Understanding the SSS Contribution Table and why you should not depend only on SSS for your retirement

Just recently I saw a Facebook update from Philippine Social Security System on the pension (or retirement) benefits one can avail for a certain amount of SSS contribution. 

The amount shocked me that it lead me to investigate further the math (or computation) behind the said values. 

As part of our Global Campaign for Financial Literacy, it is very important to understand what benefits we are getting for what our money is paying for. Thus, today, let us dissect and understand the SSS contribution table (as of 2017) and learn why we should not depend only on SSS for our retirement. 

We should not only depend on our SSS for our retirement

This is the image uploaded by the Philippine Social Security System (SSS) in their official Facebook Account: 

SSS Contribution and Benefits (source: SSS Facebook Page)

Now looking into the values:

Juan contributed every month 110.

Every year that's 1,320.

Thus, for the next 20 years of contribution that would be 26,400. 

While Pedro contributed every month 1,760. 

Every year that's 21,120.

Thus, for the next 20 years of contribution that would be 422,400.

Thus, Pedro contributed 16x more than Juan. 

Now, before we proceed with the shocking part, let's us understand first the SSS contribution table (data as of 2017).

SSS Contribution Table 2017 (source: www.sss.gov.ph)

For a Range of Compensation (monthly salary) there is an equivalent fixed Monthly Salary Credit. 

The current SSS contribution rate is 11% of the monthly salary credit not exceeding P16,000 and this is being shared by the employer (7.37%) and the employee (3.63%).

Self-employed and voluntary members pay the 11% of the monthly salary credit (MSC) based on the monthly earnings declared at the time of registration.

For OFWs, the minimum monthly salary credit is pegged at P5,000.

For the non-working spouse, the contribution will be based on 50% of the working spouse's last posted monthly salary credit but in no case shall it be lower than P1,000.

Source: www.sss.gov.ph

Now, going back to the above image, after 20 years of contribution, both Pedro and Juan applied for retirement and will be receiving the following pension benefits:

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Work from home ideas: 10 ways to make money online in the Philippines

Not enough savings? Buried in debt? Living paycheck to paycheck? 

Sometimes, managing (especially reducing) our expenses isn't enough. You don't want to get sick because you cut eating meals into twice a day instead of thrice. That's going to be an additional financial burden.

Do you want to work from home?

The solution therefore is to earn additional sources of income. And now because of technology, people can actually make (additional) money online now in the comforts of their homes. 

Here are 10 ideas how to work from home for Filipinos and start making money online:

1. Freelance work or online jobs

Because of technology, a lot of jobs are now being outsourced all over the world. Thus, online jobs are now available. 

Luckily, Filipinos are known to be skillful, full of talent and hardworking. Earning few dollars is already a big thing here in the Philippines.  

Thus, a lot of Filipinos today are doing virtual assistant jobs. A lot are doing it as a part-time income online but some already made it a full-time job. 

Just imaging working at the comforts of your home. No more heavy traffic and you own your time. 

However, freelance work and online jobs may not be easy. It requires skills, dedication and constant learning but is truly doable. 

Here are some skills and services that are perfect if you want to get a freelance work online: 

- Graphic Design

- Android/IOS Application developer

- Content Writing

- Virtual Assistant

- Technical support/Customer Service

- Social Media Marketing

- Email Marketing 

- Online Video editor

- Logo Design

- Data Entry and Online Typing Jobs

- Search Engine Optimization Services (SEO)

- Internet Research

- and many more..

Famous sites you can go to:

International freelance websites:

- Upwork (www.upwork.com)

- Fiverr (www.fiverr.com)

- Freelancer (www.freelancer.com)

Filipino Freelance websites:

- VirtualStaffFinder (www.virtualstafffinder.com)

- MyOutDesk (www.myoutdesk.com.ph)

- OnlineJobs.ph

2. Sell stuffs online and/or build eCommerce website

You can sell physical items online like clothes, gadgets, even cars or basically anything. By using media like Facebook or Instagram, you can create your own business page where people can inquire, ask quotations and schedule for meet up. 

Transactions are usually done by meeting up or through delivery. However, a word of caution as scams are also evident online, so its best to be careful especially when payments are done online. 

Another way is through building an eCommerce website. Where you can set up an online store, have a secure payment process (usually through PayPal) and have an effective delivery system. 

