Walang Yumaman na Hindi Kuripot

I was having coffee with a friend of mine and we were admiring the frugality of one of oura mentors. Ang yaman yaman niya pero ang kuripot pa rin niya. My answer was... ganon naman dapat.

Our culture looks down on people who are kuripot. In fact we should be a nation of kuripots so that our savings rate will go up. Look at the Chinese and the Japanese. They are a nation of savers and they also happen to be the richest countries in Asia.

And you know what? Ang kakuriputan ng mayaman ay hindi para sa malalaking bagay, in fact the rich are frugal in the small stuff.

• I know of one taipan who goes around his building to personally turn off the lights during lunch.
• I know a lot of wealthy people who shop using coupons or only buy stuff at a minimum of 30 per cent sale.
• The rich carry a database of where is the cheapest place to buy certain groceries. And they go there.
• I save the water from my shower to use it for flushing the toilet.
• The wealthy bargain no matter how small the amount.

There are so many more examples but the question is why are the wealthy so kuripot when they have so much money. I'll give you an analogy... I was talking to my friend who is so thin and fit. He works out so hard and eats so healthy. I ask him... Pare why do you workout so hard when you are so healthy already? He tells me an answer which makes me think... I am healthy because I workout so hard...

So it’s the same thing with being healthy. Why are the wealthy so kuripot when they have so much money? Actually it’s the reverse. The rich have so much money because they are kuripot!!! They know that if they can save small amounts of money this can go to savings and investment. The money will compound and compound and eventually it will be big.

Throughout my study of the rich I have learnt one thing - walang yumaman na hindi kuripot. Meron mayaman na hindi kuripot but the ones that became rich from being poor are all KURIPOT.

For more information on how I can help you email me on hoover@barongroup.com.ph.

Bring Him Home ASAP!!!

A friend of mine has asked me for advice about buying a Lot in a nearby village. She and her husband have managed to save about 250k and were ready to make the purchase. Her husband has been working overseas and sends money back on a regular basis. They have young children and can save about 10k a month. They currently live in a small unit which they own.

Sounds like a good move right? Invest in the Lot so that one day they can build their dream house. Land prices never go down diba? Well... It’s not bad but it’s not what I would do... Here's why:

• The Lot once they buy it doesn't generate any income or benefit. It just sits there doing nothing. Remember if the asset doesn't earn any money I don't consider it an investment.
• I estimate they will need 1m to 2m to build a house. Saving 10k a month they will need 8 to 16 years of saving!!! That's a long time not to generate any income or benefit from an asset.
• The general assumption is land prices always go up but this is NOT ALWAYS TRUE. When the time comes that you want to sell the land, there is not always a ready buyer AND if there is, it’s more often below market value.
• They will also have expenses in maintaining property - real estate tax and some maintenance costs. Imagine it doesn't generate income and you still have expenses!
• This last point is the most important. They already have a place to live. The husband works overseas and therefore he has to endure the suffering of living away from his family. He can't generate the same level of income here so he will be away from his family for at least 8 to 16 years just to save for the house. Remember this is just for the house, they still need to save for their retirement income!!! That will probably take another 16 years. At this rate his kids will grow up without their dad! (See Apr. 9 Blog - It's Hard to Say Goodbye)

At this point, they have to ask themselves what is more important to them. Living in a nice house (which the family may never enjoy) or being able to bring her husband home as quickly as possible and live as a family? If the answer is the second then here is what I would do:

• Focus on the saving, not on the lifestyle. Make do with what you have. REMEMBER!!! Every peso saved brings him home just that little bit sooner! Think that way about everything you spend from now on because every peso counts. (See Jan. 4 Blog - Na Libre Ka? Invest Mo!)
• Invest the 250k and the 10k a month. At 12% p.a. compounded over 16 years it will grow to 7.3m!!! Enough for them to retire on already! Once you have the cash then you can go out and buy your dream house. If you pay in cash, I promise you, you will get a better deal!

So remember it's ok to buy a Lot but you have to be able to generate a good income or benefit from it from day one, and that means you need to have the money to build a house on it. If you don't then you might be making one of the worst investments you will make.

For more information on how I can help you email me on hoover@barongroup.com.ph.

