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The Pinoy Financial Planning Guide Book 1 1226915393800302 8 PDF
The Pinoy Financial Planning Guide Book 1 1226915393800302 8 PDF
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TABLE OF CONTENTS
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PART 1
The first step in coming up with your financial plan is to compute for your net worth, this is done by
listing down all your assets and liabilities: Categorize your assets into current assets: assets that can
be utilised or sold within the next three months, and other assets: these are assets that you own in
which you wont and cant easily be sold. Current assets include your bank account balances, cash
on hand and the market value of your marketable securities likes bonds, stocks and mutual funds.
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PART 1
One key consideration in managing your net worth is to try to minimize if not eliminate
high-costs debt, one typical example is consumer borrowings from credit cards, the
following table illustrates the earnings you gain by placing Php 10,000 in a savings
account and interest expense of a Php 10,000 credit card balance.
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PART 1
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PART 1
PASALUBONG!
The many months or even years of
absence from our family and loved ones
during our overseas posting normally
would evoke a certain feeling of guilt at
homecoming. The result of this is that we
tend to overspend when we buy our
pasalubongs.
Does my 4-year old kid really need a cell
phone? How about the 6 one-liter bottles
of johnnie walkers for my kumpares, I
think my wife will like the 40 gms. 18k
gold bracelet i got her...
While there is really nothing wrong with
this, we need to understand why we do
the things that we do.
--- MY OFW EXPERIENCE
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PART 1
HELP
IN
Advertising and peer pressure plays a critical role in our perception of our needs and wants, consider a
bar of soap:
We buy soaps in order to make ourselves clean (a need), but a particular soap advertising contends that
being clean is not enough, we have to ensure that we are germ-free, thus, you need their product.
Another soap advertising claims that their product not only makes you clean, it also ensures your skin is
soft and smooth (to please your partner?), there is actually nothing wrong with this but if you consider
the additional expense involved, it may have an impact on how much would be your surplus (thus your
savings).
Prepare a budget plan by listing down all your household expenses, indicate the budgeted amount per
expense category, tracked your actual expenses on a month-on-month basis, include a column to
indicate actual and variance, this would prompt you if you are already going over the budgeted amount.
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PART 1
SAVINGS IS THE KEY TO WEALTH ACCUMULATION, every one peso you save today is going to make you
one peso richer tomorrow.
Income from an active pursuit of a job, profession or business is active income. There is no absolute
certainty that we may be able to maintain this indefinitely as certain fortuitous events such as illness or
accidents may hinder or worse bring it to a halt, our goal therefore, is to store our savings from our
active income so that we can draw on this reserve on any eventuality.
Allocating our savings into our three life portfolios (current needs, future needs, protection needs) is an
effective framework to help us maximize the benefits of our savings.
Understanding our own personal life goals is needed in the creation of the three life portfolios.
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PART 2
TO BECOME
WEALTHY?
*WEALTH is the ability to fully
experience life
---HENRY DAVID THOREAU
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PART 2
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PART 2
A definite and measurable level of wealth is important in the achievement of financial independence, this
table shows how much you need to accumulate to stop working and enable you to enjoy the things youd
rather do. The first column shows your average monthly household expenses; to have enough to support a
Php 50,000/month lifestyle for 15 years, you need to have a wealth base of Php 6.76M.
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PART 2
A.
B.
If you set aside two pesos each day and placed one peso on each of the two piggy banks,
which piggy bank do you think would have more money at the end of twenty years?
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PART 2
The normal answer would be the piggy bank that pays 0% (A) interest for the reason that
we cant open it. In our advisory practice in financial planning, we always advocate that
any financial plan that leads to an investment decision should be made with a specific goal
in mind.
Let me take myself as an example, i have a goal of ensuring that i have enough funds to
enable my children to go to the best schools in this country, and let us say they would be in
college in twenty years, i will now attached this goal to the one peso i placed each day
on the second piggy bank (B - the one that i can open anytime and pays 20%).
With a goal now attached to the second piggy bank, after twenty years, which one do you
think would have more money?
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PART 2
LIFE GOALS?
?car, ?house, ?college fund for children, ?set
up own business, ?comfortable retirement,
? financial independence, etc
VISUALIZING focus on the tangible benefits.
MEASURING attaching a monetary price tag allows you to measure your progress.
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PART 2
If i am 45 years old now, it means that i still have 15 years to build up a Php 15M
wealth base. In implementing my investment plan, i can now compute how much i
need each month in savings to achieve this goal, if we do our financial planning
this way, do you think it is now more achievable?
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PART 2
IDENTIFY
PROTECTION PORTFOLIO
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PART 3
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PART 3
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PART 3
For your future needs portfolio, the basic rule of thumb for selection
would be the timeline to your goals:
2 to 5 years Bond Funds (peso or dollar)
5 to 10 years Balanced Funds
More than 10 years Equity Funds
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PART 3
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Dear Reader,
Thank you for spending time to read this guide, although it may not be as extensive as i want it to
be, i hope that it has given you a broad understanding on how to lay down the framework for a
personal financial plan.
I would be coming out with a Book 2 soon after where i would be discussing specific suggestions
on how to create a future needs portfolio, please email me at acg@acgadvisors.net if youd like
to reserve a copy and please provide me with the following information which i would use as basis
for illustrations.
NAME, AGE, LOCATION, MARITAL STATUS, NUMBER AND AGES OF
CHILDREN, DESIRED RETIREMENT AGE, MOST IMPORTANT LONG TERM
GOAL.
In closing, please allow me to share a guiding principle which have a profound impact in my own
quest for financial freedom A rich man is not one who have the most, but is one who needs the
least.
Maraming Salamat,
Alijeffty C. Gonzales, CIS, RFP
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