3. Blogging

Blogging was once done as a hobby, but now can be a lucrative source of income online. A blog is basically a website where you can write anything you want. Usually informative, educational, entertaining or inspiring. 

You can be a food blogger, travel blogger or even a financial blogger. Then by building significant number of readers, visitors and traffic to your blog, you can then monetize it by adding relevant advertisements. 

Online advertising works the same with physical advertising. Have you seen those big banners with "Ads space for rent?" A company can rent a space in your building and place an ad banner. Same thing with online advertising, an advertiser will rent a "digital space" in your blog. 

Make money online as a blogger

However, just like physical advertisements where a good location is a big factor (where a lot of people can see the ad), your number of online visitors called traffic, determines how well you will earn as a blogger.

That's why choosing the right niche (specific blog topic) is also very important if you want to be a blogger and earn through advertisements. 

Good niches that can potentially receive good traffic are:

- news

- showbiz

- technology (especially gadgets)

- food and lifestyle

- travel

- relationships, family and marriage

- and even finance 

Turn your passion into profit, create a blog that you love to write about, work from home and make a decent money online! 

4. Affiliate Marketing

Affiliate marketing is basically promoting other people's products online. Unlike an e-commerce website where you need to sell your own physical products online, by being an affiliate you just promote somebody else's products and receive a commission when someone buys from your promotion. 

An example would be by being an affiliate of Amazon or an affiliate of Lazada here in the Philippines. You just apply as an affiliate, fill-up some forms and upon approval, you will receive a unique code called an affiliate link. 

This affiliate link will be coded specifically to you. Meaning, when one clicks your affiliate link leading to a certain product and that person buys you will receive commission in return. It works like a referral system. 

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Top Mutual Funds in the Philippines for 2016

Last year was a hell of a ride in our Philippine market. Now let's look at the top performing mutual funds in the Philippines for the year 2016.

Before that, here are related articles about mutual funds:

1. What is a mutual fund?
2. Nine advantages of mutual funds
3. How to compute your earnings in mutual funds
4. Three types of mutual funds
5. How to lose and not lose money in mutual funds
6. Money cost averaging strategy in mutual funds

Now we understand about mutual funds, let's look at the performance for 2016 in the Philippine market. 

Is it a bull or bear performance with Philippine mutual funds? 

The performance for 2016 will be based on the YTD or year-to-date performance. Meaning the performance will be based on the percent growth for investments in January 1, 2016 up to Dec. 29, 2016 (last trading day of the year).

Equity or stock funds

Top performing equity or stock funds in the Philippines 2016 (source: pifa.com.ph)

Based on the YTD, here are the top 5 performing mutual funds for equity or stock funds:

1. ATRAM Alpha Opportunity Fund, Inc: (+) 11.71%
2. ATRAM Philippine Equity Opportunity Fund, Inc.: (+) 4.86%
3. Philequity Dividend Yield Fund, Inc.: (-) 1.05%
4. United Fund, Inc.: (-) 1.2%
5. Philequity Fund, Inc.: (-) 1.39%

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Wealth Bootcamp: from Zero to Hero

We just concluded an awesome event last weekend, Nov. 6, 2016 at Harold's Hotel in Cebu:

Wealth Bootcamp: from Zero to Hero

as organized by ProsperPinoy + the admins of Life at IMG, in partnership with CERTA, Inc. - Family Estate Planning and Investment Advisory. 

While it was the people's champ - Manny Pacquiao's fight with Jessie Vargas, around 100 attendees still dedicated themselves in learning more about business and personal finance. 

It was a comprehensive program which covered 3 areas which are believed to be an essential factor to thrive and maximize the financial potential and opportunities in the 21st century.

1. Business & Entrepreneurship (Modern and Online Business, Art of Selling)

2. Stock Market & Mutual Funds (Types of Investments that will work for you)

3. Financial Education (Increase Cash Flow, Debt Management, Understanding Insurance, Retirement Planning)

Here's a peek at the topics that were discussed in the event: 

1. Investing in yourself

Investing in yourself

The event started with Serge Bargayo, RFP, CSS of CERTA. The topic revolved around investing in yourself which is key to increasing your value. 

While people may acquire a lot of different investments and assets. The best asset that appreciates over time is yourself. It was the perfect start of the event as it is very important to remind people why we invest in attending seminars and lectures. 

