Increasing My Financial Intelligence

Before putting up a business, I should first increase my financial intelligence. Thus, I began reading again good books on financial literacy and business magazines. I am not a Math genius, the reason why I had a bit hesitation over starting a business for fear that I might not be able to keep track of the business cash flow. But as one accountant friend told me, business mathematics does not have too complicated formulas or equations. One very inspiring book that I started reading again is Rich Dad, Poor Dad. I had the book since December of 2005. It’s a bit yellow now, the inside pages, I mean, but I guess it only compliments its contents—golden ideas.

Well, I admit I am bit sad that after six years, I was still not able to apply what I’ve learned from the book, but I guess I have to be positive. I will look at the brighter side of this occurrence. At least now, I have a fatter paycheck than in 2005. But I still struggle financially the way I did in 2005, and now I realize why after reading again this book. It is because I don’t have a working financial plan. And alright, I admit it, my financial intelligence is quite poor. 

The past three months, I began using a cash flow system called the envelope system, which I learned from Fitz Villafuerte in his Ready to be Rich blog. It’s a good system. I get to know where my money is going. The key is to use real envelopes or imaginary envelopes (using an excel worksheet) to represent my group of expenses. I used both. The technique is to allocate a particular amount of money for each type of expense so everything is budgeted. A certain amount should be set aside for savings of course. Below are my envelopes. 

Envelope 1: For family - 60%

Envelope 2: Savings - 5%

Envelope 3: Treat for family - 5 %

Envelope 4: Transpo and Food allowance for work - 15%

Envelope 5: Eat out with friends - 5%

Envelope 6: Medical Expenses - 5%

Envelope 7: Gifts - 5%

Envelope 8: Dress/Accessories - 5%

Envelope 9: Business Capital - 5%

After three months of doing this, I realized that most of my money went to:

1. Dinner treats for sending off officemates/friends who quit work
2. Gifts for officemates/friends who quit work
3. Gifts for officemates/friends for their birthdays
4. Medical checkups/medicines for family
5. Advance allowances for family
6. Orders from officemates who sell stuff
7. Load
8. Advance gifts for family and relatives

As I’ve said, I’ve been using the envelope system for three months now, but I’m still not able to keep track of my money. I always end up having just enough money to get me to the next paycheck. And often, I get money from my other envelopes, usually from my savings envelope, after I used up a certain envelope for a particular expense. It’s also not helpful that I have a spare money envelope. Last July, I got some retroactive pay after getting a salary increase at my job. Now this spare money is almost depleted. I planned to use it for buying an android phone but, soon, I saw it disintegrating before my very eyes, again because I do not know how to have control over my money.

Well at least I made some good friends really happy and I got to buy some cool stuffs, too:

1. A Ninewest bag
2. A Scoop project dress
3. A Rusty lopez shoes for mom
4. A purple So-en dress for mom
5. A book The Shadow of the Wind

Obviously, the problem is not with the system, but with my infantile self-discipline when it comes to money. After distributing my income in the envelopes, I would easily lost track of my spending. I barely have time to do my cash monitoring at work, and I’m too tired to do it when I get home. That’s why I initially wanted to buy an android phone—to help me become more organized not only with money, but also in other aspects of my life. But with or without the phone, if I can get that necessary discipline, I am sure I can control my spending habits and start saving money. 

Now, building discipline is a different story altogether because it requires a behavior change. (Research says that behavior change happens little by little.) Change should not look so complicated so I won’t feel intimidated. Now the envelope system is not too complicated, actually, but I guess I would do it some other time when I am more mature when it comes to money. I have to adopt an easier system, perhaps something that has fewer columns. And that’s when I remember the Income Statement box presented by Robert Kiyosaki in Rich Dad, Poor Dad. 

 

The Income Statement box is a very simple money diagram because it was actually made for him by his rich dad¹ when he was 9 years old (which is tantamount to saying that if I think this diagram is for me, then my financial intelligence is that of a 9-year-old kid).

