Is inflation eating up your money?

Inflation, it’s a word we hear from news, tv and banks but what really is inflation? According to the Merriam-Webster dictionary, inflation is a continuing rise in the general price level usually attributed to an increase in the volume of money and credit relative to available goods and services.

Too complicated? Yeah! Let me simplify it as much as I can, inflation is when prices goes up and our salary does not! (hehe) Kidding aside, Inflation is the increasing of prices for the goods that we buy from food, appliances, or even services.

The last time I remembered, the Jeepney fare was still 1 Peso per person, now its 8 Pesos per person. When you go to the grocery before and just have 500 Pesos with you, you can feed your family for a week! Now, 500 is just for your midnight snack. The taxi before, it was 16 Pesos plug down and 1 peso add-on, now it’s 40 Pesos plug down and 3.50 Pesos add-on.

How prices have changed! This is the effect of inflation, it lowers our buying power. So how does this affect our savings? By so much! Imagine you are saving in somewhere which only give you 1% interest a year and our inflation rate per year on average is about 3% to 4%.

It goes like this:

100,000 savings

x      1% Interest

---------------

     1000

x      20% Witholding tax (let’s not forget this!)

----------------

      200

(1000 - 200 = 800 total interest)

So, 100 000 + 800 = 100 800. This is how much money you will get after 1% interest, now let me put in inflation.

100 800

x        4%   (for example sake, let’s use 4%)

--------------

    4032

So, 100 800 - 4032 (as inflation) = 96768 Pesos

What does this mean? It means that the value of your 100 800 is not actually 100 800, it’s 96768, why? That is because of inflation, it devalues your money! How to beat inflation? Simple, Invest in the the mutual fund. Mutual funds, when the market is good may go up to 12% in interest. And the mutual funds does not have any tax!

Here's how it goes:

100,000 savings

x     12% Interest

---------------

   12000

So, 100 000 + 12000 = 112 000

112 000

x       4%   Inflation

---------------

    4480

So, 112 000 - 4480 (as inflation) = 107 520 Pesos

This actually beats inflation! Your 100 000 is still growing and the value is still more than 100 000!

This my friend, is a way to beat inflation and you are sure to have the value for your money! Save and invest now!

God bless you!

Picture is not mine, all credit goes to pokemonstevenstone found at http://pokemonstevenstone.deviantart.com/art/money-86937002.

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How to open a Mutual Fund account?

A lot of my friends ask me how could they invest in the Mutual Fund. How do we put our money in the Mutual Fund?

Quite frankly, I had these questions too! I was so excited but I thought that "Hey, with all these stocks and what not, I m pretty sure that investing is going to be difficult." WRONG!


Mutual fund investing is as simple as ABC. Here are some steps to help you open a mutual fund account:

1. Just like opening any savings account in the bank, you fill up forms and show some identification plus the cash. It is the same with opening a mutual fund account. All you need to do is fill up so forms, show some identification and VOILA, you're good to go!

2. Just like opening any savings account as well, there is an initial deposit. When you open a mutual fund account, all you need is 5000 Pesos and with that, you're off buying your first few shares! Please note that most mutual fund companies offer 5000 Pesos as initial investment.

3. When adding additional investments, the minimum amount is 1000 Pesos. All you need to do is fill up some forms still. :)

Since the mutual fund takes away the stress from the investor by letting experts manage it, there is a little, teeny weeny fee every time you invest in a form of percentage. It often ranges from 2% - 3.5%. Consider it as a fee for your funds being managed by experts.

Well, there you go. Simple and easy, isn't it? So are you ready to invest in the mutual funds?

God bless you!

Have a successful journey!

Picture is not mine, it belongs to EndlessSecrets from http://www.deviantart.com/art/Questions-268221719

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A changing world requires changing solutions

Before, our parents keeps on telling us to save money. “Son, you better save money and put it in the bank.” I heard that line too and sank in my mind as I grew older plus having an ATM card before looked so cool! (haha, see how colorful the inside of our wallet will be!)

The banks before actually had a very high interest rate, interest rate that could reach up to 12% a year! Imagine depositing 1 million Pesos, in a year you will have automatically 120,000 Pesos as interest. No wonder our parents would tell us to save in the bank.

As the years go by, interest rates in the bank has gone smaller, from 8% a year to what it is now, .50%!

.50%! How would money grow so much on that? Not to mention that taxes would still be applied for the earning that you will get from .50%! What about time deposits? Sure, deposit around 10 thousand and each year it will earn 1%. When we reach 99 years old, this 10 thousand will still be far away from 1 million!

These were the solutions before, things have changed a lot! For example:

Before we had the Walkman (yes the portable cassette player), now we have the ipod, hi tech mp3 players.

Before we had Betamax, VHS, Laser Disc, now we have DVD and Blu Ray Disc which amazingly holds 25 GB of memory.

Before we had those big cellphones where you can’t even put in your pocket, now we have the IPhone, Sony Xperia, Samsung Galaxy, HTC, Cherry mobile, Myphone (whew, what else?).

And remember these? The Family Computer, Sega Genesis, Nintendo 64, these were the pioneer in console gaming, now we have Wii U, Xbox One, PS4. Amazing how technology changed!

Everything around us changed, the way we lived before is no longer the same now, technology now was not the same as before. Only change is constant in this world.

My point is, if everything changed or changes, our financial strategy should change too.

We need to look for a venue or an instrument that would give us more that 1% a year for our savings.

The answer: Mutual Funds. Going directly in stocks are good but I personally recommend mutual funds.

The mutual funds may earn 12% or more a year depending on how the market runs. Remember, these are investments so losses and gains happen, there is no guarantee of a total earning.

The higher the risk, the higher the earnings as well. The mutual funds provide higher interest rates. Back in 2009, Philequity, one of the strong Mutual Fund company in the Philippines ended with a 65.05% return. In 2010, the same company ended with a 54.18% return.

Sounds good? Yes! But again, these do not guarantee positive returns all the time, it may go down too just like in 2008, the Global Financial Crisis, Philequity ended the year with -40.71%.

Many people stick with the old way of saving because not many are financially educated, meaning not many knows how to invest. With proper knowledge on how to invest, when the market goes down, there is nothing to fear, we should actually be rejoicing! Why? This will be discussed further in my other articles. :)

Let’s move forward, invest in the mutual funds!

Happy investing!

Cheers!

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