THE SIX STEPS

TO
FINANCIAL INDEPENDENCE
 THE SIX STEPS TO FINANCIAL
INDEPENDENCE
 Step 1
increase cash flow
STEP
STEP
11
Increase cash flow

The first step in developing your

personal financial strategy is to look at
your cash flow.

Does your current income exceed your

expenses?

If not, you need to right the ship, or

youll soon find your dreams off course.
 STEP
STEP
11
Increase cash flow
CASH FLOW MANAGEMENT
THE WAY YOU MANAGE YOUR CASH FLOW CAN MAKE YOU
POOR OR RICH!

How do you manage your INCOME?

a. SAVE SOME
b. Spend all
c. Spend before you receive it?
Change your money habits.
SAVE & INVEST!
POVERTY IS NOT LACK OF MONEY.
IT IS MISMANAGED MONEY!
 STEP
STEP
11
Increase cash flow
SPARE TIME MANAGEMENT
THE WAY YOU MANAGE YOUR SPARE TIME CAN MAKE YOU
POOR OR RICH!

How do you manage your SPARE TIME?

a. MAKE MORE MONEY
b. Waste Time
c. Waste Money
Change the things you do in your spare time.
Use it to EARN ADDITIONAL INCOME!
POVERTY IS NOT LACK OF TIME.
IT IS MISMANAGED SPARE TIME!
 STEP
STEP
11
Increase cash flow
What is cash flow?
CASH FLOW the difference between our expenses and our
income.
INCOM I AM A MAN AT WORK.
E I WORK HARD TO
SALARY / WAGES EARN INCOME.
PROFIT FROM BUSINESS VENTURES
INTEREST INCOME FROM INVESTMENT
RENTAL INCOME EXPENSES
DIVIDENDS
ROYALTY INCOME FIXED COSTS
COMMISSION VARIABLE COSTS

WHAT IS YOUR CASH FLOW?

Positive Cash Flow = when expenses are less than income.
Negative Cash Flow = when expenses are more than income.
A Positive Cash flow is crucial
to the individuals financial health and well-being.
 STEP
STEP
11
Increase cash flow
Do you have plan to increase your cash flow?

IT ALL DEPENDS ON YOUR DESIRED

STANDARD OF LIVING OR
FINANCIAL DREAMS!!!
 STEP
STEP
11
Increase cash flow
What is your financial goal / dream?

RY
XU
LU

You Work Hard for Money COMFORT

BASIC NEEDS

POVERTY

AT WHICH LEVEL ARE YOU IN YOUR GOAL / DREAM?

 STEP
STEP
11
Increase cash flow
What is your financial goal / dream?
TWO THINGS WILL HAPPEN (5-10 years from now):
2.
1. INCREASE
SHRINK YOUR YOUR
DREAM
INCOME totofitfit I
D the
the size
size of
of your
your dream!
income.
N
R
C
E
O
A
M

M INCO DREA E
ME M
STEP
STEP
11
Increase cash flow
PRACTICAL FINANCIAL SOLUTIONS

1. Reduce expenses

2. Pay yourself first

3. EARN ADDITIONAL INCOME

 STEP
STEP
11
Increase cash flow
SOLUTION 1 REDUCE EXPENSES
WHAT IS YOUR EXPENSES TO INCOME (ETI) RATIO?
ETI = EXPENSES NET INCOME
ASSUMPTION: YOU earn Php 10,000 per month.
Scenario A Scenario B Scenario C
Monthly Income =Php 10,000 Monthly Income =Php 10,000 Monthly Income =Php 10,000

Monthly Expenses =
Php 8,000 Monthly Expenses =
Php 10,000 Monthly Expenses =
Php 15,000

Difference ( + ) =
Php 2,000 Difference ( = ) =Php xxxxxx Difference ( ) =
(Php 5,000)

