Francisco Colayco: How to Save and Invest Wisely

CEBU, Philippines – According to the Bangko Sentral ng Pilipinas, only 20 percent of Filipinos have savings bank accounts. This is mostly because, according to those without savings accounts, they did not earn enough to save. But in the view of expert financial adviser Francisco Colayco, it doesn't take a large pay check to be able to have savings.

Mr. Colayco is the Chairman of the Colayco Foundation for Education. He has published several books on investment and financial planning.  In an appearance on a TV show that airs nationwide, Mr. Colayco shares practical savings and investment tips that can be adopted by those serious in improving their financial standing. His advice consists mainly of the following:

1. Understand risk and don't make purchases you're not sure you can pay.

"Growth, or making money, we can't fully control. But the risk, we can," says Mr. Colayco. "Ninety percent of us are focused on the [possible] gains, not on what could happen that could make us lose our investment. Having said that, we should be aware that whatever we invest, we can stand to lose. If we can't afford to lose our investments, [we shouldn't] risk them."

 Asked why some high-income people also find it difficult to save money, Mr. Colayco opines, "The biggest mistake people with money can make is premature acquisition of assets. [When] they have enough for a downpayment, they make the purchase. When asked how they will pay the amortization, they answer, 'I'll find a way.' You can't think like that, because the agreement you've entered into is an obligation that you have to pay whether or not you've made any profits. If you have no guarantee that you can pay, don't make the investment, even if you have enough for the downpayment."

2. Set aside at least 20 percent of your income as savings.

For people with regular jobs and regular pay, Mr. Colayco recommends that 20 percent of their pay go to savings. "This money can go to emergency funds, for payments of term insurance for accidents or deaths, especially if you have a family. If you have a family, insurance is technical, not an investment. Insurance is protection."

"There's one company that has a nice practice - if your pay is P1000, they only give you P900; the P100 is forced savings. And it's yours. They don't give it to you; they save it for you. And when you retire or resign, they give it to you. Not all companies are like this, but I wish they all were," Mr. Colayco adds.

3. Live within your means.

Mr. Colayco has some advice for those with irregular jobs or having low income. "If your basic salary is low - like PHP10,000 - then adjust your lifestyle," he advises. "Don't live in a place you can't afford. When you have a family, that's when it'll be a little difficult. So you have to find… extra income.  There's nothing magical about money."

"The National Statistics Office says that food expenses can go up to 40 percent of your income," says Mr. Colayco, "but if you can, don't let rent, transportation and food go above 60 percent of your income. The remaining 40 percent should be set aside for savings, some leisure money, clothes, etc."

(Source: www.gmanetwork.com, from an interview on GMA NewsTV's "Tonight with Arnold Clavio")