FINANCIAL LITERACY

MOHALIDIN M. SUAEB, Ph. D.

Chief Education Supervisor
Schools Governance and Operations Division
REALITY CHECK
ANG PERA, PARATING PA LANG…

PAALIS NA!
NABUBUHAY A-KINSE,
A-TRIENTA
RASON:

“Culprit” Instant Gratification

PERSONAL FINANCE
VERSUS

FINANCIAL LITERACY
PERSONAL FINANCE
is nothing but knowing How to keep what

YOU earn and do More with what you Keep

FINANCIAL LITERACY
is understanding how you can BUILD
your personal wealth
What is Financial Independence?

What do you mean by financially literate?

What is Wealth?

Kailan ba maituturing na “mayaman” na

ang isang tao?
 Where does your
Money come from?
 CASHFLOW QUADRANT
(Four ways that money may come your way)

Work for somebody else Go into business

Work for somebody else

Make your money

Work for yourself
Work for yourself work for you

RAT RACE ROBERT KIYOSAKI

Author, “Rich Dad, Poor Dad”
 CASHFLOW QUADRANT
(Four ways that money may come your way)

Work for somebody else Go into business

Make your money

Work for yourself
work for you

FAST TRACK ROBERT KIYOSAKI

Author, “Rich Dad, Poor Dad”
 CASHFLOW QUADRANT
(Four ways that money may come your way)

Work for somebody else Go into business

Make your money

Work for yourself
work for you

ROBERT KIYOSAKI
Author, “Rich Dad, Poor Dad”
 CASHFLOW QUADRANT
(Four ways that money may come your way)

Work for somebody else Go into business

Make your money

Work for yourself
work for you

ROBERT KIYOSAKI
Author, “Rich Dad, Poor Dad”
 CASHFLOW QUADRANT
(Four ways that money may come your way)

Work for somebody else Go into business

Make your money

Work for yourself
work for you

ROBERT KIYOSAKI
Author, “Rich Dad, Poor Dad”
 CASHFLOW QUADRANT
(Four ways that money may come your way)

Work for somebody else Go into business

Make your money

Work for yourself
work for you

ROBERT KIYOSAKI
Author, “Rich Dad, Poor Dad”
Where does your Money go?

INCOME
Accounts
payable/
Savings Others

Support for
Parents,
Relatives Insurance
Premiums

Your Household
Children’s Expenses
Education
 Facing
the
REALITIES
 Where are you now?

• Prepare your Personal Financial

Statements or Statement of Assets &
Liabilities (SAL)
 Salary
Interest Income from Savings and Time deposits
Income from Investments in Government Securities & stocks
Income from OtherAssets
Less: Expenses
Personal Food
Rent
Income/ Monthly Amortization for housing, car & other loans
Utilities
Expenses Insurance Premiums
Statement Allowance of children
tuition fees
Other expenses
Net Income
Less: Personal Income Tax
Net Income after tax
 FINANCIAL PLANNING
 The benefits of having a sound financial plan:

• It can help you avoid mistakes/

sidetracks

• Helps you make smarter decision

• Can insulate you from the

turbulence in the economy

• Makes money work for you!

Income EXPENDITURES can be
classified as follows:

 Consumption
 Protection
 Savings
 Taxes
Statement of Assets & Liabilities
ASSETS
Cash (Cash on hand, bank deposits,Coop deposits, etc)
Properties that you own (House, land, car, jewelry, etc)
Receivables (mgapautang)
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
carloan
credit carddebt
all payables & other loans

Total Assets – Total Liabilities = Net Worth

The CASHFLOW GAME

INCOME

EXPENSES

ASSETS LIABILITIES
 CASHFLOW 1
Job or
Profession INCOME

EXPENSES

ASSETS LIABILITIES
- Larry Gamboa
Think Rich, Pinoy!
 CASHFLOW 2
Job or
Profession INCOME

EXPENSES

ASSETS LIABILITIES
- Larry Gamboa
Think Rich, Pinoy!
CASHFLOW of the RICH
Job or
Profession INCOME

EXPENSES

ASSETS LIABILITIES
- Larry Gamboa
Think Rich, Pinoy!
FINANCIAL LIFE PHASE:
4
Retirement

ne tuning

2
Build-up Where are you NOW?

1 Where do you want to be

in the FUTURE?
Start-up
KALAYAAN SA KAKAPUSAN
(KsK) RULES
 Simple RULES in
FINANCIAL FREEDOM
KsK Rule 1: Pay yourself first. “YOU”
is your first source of Capital.

