PERSONAL FINANCE: THE X CURVE - WEALTH VS. RESPONSIBILITY

The X-CURVE  simply shows the relationship between WEALTH and a PERSON'S RESPONSIBILITY.  Unless a person is born with a silver spoon, normally, the average Filipino has NO SAVINGS when he gets out of college and bigger responsibilities as the family starts to rely on him/her when he starts working. As he/she reaches 30 to 45, he/she normally has more responsibilities with the family. Ideally, we all would like that as we age and reach retirement of 60 or 65, we would like less responsibilities and  big savings. By retirement, we would like to accumulate so much wealth and Live On Interest (LOI).

The X-CURVE also shows 2 kinds of risks:

1.  Dieing too soon - Here we all need to be prepared. In case the the inevitable happens, we should make sure our loved ones that we might leave behind are amply protected.
2.  Living too long -  The problem if  we live too long and we do not have savings is we become a burden to our families since hardly will any employer hire someone over 65.

The question now is, where are we in the X-CURVE? Are we prepared for any eventualities?  We only need to draw our FINANCIAL GOALS and make that DECISION and work hard towards reaching our DREAMs.

If you have any questions about the X-CURVE or would like to be guided or know how to be protected or what investment product best provides a solution that matches the X-CURVE, please do not hesitate to reach me at mtcm.deleon@gmail.com.

SOURCE:  In the first quarter of this year 2011,, I attended Bro. Bo Sanchez' Truly Rich Club FINANCIAL COACHING Seminar. A speaker  from IMG lectured on the X-CURVE. Incidentally, there was a young lady in the table where I sat and invited me to a free financial literacy lecture at  WFMA.. The same X-CURVE was reinforced in WFMA. I am grateful  for these  2 companies that I learned about the X CURVE this early. . Both IMG and WFMA have exactly the same operations. They carry almost the same investment products.

THE CREDIT PROCESS

Below is an illustration of the CREDIT PROCESS in Philippine Financial Institutions.  

There are  3 PHASES:

1.  Initiation Stage- Covers marketing the loan product, prospecting, discussing loan packages, negotiation of loan terms and conditions, credit investigation, property appraisal, credit evaluation and loan approval.
2.  Documentation and Closing - After approval is obtained, the terms and conditions agreed with the borrower is documented into a Loan Agreement.
3.  Portfolio Management -  These phase includes credit administration, regular credit review, billing and collection, loan restructuring or remedial. If client with a collateral mortgaged defaults on payment and collection is impossible, the account ends up in foreclosure or dacion en pago or the voluntary surrender of the property mortgaged.

HOW SAFE ARE YOUR SAVINGS IN PHILIPPINE BANKS?

 

"Mama why are there too many people infront of  BANCO FILIPINO?  What's going on?",

"Oh, son, that bank closed-shop yesterday. They're angry they cannot get their savings"

"Why did the Bank close down?"

"I'm not so sure son, but in the news, the bank was charged of unsound banking practices, meaning, they were suppose to follow certain banking laws but they did not comply."

"I pity those people mama, they worked so hard for their money and they can't get it"

"Some of them will get their money back but will take some time. Our money in the bank is PROTECTED by another company - an insurance company which pays up to P500,000. So if you  have more than that, you probably wont get the rest of it. I'm not so sure though how else to recover more than 500,000.. maybe for a long time"

-o-

This was the scene with my 12 year old son, Nicholas, when we were walking in the malls of Greenhills last March 2011.  It was the same scene, with the same bank, I experienced when I was 10 years old. I was asking my mother too.  
What will happen to my HAPPY SAVERS CLUB Bank Account, mama? 
Mama said: Dont worry, we'll get it back. Our money is insured by an agency called PDIC.
HISTORY REPEATS ITSELF...

-o-

Banks do play a very important role in the economy through their main role as  INTERMEDIATORS - Simply put, they encourage people to save  then they borrow the people's deposits to lend it to businesses and help them grow (These businesses in turn gives jobs to the people and people who earn saves and puts it in the bank - and so is the cycle .)

Question is how safe is our deposit? The bank has various types of deposits - the regular savings and the investment products. The regular savings and checking and time deposit accounts are insured by PHILIPPINE DEPOSIT INSURANCE CORP: (PDIC) up to P500,000 per depositor. If you have 2 accounts with P500,000 each - only one is insured. They do not insure the investment products.