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How to Open a Kaiser Long-term Healthcare Account?

Kaiser International Healthgroup, Inc. is a partner healthcare provider of International Marketing Group (IMG). Its long-term healthcare program is one of the most sought after products of Kaiser covering people beyond ages 60 for their healthcare needs. So, how does one avail or open an account in Kaiser? 

Here are your options:

1. Talk to an IMG financial trainer or be your own agent.

Since IMG is the only exclusive distributor of Kaiser International; one must talk to an IMG financial trainer. A financial needs analysis must be done, identifying the desired and needed healthcare protection especially during retirement years and matching it with the person’s capability to save. 

Another option is that one may opt to be his/her own financial expert or agent by joining IMG, attending its finance and product training, and doing his/her own financial needs analysis. 

We encourage the latter as we believe in empowerment and minimizing agent-client relationship, removing the middleman. 

Open a Kaiser Long-term Healthcare account with IMG

2. Fill-up Application Form 

2.1. Paper Application

An application form must be filled up. Details should be accurate as these will be verified with legal documents upon claims. A self-disclosure questionnaire is also provided. 

If a person has existing health concerns, he/she must declare it. However, for Kaiser to approve its application, medical records may be required else coverage may not be approved or may be approved with limitation such as “No Insurance Benefit” (NIB). 

Submit to your IMG financial trainer with a photocopy of a valid I.D.

Kaiser International Long-term Healthcare Application Form. 
(Version Nov.2011. A recent version may be available)

2.2. Online Application

If online transaction is preferred, then one must request online proposal from his/her IMG financial trainer. If one does not have an IMG trainer, one may request from the below link:

Click here to request a Kaiser Healthcare quotation or proposal

Please fill-up form with accurate details. A link will be sent to your email requesting to complete the application form. Details and questionnaire the same as the paper application is applied. 

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Want to achieve financial freedom? Here are 15+ sources of passive income

One of my favorite financial mentors is Mr. T Harv Eker. He is the best-selling author of the Secrets of the Millionaire Mind. 

One of my favorite topics was when he discussed about winning the money game. 

To win the money game is to achieve Financial Freedom. He defined it as "living the lifestyle you desire without having to work or rely on somebody else for money."

In short, having enough passive income!

With enough passive income you can be financially free

In my Cash Flow Upgrade ebook (click here to download for free), I mentioned that the ideal scenario is that our cash inflow should be greater than our cash outflow or in short:

Living below your means: Income > Expenses

However, if we want to be financially free, our passive income should be greater than our expenses, thus:

Financial freedom: Passive income > Expenses

The question now is, are we building a source of passive income?

To give us an idea, here are the two major the sources of passive income: 

1. Financial Instruments - money working for you.

2. Passive Business Income - passive business working for you.

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Three things we need to know about stock market investing

Investing in the stock market is a great way to grow your money. However, IMG highly recommends that before going into such investment, we need to build a solid financial foundation. This is to minimize the risk of losing your investment because of sudden emergencies like loss of life or sicknesses. 

IMG does not recommend also going into debt to invest your funds, as the interest in debt is usually higher than the interest in investments. Also, the interest of debts is guaranteed and the gains in investments aren't. That's why it is very important to build a solid financial foundation. 

See related article: Financial Foundation - How To Save The Right Way Versus The Wrong Way

But when one has built a strong financial foundation, then one can venture into other types of investments like stock market investing or real estate investing. Today, let us tackle the basics of stock market investing. 

Invest in the stock market

Here are three things we need to know about the stock market:

1. How the stock market works

2. Why invest in the stock market  

3. How to make money in the stock market

Now, let us tackle each one in detail: 

1. How the stock market works? 

It comes from two words: stock and market. Market means a place where people can buy and sell. Stocks mean shares or ownership of a certain business. Thus, the stock market means a place where people can buy and sell shares or ownership of a certain business. 

Initially, a corporation or a business is a private entity. The shareholders are limited to the owners. However, when a company decides to be a public entity whereby the public (ordinary people like us) can become part-owners of a certain business, then that company will go to the Philippine Stock Exchange (PSE). 

After being listed in the PSE, they will then conduct an Initial Public Offering (IPO) where the public can then start to buy shares of that company. 