ETI = 8,000 10,000 ETI = 10,000 ETI = 15,000

10,000 10,000
ETI = 0.8
ETI = 1 ETI = 1.5
IF YOUR ETI IS MORE THAN 1, YOU ARE IN A FINANCIAL
TROUBLE!
SET YOUR ETI @ 0.70
STEP
STEP
11
Increase cash flow
SOLUTION 1 REDUCE EXPENSES
Budgeting by EXPENSES TO INCOME (ETI) RATIO
SPENDING CATEGORY RANGE OF ETI 1. DIVIDE THE MONTHLY EXPENSE BY YOUR
30 MONTHLY INCOME.
1. Housing 20% -
%
2. FOR EXAMPLE, IF YOUR FOOD COSTS
30 TOTAL P2,000/MONTH AND YOUR NET
2. Food 15% -
% INCOME IS P10,000/MONTH, FOOD
ACCOUNTS FOR 20% OF YOUR TOTAL
20 BUDGET.
3. Unsecured Debts 10% -
%
4. Monthly Utilities 4% - 7% 3. IF YOU FIND YOUR EXPENSES ARE TOO
FAR OUTSIDE THE GUIDELINES, FIND
10 PLACES TO CUT EXPENSES.
5. Clothing/Footwear 3% -
%
4. BE SURE TO CHECK ON YOUR INCOME
20 TO SPENDING RATIO IN EACH CATEGORY
6. Transportation 6% -
% AND ADJUST WHERE NECESSARY SO
THAT YOUR PERCENTAGES COME OUT
7. Personal Care 2% - 4%
TO 100%.
20
8. Savings 5% -
%
9. Healthcare 2% - 8%
 STEP
STEP
11
Increase cash flow
SOLUTION 1 REDUCE EXPENSES
How to reduce your expenses or cut cost
NOW THAT YOU KNOW WHAT YOU ARE SPENDING, YOU WILL HAVE TO MAKE
SOME DIFFICULT DECISIONS. FOR INSTANCE, IF HOUSING accounts FOR 40%
OF YOUR BUDGET YOU NEED TO:
1. FIND A WAY TO INCREASE YOUR INCOME; or
2. FIND MORE AFFORDABLE HOUSING; or
3. REDUCE YOUR OTHER EXPENSES AS MUCH AS POSSIBLE UNTIL YOU
CAN GET INTO AN AFFORDABLE HOME.
TRYING TO SUSTAIN HOUSING COSTS OVER 30% OF YOUR INCOME WILL
SABOTAGE YOUR EFFORTS TO SAVE MONEY.
DECIDE WHICH EXPENSES ARE OPTIONAL AND WHICH ARE NOT (NEEDS VS.
WANTS). GO THROUGH YOUR BUDGET LINE BY LINE CUTTING WHEREVER
POSSIBLE.
WHEN IT SEEMS LIKE TOO MUCH WORK, REMEMBER YOUR GOALS AND USE
THEM TO MOTIVATE YOU TO STICK TO YOUR BUDGET AND KEEP CUTTING
EXPENSES WHEREVER YOU CAN.
STEP
STEP
11
Increase cash flow
SOLUTION 1 REDUCE EXPENSES
SMALL CHANGE IS BIG MONEY

ITEM COST FREQUENCY COST/ mo COST/ yr

SOFTDRINKS P20/can 2 cans/ day 1,200 14,400

Coffee Shops P30/cup 2 cups/ day 1,800 21,600

Dining Outside P1,000/meal 4/ mo 4,000 48,000

Gimmicks, partying P500 per session 1 per week 2,000 24,000

CIGARETTE P40/pack 1 pack/day 1,200 14,400

Hair REBOND, relax,
P2,000 per session 1 / month P2,000 24,000
color, straight, curl
ATM Fees P12/ trans 20/month 240 2,880

Credit Card Renewal P2,000/year 3 cards --- 6,000

Lotto Tickets P20/ticket 1 ticket/day 600 7,200

STEP
STEP
11
Increase cash flow
SOLUTION 1 REDUCE EXPENSES
SMALL CHANGE IS BIG MONEY

MONTHLY
ITEM COST
DIABETES QUANTITY ANNUAL COST
COST

P20/can 2 cans/day P1,200 P14,400

Soft Drinks

SAVINGS CALCULATOR
Monthly
Interest 5 Years 10 Years 20 Years 30 Years 35 Years
Savings

P1,000 4% 66,300 147,250 366,770 694,050 913,730

12% 80,340 221,930 911,210 3,052,010 5,813,55

7
 STEP
STEP
11
Increase cash flow
SOLUTION 2 pay yourself first (PYF)

How are you doing so far?

2,000,00
10 200,000
0 ???
AVERAGE
= TOTAL
NO. OF YEARS
WORKED ANNUALSALAR EARNED- Savings
Y INCOME

A PENNY SAVED IS A PENNY EARNED.

