Conversations with Louise – Volume 3

Conversation #21 (that cringing moment as a parent):

*during swimming, Louise was walking around the pool and said hi to another kid*

Louise: Hi!
Kid: Hi!
Me: What’s your name?
Kid: Abigail
Me: Louise, siya si ate Abigail…sabihin mo name mo.
Louise: I’m Louise.

*brief silence*

Louise: naka Hello Kitty ako na swim suit!
Abigail: Ako naka-Ariel.
Louise: Ang ganda nga ng swim suit ko…yung sa’yo pangit!

Yikes!


Conversation #22:

Me: Sakit ng dito ko! *pointing to my ribs*
Joyce: Bakit masakit? Anong nangyari diyan?
Me: Tinamaan kasi nung Monday nung nagfrisbee ako.
Louise: Bakit tinamaan?
Me: Tinamaan ng tao.
Louise: Bakit?
Me: Nag-aagawan kasi kami sa frisbee. Unahan kami makakuha.
Louise: Dapat madaming frisbee.

Oo nga naman! Bakit kasi kelangan mag-agawan!


Conversation #23:

Louise: *singing a counting song* May isang chikading na dumapo sa sanga umalis ang isa dalawa na sila.
Me: *interrupts* teka, bakit umalis na nga yung isa nadagdagan pa sila?!
Louise: eh kasi…tinawag niya yung iba!

WALA! Wala akong masabi!


Conversation #24:

*while playing Plants vs. Zombies*

Joyce: Louise, sinong papakain mo sa zombies, si lolo o si lola?
Louise: si Lola!
Lola: Bakit si lola papakain mo sa zombie, bakit hindi si lolo na lang?
Louise: eh kasi…hindi ka maganda, ako maganda. Si ate elaine (Louise’s yaya) maganda din…O! Ikaw hindi…kaya kakainin ka ng zombie…Tsaka si daddy!

Partida, wala pa ako niyan sa choices…:(


Conversation #25:

A Eureka moment for Louise who has colds and having difficulty with her clogged nose…

Louise: ah! Hindi na ako makakaamoy ng mabaho dahil barado ang ilong ko!!!


Conversation #26:

Ever wondered how Patrick Star came about?!

LOUISE KNOWS!

Me: So saan galing si Patrick Star?
Louise: Yung star, galing sa sky, nahulog sa water tapos lumubog, ayun, naging Patrick Star!


Conversation #27:

Me: *holding a book from school with a picture of a lady on the cover* Louise, sino to?
Louise: Si Safe Magdalene.
Me: sino?
Louise: Si Safe Magdalene of Canossa!!! Dahil sa kanya safe sa school ko!

Anak, it’s Saint Magdalene…


Conversation #28:

*Louise getting Joyce‘s phone*

Louise: itetext ko si daddy
Joyce: anong sasabihin mo?
Louise: *while pretending to text* Be a good boy. We love you! Be a good girl.
Me: Bakit be a good girl ako?
Louise: si Mommy katext ko.

*Louise continues*

Louise: Thank you po for this day! Paglumabas yung baby, saan po siya matutulog?
Me: sino na ba katext mo?
Louise: Si Lord!

Amen!


Conversation #29:

Louise: Gusto mo magmake-up?
Me: Ayoko.
Louise: Make up na tayo para makapunta sa church.
Me: Ayoko.
Louise: Make up na kita para gumanda ka…pangit mo eh!
Me: Sige.


Conversation #30:

Me: *opening the cabinet*
Louise: Daddy, anong gagawin mo? Wag kang kukuha ng bra.
Me: Bakit?
Louise: Pang girl lang yun!

Walang basagan ng trip anak!

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Purpose-driven Insurance

I got my first insurance when I was 28 (I’m 34 now). I was still single back then and the only reason I got insurance was because I knew the agent and I thought it’d be a good investment. I never really understood the value of insurance and why I needed one until I took the RFP course and eventually got married. Many of us probably had the same reasons for getting insurance – they knew the agent and didn’t want to reject them because they’re good friends or it was sold as an investment that would give high returns. In personal finance planning, understanding why you’re getting insurance is a key step in knowing what type of insurance you’d have to get.

There are a lot of considerations that go with picking the right insurance for you. Why would I need one? How much insurance do I need? What type of insurance would I get and why that type is best for me? What other insurance options do I have other than the one the insurance agent is presenting?