Process flow of a private business into a public company

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Why is Financial Education a Need

"You can't hire someone else to do your push-ups for you" - Jim Rohn

And so should personal finance. 

While personal finance is common sense, a lot of Filipinos are still struggling financially. Thus, it is something that we should also learn. But unfortunately, financial education is not taught in schools. It is not also evident in the financial industry like the banks, insurance and investment companies. 

Let's take a look at the current situation why Financial Education is a major need especially to Filipinos: 

Financial Education is a need

1. Schools

If financial education should also be taught in school, then who are qualified to teach this course? No offense, but even teachers (most of them) are living in debt. It is just like taking an MBA (Masters of Business Administration) and having a professor who doesn't even own a business. Talk about, "If you can't apply it, teach it."

For accounting and economic subjects, the educational system is teaching students to be prepared how to count or manage other people's finances as in the case of preparing students to work as accountants in the corporate world. Though these subjects can be applied in a personal level, not everyone applies it to themselves.

"Kapoy ihap ug kwartang d ako." (It is tiring to count money that isn't mine.) - a bank teller friend of mine often says. 

Thus, the most qualified industry to teach about personal finance should be the financial industry. The financial industry composes of the following: the banks, insurance companies and investment companies. 

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Mutual Funds: Money Cost Averaging Strategy

One thing is guaranteed in the market: it goes up and down. Thus in investing in mutual funds it is very important to know the risks involved. Yes we can lose money in mutual funds, but to minimize and manage the risk, one must constantly do additional investments and invest with a long-term horizon. 

Related Content: How to lose and not lose money in mutual funds.

This strategy is often called: Money cost averaging. How does this strategy work?

Money cost averaging in mutual funds

Money cost averaging is a strategy to systematically purchase shares of mutual funds (can also be applicable in stocks) to minimize investment risk in a fluctuating market. 

This strategy is very simple. A constant amount should be invested at a specific time interval (e.g. monthly) regardless of market condition. 

However, this strategy does not guarantee (as all other strategies) a profit or prevent loss thus it is important to consider one's ability to continue and stick with one's financial plan. 

For example, given the following details: 

Monthly Investment of 5,000
Investment Horizon: 6 months
And price per share fluctuating as shown in the table below: 

Example of money cost averaging simplified

Looking at the table above, the total amount invested for 6 months is P30,000 and was able to accumulate a total of 900 shares. Now to get the current market value, we need to multiply the total number of shares and the current market price at month 6 which is P50.

Thus:

900 shares x P50.00 per share = P45,000!

So the total growth for the past 6 months is 50% of the total investment. 

If the person invested one-time, big-time on the first month: 

Total investment on month 1: P30,000
Number of shares bought: P30,000 / 100 = 300 shares
Current market value at month 6: 300 shares x P50.00 per share = P15,000!

The investor could have lost 50% of the total investment.

Now blowing this up: 

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How to lose and not lose money in mutual funds

Is mutual funds risky? Yes it is. 

Can you lose money in mutual funds? Yes you can.

Can you also gain big time? Absolutely.

Can you then manage or minimize the risk? Ofcourse, you can! 

The answer to all these questions is basically financial education. Being financially educated does not only mean having investments or financial products. But by knowing when, how, and why you invest, at the same time understanding how to manage or minimize the risks involve. 

After understanding about mutual funds: What is a mutual fund?

Understanding its advantages: 9 advantages of mutual funds.

And why it is important to invest in mutual funds: In-depth understanding of mutual funds

Today, let us learn how to manage and minimize the risks involved in investing in mutual funds.

Anything in life, there will always be risks. Example: driving is very risky. You hear a lot of car accidents causing property damages or even death. But it does not mean that everybody should avoid or stop driving. We just need to "learn" and "apply" basic guidelines and strategies to keep us safe. Same with investing in mutual funds. 

Here are few examples how to lose money and more importantly how not to lose money in mutual funds:

1. How to lose money: Thinking short-term. 

We jump into investments because we see the potential returns. However, when the market goes down, a lot of investors panic. So instead of investing in the long-term they withdraw their funds too soon. 

Losing money in mutual funds by withdrawing too soon (source: Philam Asset Management, Inc.)

Taking Philam Strategic Growth Fund as an example, looking at the graph above, the person invested last April 10, 2015 and withdrew his money on July 1, 2016. 