BENJAMIN FRANKILIN
STEP
STEP
11
Increase cash flow
THE WEALTH CALCULATOR

Create Your Millions!

BY CONSISTENT AND DISCIPLINED
APPROACH
STEP
STEP
11
Increase cash flow
SOLUTION 1 REDUCE EXPENSES
WHAT IS YOUR EXPENSES TO INCOME (ETI) RATIO?

A PENNY SAVED
IS A PENNY EARNED.
(BENJAMIN FRANKILIN)

Save a part of your income

and begin now, for the man
with a surplus controls
circumstances and the man
without a surplus is
controlled by
circumstances.
- Henry Buckley
STEP
STEP
11
Increase cash flow
SOLUTION 1 REDUCE EXPENSES

Savings represent much more than

mere money value. They are the
proof that the saver is worth
something in himself. Any fool can
waste; any fool can muddle; but it
takes something more of a man to
save and the more he saves the more
of a man he makes of himself. Waste
and extravagance unsettle a man's
mind for every crisis; thrift, which
means some form of self-restraint,
steadies it.
Rudyard Kipling
STEP
STEP
11
Increase cash flow
SOLUTION 1 REDUCE EXPENSES

Let Pharaoh proceed to appoint overseers

over the land, and take one-fifth of the
produce of the land of Egypt during the seven
plenteous years. Let them gather all the food
of these good years that are coming,
and lay up grain under the authority of
Pharaoh for food in the cities, and let them
keep it. That food shall be a reserve for the
land against the seven years of famine that
are to befall the land of Egypt, so that the
land may not perish through the famine.

(genesis 41: 34-36)

STEP
STEP
11
Increase cash flow
SOLUTION 1 REDUCE EXPENSES

On the first day of every

week each one of you is to put
aside and save, as he may
prosper, so that no collections
be made when I come.

1 Corinthians 16:2
 STEP
STEP
11
Increase cash flow
YOUR PERSONAL SPENDING STYLE
Personal spending styles are the different ways that people spend or deal
with their money. Can you recognize these styles?

1. GIVERS are generous to a fault. Regardless of whether they have the

money, they always seem to be giving gifts or other financial support
to others.
2. ME-SPENDERS love to spend money on themselves. They enjoy
living the materialistic lifestyle.
3. BIG SPENDERS simply like to spend money on themselves and
others and enjoy it more if other people notice. They often reach for
the bill when at a restaurant with a group.
4. TIGHTWARDS save so compulsively that little is left even for
essentials.
5. GOOD STEWARDS handle money efficiently by spending less than
what they earn.
STEP
STEP
11
Increase cash flow
YOUR PERSONAL SPENDING STYLE
 Step 2
MANAGE DEBT
STEP
STEP
22 MANAGE DEBT
ECONOMIC / FINANCIAL RULE
It is a rule of our financial and economic
life that interest be paid on borrowed
moneyOnce in debt, interest is your
companion every minute of the day
and night; you cannot shun it or slip
away from it; you cannot dismiss it; it
yields neither entreaties, demands, or
orders; and whenever you get in its
way or cross its course or fail to meet
its demands, it crushes you.

J. Ruben Clark
 STEP
STEP
22 MANAGE DEBT
MONEY WORKING AGAINST YOU: ADD-ON INTEREST LOAN
LOAN AMOUNT: Php 15,000.00
Amount Loan Principal Interest Payment Effective Effective Diminishing
Month
Balance Payment (Add-On) Monthly Rate Annual Rate Interest Payment

1 15,000.00 1,250.00 300.00 2.0% 24.0% 300.00

2 13,740.00 1,250.00 300.00 2.2% 26.0% 275.00
3 12,500.00 1,250.00 300.00 2.4% 29.0% 250.00
4 11,250.00 1,250.00 300.00 2.7% 32.0% 225.00
5 10,000.00 1,250.00 300.00 3.0% 36.0% 200.00
6 8,750.00 1,250.00 300.00 3.4% 41.0% 175.00
7 7,500.00 1,250.00 300.00 4.0% 48.0% 150.00
8 6,250.00 1,250.00 300.00 4.8% 58.0% 125.00
9 5,000.00 1,250.00 300.00 6.0% 72.0% 100.00
10 3.750.00 1,250.00 300.00 8.0% 96.0% 75.00
11 2,500.00 1,250.00 300.00 12.0% 144.0% 50.00
12 1,250.00 1,250.00 300.00 24.0% 288.0% 25.00

