how rich people in the Philippines spend their money. He noticed that Henry Sy, Lucio Tan and other billionaire tycoons move their money around. In a way, they are actually just buying from themselves. For example, Henry Sy who owns the very popular SM department stores, is renting mall space for his department stores from SM properties, which is a different company but still owned by the same family. When SM properties build new malls or residential buildings and need money, who do they ask money from? Instead of borrowing from other banks, they borrow from their own bank – BDO, which, is owned by the same man, Henry Sy. The same is true with Lucio Tan. When his Philippine Airlines and several tobacco companies need money to finance its projects and investments, from which bank does it borrow money? Of course, through Allied Bank or Philippine National Bank, which Lucio Tan owns a stake. So you see, money is just flowing around, being controlled by the same rich people who owns most businesses, selling high quality goods and providing world-class services for our countrymen. Wouldn’t it be nice to be able to do the same thing? Wouldn’t it be nice to buy from yourself and save on costs? You might even want to give yourself a hefty discount as part of your loyalty program. Who wouldn’t want to be a loyal customer to one’s self? 🙂
The idea of mutual funds, I learned, is making investing available to ordinary citizens. Each person invests a small amount, as little as 5000 pesos. The money from all the investors are then pooled together and invested into money generating assets like bonds, stocks or both. The money is managed by professional fund managers. The goal of the fund manager is to make money for the small investors. Whether you invested big money or not, you earn the same profit percentage as that of the group.
This is particularly beneficial for ordinary citizens who don’t have much time and money to participate actively in managing the investment and content to just leave their money to professional fund managers.
One way to minimize risk, is to use an investing method called peso cost averaging. It is an investing technique based on the assumption that since you’re unable to time the market, you just try to average out the risk by investing same amount of money every month or every quarter to take advantage of the times when the price of the stock/net asset value per share (for mutual funds) becomes very low. Even though the price is fluctuating, or is going roller coaster, the risk is minimized as the same amount of money can buy more shares when the stock price is low. When the price is up you can either take away your profit/earnings or leave it there to earn compound interest. It is advisable to maintain a long term outlook on your investments like a 10 or 20 year time frame in this scenario. If you need the money within 1 year or 3 years, it is best to leave it at the bank where it is safe and liquid.
There are also different types of mutual funds: 1) bonds & securities, 2) stocks & equities, and 3) combined. Mutual funds which invest in company or government bonds & securities are stable but offer limited earning potential. These funds are especially designed for those that are risk-averse and those that are already retiring and don’t want to spend their time analyzing funds for themselves. The mutual funds which invest in stocks have high growth potential but also entails higher risk especially during times of booms and recessions. This is advantageous for those still young and can tolerate the swings in the market that even if they lose money, they can still go back up. The upside is that if they make money, they earnings is also big.
Passion, Hardwork & “Angel” Investors in Business
The third speaker was a successful businessman. His name is Ronnie Siyasoyco. He has built several successful businesses to which he attributes most of his success today. He shared personal stories on his many ups and downs and a little bit of luck dealing with business failures, learning from them and enjoying his successes.
Ronnie got started selling “uling” (charcoal) one summer day. He and his brothers experienced being laughed at by their friends because of their dirty clothes which was battered from their having to lift several sacks of charcoal each day. The painful thing, according to Ronnie, was seeing their friends make fun of them, and them not being able to enjoy the seemingly “easy” lives that their friends had. Many times, he went home crying, asking himself, why they are very poor. But with a powerful & positive attitude, he worked hard, ignored the joke from their friends, even hired some of them to do the charcoal delivery themselves and earn extra money. That summer, he and his brothers were able to sell 3 truck loads of charcoal. Not an easy feat for 3 young high school boys.
In those early days, he learned the value of hard and honest work. Growing up in a family of entrepreneurs, breakfast and dinner time was shared and business ideas were freely discussed among the family members. His mother would always ask him if there’s anything he needs to do for the day. When he starts answering “nothing”, he would be scolded and the words “there is ALWAYS something to do” would then be ingrained in his head. If you have nothing to do, you find something to do.
Very early in his life, he had asked his parents why they were so poor. His mom would say that they are NOT poor. They eat 3 times a day. They go to school. They have the necessities of life. His dad would add that the only legacy that their parents can pass on to their children is good education. So it was in their hands to make the most out of it. If they squander the opportunity, their lose will be their own doing, not the fault of their parents.
Ronnie also shared his personal story on how he lost 80 million pesos through a cancelled deal and several outside forces devaluating the peso and skyrocketing the value of his loans. For one month, he was not able to sleep very well. That went on and on, until he prayed and surrendered his problems all to God and a miracle happened. Since he was not doing anything one day, his friend invited him to drive him to meet up someone. He was just listening there watching his friend speak to this very rich businessman, when the businessman suddenly asked him, “you, gentleman, what are you doing here?” To which he replied that he was accompanying his friend. He asked again, “what do you do? what business are you in?” and so he answered again and provided a background on his business. And so on until the businessman asked how his business was doing and how he can be of help. At the end of the conversation the businessman offered to help by giving him a cheque, enough to help him pay back his loans and get his business moving again. He referred to this businessman as an “angel investor”. The moral of the story he says, is saying “yes” to your friends when they ask you to drive them. You never know, an angel might be waiting on the other side for you. 🙂
What I appreciated about Ronnie is how he passionately shared about his ups and downs. His story is truly inspiring.
The last speaker of the day was Bo Sanchez’s internet marketing mentor, Jomar Hilario. Jomar talks fast and is very entertaining. He shared his experiences selling concert tickets through online internet marketing. He also mentioned his initial attempts to enter the world of marketing through selling “forever living” products, carrying a big box with him, seemingly always in “high” state, shouting positive affirmations to himself.
After reading from Robert Kiyosaki’s book that one needs to visit at least 100 properties to buy just 1 house, he visited houses one after another and took a lot of pictures of those houses using his old film camera. At the end of the day, he was exhausted.
At some point, he also mentioned the story on how he spent 80,000 pesos to attend a wealth seminar in Singapore, bought the training materials, only to find out that the ideas on the training materials are the same ideas he had already done before when he promoted concert tickets in 30 days to fill a whole coliseum, all by himself.
Lastly, Jomar extended an invitation to his upcoming Internet Marketing Seminar and his Online Marketing Workshop Club. You may learn more about his seminars by visiting www.jomarhilario.com.
Action starts now!
It was long day. With lots of financial information to digest, I had to prevent myself from suffering “information overload”. Overall, the Truly Rich Financial Coaching Program was a very good seminar, showcasing the different financial vehicles and opportunities on how to invest and make money. From here, the only thing to do is take action!
Watch out for the next articles in the coming weeks and months, as I try to share my progress and experience taking action on some of these financial lessons.
Do you like to attend Bo’s Truly Rich financial seminars but you are based outside the Philippines? Here’s your chance!