WELCOME

FINANCIAL MANAGEMENT

by:
PLTCOL RONALDO L MAALA
FINANCIAL
INDEPENDENCE…
Is simply having the means to maintain the
lifestyle you choose to have without having to
actively work.
It is a state of economic well-being where
your personal investments or savings are
generating investment income sufficient to cover
your expenses consistent with the level and type
of lifestyle you want.
FINANCIAL
INDEPENDENCE…
Investment income is key to financial
independence. Without it, you will never
achieve financial success.
FINANCIAL MANAGEMENT
OF THE RICH
FINANCIAL
STATEMENT
INCOME

EXPENSE

ASSETS LIABILITIE
S
CASH FLOW PATTERN OF AN
ASSET

INCOME

EXPENSE

ASSETS LIABILITIES
CASH FLOW PATTERN OF A
LIABILITY
INCOME

EXPENSE

ASSETS LIABILITIE
S
CASH FLOW PATTERN

MIDDLE CLASS BUY

POOR HAVE LIABILITIES THEY RICH BUY
EXPENSES THINK ARE ASSETS. ASSETS
CASH FLOW PATTERN OF A
POOR MAN
INCOME
JOB PAYCHECK

EXPENSE
TAX FOOD
RENT CLOTHES

ASSETS LIABILITIES
CASH FLOW PATTERN OF THE
MIDDLE CLASS
INCOME
JOB PAYCHECK

EXPENSE TAX
FOOD
RENT
CLOTHES

ASSETS LIABILITIES

MORTGAGE
LOANS
CREDITCARDS
CASH FLOW PATTERN OF POOR & MIDDLE INCOME:

CONTINUOUS RAT RACE

 Fear of being without money motivates

us to work hard. Once we get the
paycheck, greed or desire starts us
thinking about all the wonderful things
money can buy.

 Get up to go to work, pay bills, work,

pay bills. More money more spending.
Lives are run forever by two emotions -
fear and greed.
CASH FLOW PATTERN OF
THE RICH
GOLDEN RULE:

BUY
ASSETS!
CASH FLOW PATTERN OF A
WEALTHY PERSON
INCOME
JOB PAYCHECK
DIVIDENDS
INTEREST

EXPENSE

ASSETS LIABILITIES

STOCKS
BONDS
INVESTMENTS
REALITY:

“THE POOR AND MIDDLE CLASS

WORK FOR THE MONEY.
…THE RICH HAVE THEIR
MONEY WORK FOR THEM.”
MIDDLE INCOME EARNER
FINANCIAL STATEMENT
INCOME

EXPENSE

ASSETS LIABILITIE
S
WEALTHY FINANCIAL
STATEMENT
INCOME

EXPENSE

ASSETS LIABILITIES
WHY THE RICH GET RICHER
INCOME

EXPENSE

ASSETS LIABILITIES
WHY THE MIDDLE CLASS
STRUGGLE?
INCOME

EXPENSE

ASSETS LIABILITIES
PEOPLE’S BEHAVIOR ON
MONEY
BEHAVIOR 1 BEHAVIOR 2 BEHAVIOR 3

INCOME EXPENSE INCOME

LESS LESS LESS

EXPENSE INCOME SAVINGS

EQUALS EQUALS EQUALS

SAVINGS DEBT EXPENSE

WHICH ONE ARE YOU?

How Php 50 CAN GROW INTO
Php 50 MILLION

INTEREST
RATE YEARS

0% NEVER!

3% in 468 years

5% in 284 years

10% in 145 years

15% in 99 years
HOW VARIOUS AMOUNTS PER DAY CAN GROW
INTO Php 50 MILLION!

at 10% at 15%
SAVINGS

Php 50 56 40

Php 100 49 36

Php 200 42 31

Php 300 38 28

Php 400 36 26

Php 500 34 25
 “THE NUMBER ONE PROBLEM IN TODAY’S
GENERATION AND ECONOMY IS THE LACK OF
FINANCIAL LITERACY”
- ALAN GREENSPAN
STATISTICS
(2002 Survey, SSS)

FINANCIAL FACTS

45% are 30% are 22% are still only 2% are

DEPENDENT DEPENDENT FINANCIALLY
WORKING INDEPENDENT
On RELATIVES TO CHARITY

WHERE DO YOU SEE YOUR SELF ON

YOUR RETIREMENT YEARS?
Here’s a scenario for you to
consider…
a couple retires at the age of 56
WHAT and expects to live 20 more years. On food
IF… expense alone, how much will they spend?