Why would I need/want insurance? The main objective of insurance is to protect a dream or a goal, goals such as ensuring my children graduates from college to a gracious retirement for me and my family or to some it may be a tax-free inheritance to their beneficiary. The purpose of insurance varies as well on the life stage you are in. Someone who’s single and is not a breadwinner for example would need life insurance for income continuation in case of accidental disability or dismemberment. Couples with kids would probably need both life and health insurance to protect their kids’ education while an older couple nearing retirement should’ve had health insurance while they were younger and may need life insurance to protect their estate.

How much insurance do I need? Without having answered the first question, it will be difficult to determine the amount of insurance coverage one would need. As an example, to protect the education of their kids, a couple would need about 2M-4M insurance for each kid to ensure that their education will be covered. You don’t want to be having too little insurance that it won’t be enough for your family to reach their dreams.

What type of insurance should I get and why? Much like buying a car, a bag or any other consumer items, there is also a thing called compatibility when getting insurance. One should ensure that the product has addressed the need.  Again, it will be difficult to find the right insurance product without knowing what it is for. Do you get a variable unit linked insurance, where living benefits are not guaranteed but could give higher returns, thus eventually giving you higher protection or an ordinary life insurance, where living benefits are guaranteed but death benefit is fixed.

What are the different insurance options for my need? If you’re talking to an insurance agent from one company, make sure you ask for other options for your insurance needs. A term insurance for example may be a good solution to address insurance needs for your kids’ education as it is the cheapest of all insurance products and you’ll be covered for a certain period (during the education years) only. You may also shop around a bit from different insurance companies and see which product suits you best.

Will my advisor support my needs after the sale is made? Regardless of which reputable insurance company you choose, one major factor people consider in getting insurance is the financial advisor. Products usually are similar among companies, but traits of advisors vary. It is important to know the reason your financial advisor is doing what he/she does. At the same time, to ensure that after sale support is given, it is also important to know if the advisor is in the industry for the long run.

*Published in Business Mirror – April, 2015

When Business Becomes Personal

They say that running a household is very much like running a business. Once you become an expert in running your personal finances, it would be easy to manage your business finances. Sometimes though it can get complicated and it wouldn’t seem as simple as it should be. A lot of times individuals who are just starting their own businesses have to deal with a messy cash flow, thus eventually costing them the opportunity of making their business profitable. So here are some tips from personal experiences and conversations with some start-up business owners that could hopefully stray you from the losing and get you closer to profiting.

  1. Know how far your capital can go. Before even starting a business, figure out how much capital you’d need to survive at least 3-5 years. Plan out possible expenses to see how cash flow would look like once you’ve started. Know how you’d use the capital considering the potential expenses in putting up the business and the operating expenses once the business has started. Planning will not guarantee profit, but at least it lowers the risk of losing the business.
  1. Have an emergency fund. Much like our household, businesses can encounter emergencies that can disrupt regular cash flow. Set aside part of your capital for these situations so as not to disrupt business operations. As a business owner, it will also lessen your worry on where you would scour for money when emergencies arise.
  1. Separate business money and household money. There’s a reason why mixing pleasure with business can be dangerous. If the pleasure is too good, you might end up forgetting you’re still in business, eventually losing all of the latter. Start off the right way by creating 2 different accounts: one for business and another for household. Avoid transferring money from one account to another unless there’s a really good reason why you are doing it (like cashing in on profit/getting a salary). I’ve had encounters with small business owners having difficulty managing their cash flows because both business and household expenses are taken from one account only. Another good reason for doing this is if your business gets into financial troubles, you won’t have to worry about your personal finances as much.
  1. Track expenses (separately) for business and household. One common mistake in personal finance is not tracking expenses simply because it’s too tedious. Creating a budget without tracking expenses makes budgeting useless. In business, expenses is one key component in assessing if your business is profitable, while in your household, tracking expenses allows you to see if you are living within your means. Keep a separate list as well so you won’t be confused.
  1. Give yourself a salary. If your business will be your source for paying off household expenses, give yourself a fixed monthly salary instead of allowing yourself to freely get money from your business account. It will be very tempting to just get as much money as you want from your business account especially if you are the sole decision maker in the business. So to keep yourself away from this temptation, treat yourself as an employee of your own company instead of a business owner. Schedule transfer of salary monthly or bi-monthly and make sure to list your salary as a business expense.
  2. Save and invest in expanding the business. Businesses, ideally should not be a one and done affair. Expansion is usually part of the business cycle. Save a part of your profit for eventual expansion instead of cashing in on profit early. A lot of times we’d want to cash in on profits immediately to satisfy our urge to splurge on personal luxuries. Before splurging look at the big picture and see what you want your business to be like 5-10 years from now. One could lose on the opportunity of earning more from the business if profit is realized and used for personal wants.