15,000.00 3,600.00 1,950.00

EFFECTIVE INTEREST RATE 6.2% 74% 2%

 STEP
STEP
22 MANAGE DEBT
CREATE A STRATEGY FOR ESCAPING THE GRIP OF DEBT
PRACTICAL TIPS:

1. Prioritize payment on higher interest loans/debt.

2. See your creditors regularly. Assure them that you
will not run away from your obligations. Negotiate
to reduce interest.
3. If your expenses are bigger than your income, work
to make more money instead of borrowing.
4. Manage your others loans before applying for a
housing loan.
5. Avail of a lower interest debt and pay the higher
interest debt.

CONTROL YOUR DEBT,

OR ELSE DEBT WILL
Creditor Amount You Owe Interest CONTROL YOU. DONT
A 50,000 120% LET DEBT CONTROL
B 75,000 60%
C 100,000 30%
YOUR LIFE!
D 150,000 20%
 Step 3
create an emergency fund
STEP
STEP
33 Create an emergency fund

Dont let unexpected emergencies blind-side

you, follow the Boy Scouts lead and BE
PREPARED!
Whether natural or man-made, disasters and
emergencies can happen at anytime.
The key is to be prepared for whatever life
throws your way.
STEP
STEP
33 Create an emergency fund
What is an emergency fund
EMERGENCY FUND is a stand-by money intended for
emergency situations.
Dont you think you need an Emergency Fund?
Consider how you would pay for the following unexpected
expenses?
Loss of job or job interruption
Serious illness or hospitalization
Extended elder/parental care
Major house repairs
Major appliance repairs, or replacement
Major car repairs (if any)
Investment opportunities

What is your first line of defense?

 STEP
STEP
33 Create an emergency fund
SHOCKING FACTS: FILIPINO HOUSEHOLDS SAVING &
INVESTING

More than 90% of Filipino families

have no savings for medical emergency needs.

PHP 200.00
Average Emergency Savings

Source: Consumer Survey 2012, Bangko Sentral ng Pilipinas

 STEP
STEP
33 Create an emergency fund
Practical solution: build a 6-month income fund
BUILD AN EMERGENCY FUND BY
HAVING A MINIMUM OF SIX (6)
MONTHS OF YOUR MONTHLY
INCOME.

HAVING THIS EXTRA SOURCE OF

FUNDS AVAILABLE WILL GIVE
YOU AND YOUR FAMILY THE
PEACE OF MIND THAT YOU
CAN RECOVER QUICKLY WITH
THE LEAST DISRUPTION TO
YOUR LIFE.
 Step 4
ensure proper protection
STEP
STEP
44 Ensure proper protection
The financial foundation
BIG SAVINGS
BIG RESPONSIBILITIES
THE X-CURVE
MAN AT WORK MONEY AT WORK
INCOME Temporary INTEREST INCOME
RESPONSIBILITIES Permanent Food
Food Shelter
Shelter Clothing / Footwear
Clothing / Footwear DIE TOO SOON LIVE TOO LONG Healthcare
Education / Healthcare
Debts

PROTECTION INVESTMENT

LITTLE / NO SAVINGS NO RESPONSIBILITIES

YOUNGER OLDER
Love Your Family Live in Dignity

STAGE 1 STAGE 2 STAGE 3 STAGE 4

No Savings Small Savings Big Savings Financial
Big Responsibility Big Responsibility Less Responsibility Independence
STEP
STEP
44 Ensure proper protection
STEP
STEP
44 Ensure proper protection
STEP
STEP
44 Ensure proper protection
STEP
STEP
44 Ensure proper protection
STEP
STEP
44 Ensure proper protection
What about you?
STEP
STEP
44 Ensure proper protection
What about you?
 STEP
STEP
44 Ensure proper protection
The financial foundation
Name: Mr. CLIENT To Retire At: 65 Current Age: 30
To Go: 35
PHP1,000,000
________ PHP10,000,000
_________

MI 12 10 = Protection Needed AI FV 10 = Retirement Fund Needed

10,000 12 10
_______ 1,200,000
= PHP 120,000 _____
______ 10.67 10 = PHP ________
12,804,000
________
LESS: ASSETS 200,000
= PHP ________ LESS: ASSETS 2,804,000
= PHP ________

Net Protection 1,000,000

= PHP ________ 10,000,000
Net Retirement Fund = PHP ________

Love Your Family Live in Dignity

HOW MUCH CAN YOU SAVE PER DAY TO START YOUR PROTECTION / LTC FUND PROGRAM?

