The Investing Perspective: Should students join a "Paluwagan"?

What is "Paluwagan"?

      Paluwagan is a Filipino term for a saving or investment method commonly practiced in the Philippines. Paluwagan comes from the root word "luwag" which means loose or allowance.

How does it work?

      It starts with a group of people who will pool a fixed amount each week. This amount will be given to 1 member of the group and that will be his income from the paluwagan. On the next week, the group will be giving the same amount in the pool and this amount will be given to the next person on the list. How much you earn from the paluwagan depends in how many yo are in the group and how much you put in it each week. most of the time, the main person in-charge keeps track on who and when someone will be getting his share and will inform that person.

Is this a good investment option?

     Some analysts or advisers might tell you that paluwagan isn't a good investment option since it doesn't really have a clear sense of the time value of money and, that because the pool will be given to different persons each week, it would seem that the first money will be benefitting the most.

   

     But to me, I don't like to think of it as an investment because it's NOT! It won't be sufficient for you to finance your goals and if you only have a paluwagan as your investment then you've got to think of other ways to grow your money.

    I like to think of it as more of a saving method than an investing one. The money you put on the pool will be  keep for safekeeping and in a few weeks time it will be returned to you. If your give 100 pesos of 10 weeks in a paluwagan, you will be getting 1000 pesos on the 11th week. in that case, you don't really earn anything instead your only saved the 1000 pesos from getting used for you current whims and wants.

When should students join a paluwagan?

   Paluwagans aren;t necessarily a bad thing, but what students should understand is that before joining anything that involves your finances, make sure that you have gather all the important details such as how much you will be needing to contribute and when or how you will be getting the income. The most important tip that I can give you is only join a paluwagan if you have SPARE MONEY or SPARE ALLOWANCE. 

   Don't join one just because everybody else is doing it. Join for the experience, yes, but don't venture on something that you can't commit to. Remember that this involves a group of people and they are dependent on your contribution as you are with theirs.

Disclaimer: This post is based on my options only. The images is from google and from a site called onlinepaluwagan.blogspot.com so credits to them! :)

The Investing Perspective: The Not-So Perks of Overspending | The Investing P.O.V.

Hi guys! Welcome back to my blog! I hope that you are all spending a blessed All Saint's day here in the Philippines and are having an awesome Halloween on your country as well!

Today, I want to talk about Overspending. We'll tackle what it really means, why it happens and how to stop it.

What is Overspending?

Basically, overspending means living outside of your means. You are spending more than what you really have. If you were given Php 500 allowance for the week, you most likely have spent Php 600 causing you to either ask for more allowance or borrow money from a classmate or friend.

Why do we Overspend and How do we stop it?

1. Misconception of having lot of money
This happens especially to those students that are given monthly or weekly allowances. At the begin of the month or week, there's this feeling that you have so much money to spend with! (which is obviously not true) And so, he/she might be tempted to use it on unnecessary things. You need to pause and remember that this will be your allowance for a span of time and assess first how much you'll need everyday, making sure you've covered it first before spending that rest on what you want.

2. You don't have a clear Budget to begin with

For me, this is the number 1 reason why a person overspends. I get my allowance on a monthly basis and before the start of every month, I would manage that allowance by making a budget (see: How I budget my Allowance) to make sure I can cover all my anticipated expenses, use a portion of it to save and invest, and the rest goes to my daily expenses. I will always save first before spending.

3. You have a Budget but it's not correct
I'm guilty with this one on a few occasions, you might have not anticipated correctly or underestimate/overestimated you budget. It's important to update your budget regularly so that you can be sure it really works for you!

4.Need to keep up with the current trends

Maybe, there's a new phone coming out? or a new game console? Maybe it's because there's a new fashion trend and all your friends are starting to wear it. Keeping up with the trends, make a person, especially, young adults feel like they belong to their group or circle but it's not necessary to do so. Trends will most like come and go, and by the end of the month you'll find yourself buying the next big thing. Sure, if you can afford to do so, then that's good, however, if you know that this is beyond your budget then you better think twice! 

5. It's Human nature?
Mr. Edric Mendoza of ANC addresses this as, people always wanting for MORE. When a person has means they would start a cycle of greed and end up wanting more. However, we also have a capability to change that way of thinking and focus more on what we need rather what we want. 

For me, overspending isn't just a situation a person faces, it could also be a lifestyle for other people. It's important to break from it while we're still young, that way, we are surely one step closer to financial freedom!