*Published in Business Mirror – October, 2014

Understanding Your Insurance

Ever been approached by an insurance agent who offered you insurance that you never really understood? I’m sure it happens a lot. More often than not, we get insurance because of the following reasons: the insurance agent is a good friend and we didn’t want to turn him down or we thought it was an investment. So in this article, let me try to give the low down on some basic concepts about life insurance.

There are 2 major types of life insurance: ordinary life (OL) and variable unit linked (VUL).

Ordinary Life Insurance. There are 2 types of insurance products that are classified under OL: traditional life insurance and endowment.

For traditional life insurance, living benefits come in the form of cash surrender values and/or dividends. Cash surrender value is the monetary amount that you would get in case you surrender your life insurance before the policy’s maturity. Usually cash values start accumulating by the 3rd or 4th year. Thus, it will take a while before the cash values grow bigger than the total premium you are paying for. Policy owners can also take loans from cash values of their OL policies. Dividends, meanwhile, are the non-guaranteed cash benefits given to policy holders depending on the insurance company’s performance. The cheapest type of traditional life insurance is a term insurance where one is covered for a certain period of time or up to a certain age only. Term insurance has no cash values nor is it participating in any dividends distribution. However, term insurance can be converted to a traditional life insurance.

Aside from the traditional life insurance, endowments are also classified as an OL product. Endowments are different from traditional life insurance in that after paying premiums, you can periodically receive cash benefits after maturity. It is a good tool for forced savings. Returns are guaranteed but interests in the returns are most often lower than inflation.

OL products also have non-forfeiture options in case you’d like to surrender your policy before maturity and different settlement options for claims.

Variable Unit Linked. VUL insurance products are probably the most famous insurance product these days. A VUL is an insurance product with an investment component. It is like a term insurance and a mutual fund combined into just one product. Similar to OL, there is a fixed minimum death benefit or face amount. However since VULs have an investment component, the death benefit can grow as your investment grows.

Unlike OL products, VULs don’t have cash surrender values nor dividends. In VULs, a portion of your premium buys you units which have equivalent value called the Net Asset Value per Unit (NAVPU). The NAVPU changes on a daily basis, thus if you multiply your units by the NAVPU, you will get the actual value of your investment or the account value.

A policy holder can regularly add to their investments to their VUL on top of the premium they are paying. These additional investments are called topups.

Usually there are three types of funds where you can invest in: equities fund, balanced fund or bond fund. Since these are investments, the returns you can get are not guaranteed but you can potentially earn from 4%-15% annually from your investment. Policy owners can also withdraw a portion of their investments, but can incur withdrawal charges usually within the first 5-10 years depending on the product. Note though that even if some VULs are considered limited pay, cost of insurance will still be deducted from your account values. It is advised to make regular top-ups so you won’t deplete your account values. Once the account value becomes zero, the policy lapses.

For both OL and VUL, one can also additional coverage that are called riders. Every insurance product can have different riders. These riders can come in the form of additional insurance coverage for death via accidents and disability due to accident, waiver of premiums in case of disability, critical illness coverage and a lot more.

Having insurance is an important aspect of personal finance and understanding the different types of life insurance products is just one step in picking the right one for you. In case you already have one, it might be a good idea to review its features and see what type of insurance you got. In case you’re looking for one, remember that the key to picking the best insurance product for you is making sure it addresses your needs and is aligned to your goals.

*Published in Business Mirror – September, 2014

Misconceptions About Life Insurance

Life insurance is an important aspect of personal finance. Despite this, less than 10% of Filipinos are insured. I would say part of reason why Filipinos are not aware how important insurance is or why they don’t take action is because the don’t fully understand how life insurance works and how it can be beneficial to them. Here are some misconceptions about life insurance that at times prevent an individual from getting his own insurance.

