Saturday, March 10, 2012

Value of Personal Finance as Advocates Promote Validated by Orman's Visit, A Wake Up Call to Skeptics

By:  Gilbert M. Forbes 

Photo from www.
Personal awakening on the value of managing finances well came to time when I was almost broke seven years ago.  The toll of financial mismanagement is great because until now, instead of being on a savings stage and creating passive income, I am still struggling on getting out of debt the fast as I can.

Slow as it may, but we are doing well.  From having debt to seven major creditors, we are now trying our best to get out of the remaining three of which the house and lot where we reside is included.  From having a negative net worth, we are now experiencing a positive net worth for three years and it is continuously increasing. 

With the difficulties our family has to pass, since, experiencing for the first time having a positive net worth three years ago, I was inspired to include financial literacy in the work place as one of my personal advocacy.  It later included this medium.

However, fellow workers acceptance of the concept is still weak.  I could still remember one time that a fellow worker said in defense of her colleague that I should understand that we have different set of values when it comes to finance.  That we should just leave it that way.

The problem however, is due to being enslave to credit, as a result of complicated lifestyle their productivity in the work place have been affected tremendously.  Some have to do business in the work place even when it is greatly against the work place policy and ethical standards. Their lukewarm attitude towards the value of simple living and managing finances only proved them wrong upon the visit of Internationally Acclaimed Personal Finance Expert, Suze Orman who warned Pinoys of their spending habits which is patterned after the Americans.  

“ Filipino consumers should avoid going the way of the US, which had allowed its economy to grow on credit (card) and lending to people who could not afford homes and have been grappling with more people “on a highway to poverty.” “Build this country on cash (meaning save more and more) so that it could never collapse, then you can change your lives,” said Orman, who was raised in an unruly Chicago neighborhood and who used to wait on tables and sleep in her car before transcending poverty as a broker at American investment house Merrill Lynch.

The American personal finance guru spoke strongly against incurring debt to purchase non-essential things, noting she had watched her own country fall apart because of this.  She said consumers must distinguish between good and bad debt, good debt being amortizing to one day own a home.
I could say however is cautioned must be undertaken when applying for a house and lot.  Be sure that your budget and ability to pay is considered or else, home amortization would also led you into trouble.  Investing in real state is better if it will generate income enough to pay for itself or you are renting a home and the rent is more than enough for rent to own financing.  If not, its better to invest in agricultural lands which could be must cheaper particularly in rural areas.

Orman also advised OFW’s to consider whether sending money to adult brothers or relatives would only be encouraging dependence. “Is it possible that it’s hurting them rather than helping them?,” she said, adding that some people may not reach their potential or may not be driven into making contingency plans because they have remittances to fall back on.

But she stressed that for parents, it’s a whole different light, as she herself would want to take care of her mother. For young people, they should realize that their best commodity is time and that by starting to regularly save a portion of their earnings regularly, they will accumulate more wealth with the help of compounding, which means earnings from an initial investment are reinvested over and over, according to Orman.

With the help of compounding, she said a person who would set aside $100 (or Php100) a month starting the age of 20 would end up with $1 million (or Php1 million) upon reaching 60.  But if one waits until age 30 to start setting aside, the same person will end up with only $300,000 at age 60. This 10-year delay in starting an investment plan has thus cost the person $700,000, she noted.

“Every single person in this world has the ability to be more and have more and it’s the choices that we make about ourselves that become our net worth,” she concluded. I am just sad that I am already 20 years or more late because until now, I am still settling for the eradication of my debt.  I wish, I could have learned all of these when still new in the service and fresh from college and from the success of having between ends meet.

If it would have been, we are already millionaire and could have been helping more and the nation instead of being still in-debt.  Thanks to the strong will that God has provided us through the years.  His guidance and presence gave us enough wisdom to delay gratification though at times we still had some buying sprees.

Reference:  Dumlao Doris C., Philippines to shine in global community soon, says finance guru Suze Orman, Philippine Daily Inquirer, Feb. 28, 2012.

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