Thanks for tuning in! What financial concept would you like to talk about next time? Comment them below and see you next Tuesday!

Note: Found that cute little piggy bank image from Google, credits to its owner! 

Investing in Experiences: Online Stock Trading Seminar

Last Monday, I attended the Online Stock Trading Seminar of the DLSU-D JFINEX. It's their annual stock trading seminar which aims to encourage students to create their on online stock accounts and start investing early. For 2 years, COL Financial has been their partner in spreading financial literacy and letting the community know that investing in stocks are not only for the rich and wealthy but for every Filipino! COL also set up a booth where student are inquire and fill up account forms.

Mr. Jed Velarde, a training consultant from COL Financial, was invited to talk this year. I really enjoyed listening to him and he gave us a lot of tips on how we should perceive the market and look at it from a long term perspective. He gave a lot of stories and analogies that were simple yet effective that both students and professors understood and related upon like comparing the amount of groceries you can buy then and now to explain inflation. He is such an engaging speaker and was able to even make students laugh at some of his jokes. 

I learned 3 important things from Mr. Velarde which are:

Be an Investor - Mr. Jed encouraged us to think of ourselves as investors in the stock market and not traders. Traders are usually does person who closely watch the market and day trade which is to buy and sell a stock on the same and gain profit through  share price appreciation. He told us that it would that, although there is nothing wrong with being a trader, it entails a lot of risks and as students who wish to maximize the growth potential of our portfolio we have yet to afford such risks. He recommend being an investor instead where you can continuously invest in the market.

Invest for the Long Term - We should also invest in the market with a long horizon in mind. The market is constantly changing however, in the end, its trend will always go up especially in a developing country like the Philippines which still has so much potential to grow moving forward. Which is why if you are going to invest now, keep in mind that you will doing so for the next 30 to 40 years into the future.

Do it Regularly - Invest in the market regularly. Mr. Velarde suggests monthly, quarterly or maybe semiannually and make sure to invest in stocks with good fundamental which will certainly continue to grow and be more profitable in the future. The trick to this strategy is to continue investing even if the market if high or low. COL Financial  believes that thru peso cost averaging you will be able to create a sizeable portfolio with low cost stocks especially in the long term and you may do this as well through their EIP.

So if you are a student and you are interested in creating your own stock account you may do so thru COL Financial starting with 5000PHP. Here's what you'll need to open one. I hope you'll find it helpful and see you in the next post! 

Disclaimer: This post is sponsored or anything of that sort. Also credits to the DLSU-D JFINEX for the posters and guidelines on the COL account requirements.

The Investing Perspective: How I Budget My Allowance?

I apologize for the temporary haitus for this blog. University life has basically eaten up almost all of my free time. But I'm glad to be back! Today, I want to talk about something I've been doing for the past month in order to help me stay on budget. I have tried a lot of methods to keep track on what I spend but I just couldn't commit to any until this one.

As a typical college student, it really vital for me to monitor my allowance because of I don't, I wont be able to eat the next day. And since, I'm a student leader, I'm very active and I usually join events and competitions. These are a few of the reasons why I created a system for my to budget my allowance.Basically, I made this budgeting system using Google Sheets, which I really find convenient. I can easy edit my template on my laptop using my google account; or my phone using the Sheets App. 

The formula I use is very straightforward. It's my take on the concept of Income - Savings = Expenses. My savings are my deposits to my stock account since I still don't have a job and really want to take advantage of investing early in the stock market, I put a portion of my allowance to my investment.  But I also deduct one time expenses that I foresee to happen in that coming month. For example, I know that I will have to pay membership fees last September so I made sure to deduct it on my spendable allowance beforehand. I really love the fact that Conditional Formatting is available in Google Sheets as well and it really help to condition my mind to save even further.

I also included the one-time expenses I failed to budget on (red mark) so that I can have a better view of the things I did not take account for so that I can avoid it in the future.

After getting the Spendable allowance, I would divide it by 4 weeks and further divide it by 6 days which are my normal school days in a week to get my spendable allowance per day. However I also add the Total Variance to that which is equal to the maximum I can spend in a day. The variance may be a surplus of deficit depending on by much I saved out of the allowances on the previous days.




If you want to try using this template I have uploaded a sample here as well, feel free to download it. The Investing POV: Monthly Budget Allowance

How about you? How do you budget your allowance? Comment them down below.

Disclaimer: The formula is something I created for myself, it may vary from one person to another!