Financial Literacy and

Security
CSUPT BRENDAN O FULGENCIO
Certified Financial Education Instructor
National Financial Educators Council
 Objectives
 Discuss and understand Financial Security:
 Discuss and understand how to achieve Financial
Security;
 Discuss and understand the common mistakes of
retirees:
 Discuss and understand the things that needs to be
done before and after retirement:
 Understand How Do Money Works”.
 What is Financial Security
 Financial security involves having enough
money to comfortably cover your monthly
expenses, recover from financial setbacks, and
save for your future.
 It’s also about having low financial stress and
feeling in control of your money.
 How Financial Security Works
 You no longer panic when a financial setback
happens.
 You have enough money to splurge on “wants”
(like a vacation or fancy dinner) without digging
yourself deeper in debt.
 You’re able to take risks in your career and chase
opportunities that make you happy (rather than
doing what makes the most money).
 Having financial security requires you to be
future-oriented.
 You have to make a financial plan to live below
your means now, so you can buy yourself
freedom, flexibility, and options later on.

 Most importantly, financial security is a state of

well-being.
 It’s about feeling calm and in control of your
money, rather than having a fancy job title or
salary but still struggling with finances.
 How to Achieve Financial
Security
 Get an accurate picture of your current financial
situation.
 Build an emergency fund.
 Pay down high-interest debt.
 Make sure you’re insured in case of emergencies.
 Don’t forget to prioritize retirement.
 Invest
 Start/Increase your savings
 You can save a little amount from the
 How To Save? money intended for your needs.
 You can save more from the money
 Spend Less Than You Earn
intended for your wants.
 Manage Your Expenses  Think about it:
• 1 peso 1,000,000
 List Your Expenses • invested at 8%per annum
(compounded)
 Classify Needs And Wants • you will have 1M after 180 years
• at 18%, it will only take 80 years
 Develop a Spending Plan
 Cut Back On Your Wants/Focus On Your Needs
 Earn Additional Income
 Stop Wasting Your Precious Time
Don’t forget to prioritize
retirement
 Don’t forget to prioritize
retirement
Filipinos’ retirement savings lowest in Asia — Manulife
survey (Mary Grace Padin (The Philippine Star) -
April 6, 2019 - 12:00am)

In a study done by Sun Life Philippines, out of 100

individuals within retirable age in the country, it’s been
found that:
• Only 2 are financially independent
• 45 depend on their relatives
• 30 rely on charity
• 23 are still working
 Case Studies (BJMP Retirees)
• Retiree no. 1
• 65 years old, with one college student
• Pension net take home pay = P100.00/month
• BJMP-MPC Capcon = 30k, no other savings
• Every 5 to 6 months he needs to re-loan to sustain their needs
• Retiree no. 2
• 54 years old, with two children who are still studying
• Retirement benefits were used to purchased a brand new vehicle,
improvement of the house, and student tuition
• BJMP-MPC Capcon = 30k, no savings
• One year after retirement:
• He needed to work as a security guard to sustain their needs
• Wants to borrow money from the Coop, but loan was not granted
• Forced to terminate his membership to Coop to get his 30k
 Case Studies (BJMP Retirees)
• Retiree no.3
• Retirement benefits = 3,500,000.00
• BJMP-MPC Capcon = 30k, no other savings
• He put up a piggery using the large amount from his retirement
benefits
• Two years after retirement, piggery was gone
• He was forced to terminate his membership to Coop to get his 30k
 Case Studies (BJMP Retirees)

• Retiree no. 4
• 58 years old, with one college student.
• Capcon and Savings before retirement (COOP and AFPSLAI)= 2.2M.
• Large amount of his retirement benefits was invested in coop, a
small amount were utilized to put up a small business.
• At present, he consider himself to have achieved financial freedom.
• Financial freedom means having enough savings, financial investments, and
cash on hand to afford the kind of life we desire for ourselves and our
families. It means our money is working for us rather than the other way
around.