____ Php ____ Php ____ Php ____ Php ____ Php
75.00 100.00 150.00 200.00 300.00
 STEP
STEP
44 Ensure proper protection
The financial foundation

BUILD IT RIGHT, BUILD IT STRONG.

INVESTMENT

EMERGENCY FUND

DEBT ELIMINATION
PROTECTION
LIFE INSURANCE OR INCOME PROTECTION

HEALTHCARE
LONG TERM & SHORT TERM CARE

LIKE BUILDING A HOUSE, YOU MUST BUILD IT FROM THE GROUND UP.
 Step 5
BUILD LONG-TERM
ASSET ACCUMULATION
STEP
STEP BUILD LONG-TERM ASSET
55 ACCUMULATION
THE RACE TO RETIREMENT IS ON!
What if I live too long?
Who will take care of myself?

What separates the rich from the poor is

their ability to acquire ASSETS those that
generate money even when they stop
working.
If you cant tell the difference
between asset and liability,
you may be setting yourself up
for a life of financial trouble.
 STEP
STEP BUILD LONG-TERM ASSET
55 ACCUMULATION
SHOCKING FACTS: FILIPINO HOUSEHOLDS SAVING &
INVESTING

Only 2 out 10 of Filipino

households have a bank
deposit account

1 in 5 Filipino households
receives financial
assistance abroad

4 out 10 say they will put

any surplus money in the
bank

Source: Consumer Survey 2012, Bangko Sentral ng Pilipinas

 STEP
STEP BUILD LONG-TERM ASSET
55 ACCUMULATION
SHOCKING FACTS: FILIPINO HOUSEHOLDS SAVING &
INVESTING

PHP 6,875
Median Balance
of
Peso Saving Account

Source: Consumer Survey 2012, Bangko Sentral ng Pilipinas

 STEP
STEP BUILD LONG-TERM ASSET
55 ACCUMULATION
SHOCKING FACTS: FILIPINO HOUSEHOLDS SAVING &
INVESTING
BANK DEPOSITS

0.375% / a.

VS.

Average Interest Rate of

19 % / a.
Regular Bank Deposits
Accounts
5-Year Average Return of a
Mutual Fund placed in
Philippine Stock Exchange
STOCKS / EQUITIES

Source: Consumer Survey 2012, Bangko Sentral ng Pilipinas

 STEP
STEP BUILD LONG-TERM ASSET
55 ACCUMULATION
SHOCKING FACTS: FILIPINO HOUSEHOLDS SAVING &
INVESTING
43.9
SPEND MORE THAN THEIR INCOME
%

51.5
%
SPEND AS MUCH AS THEIR INCOME

4.6 % SPEND LESS THAN THEIR INCOME

Source: Consumer Survey 2012, Bangko Sentral ng Pilipinas

 STEP
STEP BUILD LONG-TERM ASSET
55 ACCUMULATION
ASSET VS. LIABILITY?

ASSET IS SOMETHING YOU BUY AND THEREAFTER

ASSET BRINGS MONEY INTO YOUR POCKET

REAL ASSETS

FINANCIAL
ASSETS
 STEP
STEP BUILD LONG-TERM ASSET
55 ACCUMULATION
ASSET VS. LIABILITY?

LIABILIT ASSET IS SOMETHING YOU BUY AND THEREAFTER

Y TAKES MONEY FROM YOUR POCKET
 STEP
STEP BUILD LONG-TERM ASSET
55 ACCUMULATION
ASSET VS. LIABILITY?

ACCUMULATE ASSETS NOT LIABILITIES

RE-ALIGN YOUR ASSETS
Convert non-income producing assets to income producing assets
Replace expensive insurance to cheaper insurance
Move low interest savings to high interest savings
KNOW THE RULE OF MONEY
Take advantage of one of the most amazing financial concepts of all --- The
Power of Compounding Interest!
Myth: Few extra percentage points of interest dont amount too much money.
Fact: Just 1% or 2 % of interest compounded over a number of years can be the
difference in millions of additional pesos for you.

