FINANCIAL

LITERACY
REALITY CHECK
ANG PERA, PARATING PA LANG…
PAALIS NA!
NABUBUHAY A-KINSE,
A- TRIENTA
RASON:

“Culprit” Instant Gratification

PERSONAL FINANCE & FINANCIAL LITERACY
Is nothing but knowing How to keep what

YOU earn and do More with what you Keep

FINANCIAL LITERACY
is understanding how you can build
your personal wealth
What is Financial Independence?

What do you mean by “financially literate?”

What is Wealth?

Kailan ba maituturing na “mayaman”

na ang isang tao?
 Where does your
Money come from?
CASHFLOW QUADRANT
(Four ways that money may come your way)

Work for somebody else Go into business

Work for yourself Make your money

work for you
RAT RACE
ROBERT KIYOSAKI
Author, “Rich Dad, Poor Dad”
CASHFLOW QUADRANT
(Four ways that money may come your way)

Work for somebody else Go into business

Work for yourself Make your money

work for you
FAST TRACK
CASHFLOW QUADRANT
(Four ways that money may come your way)

Work for somebody else Go into business

Work for yourself Make your money

work for you

ROBERT KIYOSAKI
Author, “Rich Dad, Poor Dad”
 CASHFLOW QUADRANT
(Four ways that money may come your way)

Work for somebody else Go into business

Work for yourself Make your money

work for you

ROBERT KIYOSAKI
Author, “Rich Dad, Poor Dad”
 CASHFLOW QUADRANT
(Four ways that money may come your way)

Work for somebody else Go into business

Work for yourself Make your money

work for you

ROBERT KIYOSAKI
Author, “Rich Dad, Poor Dad”
 CASHFLOW QUADRANT
(Four ways that money may come your way)

Work for somebody else Go into business

Work for yourself Make your money

work for you

ROBERT KIYOSAKI
Author, “Rich Dad, Poor Dad”
 Where does your Money go?

Accounts
payable/ INCOME
Others
Savings

Support for
Parents, Re Insurance
latives Premiums
Your
Children’s Household
Education Expenses
FACING THE REALITIES
 Where are you now?
Prepare your Personal Financial
Statements or Statement of Assets &
Liabilities (SAL)
Personal Income/Expenses Statement
Salary
Interest Income from Savings and Time deposits
Income from Investments in Government Securities & stocks
Income from Other Assets
Less: Expenses
Food
Rent
Monthly Amortization for housing, car & other loans
Utilities
Insurance Premiums
Allowance of children
tuition fees
Other expenses
Net Income
Less: Personal Income Tax
Net Income after tax
FINANCIAL PLANNING
➢ The benefits of having a sound financial plan:

• It can help you avoid

mistakes/ sidetracks

• Helps you make smarter

decisions

• Can insulate you from the

turbulence in the economy

• Makes money work for

you!
INCOME EXPENDITURES CAN BE
CLASSIFIED AS FOLLOWS :

Consumption
Protection
Savings
Taxes
 Statement of Assets & Liabilities
ASSETS
Cash (Cash on hand, bank deposits,Coop deposits, etc)
Properties that you own (House, land, car, jewelry,etc)
Receivables (mga pautang)
Investments (T-bills, T-bonds, shares of stock, Coop Capital,etc.)
Insurance & pension and academic plans.

LIABILITIES
Loans you owe your relatives & friends
Housing loan
car loan
credit card debt
all payables & other loans

Total Assets – Total Liabilities = Net Worth

The CASHFLOW GAME

INCOME

EXPENSES

ASSETS LIABILITIES
 CASHFLOW 1
Job or
Profession INCOME

EXPENSES

ASSETS LIABILITIES

- Larry Gamboa
Think Rich, Pinoy!
 CASHFLOW 2
Job or
Profession INCOME

EXPENSES

ASSETS LIABILITIES

- Larry Gamboa
Think Rich, Pinoy!
 CASHFLOW of the RICH
Job or
Profession INCOME

EXPENSES

ASSETS LIABILITIES

- Larry Gamboa
Think Rich, Pinoy!
FINANCIAL LIFE PHASE
4
Retirement

3
Fine tuning

2
Build-up Where are you now?

1 Where do you want

to be in the future?
Start-up
KALAYAAN
SA
KAKAPUSAN
(KsK)
RULES
SIMPLE RULES IN FINANCIAL
FREEDOM
Rule 1: Pay yourself first. „YOU” is your
first source of Capital

SAVINGS
SAVE!!!
Redefining Savings
It must be defined as
an EXPENSE.
It is an expense that
BUYS your FUTURE.
SAVINGS

Saving is a conscious
and deliberate way of
setting aside a portion of
the personal income.
EQUATION

Y- Income
_
S - Savings

C – Consumption
EQUATION

Y- Income
_
C – Consumption

= S - Savings
KsK Rule #2
Define your Financial Target @ each Life
phase
 RULES IN SETTING
GOALS
Set
State it
Put it specific
in Monitor
into timetable
positive progress
writing for each
terms
goal
OBSTACLES TO SAVINGS

Procrastination - delaying savings

or putting savings off for another
time;

Poor Spending Habits –

includes spending on
unnecessary items;
Impulse buying;
hedonistic lifestyle
OBSTACLES TO SAVINGS
Culture of Dependency -- Being
overly dependent on others

Lack of Financial Literacy –

spending on liabilities or items
that decrease in value over
time; not knowing how your
money will grow or work for
you.