SAVINGS
 Redefining SAVINGS:

It must be defined as an EXPENSE.

It is an expense that BUYS your
FUTURE.
Saving is a conscious and deliberate way of setting
aside a portion of the personal income.
Correct EQUATION:

Y-Income
–
S-Savings
C – Consumption
Wrong EQUATION:

Y-Income
–
C-Consumption
S – Savings
KsKRule 2:
Define your
Financial
Target and
each Life
Phase
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
Culture of Dependency -- Being
overly dependent on others

Lack of Financial Literacy –

spending on liabilities or items
that decrease in value over
time; not knowing how your
money will grow or work for
you.
KsK Rule 3: Stop spending on things that
diminish in value. Know the difference between
Assets and Liabilities.
Poor Spending Habits:
• Impulse buying

• Uso kasi

• Too much entertainment

Know the difference

Your Your
NEEDS WANTS
Rule 4: Protect your greatest Income Generating
Asset, Yourself

ALERT #1 Health is Wealth

Health and Protection are very much
interrelated. If you are not healthy and you
do not take care of yourself, you can get sick,
meet an accident, get disabled, or die.

GOD HELP THOSE WHO HELP THEMSELVES

Rule 5: Grow with the Economy and
Beat Inflation
An Illustrative Formula of 80/20
Rule 6: Trust the Power of Time and Compounding
Period 1 Period 2 Period 3

Your
Money
Your +
Money Interest
Earning

Your
Your Money
Money +
Interest Your
Your
Earning Interest
Interest
Earning Earning
+
Interest
Earning
 Power of Compounding
Simple
Interest Compound
Year Principal Total Principal interest Total

End of 1 yr 1000 100 1100 1000 100 1100

End of 2 yr 1000 100 1200 1100 110 1210

End of 3 yr 1000 100 1300 1210 121 1331

End of 4yr 1000 100 1400 1331 133 1464

End of 5 yr 1000 100 1500 1464 146 1611

End of 6yr 1000 100 1600 1611 161 1772

End of 7yr 1000 100 1700 1772 177 1949

End of 8 yr 1000 100 1800 1949 195 2144

End of 9 yr 1000 100 1900 2144 214 2358

End of 10 yr 1000 100 2000 2358 236 2594

Difference 594
Rule 7: Assess Risk and Option
Note: The higher the risk, the higher the
return. Always investigate 1st before believing.
(UNDERSTANDING)

LOAN INVESTMENT
 When do banks or lenders lend?

• The borrower has more than enough sustainable

income to pay for the loan plus interest;
• The lender does not mind foreclosing on or taking
over the collateral;
• The ability of the borrower to prove that he will
use the proceeds of the loan in an activity that will
produce sufficient income to repay the loan.
Rule 8: Make Money work for you

The Power of leverage

• Borrowing – leverage in finance
(Analyzing Good Debt)
• People leverage
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.
Rule 9: Invest and Diversify

Make your MONEY grow.

Invest your savings in money-

making assets. MAKE YOUR
MONEY WORK FOR YOU.

Don’t put a l l your eggs in 1 basket

Evaluate Investment
Return/Yield

Liquidity Safety/Risk
Eight Simple Ways to Invest
Invest in debt and
gambling reduction

Lending investments:
◦ Gov’t/corporate Bonds
◦ Banks
◦ Pension Plans
Real Estate

Stock Market

Mutual funds

Engage in Business
ALERT #2: When Buying Real Estate 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.
INVESTING IN YOUR OWN BUSINESS

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.
Negative Mindsets

“I do not have enough money”

“I do not have good enough ideas”
Distrust of people – “mandaraya silang
lahat”
Fear of failure
Rule 10: Make use of the Power of One:
Strength in Numbers

Strength in Numbers
Saving together provides more & varied
opportunities to earn higher returns as well as
secure better benefits for all.
Cooperatives are a good way to avail of the
power of many.
Learning to say NO! is
part of Discipline

In good or bad times,

Never give up!
Remember, Winning
is a habit; Make it
yours!
The importance of SHARING…

Walang sino man ang

nabubuhay para sa
sarili lamang.
Tayong lahat ay may
pananagutan sa isa’t
isa…
Sharing always brings more blessing!
“ You have not lived a perfect day,
even though you have earned your
money, unless you have done
something for someone who will
never be able to repay you.”

- Ruth Smeltzer
dehn_su@yahoo.com