To live a happy retired life, you have to make your hard earned
money work for you.
 What do you think are the common mistakes of
retirees?
 Top 10 mistakes of retirees: By
Randell Tiongson, RFP
 SHORT TERM ORIENTATION.
 The fact is, you will probably live about 15 to 20 years
more upon retirement (even longer hopefully).
 THE X-CURVE CONCEPT (By Art L. Williams)
You must take care of your responsibilities while building your wealth
Big Responsibility Long-term perspective turns out to be Big/Enough Savings
Work Hard for Money more important than virtually any other Money working for you
single factor in determining your success
Income: Salary (Active) Living on Interest Income
 Food in life and at work.  Food
 Shelter (rental/loan)  Own a House
(Die Too Soon) (Die Too Long)
 Clothing  Clothing
Protect Your Family Protect Yourself
 Education Income Replacement-Insurance  Health
 Healthcare  Debt Free
 Debt/Loan
Let Your Long-Term Perspective Financially free
Financially stress Determine Your Short-Term Priorities Enjoy Life

No Savings No Responsibility
Age Line
Young Older
 Reflection Paper
 For submission:
 What is your “ideal financial future”?
 Top 10 mistakes of retirees: By
Randell Tiongson, RFP
 SHORT TERM ORIENTATION.
 The fact is, you will probably live about 15 to 20 years more
upon retirement (even longer hopefully).
 FORGETTING ABOUT INFLATION.
 Inflation will not retire just because you did. Your retirement
funds will still need to grow to catch up with inflation.
Philippines Inflation Rate 1960-2025
 Top 10 mistakes of retirees: By
Randell Tiongson, RFP
 SHORT TERM ORIENTATION.
 The fact is, you will probably live about 15 to 20 years more
upon retirement (even longer hopefully).
 FORGETTING ABOUT INFLATION.
 Inflation will not retire just because you did. Your retirement
funds will still need to grow to catch up with inflation.
 PUTTING ALL YOUR EGGS IN ONE BASKET.
 The rule on investing still applies during retirement: diversify.
 SPENDING TOO MUCH, TOO SOON.
 A common behavior among retirees is they rush into a
spending spree. Retirement to others is liberating and the
urge to live beyond your means is a very strong temptation.
 Top 10 mistakes of retirees: By
Randell Tiongson, RFP (Cont.)
 MAKING RISKY MOVES WITH MONEY.
 While it is necessary that a retiree should still be investing,
going into high risk or speculative endeavors might not be a
really good idea.
 NOT PREPARING FOR MEDICAL EMERGENCIES.
 56 up is still a relatively young age, so the need for medical
concerns is not yet taken seriously. However, while the spirit
is still willing, the body is not and it will be good to provide for
a time when we will experience physical ailments.
 NOT REVIEWING FINANCES AND INVESTMENTS.
 The need to do a periodic review on finances and investments
should be a primary concern of any retiree.
 Top 10 mistakes of retirees: By
Randell Tiongson, RFP (Cont.)
 RELYING ON PENSION ALONE.
 Pension is meant for a retiree to survive, not for a retiree to
enjoy his retirement. Do the math - no one can live a decent life
with just Pension benefits.
 WORRYING TOO MUCH.
 Alas, while prudence is key during retirement, fear is a very
crippling mindset. So long as you follow common sense and
have done your best in preparing for retirement, try to relax as
this is what retirement is all about.
 SIMPLIFYING ESTATE PLANNING.
 Retirement is a good time to consider some serious estate
planning. Learn about the many ways you can plan for your
estate.
 Other common mistakes of
retirees:
• Failing to plan
• Depending on Children
• Starting something with zero knowledge
• Giving too much
• Failing to prepare emotionally
• Not recognizing how expenses change in retirement.
• Being over-invested in their house.
• Many retirees are house-rich but cash poor, to the point where
their house will be worth more than their retirement accounts.
 Things to do before and after
retirement
• Key points
• Picture yourself in retirement. Then estimate the resources you
will require to support your vision. You may need to make some
adjustments now.
• Consider maintaining a sound mix of investments and other
assets to provide your portfolio growth opportunity throughout
retirement.
• Health care costs will likely be higher later in life. Consider
options to make sure your needs are covered in retirement.
 Things to do before and after
retirement
1. Plan ahead
A. Estimate your retirement expenses
Formula to estimate future expenses:
Future value = Present Value multiply by (1+inflation/interest)n
FV = PV x (1+I)n
 n = number of years before retirement

