I consider myself still a newbie in investing.
But a little over a year of learning and experience, I come to realize some reasons why most of us Filipinos don’t end up rich.
Below are some of the 5 reasons why:
1. We are a people of excuses. We already give up without even trying. We love the phrases: “mahirap yan”, “saka na”, “busy ako”, “wala akong time”,“wala akong pang-invest” or “kasalanan ng gobyerno”.
Instead of making excuses and blaming others, why not find ways to improve ourselves and to seize every good opportunity that comes our way.
If we try and succeed, then good on us. If we try but fail, let’s learn from it, rise up and move on.
It always feels better to have tried than to have done nothing at all.
2. We tend to be a very envious people. We have a consumerist mindset. We are brand conscious. We always think on what other people say or think about us.
We always want to be in the trend. If our friend has an iPhone, we also want an iPhone. If their family eats in Jollibee then we’ll also eat in Jollibee. If our officemate buys a condo, we’ll also get a condo.
Credit cards, branded shoes and clothing and fast-food everyday. We are biting more than what we can chew.
If we can afford it and we are earning too much, why not. But most of the time we can’t.
One Starbucks Java Chip Grande cost P155. If we have it 5 times a week then it will cost us P775 or P40,300 per year!
What about just drinking that coffee available in our pantry or just get the cheaper 3-in-1 coffee sachets? We could have invested that saved money in a mutual fund or in the stock market that can make us millionaires after so many years.
Let’s learn to simplify our lives. Keep track of our expenses. Prioritize our needs. Minimize our wants.
We should not think too much on what other people will say or think about us.
In reality these other people won’t really care on what is happening and on what are still bound to happen in our lives.
3. We Filipinos don’t have the proper mindset to become rich. We would rather rely on luck, faith and fate. We would believe in horoscopes or just pray to win the lotto rather than look for proven means to increase our wealth.
Currently, a PCSO GrandLotto 6/55 lotto ticket costs P20 per combination. It’s being drawn 3 times a week (Monday, Wednesday and Saturday).
When a person buys 2 combinations for P40 in each of the 3 draws, he/she will spend P120 per week or P6,240 per year (i.e. P120 x 52 weeks). Almost or 100% of the time a lotto bettor loses and will never be able to recover what he/she spent.
What if the lotto bettor saved the P6,240 per year and invested it in Philequity Fund, Inc. (minimum initial investment of P5,000)? His P6,240 could have ended at P6,848 (i.e. P6,240 x 109.74%) or P608 gain at the end of 1 year. What more if investing is done in 10 or 20 years.
Note: Philequity Fund, Inc.’s Year-To-Date growth as of March 11, 2014 is at 9.74%
4. We are a very impatient people. We want to earn money at the soonest possible time. We often fall for get-rich-quick schemes or investment scams. Instead of gaining knowledge about legitimate investments we would rather believe in tsismis or in what our neighbors say and do.
A popular example would be the Aman Futures pyramid scheme in 2012. Approximately 15,000 Filipinos in Visayas and Mindanao lost an estimated P12-billion worth of their hard-earned money.
They were promised 40% to 60% return of investment within a 2-week period. The initial investors were seen to be driving new cars and receiving big amounts of money. Unfortunately after a few months, the so-called investment company crashed and the scammers are nowhere to be found.
5. We lack financial literacy. We don’t have a concept of what an investment is and on how money works. As much as possible we don’t want to take risks. We would rather keep our money at home or in the banks.
According to the 4th Quarter 2013 Consumer Expectations Survey of the Bangko Sentral ng Pilipinas (BSP), the total savings of households in the Philippines are placed or kept as follows:
Looking at the doughnut chart, very few Filipinos invest their savings. 65.1% still put their money in banks and surprisingly 23.8% keep their money at home!
We are missing out on great opportunities to grow our money if we just keep it at home or in the banks.
Big banks in the Philippines currently offer 0.25% interest rate on savings account. Time deposits on the other hand offer minimum of 0.5% or max of 1.125% depending on the time period and amount of deposit.
The said savings and time deposit rates haven’t considered yet the 20% withholding tax on the interest earned.
Let’s take a look at the bigger picture. Let’s learn how a bank works and how it earns money.
Banks receive money from various depositors. In the Philippines, 18% of deposits go to reserves and the remaining 82% for bank use.
The depositor earns interest from their savings or time deposit accounts.
On the other hand, the bank earns from interest on amounts they loan, their fees and charges and their investments.
Below is a hypothetical infographic to illustrate this. We assume that a person deposits P1,000,000 for 10 years in a bank time deposit account.
Looking at the illustration, after 10 years of a depositor’s money sitting in a time deposit, the bank is clearly the winner when it comes to income. A staggering 1,247% difference! Now we know how the wealthiest in the Philippines build up their wealth.
No wonder in the Philippines, only a few people makes it to the wealthy list. Indeed, the rich gets even richer and the poor becomes even poorer.
My intention in writing this post is to make all of us aware and realize the opportunities that we are missing out. I have nothing against banks, brands or traditional views. I just want each reader to keep learning about financial literacy and to start building their own roads towards financial freedom.
Whether we succeed or fail, it doesn’t really matter. At least we tried.
Happy learning and investing! :)
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