It is expensive. Expensive may be relative so I’d let you be the judge if these options for life insurance products are indeed expensive in your views. Term insurance is the cheapest form of insurance and to illustrate how low can premiums be: a P500,000 coverage for a 30-year old can only cost P3,000-P4,000 a year. This is just about P300/month, which is equivalent to 2 coffee drinks from your favorite coffee shop. A Variable Unit Linked product, an insurance with investment component, can cost just P1,200-P2,000 a month but since it has an investment component, one can possibly earn enough from the investment to recover all the premiums paid. Corporate or group insurance costs even less than the term insurance, with some products having a premium of less than P100 per year per person in a group.

It only has death benefits and no living benefits. A traditional life insurance has cash values which can be loaned or redeemed in full once surrendered. Endowment plans also allow one to receive guaranteed cash amount regularly after maturity while VUL policies have investment component which can give non-guaranteed returns between 3%-15% on the average annually. Though life insurance’s main purpose still remains to be for the benefit of those who were left behind by the insured, it still has features that would allow the insured to enjoy benefits while still alive.

Coverage is limited to the insured’s death. A lot of people think that life insurance companies only covers a person’s death, meaning benefits can only be paid out after the insured dies. But there are products that can assist financially in case of accidental dismemberment or disability and even critical illnesses. For instance, upon diagnosis of cancer, a critical illness insurance can give a first diagnosis lumpsum payment to help with treatment and medications. The amount may not be fully enough to compensate all medical expenses, but it eases the burden of shouldering cost out of our own pockets and eventually making us financially handicapped. For both accident and critical illness benefits, you can attach them as riders to your plans or get yearly renewable stand-alone insurances.

If I cannot pay premiums, I have no option but to let the policy lapse. First off, one has 30 days from the due date to pay the premiums. Secondly, assuming the policy owner was unable to pay the premiums within the grace period and the policy indeed lapses, he can still reinstate the policy as long as he pays all unpaid premiums and possibly interests that goes with it. Lastly, if the owner wants to stop paying premiums but would like to still be insured, he can choose the reduced paid up option which would allow him to completely stop paying succeeding premiums but still be covered, this time for a smaller face amount. For VUL policies, the owner can choose to go on premium holiday for a year or two (or even longer) as long as he makes sure that he has enough investments or account values that can pay for the premium charges if any and the cost of insurance.

HMO health insurance and life insurance is one and the same. I’ve asked a number of people if they have life insurance and many would answer yes because the company provides for them. But if I asked how much they are covered for, they tell me that checkups are free and there’s additional benefits for hospitalization. These are benefits of an HMO insurance and not of a life insurance. Both are really good products but serve different purposes. Though there are life insurance products that can cover for hospitalization, they don’t cover checkups or annual physical examinations which are provided by HMOs.

*Published in Business Mirror – July, 2014

Never Give Up

“…after you fail you will be one step closer to succeeding, you will be wiser and stronger and you almost certainly will be more respected by all of those that are afraid to try.” – Seth Godin

My parents and some of my dad’s friends used to invest in the stock market. At that time they were lured into investing signficant amount in IPOs. Unfortunately, they lost a big part of their investment. But more importantly, they lost their appetite to learn more, and be open to investing further. Similarly, I also tried investing and somehow failed to earn at the start. It was in 2008 when I made my first investment. At that time I just learned about mutual funds from some financial forum and decided to give it a try. I invested P30,000.00 in one of the mutual funds offered by a reputable financial services company. A few months after, the global financial crisis happened. In less than a year, I lost 40% of my investment. Being a first time investor, I panicked. I knew it was paper loss, but decided to just stop investing more.

Though my parents and I were in almost similar situation when we started investing, we had our differences in how we handled losing our investments. My parents stopped investing while I on the other hand shook off the trauma of losing my investment for about a year and read more articles about the different investment instruments and how I can benefit from them. I eventually continued making regular investments a year after the crisis.

Just like any other endeavor in life, failing/losing money can be part of investing. The key however is not how many times you fail, but how open are you to learning and pushing yourself to take one more step closer to succeeding. In case you’ve started investing and have lost money, here are some tips that can help you move forward and continue investing:

Learn why you are losing money. I lost money because of the financial crisis. I had to learn about such crisis the hard way. There are a lot of factors that can make our investments lose money, in investment terms these are called risks. Assess the causes why your investment lost money and look for different safety nets on how can you prevent this from happening again in the future. Investments are not guaranteed, thus the general rule is the higher the potential return, the higher the risks as well.