SAMPLE
COMPUTATION… 365 days
X 2 persons

X 20 years
X 3 meals

= 43,800 meals
X 50.00/meal

TOTAL = Php 2,190,000.00

TUITION FEE PROJECTIONS

TUITION SCHOOL YEAR SCHOOL YEAR SCHOOL YEAR SCHOOL YEAR SCHOOL YEAR
FEE 2005 2010 2015 2020 2021
SCHOOL
UST 63,400 127,520 256,488 515,889 593,272

MERIAM 70,000 140,794 283,188 569,591 655,030

ASSUMPTION 110,000 221,248 445,007 895,068 1,029,328

SAN BEDA 80,000 160,908 323,643 650,961 748,605

DLSU 141,000 283,603 570,426 1,147,330 1,319,430

ADMU 130,000 261,477 525,923 1,057,818 1,216,491

 Factors
That Highly Affect Financial
Independence
 Poor or No Planning
According to a recent study by the Department of Health and Human services, for
every 100 people starting their careers, the following situation exist at age 65…

4 25
Have annual incomes who
lived their dreams Are dead

49 Have annual incomes

22 Have annual incomes
who could hardly live
on basics
who lives on poverty

These people didn’t plan to fail…

they failed to plan.
 FINANCIAL
DESTINY… INDEPENDENCE
is not a Dream.
It is a Decision. Step #4
Review and
update the
plan regularly
Step # 3
Initiate a
plan of
action
Step # 2
Prioritize
those
goals
Step # 1
Most people have no specific plan.
Set
financial
They procrastinate during their working years and don’t
goals ever seem to get around to start to plan.
The end result, FINANCIAL FAILURE

The longer we wait... the steeper the climb

 Hit & Miss Method of Saving
There are only two methods of building financial independence

The Hit-And Miss Method The Systematic Planned Method

Most People Spend First… Few People Save A Definite Amount First…
and Try to Save Whatever Is Left and Spend The Balance

SAVE

SPEND
SPEND

SAVE

 These people will generally make the best

 It’s easy to spend! use of their money left to spend.
 And there is generally little  Because of the potential for waste in the
or no money left first method, the systematic savers will
have just as good a lifestyle today and a
better lifestyle tomorrow
Nobody saves to fail but too many of us failed to save.
 Consumptive Saving
Saving money to spend it on something not worth
your while is saving like the roller coaster
way.
Have you tried saving money in the past to spend it on something…
save and spend… save and spend... Sometimes borrow money to spend?
What would you like
Roller Coaster Way of Saving to happen when you
retire?

Financial
Life Line Independence

Started Ret.
0 Today
Working Age

If you were to save for the next 20 years. As you have saved in the past,
would it be enough to take care of yourself for the rest of your life?

Spending so much today at the expense of tomorrow is a mistaken

kindness.
 The Impact of Inflation
History tell us that Inflation is here to stay.
HISTORICAL PROJECTION
Inflation Purchasing Purchasing
Year Power Year Power
Rate
2004 1.00 2004 1.00
2003 3.04% 1.03 2005 0.97
2002 3.11% 1.06 2006 0.94
2001 6.13% 1.13 2007 0.88
2000 4.40% 1.18 2008 0.84
1999 6.70% 1.26 2009 0.79
1998 9.70% 1.38 2010 0.71
1997 7.61% 1.48 2011 0.66
1996 8.50% 1.61 2012 0.60
1995 8.10% 1.74 2013 0.55
1994 7.06% 1.86 2014 0.51
1993 7.61% 2.00 2015 0.47
1992 8.95% 2.18 2016 0.43
1991 18.66% 2.59 2017 0.35
1990 14.17% 2.96 2018 0.30
1989 12.20% 3.32 2019 0.26
1988 8.06% 3.59 2020 0.24
1987 3.03% 3.69 2021 0.24
1986 4.60% 3.86 2022 0.22
1985 2.35% 3.95 2023 0.22
1984 4.71% 4.14 2024 0.21

The staggering effect of inflation cause to devalue our peso every year
 The Effect of Compound Interest & Time
Divide 72 by the interest rate to estimate the number of years it takes for your
money to “double” for or against you.
This illustration simply describes the effect of compounding P 1,000,000.00 pesos
at various interest rates. It does not in any manner reflect the past or future
performance of any specific product.