The PDIC has a very good article to guide the depositors. The article's no.1 tip is  "KNOW YOUR BANK" - it simply means we also have to conduct our own due diligence with the Banks we deal with. See below PDIC's 

7 HABITS OF A WISE SPENDER. 

Personally, if your bank is a conservative bank and  already has a track record, (for me it means existing say over 30 years), then there is really nothing to fear.  Second, we always have to read the news - As long as the country's economy is stable and strong and the bank you have chosen is conservative - then our deposits - whether insured by PDIC or not- will always be safe.

 

KEEP SAVING!

7 HABITS OF A WISE SAVER -PDIC 1.  Know your bank Know the owners of your bank -- the people behind it and the people who manage it. Find out and ask about your bank's finances and its strengths and weaknesses. PDIC, BSP, SEC, and your bank's websites, newspapers, magazines, television and radio will provide most of the information you need. 2.  Know your bank products Understand where you place your cash. Don't confuse investments with regular deposits. Read and understand the fine print and don't hesitate to clarify with bank personnel terms and conditions that are not clear. 3.  Know your bank's services and fees Choose the right bank for you by knowing your needs and matching these with your bank's services. Be aware of bank charges and fees. 4.  Keep your bank records safe and updated Secure your passbook, ATM, certificate of time deposit (CTD), checkbook and other bank records at all times. Have your passbook and CTDs updated every time you do a transaction. Inform your bank whenever there are changes in your contact details to avoid bank mails with sensitive information getting into the wrong hands. 5.  Transact only inside the bank* with authorized bank personnel Do not hesitate to ask personnel to present an ID and always ask for proof of your transaction. 6.  Be informed about PDIC deposit insurance PDIC guarantees deposits up to P500,000 per depositor. Investment products, fraudulent accounts, laundered money and deposit products from unsafe and unsound banking practices are not covered by insurance. 7.  Be cautious Simply walk away from offers that are too good to be true. Generally, excessively high interest rates carry more risks. Please refer to Bangko Sentral ng Pilipinas Circular 640 for more information.

Cs of CREDIT: HOW IS YOUR LOAN APPLICATION EVALUATED?

For 25 years, I  worked as a CREDIT EVALUATOR / UNDERWRITER for almost all types of loans - working capital loans, credit lines for corporate, middle market and small and medium enterprise accounts, project financing, remedial loans, home loans, auto loans, credit cards, and personal loans. Across all financial institutions I've worked for  (4 big names all of them in METRO MANILA) - the same principles apply:

As an evaluator, I grant loans/credit lines base on the following Cs of CREDIT:

1.  CHARACTER - integrity of the Borrower that he/she will pay you back.
2.  CAPACITY-TO-PAY - Cashflow or the source of repayment.
3.  COLLATERAL - the thing of value convertible to cash in case  borrower won't be able to pay.
4.  CAPITAL - the equity share of the Borrower in the project being financed.
5.  CONDITION - impediments to the loan application, ranging from market share, industry, age, health, and various other non-financial or financial factors
6.  COMPLIANCE - this is not found in any book yet.... documentary requirements and policy compliance.

So if you are planning to apply for a loan next time, make sure you will meet the above requisites  and for sure you will be granted a loan.  Always review your Cs of CREDIT before you even submit your loan application and pay the processing fees.

For your inquiries or questions, please feel free to post on-line. For those of you who have always been DISAPPROVED or DENIED a loan application and you feel you really need that loan badly - allow me to help you - send your queries to pinoyunderwriter@gmail.com or financialsolutions180@yahoo.com.ph  and state the subject LOAN INQUIRY in bold letters please - so I notice your email right away.

 PLEASE USE YOUR APPROVED CREDIT LINES/LOANS WISELY.

Origin, Etymology, Definition and Elements of Credit

Origin (etymology) of CREDIT

Middle French, from Old Italian credito, from Latin creditum something entrusted to another, loan, from neuter of creditus, past participle of credere to believe, entrust — more at creed.