Compounding takes place when the returns (such as interest) on

investments start earning returns of their own.
STEP
STEP BUILD LONG-TERM ASSET
55 ACCUMULATION
THE RULE OF 72

Your Money Will Double In

With 2% interest, your money
72 2% 36 years will double in approximately 36
years.
72 4% 18 years
72 6% 12 years
72 8% 9 years
6 years With 12% interest, your money will double in
72 approximately 6 years!
12%
STEP
STEP BUILD LONG-TERM ASSET
55 ACCUMULATION
THE RULE OF 72
How much would a 29-year old person make at age 65 if he will
invest PhP 100,000 at 4%, 8% and 12% rate of interest?

72 4 = 18 72 8 = 9 72 12 = 6
Money doubles every 18 years Money doubles every 9 years Money doubles every 6 years

Age 4% Age 8% Age 12%

29 Php 100,000 29 Php 100,000 29 Php 100,000
47 Php 200,000 38 Php 200,000 35 Php 200,000
65 Php 400,000 47 Php 400,000 41 Php 400,000
56 Php 800,000 47 Php 800,000
65 Php 1,600,000 53 Php 1,600,000
59 Php 3,200,000
65 Php 6,400,000
Albert Einstein called the Rule of 72 the eight wonder of the world and mankinds greatest invention,
because it is the mightiest force ever unleashed for the amassing of wealth.
STEP
STEP BUILD LONG-TERM ASSET
55 ACCUMULATION
THE LAW OF BUILDING WEALTH

THE WEALTH BUILDING YOUR WEALTH REQUIRES YOU TO

FORMULA CONSIDER THE FOLLOWING FACTORS:

Money 1. MONEY : THE AMOUNT OF MONEY YOU SAVE.

+ Time
+/- Rate of Return 2. RATE OF RETURN : GET THE HIGHEST
________________ RATE OF RETURN, OR ROR (INVESTMENT);
LOWEST RATE OF RETURN, OR ROR (DEBT)
CAPITAL/FUND
Inflation 3. TIME : GIVE TIME FOR YOUR MONEY TO
Taxes COMPOUND. PUT TIME ON YOUR SIDE.
________________
4. TAXES : INVEST YOUR MONEY IN AN
WEALTH
INVESTMENT WITH TAX ADVANTAGES.

You can build 5. INFLATION : YOUR INVESTMENT MUST

a successful OUTFACE INFLATION.
financial future!
STEP
STEP BUILD LONG-TERM ASSET
55 ACCUMULATION
THE LAW OF BUILDING WEALTH
THE EFFECT OF TAXES AND INFLATION ON YOUR
THE WEALTH MONEY
FORMULA
EXAMPLE 1 EXAMPLE 2
Money
+ Time
+/- Rate of Return If you save - P 10,000 If you save - P 10,000
________________ @ 2 % Interest - + 200 @ 7 % Interest - + 700
Pay Tax @ 20% - - 40 Pay Tax @ 20% - - 140
(Withholding Tax) (Withholding Tax)
CAPITAL/FUND
Inflation
Net After Tax - P 10,160 Net After Tax - P 10,560
Taxes
Inflation @ 5% - - 500 Inflation @ 5% - - 500
________________

Actual Return - P 9,660 Actual Return - P 10,060

WEALTH
(After Tax & Inflation) (After Tax & Inflation)

You can build

a successful You must get about 7% or
financial future! YOU LOSE! more in interest to beat
taxes and inflation
STEP
STEP BUILD LONG-TERM ASSET
55 ACCUMULATION
Money takes time to grow

Time is mans greatest asset. But

when time becomes mans greatest
wasted asset blame that to
procrastination.

Time can be your worst enemy or

your greatest ally in building
wealth.

The secret to building wealth is to

start saving now. The sooner you
begin, the less money you need to
put aside to build wealth.
 STEP
STEP BUILD LONG-TERM ASSET
55 ACCUMULATION
Put time on your side

Target Retirement Current Saving Required Monthly Required Yearly

Retirement Age Age Period Savings @ 10% ROI Savings @ 10% ROI

5 MILLION 60 55 5 68,249 818,987

5 MILLION 60 50 10 26,145 313,735

5 MILLION 60 45 15 13,114 157,371

5 MILLION 60 40 20 7,274 87,298

5 MILLION 60 35 25 4,236 50,840

5 MILLION 60 30 30 2,533 30,396

5 MILLION 60 25 35 1,537 18,488

 STEP
STEP BUILD LONG-TERM ASSET
55 ACCUMULATION
taxation
THE MOST POWERFUL CHALLENGE FACING YOUR FINANCIAL
FUTURE
1. YOU EARN IT. THE GOVERNMENT TAX IT.
2. YOU SPEND IT. THE GOVERNMENT TAX IT.
3. YOU SAVE IT. THE GOVERNMENT TAX IT.
4. YOU DIE with IT. THE GOVERNMENT TAX IT.
HARNESS THE POWER OF TAX ADVANTAGES
Mr. A Mr. B
Year @ 12% Net of Tax @ 12% With Tax