Compute your future expenses

• Current expenses (monthly)= 10,000
• Inflation = 5%
• Numbers of years to retire = 15 years
FV = 10,000 x (1+0.05) 15
FV = 20,789
Calculating future expenses
Things to do before and after retirement
1. Plan ahead
A. Estimate your retirement expenses
B. Estimate the amount you needed to sustain your expenses
 Based on calculation, my future expenses is 20,789.00/month
 20, 789 x 12 = 249,468.00 (amount I needed in one year).
 How much investment do I need in order to have 249,468.00 per annum?
 Assuming I can invest my money at 10% per annum.
 Formula: Money needed: (X) (.10) = 249,468
 X = 249,468/(.10)
 X = 2,494,680.00
I need to save 2,494,680.00 - invest it at 10%/annum - to produce
249,468.00 a year - to sustain my 20,789.00 monthly expenses.
C. Have an inventory of your current savings/investment and compute how
much more you need you save.
 Things to do before and after
retirement
1. Plan ahead
2. Start saving/ increase your savings.
3. Invest your savings wisely. Make sure you're diversified
and investing for growth.
4. Limit/Avoid new debt and reduce existing debt.
5. Maintain an emergency fund (3-6 months expenses).
6. Determine your healthcare options.
 Things to do before and after
retirement
1. Plan ahead
2. Start saving/ increase your savings.
3. Invest your savings wisely. Make sure you're diversified
and investing for growth.
4. Limit/Avoid new debt and reduce existing debt.
5. Maintain an emergency fund (3-6 months expenses).
6. Determine your healthcare options.
7. Do something that will keep you emotionally fulfilled (if it is
something that will give you an additional income, much
better).
8. Consider estate planning
 How Do Money Works?
 The Power of Compound
Interest
 Compound interest:
 when interest is added to
the principal of a deposit;
 the interest that has been
added also earns interest;
 this addition of interest to the
principal is
called compounding.
 “Compound Interest is man’s
greatest invention.” - Dr.
Albert Einstein
The Power of Compound Interest
 The Power of Leverage
Buying a house Option 1 Option 2
Cash/cost of house = 500,000
Mode of acquisition Cash-full payment 20% down payment ; 100,000
500,000 15 yr. loan; 400,000 @ 6%p.a.

Monthly amortization 3,375

Cash available for investment Opportunity Cost: 400,000
 The benefits missed
Monthly collection if 400,000 is invested 4,000
at 12% per annum when choosing one
option over
Available cash for investment after another. 625
monthly payment Can be invested in 12%/annum

Total amortization -15 years 607,500

Total amount paid -15 years 707,500
Interest Earned after 15 years 308,751.2
Total Value after 15 years 708,751.2
Why Save and Invest your Money?
 Why save and invest your money?
Monthly IOC – 12% per 5 years 10 years 15 years 20 years 25 years 30 years
Capcon annm

Total 180,000 360,000 540,000 720,000 900,000 1,080,000

contribution
3,000.00 dividend- 50,874 257,075 664761 1,338,957 2,371,302 3,882,338
compounded in
6% per annum
Grand total 230,87 617,075 1,204,761 2,058,957 3,271,30 4,962,33
4 2 8
Total 300,000 600,000 900,000 1,200,000 1,500,000 1,800,000
contribution
5,000.00 dividend- 65,735 364,400 979,192 2,017,034 3,621,013 5,981,806
compounded in
6% per annum
Grand total 365,73 964,400 1,879,192 3,217,034 5,121,01 7,781,80
7 3 6
 Invest wisely; Make sure you’re
Diversified
• COOPERATIVES
• AFPSLAI/BJMPSLAI
• Stock securities (PSE)-shares of ownership in a corporation
• Managed funds --- Mutual Fund and UITF
• Real Estate-investing in raw land, buildings or rental
properties
• Other business opportunities- you become an
entrepreneur
GROW YOUR
MONEY
AND
ENJOY LIFE
FULL OF
ABUNDANCE
What Questions do you have?