4% 6% 8% 12%
(do uble e ve ry 18yrs .) (do uble e ve ry 12yrs .) (do uble e ve ry 9yrs .) (do uble e ve ry 6yrs .)

29 - P1,000,000 29 - P1,000,000 29 - P1,000,000 29 - P1,000,000

47 - P2,000,000 41 - P2,000,000 38 - P2,000,000 35 - P2,000,000

65 - P4,000,000 53 - P4,000,000 47 - P4,000,000 41 - P4,000,000

65 - P8,000,000 56 - P8,000,000 47 - P8,000,000

65 - P16,000,000 53 - P16,000,000

59 - P32,000,000

65 - P64,000,000

“The miracle of COMPOUND INTEREST and TIME makes this possible.”

Bad Investment
To minimize investment risk, Investments must be diversified. Putting all money in one
basket can cause the outright loss of our money.

One of the first things we need to understand about investments is

that, the greater the rate of return offered, the greater the risk.

Wealthy people who can afford to lose some of their capital can take
chances in an effort to obtain high rates of return. For most of us,
however, this is not a prudent course of actions. There are at least
two reasons for this:

1. We simply cannot afford to lose “Hard Earned Money”

2. Losses are difficult to overcome.

So the best strategy may well be to invest for safety first and return,
second.
Bad investment can cause the outright loss of our money
Procrastination…
can be a very costly decision P1,000,000

Saving a Million
@8% return
People will come up P63,917 /yr
with all types of reasons
as to why they didn’t do
what they said they P20,234 /yr
wanted to.
P8,174 /yr

P3,575 /yr

@25 @35 @45 @55 @65

Or is the real reason… that we fail to take the time to organize our
financial affairs and then develop a systematic plan that will help us get
where we want to be?
We All Procrastinate!
The Hazard of Death 1958 CSO
Mortality Table
A nnua l C h a n c e s i n 10 0 o f A nn u a l C ha n c e s i n 10 0 o f
Ex p e c t a t Ex p e c t a t
De at h S u rv i v i n g De at h S u rv i v i n g
io n o f io n o f
A GE Rat e A GE Rat e
Li f e 10 20 Li f e 10 20
per per
( Y e a rs ) Y e a rs Y e a rs ( Y e a rs ) Y e a rs Y e a rs
10 0 0 10 0 0
20 50 .4 1,79 9 8 .1 9 5.6 50 2 3 .6 8 .3 2 8 7.9 6 3 .8
21 4 9 .5 1.8 3 9 8 .1 9 5.5 51 2 2 .8 9 .11 8 6 .8 6 1.2
22 4 8 .5 1.0 1 9 8 .0 9 5.3 52 2 2 .0 9 .9 6 8 5.6 58 .4
23 4 7.6 1.8 9 9 8 .0 9 5.0 53 2 1.2 10 .8 9 8 4 .4 55.5
24 4 6 .7 1.9 1 9 7.9 9 4 .8 54 2 0 .5 11.9 0 8 3 .1 52 .6
25 4 5.8 1.9 3 9 7.9 9 4 .5 55 19 .7 13 .0 0 8 1.6 4 9 .6
26 4 4 .9 1.9 6 9 7.8 9 4 .2 56 19 .0 14 .2 1 8 0 .1 4 6 .5
27 4 4 .0 1.9 9 9 7.8 9 3 .8 57 18 .2 15.54 78 .4 4 3 .5
28 4 3 .1 2 .0 3 9 7.7 9 3 .4 58 17.5 17.0 0 76 .6 4 0 .4
29 4 2 .2 2 .0 8 9 7.6 9 2 .9 59 16 .8 18 .59 74 .7 3 7.2
30 4 1.3 2 .13 9 7.5 9 2 .4 60 16 .1 2 0 .3 4 72 .6 3 4 .1
31 4 0 .3 2 .19 9 7.3 9 1.9 61 15.4 2 2 .2 4 70 .5 3 1.0
32 3 9 .4 2 .2 5 9 7.2 9 1.2 62 14 .8 2 4 .3 1 6 8 .2 2 7.9
33 3 8 .5 2 .3 2 9 7.0 9 0 .5 63 14 .1 2 6 .57 6 5.8 2 4 .9
34 3 7.6 2 .4 0 9 6 .8 8 9 .7 64 13 .5 2 9 .0 4 6 3 .3 2 2 .0
35 3 6 .7 2 .51 9 6 .5 8 8 .9 65 12 .9 3 1.75 6 0 .7 19 .3
36 3 5.8 2 .6 4 9 6 .3 8 7.9 66 12 .3 3 4 .74 58 .1 16 .7
37 3 4 .9 2 .8 0 9 6 .0 8 6 .9 67 11.7 3 8 .0 4 55.4 14 .3
38 3 4 .0 3 .0 1 9 5.6 8 5.8 68 11.2 4 1.6 8 52 .7 12 .1
39 3 3 .1 3 .2 5 9 5.2 8 4 .6 69 10 .6 4 5.6 1 4 9 .9 10 .1
40 3 2 .2 3 .53 9 4 .8 8 3 .3 70 10 .6 4 9 .79 4 7.0 8 .4
41 3 1.3 3 .8 4 9 4 .4 8 1.9 71 9 .6 54 .15 4 4 .0 6 .8
42 3 0 .4 4 .17 9 3 .9 8 0 .4 72 9 .1 58 .6 5 4 1.0 5.4
43 2 9 .5 4 .53 9 3 .3 78 .8 73 8 .7 6 3 .2 6 3 7.9 4 .2
44 2 8 .7 4 .9 2 9 2 .7 77.0 74 8 .2 6 8 .12 3 4 .8 3 .2
45 2 7.8 5.3 5 9 2 .1 75.2 75 7.8 73 .3 7 3 1.8 2 .4
46 2 7.0 5.8 3 9 1.4 73 .2 76 7.4 79 .18 2 8 .7 1.6
47 2 6 .1 6 .3 6 9 0 .6 71.0 77 7.0 8 5.70 2 5.8 1.1
48 2 5.3 6 .9 5 8 9 .8 6 8 .8 78 6 .6 9 3 .0 6 2 3 .0 0 .6
49 2 4 .4 7.6 0 8 8 .8 6 6 .4 79 6 .2 10 1.19 2 0 .3 0 .2