1 100,000 100,000

36 6,400,000 3,200,000
 STEP
STEP BUILD LONG-TERM ASSET
55 ACCUMULATION
Diversification and asset allocation
Long term care Real estate bonds
insurance Unit investment trust stocks
Bank deposits fund (UITF) Mutual funds

Investor 1
Investor 2
100,000 in a Single
100,000 in a five different investments
Investment
100,000 20,000 20,000 20,000 20,000 @ 20,000 @
Year Year
@ 6% @ lose @ 0% @ 5% 10% 12%
1 100,000 1 20,000 20,000 20,000 20,000 20,000

216,69
25 429,187 25 0 20,000 67,727 340,001
4
Total Portfolio
Growth Total Portfolio Growth = 624,422
= 429,187
 STEP
STEP BUILD LONG-TERM ASSET
55 ACCUMULATION
Why the rich gets richer?

AT LEAST 80%
OF THEIR
WEALTH
IS IN
STOCKS & BONDS
 Step 6
preserve your estate
STEP
STEP
66 PRESERVE YOUR ESTATE
Whatever your age, your long-term financial strategy should
include provision for maintaining control over the
distribution of your estate.

It is important that you consider how you want your assets to

pass to your heirs, as well as how to alleviate the stress of
the administrative burden that will confront them. If you
have extensive assets, you may also consider steps to
help minimize estate taxes.
STEP
STEP
66 PRESERVE YOUR ESTATE
SOME CONCEPTS TO UNDERSTAND
ESTATE
Real and personal property, whether tangible or intangible, or mixed wherever
situated at the time of death of the decedent.
GROSS ESTATE
All properties, real or personal, tangible or intangible, wherever situated that is
left behind by the decedent for transmission to the legal heirs or beneficiaries.

NET ESTATE
The difference of gross estate and allowable deductions
ESTATE TAX
An excise tax on the right of transmitting property at the time of death and on
the privilege that a person is given in controlling to a certain extent the
disposition of his property to take effect upon death.
 STEP
STEP
66 PRESERVE YOUR ESTATE
ESTATE TAX
GRADUATED ESTATE TAX RATES
As of December 26, 1997
OVER BUT NOT OVER TAX SHALL BE PLUS OF EXCESS OVER
- 200,000 EXEMPT - -
200,000 500,000 - 5% 200,000
500,000 2,000,000 15,000 8% 500,000
2,000,000 5,000,000 135,000 11% 2,000,000
5,000,000 10,000,000 465,000 15% 5,000,000
10,000,000 AND OVER 1,215,000 20% 10,000,000

Assumption: The taxable net estate amounts to Php 12,000,000

Computation:
Tax on Php 10,000,000 : Php 1,215,000
Tax on Php 2,000,000 (2,000,000 20%) : Php 400,000

ESTATE TAX ON PHP 12,000,0000 : Php 1,615,000

 STEP
STEP
66 PRESERVE YOUR ESTATE
KEYS TO PRESERVING YOUR ESTATE
1. HAVE A WILL.
Important & essential documents in Estate Planning. Make one
and keep it updated.
2. AVOID PROBATE USING THE FOLLOWING MODES OF ASSET
TRANSFER
Revocable Living Trust Life Insurance
Joint Tenancy Donation Inter Vivos
3. UNDERSTAND THE PROBATE PROCESS.
4. LEARN HOW TO MINIMIZE ESTATE TAXES.
5. DONT DELAY.

Meet with an experienced estate attorney to have your will

drafted and/or established your trust(s) and estate plan.

A PROPER ESTATE PLAN CAN TAKE CARE OF YOUR FAMILY

DURING YOUR LIFE AND AFTER YOUR DEATH.
 STEP
STEP
66 PRESERVE YOUR ESTATE
A PITFALL OF NOT HAVING AN ADEQUATE ESTATE PLAN