Financial Literacy

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Financial literacy intended for Overseas Filipino Workers

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Financial Literacy

  1. 1. FINANCIAL LITERACY Anne A. Alban Family Welfare Officer Albanne_10
  2. 2. REALITY CHECK
  3. 3.  ANG PERA, PARATING PA LANG… PAALIS NA!
  4. 4. NABUBUHAY A-KINSE,A- TRIENTA
  5. 5. RASON:“Culprit” Instant Gratification
  6. 6. PERSONAL FINANCE & FINANCIAL LITERACY Is nothing but knowing How to keep whatYOU earn and do More with what you Keep FINANCIAL LITERACYis understanding how you can build your personal wealth
  7. 7. What is Financial Independence?What do you mean by “financially literate?”What is Wealth?Kailan ba maituturing na “mayaman”na ang isang tao?
  8. 8. Where does yourMoney come from?
  9. 9. 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”
  10. 10. 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
  11. 11. 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”
  12. 12. 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”
  13. 13. 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”
  14. 14. 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”
  15. 15. Where does your Money go?Accountspayable/ INCOME Others SavingsSupport forParents, Re Insurancelatives Premiums Your Children’s Household Education Expenses
  16. 16. FACING THE REALITIES
  17. 17. Where are you now? Prepare your Personal Financial Statements or Statement of Assets & Liabilities (SAL)
  18. 18. Personal Income/ExpensesStatement 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
  19. 19. 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!
  20. 20. INCOME EXPENDITURES CAN BECLASSIFIED AS FOLLOWS : Consumption Protection Savings Taxes
  21. 21. 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 loansTotal Assets – Total Liabilities = Net Worth
  22. 22. The CASHFLOW GAME INCOME EXPENSES ASSETS LIABILITIES
  23. 23. CASHFLOW 1Job orProfession INCOME EXPENSES ASSETS LIABILITIES - Larry Gamboa Think Rich, Pinoy!
  24. 24. CASHFLOW 2Job orProfession INCOME EXPENSES ASSETS LIABILITIES - Larry Gamboa Think Rich, Pinoy!
  25. 25. CASHFLOW of the RICHJob orProfession INCOME EXPENSES ASSETS LIABILITIES - Larry Gamboa Think Rich, Pinoy!
  26. 26. 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
  27. 27. KALAYAAN SAKAKAPUSAN (KsK) RULES
  28. 28. SIMPLE RULES IN FINANCIALFREEDOM Rule 1: Pay yourself first. „YOU” is your first source of Capital SAVINGS
  29. 29. SAVE!!!
  30. 30. Redefining Savings It must be defined as an EXPENSE. It is an expense that BUYS your FUTURE.
  31. 31. SAVINGSSaving is a consciousand deliberate way ofsetting aside a portion ofthe personal income.
  32. 32. EQUATION Y- Income _ S - Savings ______________________ C – Consumption
  33. 33. EQUATION Y- Income_ C – Consumption ______________________= S - Savings
  34. 34. KsK Rule #2 Define your Financial Target @ each Life phase
  35. 35. RULES IN SETTING GOALS Set State itPut it specific in Monitor into timetable positive progresswriting for each terms goal
  36. 36. 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
  37. 37. OBSTACLES TO SAVINGSCulture of Dependency -- Beingoverly dependent on othersLack of Financial Literacy –spending on liabilities or itemsthat decrease in value overtime; not knowing how yourmoney will grow or work foryou. Culture of Dependency
  38. 38. Stop spending on things thatdiminish in valueKnow the difference between Assets & LiabilitiesPoor Spending Habits –*Impulse buying•Uso kasi•Too muchentertainment
  39. 39. Know the difference Your Your NEEDS WANTS
  40. 40. Protect your greatest IncomeGenerating Asset, Yourself ALERT #1 Health is WealthHealth and Protection are very muchinterrelated. If you are not healthy and you donot take care of yourself, you can get sick, meetan accident, get disabled, or die.
  41. 41. GOD HELPS ONLY THOSEWHO HELP THEMSELVES
  42. 42. GROW WITH THEECONOMY AND BEATINFLATION