First Known Use: 1537

Related to CREDIT

Synonyms:  trust

Antonyms:   disbelief, discredit, doubt, nonbelief, unbelief

SOURCE: http://www.merriam-webster.com/dictionary/credit

Definition of Credit

A    A contractual agreement in which a borrower receives something of  value now and agrees to repay the lender at some later date. 

Read more: http://www.investorwords.com/1193/credit.html#ixzz1LBKtbNzQ

2)        

       Credit is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately (thereby generating a debt), but instead arranges either to repay or return those resources (or other materials of equal value) at a later date. The resources provided may be financial (e.g. granting a loan), or they may consist of goods and services (e.g. consumer credit). Credit encompasses any form of deferred payment.  Credit is extended by a creditor, also known as a lender  to a debtor  also known as a borrower.

Read more:   http://en.wikipedia.org/wiki/Credit_%28finance%29

 Base on the ORIGIN and DEFINITION of CREDIT above we can derive the following ELEMENTS of Credit:: 

1. Two–party contract.   The 2 parties are the borrower (debtor) and the lender (creditor)
2. Presence of Trust. Implies that the creditor has faith in the ability and willingness of a debtor to fulfill obligations.   
3. Time of Payment. Borrower has an obligation to pay debt at a definite time or date.

One thing worth mentioning though (not taken up above)  is CREDIT entails 

4.       4.  Risk.  Creditors are always at risk when they extend credit and this is the risk of DEFAULT or NON-PAYMENT.

THE NEW 2010 PHILIPPINE PESO BILLS

 The new 2010 Peso Bills have been released since December 2010. . . I'm so eager to have and hold all of it. I've only seen the P50-bill from my son and I'm actually holding on to a P200.bill which I even asked a friend if I can have it... (I even took a picture of it (BELOW) ... I always like new bills in my purse.).  

Per the Bangko Sentral ng Pilipinas,  the old bills will still be in circulation in the next 3 years..  So if you still have those old bills in your "baul" (treasure chests) make sure you return it to the Banking System by 2013.or they will no longer be legal tender. 

Its interesting to know about these new bills especially the craftsmanship that goes into it and moreso the added security features to protect the public from counterfeit money.  

I came across a video by the BANGKO SENTRAL NG PILIPINAS  (BSP) on these NEW GENERATION PESO BILLS. . . Its very INFORMATIVE. I especially loved the 3D effects of the video. Please take a look at the video to know more about the story behind our very own Philippine Money; how our "piso" bills tell so much about our history and our rich natural resources.   Here is the link:

http://www.bsp.gov.ph/multimedia/newgencurr.asp

The new P20 peso bill  honors Manuel Quezon, the first-elected  Philippine President who advocated the adoption of national language and tirelessly regained  Phil Independence, The bill also features the Palm Civets of the Cordillera,  its rich coffee industry - the alamid coffee and the Banaue  Rice Terraces -a wold heritage site.

The P50 peso bill features  Sergio Osmena, who played a critical role in the WWII transition to an independent nation.  The reverse side of the bill shows Taal Lake - home of the smallest volcano and maliputo milk fish

The P100 peso bill has Manuel Roxas, who prioritized crafting BSP Charter, and the reconstruction of the country from  devastation from the WWII. At the back is the majestic and almost perfect-cone-shaped - Mayon Volcano and the Butanding - the largest fish specie or whale shark.

The P200 peso bill shows  Diosdado Macapagal, who started land reform and restored Philippine Independence. Opposite side is the Chocolate Hills and Tarsier in the Visayas Region.

The P500 peso bill has Ninoy and Cory Aquino, our champions of Philippine democracy against martial law and the first woman Philippine President. At the reverse side of the bill is : Palawan's Subterranean River National Park, declared by UNESCO as a  world heritage site,  and the blue-naped parrot from Palawan and Mindoro.

Finally, the P1000 peso bill  features the 3 war veterans Jose Abad Santos, Girs Scout of the Philippines'  Josefa Llanes Escoda, and Vicente P. Llim.  At the back of the bill is the Tubbataha Reef Marine park and South Sea Pearl.

Go and check out BSP's video. . . It tells us a little about our Philippine numismatic history, why they can't just keep printing bills, the printing and the process of how the money reaches the public and  more importantly, one thing you should not miss, is the security features of our new bills so that you are protected from counterfeit money.