Related Content: How to compute your earnings in mutual funds?

Percent loss from 595.58 to 561.37 NAVPS = 5.74%

Assuming he invested 100,000: 

His 100,000 becomes: 94,256

Minus early redemption fee of 1 year to less than 2 years: 0.5% 

Actual Value: 93,784!

Therefore, how to not lose: Invest for the long-term

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How to buy a car for FREE using mutual funds

The top three dreams of most Filipinos are buying their own house and lot, buying a car and have an amazing vacation and travel with their families. 

Today, let us look at different ways to buy a car. 

Different ways to buy a car

1. Take a car loan.

This is the usual approach. Since buying a car is expensive, the most practical way is to take a car loan. And with the trending decrease in the down-payment, almost everyone can now afford to drive home a car. 9k and you get a Kia Picanto or with 5k, hello Hyundai Eon! (this maybe the reason why the roads are getting high traffic) 

But by doing math, buying a brand new car is often the biggest expense that loses its value very fast. A new car loses 50 to 70% of its value in the first four years.

Example:

Car: Model X

Unit Price: 735,000

Down-payment: 147,000 (not including insurance + LTO + chattel fee)

Monthly Payment: 14,877

Payment Period: 5 years

Total Spent: 1,039,620

Car Value after 5 years: ~ 300,000 only!

In buying a 735K worth of car, you spent around 1M but after 5 years its value is now 300K! That doesn't look practical to me especially if right now we are not yet financially stable. 

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In-depth Understanding on the Three Types of Mutual Funds

There are three common types of mutual funds. These are:

- Bond Fund

- Balanced Fund

- Equity Fund

These different types of mutual funds have diversified portfolio depending on the risk appetite of the client. Typically, the portfolio of each type are as follows:

Bond Fund ~ 90% bonds | 10% stocks

Balanced Fund ~ 50% bonds | 50% stocks

Equity Fund ~ 90% stocks | 10% bonds

Grow your money through mutual funds

Bonds can be in the form of government securities or corporate bonds. It is a way of obtaining money from the public (e.g. for government projects) and promising a percentage growth of the money. It is considered low risk especially government bonds as it is almost impossible that the government will default its own debt. The rate of return however, may not be very substantial because of its low risk nature. 

Stocks on the other hand are high risk in nature. Buying stocks is like buying a share of a certain corporation and trading it in the stock market in the hopes of earning a higher return. Therefore it is a high-risk, high-return type of investment. 

Now looking at these risk-reward ratios: the higher the risk, the higher the returns but the lower the risk, the lower the returns, we can then conclude that: 

Bond Fund - low risk, low returns (4 - 8% per year)

Balanced Fund - moderate risk, moderate returns (8 - 12% per year) 

Equity Fund - high risk, high returns (>12% per year)

Now knowing these risk-reward ratios, it can then be tempting to say, "I'd go invest then in equity funds because of its high returns." However, each type of mutual fund have different purposes and it is also important to know why and when to invest on each type. 

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How to be Living on Interest via Mutual Funds

We know that money works through compounding interest. It is one of the secrets of the wealthy: making money work for them. Money is the best employee because:

- Money does not get sick

- It does not sleep

- It works 24/7

- It does not go into vacation leaves

and that is why it is important to let money work for us. The only challenge is to accumulate money. We need the discipline to set aside and invest our money. 

Related Content: Rule Of 72: Understanding The Secret Of The Wealthy

Do you want to live a relaxing retirement?

Assuming we have already accumulated enough money for retirement. Then we want to be living on interest. Using the simple retirement formula:

Annual Income x 10 = Retirement Goal

Assuming average lifestyle today is 20,000 per month, then retirement goal should be:

20,000 x 12 months x 10 = 2,400,000 ~ 3M retirement goal

To be living on interest, we invest our 3 Million in an investment vehicle like a mutual fund that earns around 10% interest per year. So: 

3,000,000 x 10% = 300,000 gain as interest

300,000 / 12 months = 25,000 per month living on interest

The 3 Million is intact, but you earn 25,000 per month. Money working for you. So even without working, your money is working for you and that is what we call financial freedom.

However, this computation is based on an ideal scenario. Let's blow this up by using actual data from mutual fund performance and let us include inflation in the scenario:

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