Income
Expense
Asset	Liability

All I have to do is put the amount/item in the appropriate box indicated. Income is of course the money I am regularly receiving. Expense is what I spend. Asset is what I own that earns me additional income without doing extra work such as real estate properties while liability is something that takes money from me without anything in return (whether goods or money), like interest on loans and items bought with credit cards.

Below is how my income statement box looks like:

Income From job/paycheck From loading business
Expenses 60% of my paycheck to family Taxes, SSS, medocare and other deductions Transpo and food allowance for work Sunday dates with mom Church donation Dinners Gifts Accessories, clothes
Asset Bank savings	Liability None

Of course, I deliberately did not include actual peso figures in the diagram for my own safety from those who would sneer at my income ^_^. Kidding, aside. Wow, I am really overspending. That’s why I can’t save enough money for my business. Plus, as for my assets, I only got my bank savings which earns about less than 0.01% a year. Well, at least I don’t have any liability because I don’t own a credit card and I don’t borrow money from banks or the office.

Here are my resolutions:

1. Deposit my savings to the bank regularly (so I can’t readily spend my extra money for unplanned dinners, etc.)
2. Open up a time deposit acct or a mutual fund.
3. Cut on my expenses
4. Get more income (raket²)
5. Get more assets (stocks, bonds, notes, real estate, royalties, insurance/life plans)

Well, wish me luck again, guys. In the meantime, I have to tie my shoe laces (or some loose ends) because I have to face the fact that I’m still in the rat race.³

And now responsibilities in the office are adding up. And like what Robert Kiyosaki said, do not work to earn money, but work to learn. And yup, now I’m learning about business management at work.

Footnotes:

1 Rich Dad is the father of Mike, Robert Kiyosaki’s childhood friend. Rich dad taught him how to develop his financial intelligence

2 Rat race is a pattern of get up, go to work, pay bills, get up, go to work, pay bills

3 Raket is other means of income aside from ones regular job

Family Business

I had a dilemma a few days ago. I wanted to start a business soon, but I wanted to do it with the help of my family. I want all of them to be involved so that in the future, all of us will share in the profit. Who knows just how big our business could become? But unfortunately, the small family that we are, each of us had a different type of business in mind.

My mom wants a gift shop or a boutique.

My dad wants a build and sell business or for a small business, a siomai house.

My eldest brother wants a bookshop.

I want a school supplies store or a beauty and wellness center.

While my other kuya says he supports any business that we decide to put up. 

I say it’s a pretty chaotic mix. Whose idea will prevail, especially if we are going to pool all our resources together to build capital?

I believe answering the questions below would help us decide which business to pursue:

1. Who is going to manage the business?

2. Which business is the easiest to set-up?

My amateurish answer for no. 1 is that my mom would be managing the business because she has the most time available among us. As for no. 2, gift shop is easiest because gift items can be bought anywhere. But of course, I thought deciding for business matters can't be as easy as this. There are plenty more questions like:

1. Where are we going to get the products?

2. Do we need suppliers?

3. Who will contact the suppliers?

4. Are we going to buy the products and resell them or are we going to ask for consignment arrangements?

These are just six questions in total but they appear overwhelming, right? We will be embarking on our first business venture ever. So, we find things both scary and exciting. As beginners, we will be experiencing all the business intricacies for the first time. Thus, we need to ensure that we won’t overwhelm ourselves.

A little bit of common sense makes me think that it would be easier for us to start a retail business rather than a manufacturing business. In retail business, we will just buy items in bulk, bring it to our location, and sell them with a mark-up price. But my heart wants to manufacture new, original products. Wow, who knew planning can be so grueling?

