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Showing posts from January, 2017

Term of the Day: Rule of 72

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The rule of 72 is a shortcut to estimate the number of years required to double your money at a given annual rate of return. The rule states that you divide the rate, expressed as percentage, into 72: Years required to double your money = 72/compound annual interest rate Example: 72/8 (8% annual interest rate) = 9 years to double your money The rule can also be used to find the amount of time it takes for money's value to halve due to inflation. If inflation is 6%, then a given amount of money will be worth half as much in 72/6 = 12 years. Adjusting For Higher Rates The rule of 72 is reasonably accurate for interest rates between 6%-10%. When dealing with outside the range, the rule can be adjusted by adding or subtracting 1 from 72 for every 3 points the interest rate diverges from 8%. Example: 11%, 73; 14%, 74; 5%, 71. Adjusting For Continuous Compounding For daily or continuous compounding, using 69.3 gives a more accurate result. Some people adjust it to 69 or 70 for simplicity. …

PERA: Personal Equity Retirement Account

As a voluntary retirement account, PERA provides an organizing framework to help Filipinos 18 years old and above prepare for their eventual retirement. The PERA law, crafted in 2008 as Republic Act 9505, provides tax benefits while instilling the saving discipline of making annual contributions to their own account. Unlike existing national or corporate pension schemes, PERA does not require a deduction from one’s salary to accumulate funds. Instead, PERA relies on an individual’s decision to invest up to Php100,000 annually to prepare for retirement. The PERA law allows individuals to open up to five PERA accounts and these can be invested in specific PERA-accredited product lines. Overseas Filipino Workers are provided the additional benefit of being able to invest up to Php200,000 annually which is twice the normal limit. Why PERA? Because it enjoys the following incentives: 5% income tax credit on the actual PERA contribution. This tax credit can be used to pay your income liabi…

Paano Nga Ba Kumita Sa Stock Market?

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Ngayon na naintindihan na natin kung ano ang stock market, paano nga ba kumita dito? May dalawang paraan kung paano kumita sa stock market. Ito ay: 1) Pagtaas ng Presyo (Price Appreciation) - eto ay kung saan nabili mo yung stock sa murang halaga tas biglang tumataas yung presyo habang tumatagal. Pwede din bumaba yung presyo depende sa mga balita tungkol sa company or sa Pilipinas or sa ibang bansa na pwedeng maka-apekto sa market. Halimbawa: Nung 2010, ang Jollibee ay nagkakahalaga ng P50++ per share. Tapos nung 2012-2013, ang isang share ay nagkakahalaga ng P100-P170++. Nung 2015, naging P200++ per share ito. Nag-P250 nung August 2016 kung saan ang index ay umabot ng 8100 pero nung November 2016, bumaba yung presyo ng P208 at ganun din ang index (6800) dahil sa mga sunod-sunod na pangyayari tulad ng halos kakatapos lang ng election sa US, inaantay yung fed rate hike sa December at kung ano pang balita. Kung nakabili ka noong 2010 ng 500 shares @ P50 at naibenta mo noong nag-P208 a…

Sole Proprietorship, Partnership or Corporation?

To determine the right legal form for your business, you have to know the following: Single Proprietorship (one person only) Simplest form of business organization. The establishment, management and operations of the business is not governed by a special law unlike corporations. Has unlimited liability in the sense that creditors may proceed not only against his business assets and property but also after his own personal assets and properties. In short, there's no distinction between his personal affairs and his business transactions. Required to register with DTI (Department of Trade & Industry) Usual tax liabilities: Individual Income Tax VAT if VAT registered (Gross sales is P1,919,500 or more) Percentage tax if non-VAT (3% of gross sales)Withholding tax if any
 Partnership (2 or more persons) Unlike single proprietorship, a partnership has a judicial personality separate and distinct that from each of the partners.   However, as a general rule, the liability of the partners…

Budgeting

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Now that you know your financial status and have listed all your goals, the next step would be budgeting what you have.

Budgeting is very crucial to our financial success. It is knowing how much you are willing to spend for that thing. It will give you a big picture of your financial performance just like the income statement. The only difference is that, the income statement provides actual results while the budget provides only assumptions. That's why when you track your actual expenses and compare it to your budget, this will show whether you are doing well or not.

Example:

For those who really don't have the time to track their expenses, I would suggest separate right away your money according to your budget. Put it in an envelope or in your atm but don't mix it to your other funds. As you spend that certain fund, you will know whether you will have an excess or none.   Monitor also if you are reaching your goals or not. Below is an example of how you will monitor …

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