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FUNDAMENTAL CONCEPTS TOWARDS FINANCIAL FREEDOM

FINANCIAL LITERACY
Why are you here?

Who is your celebrity look-a-like?


A bit of me

 Associate Professor in Finance & Economics, The University of Manila


 Executive Secretary, UM College of Law
 Licensed Life Stage Financial Advisor and Field Underwriter, Pru Life UK
 Accredited Mutual Fund Advisor, First Metro Asset Management, Inc.
(FAMI)-Member of Metrobank Group
 Accredited Trainor, Finance Education Center (Training Partner of
Chartered Institute for Securities and Investment (CISI), London, UK)
 Fundamentals of Financial Services Passer, Chartered Institute for
Securities and Investment (CISI), London, UK
Coverage & Importance of FL
 Financial Plan (Budget): Mindset
 Cash Flow
 Spending
 Consumer Finance
 Savings
 Risk-Taking
 Taxation
 Investment
 Retirement and Pension
 Life and Health Insurance
 Estate Planning
How the Rich Get Richer?

How do…
 Broke

 Middle Class People


 Rich People

Spend Their Money?


Financial Terms

 Cash Flow= money you bring in


 Liabilities = money you spend
 Assets= something that pay you
 Liabilities= something that cost you
Quick Review

Cash Flow Money you make

Expenses Money you spend

Assets Liabilities

Pay you Cost you


How the Broke spend?

 Live from paycheck to paycheck


 Buy “stuff”
How the Broke spend?

Cash Flow 10,000

Expenses
10,000

Assets Liabilities
How the Middle Class spend?
How the Middle Class spend?

Cash Flow 50,000

Expenses 50,000

Assets Liabilities
 Car
 House
 Gadgets
 Credit Card
Debt
How the Middle Class spend?

Cash Flow Expenses


How the Rich spend?
Cash Flow 10, 000

Expenses

Assets Liabilities
• CGO/Business
• Securities
• Real Estate
• Commodities
• Education
Wealth Creation Formula

 The broke buy stuff or spend all they earn


 The middle class buy liabilities
 The rich buy assets

It’s not how much money


you earn, but how
money you keep
AND INVEST!
#HugotOnEarnings

“Never depend on single


income, make investments to
create a second source.”
—Warren Buffet
Basic concepts on investment

 Inflation
 Leverage
 Debt
 Compound Interest
 Rule of 72
 Risk-Return Tradeoff
 Diversification
Inflation Effect
Risk-Return Tradeoff
Leverage
Diversification
Compound Interest
THE RULE OF 72
Dividing the number 72 by the interest rate of your savings or investments
will give the estimated number of years it will take for your money to double

72 ÷ 4 = 18 72 ÷ 8 = 9 72 ÷ 12 = 6
Money doubles every 18 years Money doubles every 9 years Money doubles every 6 years

Age 4% Age 8% Age 12%

29 Php 100,000 29 Php 100,000 29 Php 100,000


47 Php 200,000 38 Php 200,000 35 Php 200,000
65 Php 400,000 47 Php 400,000 41 Php 400,000
56 Php 800,000 47 Php 800,000
65 Php 1,600,000 53 Php 1,600,000
59 Php 3,200,000
4X 65 Php 6,400,000

16X

Simple lang pala ang magpalago ng pera!!!


Bad Spending Habits
 Be Mañana habit (No Savings)
 Bahala na si Batman (Failing to Budget)
 Feast with Friends
 Investing in things that depreciate in value
 “Pasalubong" mentality
 Giving in money for vices
 Impulse Buying
 Paying for Unused Services
 Emotional Spending
 ATM Fees /Overdrawing Accounts/Late Fees
 Investing in get rich quick scams
#HugotOnSpending

“Don’t buy things you can’t afford


with money you don’t have to
impress people you don’t like.”

“If
you buy things you do not need,
soon you will have to sell things you
need.” –Warren Buffet
Traditional Investment
What is your SAVING Formula?
INCOME - EXPENSES = SAVINGS
100% - 110% = - 10%
PROSPERITY FORMULA
INCOME - TITHES - SAVINGS = EXPENSES
100% - 10% - 20% = 70%

PAY YOURSELF FIRST!!!


It is not what you earn, it’s what you keep.
The Four Obstacles to Building Wealth
1. PROCRASTINATION 3. Inflation
2. Spending Habits 4. Taxation
POVERTY IS NOT LACK OF MONEY;
POVERTY IS MISMANAGED MONEY
BUILDING A SOLID FINANCIAL FOUNDATION
Like building a house, you must build it from the ground up.

INVESTMENTS

EMERGENCY FUNDS

ELIMINATE DEBTS
PROTECTION
LIFE INSURANCE
HEALTHCARE
SHORT TERM & LONG TERM CARE
INCREASE CASHFLOW
1. Earn additional income 2. Manage expenses

BUILD IT RIGHT, BUILD IT STRONG.


Final Words

 Develop a Positive Mindset!


 The quality of your thoughts determine the quality of your life!
 Yes, your attitude determines your altitude.
 Rich thoughts, rich life; poor thoughts, poor life.
 Money is 80 percent behavior, 20 percent head knowledge. It’s
what you do, not what you know.
HEY!
Thank you!