Of course, there will also be issues on sharing of profit, but for me that's a very easy part. The tougher one would be on the delegation of responsibilities. Like this:

Figure from http://www.paradigmassociates.us/family-business/life-cycle-issues.php

Thus, I again consulted a few books, magazines, and web sites, and true enough, in order to answer the questions above and more, I need to have a feasibility study. "Feasibility studies aim to objectively and rationally uncover the strengths and weaknesses of the existing business or proposed venture, opportunities and threats as presented by the environment, the resources required to carry through, and ultimately the prospects for success." 1

I've actually started writing one and you'll see them in bits and pieces posted here some time soon. I will also tell about my battles while doing conducting research and making plans. But for my next post, I will discuss first the elements of a feasibility study so we can orient ourselves with new terms, etc.

Wish me luck!

Source:

Justis, R. T. & Kreigsmann, B. (1979). The feasibility study as a tool for venture analysis. Business Journal of Small Business Management 17 (1) 35-42.

Filipinos Are Rich: They Just Don’t Know About It (Book Review)

“The Chow Dynasty of China mentioned our country in their record books of 722 B.C., making the Philippines at least 2731 years old. Our culture of success, wealth, prosperity, honesty, and respect was already established before Magellan’s supposed discovery. (A)s a people, we were branded as good! We were thought of as being trustworthy.. We were praised for our honesty, zeal, and our respect of other people… We enjoyed a stature unequalled in Asia. Foreigners enjoyed coming and doing business with us.”

“…My vision for our country is this—(the Philippines) is the new financial giant and the gold standard for success, decency and prosperity in the whole world… I know we can (do it) because a long time ago… we were branded as a good people and a good country. What we are in our hearts of hearts and what we will become is not the new and improved Philippines—it’s the old and classic brand that we have always been.”

These two passages sum up the message that the book Filipinos Are Rich (They Just Don’t Know About It) by Cris Enriquez, M.D. wants to convey. So if you are a Filipino who wants to be rich and make the country prosper as well, this book is for you.

Yes, I’ve read the book, because I found the title interesting and intriguing, especially the subtitle, and also because yes, I am a Filipino and like most, I dream to become rich and help this country become a great nation again. A book of only 113 pages, I finished reading it in more or less three hours with intermittent spawning of inspiring thoughts and conjuring up of plans of applying the lessons I picked up from this book. While reading it, I kept on telling myself, I hope many people get to read this. In fact, I wanted to share its message so much that one idea from it already landed as a post in my facebook account: “The problem of Third World Countries is not poverty or corruption—it’s leadership.”

The book is not your ordinary step-by-step guide on becoming rich but is a rich (pun intended) source of facts and concepts that convince readers that yes, Filipinos are born to be rich not only in wealth but also in admirable character. It has chapters that remind the readers to dream because it gives a road map of life, to have the right attitude, to become responsible, to be a giver, to take risks, to have determination, to make a change, and to take action. It also tackled the issues on failure, luck vs. opportunities, and crab mentality.

A few days after reading the book, I can still feel that surge of pride and patriotism brought about by learning the admirable attributes of the old Philippines and the nobility that runs in the Filipino veins. I felt a little ashamed to realize that I sometimes get swayed with some other people’s opinion—that our country is a hopeless case. I think now that perhaps, the reason why I always see us fall short of our own expectations is because I don’t trust enough that we can succeed. But after reading the book, I realized that all along I was thirsting to know something like this, something so heavenly about ancient Philippines. Maybe, the rest of the pessimistic Filipinos just need to be informed, too, that we are not merely a country that was colonized—that 300 years of colonization is just a short break in our 3000 years of history. Our history was obscured by the colonizers but the truth will always come into light as is happening now. For example, as recounted in this book, the first mass in Philippines was celebrated not by a Spaniard in Limasawa in 1521 but by an Italian Priest named Father Orico in Bolinao, Pangasinan in 1324.

I also learned new perspectives on poverty. Dr. Enriquez cited an article from The Wall Street Journal… “Stop thinking of the poor as victims, or as a burden, and start recognizing them as resilient and creative entrepreneurs, who have remained dormant only because of suppressed dreams and lack of nurturing and mentoring.