Death is like a thief in the night… It steals our dreams for our family’s future !
 The Probability of Becoming Disabled
The chances...
Chances of disability Chances of disability

1000 men over 90 days before 1000 women over 90 days before

at age age 65 at age age 65

25 474 4 out of 9 25 570 4 out of 7

30 446 4 out of 9 30 534 1 out of 2
35 418 2 out of 5 35 490 1 out of 2
40 389 3 out of 8 40 435 3 out of 7
45 354 1 out of 3 45 369 1 out of 3
50 309 3 out of 10 50 204 1 out of 5
55 245 2 out of 9 55 211 1 out of 5
60 148 1 out of 7 60 117 1 out of 9

The possibility of prolonged disability can wipe out years of accumulation !

Source: 1985 Commissioner’s Individual Disability Table
PERSONAL FINANCIAL PLANNING CONSISTS OF
THREE (3) GENERAL ACTIVITIES

I. Controlling your day-to-day finances to enable you to do the

things that bring you satisfaction and enjoyment

II. Choosing and following a course toward long-term financial

goals such as buying a house, sending your kids to college, or
retiring comfortably

III.Building a financial safety net to prevent financial disasters

caused by catastrophic illnesses or other personal tragedies
YOUR DECISION NOW WILL DEFINITELY
AFFECT YOUR FUTURE…

“IT’S NOT HOW MUCH MONEY

YOU MAKE EACH MONTH THAT
COUNTS, IT’S HOW MUCH
MONEY YOU SAVE AND INVEST
EACH MONTH THAT COUNTS”.
FINANCIAL PLANNING
FINANCIAL PLANNING IS IMPORTANT FOR
EVERYONE, WHETHER YOU’RE
PREPARING TO SAVE FOR EDUCATION,
YOUR OWN HOUSE & LOT OR
PROTECTION OF ONE’S INCOME &
RETIREMENT.
ASSETS IS ALSO VITAL.
A FINANCIAL PLANNER CAN HELP YOU
ANALYZE YOUR NEEDS AND GIVE YOU THE
RIGHT PLAN.
THANK YOU!