Huwag Kang Puro Hangin (Like Ricky Hatton)

This article is for all the guys out there who just don't get what this saving and investing is all about. So today I'm going to talk our language - Sports.

Why did Ricky Hatton lose? Because he didn't protect himself when Manny hit him with that powerful left hook. He was too focused on trying to knock Manny out! In other words all offense and no defence.

In basketball, it's the same thing. All basketball experts will tell you, defence wins games. It’s nice to see the basketball teams that can score, dunk and shoot but rarely do these teams win basketball games.

Fortunately, it's the same with saving and investing. Offense is income generation and defence is expense minimization. In other words offense is trying to earn as much money as possible through salary or business. Defence is trying to keep money in your pocket, saving and minimising expenses.

Ricky Hatton was all about offense, all he said he was bigger than Manny and he was going to knock Manny out. He was all glitz and glamour. High profile. All offense and no defence.

The high scoring basketball teams are all glitz and glamour, people love to watch teams that are all offense. People love the dunks and the nice shots but don't appreciate the defensive plays. In the NBA, the Phoenix Suns and Dallas Mavericks are the best offensive teams. But it was the Boston Celtics, the best defensive team that won the Championship. This happens every year.

It’s the same when it comes to saving and investing. We often admire and appreciate the high offense people; people who earn high incomes and live the glamorous lifestyles. But like Ricky Hatton normally puro hangin lang sila. We should look for and emulate people who live simple lives but retire early. These people earn good incomes (good offense) but are extraordinary savers (excellent defence).

Its true that we can't save if there is no money coming in but I believe people today are too concerned with how much they earn and not concerned enough about saving. No amount of offense can't stop a poor defence! In other words no matter how much money you earn it will never be enough if you don't have the discipline to save.

My message today is short and simple. You can't win in boxing without defence, you can't win in basketball without defence, and you can't win in life without defence!

For more information on how I can help you email me on hoover@barongroup.com.ph.

Bakit natin inuuna yung gamit sa bahay?

I went to visit my friend at his house yesterday. He lived in a nice condo and I commented on his nice furniture and appliances. He even 'invested' in a nice entertainment system. That was all great until I found out he was just renting his unit. To make matters worse, he didn't have any savings and all of the stuff he bought was on zero installment...

I spoke to another person about her plans and goals for the future and one of the first things she told me was - 'Gusto ko na magkapera para magkaroon na ako ng gamit sa bahay.'

I'm at the house of another friend who is about to send a balikbayan box back to the Philippines (I’m overseas right now). It was full of groceries and 'gamit para sa bahay'!

Why do we give so much importance to the stuff we have for the house? Bakit natin inuuna yung gamit sa bahay?

Why can't we give priority to our long term financial future instead?

Is it because it was on sale? Is it because we think we need it? Is it because we just liked it and bought it? Or, is it because we grew up thinking that the 'gamit' we have rewards our hard work and shows our success in life?

Honestly, I don't know the reason. Different people have different reasons. But what I know is this:

• Most of the time, the stuff we buy for our house we don't really need. It's nice to have but we don't absolutely really need it. The 'gamit' depreciates as fast as you buy it. This means the moment its in your house you can't sell it for what you bought it for.
• Saving the money that you spend for gamit and investing it means that you are one step closer to having a comfortable retirement.

When I was younger I dreamed of the nice car, nice clothes, nice house, travel and all the 'gamit' that I ever dreamed of. I used to dream that I would get this high paying job or have a big business that I would get my income from. But then I learned two important things:

1. No matter how much money I earn I can NEVER have all the gamit I ever want. There is always something newer that comes along and my bank account was always EMPTY!
2. I met two very important people that changed my life. I met a guy who I thought was successful. He had all the stuff and the lifestyle I wanted. But there was one big problem. He wasn't wealthy. He had to work harder and longer just to maintain his expensive lifestyle. Then I met another person. On the outside a very simple person, didn't have all the things that I wanted in my life but there was one thing she had that I REALLY wanted. At age 40 she was already retired. She didn't want to work her entire life so she saved her money little by little until she had enough to retire. Now she wakes up everyday not needing to work, she does the things she wants to do. It's a beautiful way to live.

For more information on how I can help you email me on hoover@barongroup.com.ph.