  43. 43. An Illustrative Formula of 80/20 43
  44. 44. Trust the Power of Time and Compounding Period 1 Period 2 Period 3 Your Money Your + Money Interest Earning Your Your MoneyMoney + Interest Your Your Earning Interest Interest Earning Earning + Interest Earning
  45. 45. Power of Compounding Simple Interest CompoundYear Principal Total Principal interest TotalEnd of 1 yr 1000 100 1100 1000 100 1100End of 2 yr 1000 100 1200 1100 110 1210End of 3 yr 1000 100 1300 1210 121 1331End of 4yr 1000 100 1400 1331 133 1464End of 5 yr 1000 100 1500 1464 146 1611End of 6yr 1000 100 1600 1611 161 1772End of 7yr 1000 100 1700 1772 177 1949End of 8 yr 1000 100 1800 1949 195 2144End of 9 yr 1000 100 1900 2144 214 2358End of 10 yr 1000 100 2000 2358 236 2594 Difference 594
  46. 46. Rule of 72(DOUBLE YOUR MONEY) For example, you are being invited to invest in a financial transaction that offers a 20% return per year. Simply divide 72 by the rate of return, or 20%, and you will get the number of years it would take to DOUBLE your money. That is, if you do not withdraw the earnings. 72 No. of years = = 3.6 years 20 %
  47. 47. INVESTING & INFLATION INFLATION ◦ Is the economic condition of sustained price increases. Money is an asset that continuesly losses its value.
  48. 48. Rule of 72 (DOUBLE YOUR MONEY)On the other hand, if you want to DOUBLE your money inthree (3) years, at what rate of return should you invest yourmoney?Simply divide 72 by the number of years within which youwould want to double your money, or 3 years, and you will getthe required rate of return to DOUBLE your money within thespecified period. That is, if you do not withdraw the earnings. 72 No. of years = = 24 % 3 yrs.
  49. 49. ASSESS RISK & OPTION Note: The higher the risk, the higher the return. Always investigate 1st before believing UNDERSTANDING LOAN INVESTMENT VS
  50. 50. 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
  51. 51. Make Money work for you: thePower of leverage Borrowing – leverage in finance (Analyzing Good Debt) People leverage
  52. 52. INVESTMENTS Investment is the commitment of funds made in expectation of some positive rate of return. If the investment is properly undertaken, the return will be commensurate with the risk it assumes.
  53. 53. INVEST & DIVERSIFY INVESTMAKE YOURMONEY GROWInvest your savings inmoney-making assets. MAKEYOUR MONEY WORK FORYOU. Don’t put all your eggs in 1 basket
  54. 54. Evaluate Investment Return/Yield Liquidity Safety/Risk
  55. 55. Eight Simple Ways to Invest  Invest in debt and gambling reduction  Lending investments: ◦ Gov’t/corporate Bonds ◦ Banks ◦ Pension Plans
  56. 56. Eight Simple Ways to Invest  Real Estate  Stock Market  Mutual funds  Engage in Business
  57. 57. ALERT #2 When Buying RealEstate 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.
  58. 58. INVESTING IN YOUR OWNBUSINESS 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.
  59. 59. Negative Mindsets “I do not have enough money” “I do not have good enough ideas” Distrust of people – “mandaraya silang lahat” Fear of failure
  60. 60. The case for Would-beEntrepreneurs  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
  61. 61. Make use of the Power of One: Strength in NumbersSaving together provides more & variedopportunities to earn higher returns as well as secure better benefits for all. Cooperatives are a good way to avail of the power of many.
  62. 62. Learning to say NO! is part of Discipline In good or bad times, Never give up! Remember, Winning is a habit Make it yours!
  63. 63. THE IMPORTANCE OF SHARING Walang sino man ay nabubuhay para sa sarili lamang. Tayong lahat ay may pananagutan sa isa’t isa.Sharing always brings moreblessings
  64. 64. “ You have not lived a perfect day, even though you have earned your money, unless you have done something for someonewho will never be able to repay you” -Ruth Smeltzer
  65. 65. Albanne_10

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