Culture of Dependency
 Stop spending on things that
diminish in value
Know the difference between Assets & Liabilities

Poor Spending Habits –

*Impulse buying

•Uso kasi

•Too much
entertainment
Know the difference

Your Your
NEEDS WANTS
Protect your greatest Income
Generating Asset, Yourself

ALERT #1 Health is Wealth

GOD HELPS ONLY THOSE
WHO HELP THEMSELVES
GROW WITH THE
ECONOMY AND BEAT
INFLATION
An Illustrative Formula of 80/20

43
 Trust the Power of Time and Compounding
Period 1 Period 2 Period 3

Your
Money
Your +
Money Interest
Earning

Your
Your Money
Money +
Interest Your
Your
Earning Interest
Interest
Earning Earning
+
Interest
Earning
 Power of Compounding
Simple
Interest Compound
Year Principal Total Principal interest Total

End of 1 yr 1000 100 1100 1000 100 1100

End of 2 yr 1000 100 1200 1100 110 1210

End of 3 yr 1000 100 1300 1210 121 1331

End of 4yr 1000 100 1400 1331 133 1464

End of 5 yr 1000 100 1500 1464 146 1611

End of 6yr 1000 100 1600 1611 161 1772

End of 7yr 1000 100 1700 1772 177 1949

End of 8 yr 1000 100 1800 1949 195 2144

End of 9 yr 1000 100 1900 2144 214 2358

End of 10 yr 1000 100 2000 2358 236 2594

Difference 594
Rule of 72
(DOUBLE YOUR MONEY)

72
No. of years = = 3.6 years
20 %
INVESTING & INFLATION
INFLATION
◦ Is the economic condition of sustained
price increases. Money is an asset that
continuesly losses its value.
 Rule of 72
(DOUBLE YOUR MONEY)

72
No. of years = = 24 %
ASSESS RISK & OPTION
▪ Note: The higher the risk, the higher
the return. Always investigate 1st before
believing

UNDERSTANDING

LOAN INVESTMENT
When do banks or lenders lend?

The ability of the The borrower has

more than enough
borrower to prove sustainable income
that he will use the to pay for the loan
proceeds of the plus interest;
loan in an activity The lender does
that will produce not mind
sufficient income to foreclosing on or
repay the loan. taking over the
collateral
Make Money work for you: the
Power of leverage
Borrowing – leverage in finance
(Analyzing Good Debt)
People leverage
INVESTMENTS
 INVEST & DIVERSIFY

INVEST
MAKE YOUR
MONEY GROW
Invest your savings in
money-making assets. MAKE
YOUR MONEY WORK FOR
YOU.
D o n ’ t put a l l your eggs i n 1
basket
Evaluate Investment

Return/Yield

Liquidity Safety/Risk
Eight Simple Ways to Invest

Invest in debt and

gambling reduction

Lending investments:
◦ Gov’t/corporate Bonds
◦ Banks
◦ Pension Plans
Eight Simple Ways to Invest

Real Estate

Stock Market

Mutual funds

Engage in
Business
ALERT #2 When Buying Real
Estate Property
Do a canvass on the location, area, total cost, down
payment and monthly installments for house and lot and get
information for several houses from which your family can
choose your desired home; Take your time; Don’t be in a
hurry;
Make sure the property you are buying is properly titled and
has no claimants “clean title” other than the owner. Check
with the registry of deeds where the property is located;
If the property is newly developed, check with the HLURB if
the seller is accredited and has license to sell property;
Get a document in exchange for every payment you
make, whether it is an official receipt, a contract to buy and
sell, deed of absolute sale or the original title itself;
If you can easily afford to pay in cash, ask for a big discount
because you are doing the owner a big favor.
INVESTING IN YOUR OWN
BUSINESS
Remember that not everyone has what it takes to
run a successful business;
If you think that you have what it takes to become a
successful business person, then its time to plan
your business;
Think about what business you can engage in;
Look around you and identify business
opportunities and evaluate each options;
Do a situational analysis; identify the
strengths, weaknesses, opportunities and threats
to your proposed business.
Negative Mindsets

“I do not have enough money”

“I do not have good enough
ideas”
Distrust of people – “mandaraya
silang lahat”
Fear of failure
The case for Would-be
Entrepreneurs
They lacked the business & management
skills
They may have had enough money in the
beginning but miscalculated the working
capital requirements & were thus unable to
raise the correct financing when they needed
it
They seriously mismanaged the operations of
the business.
They did not see the value of competent staff
or of consulting advisors in the areas of
marketing, production, technology, legal
aspects, personnel & importantly leadership
 Make use of the Power of One:
Strength in Numbers
Saving together provides more & varied
opportunities to earn higher returns as
well as secure better benefits for all.

Cooperatives are a good way to avail

of the power of many.
Learning to say NO! is
part of Discipline

In good or bad times,

Never give up!
Remember,
Winning is a habit
Make it yours!
THE IMPORTANCE OFSHARING
Walang sino
man ay
nabubuhay
para sa sarili
lamang.
Tayong lahat
ay may
pananagutan
sa isa’t isa.
Sharing always brings more
blessings