I think this book will capture the interest of aspiring social entrepreneurs whose goal in putting up a business is not only to earn profit but also to help the country’s economy, create jobs and help other entrepreneurs, as well as aspiring politicians and teachers who really want to serve the country. But surely, even ordinary readers will appreciate this book because its themes are universal— pursuing dreams and loving the country. Generally, I believe this book can help its reader continue to dream despite the challenges in his/her life or that this country faces.

This book is also very easy to read. The language is relatively simple and thus easy to understand, but the words are phrased craftily in a way that makes sentences memorable and quotable. In fact, some idiomatic expressions seemed familiar to me because the great Mr. Alejandro D.Padilla, our senior editor and editorial adviser, edited the book.

The book ended with a discussion on crab mentality, telling the readers that love is the antidote to crab mentality. But if I were to choose for the author, I would have the book ended with the chapter on responsibility. This way, readers will be armed with the desire to become responsible. Thus, I will end this review with a passage from Chapter 6, Responsibility. And so it goes:

A person has the power over his circumstance and his future. Attitude determines whether one becomes productive and a treasured member of society or a liability to the community. To be responsible is to be accountable to the family, the company one works for, or the community one lives in. You are not just an innocent bystander or an inert statistic…Everyone has a different definition of responsibility but to me it is doing the right thing at the right time, and at the right place, even in the absence of authority. Eventually, one is responsible to God for what he does.

Take a Break!

My office mate told me, "Go on a vacation leave for 2 weeks and then plan for your business." She did that last April and now she has already filed her resignation. Her last day will be on July 15, 2011.

I also filed my resignation last week, but I was told to take a leave instead and really think and pray about my decision. Honestly, I’m still quite scared what the future holds for me. But I really was tired and stressed, I was convinced I wanted to quit when I handed my resignation paper. Now, I think perhaps all I need is a break. 

Breaks have to be scheduled, otherwise, physical, mental, and even emotional and spiritual breakdown might surprise you.

When I take that break, I will pamper myself. I won’t go out of town or travel, I will just stay at home, wake up late, read my books, watch DVDs, visit our garden, and yes, plan for my business.

I have started giving 30 minutes of each day to business planning and other business actions, but it simply is not enough, especially with the nature of my job where I have to bring home work, in my head and in my bag. With the rate I’m going, it would take probably another five years and great discipline for me to finally turn my plans to reality. God willing, I will do it. 

= Elle

On Becoming My Own Boss

I have been an employee for more than seven years already. Add to that, I worked part-time for almost a year for fast-food chains while I was studying in college. I am now at a fork in my life. Am I ready to let go of the corporate world and start my own business?

 Photo from one of the many business blogs I am reading these day, http://www.vickidonlan.com

I have been entertaining the idea of putting up my own business since I formed a business concept in my mind five years ago. After five years of imagining, I have already witnessed my business grew into an empire inside my head. If only starting a business is as easy as it appeared in my dreams.

I am seriously reading several magazines on business planning and they all say that the best time to put up a business is NOW. I say, it’s very tempting to do so each time I read inspiring stories from entrepreneurs who started small and became successful. But I have so many fears and other reservations. Will I be able to get immediate return of investment? Will I earn more than (or at least maybe even equal to) the amount I am receiving now as an employee? Am I fit to become my own boss?

This blog will be my business notebook springing to online life. I will record here my experiences as an aspiring entrepreneur. It is said that one should not reveal his/her plan otherwise some other people may copy it, but it is also said that plans don’t come to life unless written down and shared to others. This way, one becomes accountable to fulfill his/her plan because there are other people involved now, people who care and support, or people who are negative and wants to see the other down.

I of course hope to find more people on the brighter side, supporting me. And when I finally realize my dreams of running my own business, I will invite all of you to one huge party!