Reassess the type of investment instrument fit for your profile. A lot of first time investors I know dove into investing in the stock market and relied merely on tips by other stock market traders/investors. Obviously, without proper study, they lost money and may seem to be in ‘paper-loss’ mode for a long time. Stock market investing for one requires a lot of research and analysis that will eat up much of the investor’s time. It is a very volatile investment and not doing your homework before investing would definitely increase your risk of losing money. Not all profiles fit this type of investment instrument. Look for other investment options and see what fits your profile the best.

Consult a financial planner. Many of us are afraid to consult a financial planner because we are afraid of being offered a financial product. There are a lot of independent financial planners that can help you understand your investment options and give you advice on how you can move on from your investment losses. Ideally, financial planners should also ask for your goals so any advice or action would be a step closer to achieving the goal.

Create an investment plan. When one wants to get into a business, he/she usually comes up with a business plan as guidance. The same should be done prior to investing. An investment plan would guide one in 1) the type of investment instruments to have for the goals to be achieved and 2) the strategy to different risks that come with the chosen investments. The plan can include different diversification strategies, when to preserve profits and when to cut losses.

Every investor, even the successful ones, has their wins and losses. What made them successful is how they dealt with the losses as they moved on. Losing money in investments can be painful experience, but just like in life, every experience shapes us to become better and gets us closer to what we want to achieve. The only time you fail is the time you give up.

*Published in Business Mirror – February, 2014

Financially Preparing for Another Yolanda

“If you are going through hell, keep going.” – Winston Churchill

Two major calamities, thousands of families affected. I can’t help but think how would these families start over. A lot of these families lost their homes, lost their livelihood and worst, lost their loved ones. Where do they go from here?

What happened to Cebu, Bohol (earthquake) and Leyte, Samar, IloIlo, Capiz and Palawan (Typhoon Yolanda) were calamities that were unexpected. Physically, psychologically and emotionally it was very hard to prepare for such tragedies.  Financially though, there are ways to prepare that would make starting over ‘easier’. Don’t get me wrong, preparing financially will not heal wounds that were brought about by these disasters, but it eases the short term pain and trauma these victims will go through knowing that they were able to save enough to start a new chapter in their lives.

Set up an emergency fund. Having an emergency fund which can be used to support your day to day expenses will be very useful in situations like these. For those who’ve completely lost their livelihood, part of this fund can be used to start over. Many would say 3-6 months worth could be enough, but in cases such as these, I’d say at least 6 months worth. The key to building an emergency fund is to continuously set aside for it and maintain the habit of saving some amount that can eventually last for as long as 1-2 years.

Get a life insurance. When natural disasters strike, everyone’s life is in danger. The worst is if the life it chose not to spare is the one of a breadwinner. Unfortunately for many, life insurance would come secondary to say an auto insurance or home insurance. But come to think about it, what would be more important to your family, your life or your car/home? It is important for those being depended upon financially to secure a life insurance for their loved ones. The obvious benefit of a life insurance is its death benefit which can be claimed when the insured dies. Some other benefits one can get from a life insurance are: disability and permanent dismemberment benefits and loan benefits. All of these can be a good starting point to a new life.

Get home insurance with coverage for disasters. After Ondoy, no one really knew what Acts of God coverage is. Many thought that their basic car insurance covers such calamities. Unfortunately, it was too late for many whose cars were drifted by the floods. I can only assume that the same would be true for those whose home were insured but did not have disaster coverage riders attached to their basic property insurance. Check your property insurance to see if you have such coverage. In case you don’t, with the rapid climate change happening every year, it might be getting such cover might be worth considering.

Get insurance for your business. Looting became a problem as survivors were in desperate need of survival after Typhoon Yolanda ravaged through their homes. And I would think that for some businesses, the typhoon and eventual flooding also wiped out whatever they had. For these businesses, a non-life insurance to cover for their business could be an option. Though costs for such type of insurance coverage is quite high,  the tradeoff of having a peace of mind could be well worth it.

Weeks after these calamities, let us continue to do our share and help our countrymen rebuild their lives through giving and volunteering. At the same time, being able to financially educate them as they start over is also important for them to have financial peace of mind as they try to put the trauma of these disasters behind them.

*Published in Business Mirror – November, 2013