18. Swabeng Discussion: Inflation

Remember the last post about the rising cost of goods and services over time?

We'll try to understand the reason behind it.

Do you also know that this is a Silent Peso-Killer here in the Philippines.

Inflation is basically defined as a general upward price movement of goods and services over a period of time. As time passes, the costs of goods and services increase, making the value of your money decrease over time. There are several factors (will try to add some soon) that determine inflation rate on a monthly and yearly basis.

Inflation is inevitable. No one can escape from it. Take a look at the chart.

Notice that its rising. However, were fortunate that its still a bit low compared with recent years.

Do you have any idea how high it went?

That's more than 50% during the early to mid-80's


Let's say annual inflation is at 3.00% (This is just a safe assumption), you need to make your money work to gain at least 3.00% (to break even) or gain much higher.


I have an example of what would happen to your one-million pesos (deposited one-time) in 15 years given that it's untouched (withholding taxes and other fees are not yet included).

While your money at the bank may still value around one-million, its buying power would significantly reduce over time.


Still not convinced? You may try this and give some variations and I'm sure you'll agree that the end result would still be the same.


Anyway till the next...

17. Swabeng Dilemma: The Power of Your Money (An Introduction to Inflation)

Have you noticed that when you were young, the cost of a certain product or service would only be this amount only to find out years later, the price will increase through the years?


I remember a couple of years back (circa mid-90's), a Burger McDo Meal back then costs only 39 pesos (which includes regular fries and drinks). Fast forward to today, now it costs double at 79 pesos (with the same inclusions).

Within the span of almost two decades, the price of the Burger McDo Meal has doubled given that the product is still the same.


Also, what I remember was when we use to do grocery a couple of years back (circa mid-90's again), You would be able to buy a cart full of groceries for around 2000 pesos. Fast Forward to today again, the same 2000 pesos won't even fill half of the cart (unless your willing to spend more than 2000 pesos).

Given the same span of years, the value of money decreased overtime and you'd notice by then prices of good increase on a time-basis (annually).


I would also remember whenever my Dad takes me to school before he goes to work, Prices of fuel (particularly Diesel) costs around 7.xx pesos per liter. His budget of 500 pesos for diesel would give him around 71.5 Liters that usually lasts a couple of days (given his route would be home-school-work-home).


However, how far can today's 500 pesos worth of diesel can take you? How long it could last given the same route my dad takes? Definitely a few days less that what it can cover a couple years back.


And even way back, I remember my parents telling me that they only receive this amount of money as allowance. Lets say a couple of cents back during their time. They would told me that a bottle of softdrink costs between 5 to 10 centavos and a whole fried chicken at Max's back costs 5 pesos (compared to 449 pesos today).

Imagine the increase from 5 pesos to 449 pesos would be a staggering 8880%. Yes that's 8880% and I kid you not.


Anyway, why costs of goods back then costs much lower than it is today.

16. Swabeng Dilemma: Beyond your Savings Accounts

Let's say that you were able to pay your debts, completed your emergency fund and learned some basics on Savings Accounts. What's next for you?


Would you just spend the incoming money thinking that your already settled and financially secured for the years to come?


Or would you thirst for more and try to learn as much financial knowledge as possible?


I'm sure you have did your part more than I do as of this time and I know somehow your Financial IQ has increased from zero to something that you could pass on to future generations.

As for me, I'm still thinking what to write next. Care to comment so you could give me an idea on what to share?

15. Swabeng Thoughts: And the Best Bank is.....

Sorry it took me a while to gather some of the latest data regarding the banks where you can park your money for emergency use.

Here are some list of the known banks (unranked) here in the country. I'll just list down their basic services (Savings Account). You can also visit their respective websites for any updates.


1. BDO

2. Security Bank

3. BPI

4. Metrobank

Anyway, I'll try to update this from time to time. Just hit me a comment which bank would you want me to add (but limited to Savings Account for now)

14. Swabeng Dilemma: Your Money in Banks

Banks are establishments that keep safe your money while it earns interest (depending on what type of account you'll open with them). You can also lend money from them and pay them back at an interest. Sounds interesting right?

When I was young, my Parents taught me how to save money on banks. I think, I was 10 or 11 years old when I first open my first savings account. I was really excited that time my dad opened an account for me. The texture of the passbook makes me want to save money back then.


My wife is also an advocate of banks. Whenever she can, she usually puts her money in banks where she can easily withdraw anytime of the day.

Over the years, I noticed that the longer my money is in the bank, the less chance it earns for me. Did you notice it too? I'm sure you do!

Please, share your thoughts on the comment section on Banking and how it has affect your financial life.

13. Swabeng Dilemma: What Insurace Suits you Best?

In my last post, I shared to you my perception of having an insurance back then when I was young.

On this post, while I'm sure you had a better understanding on the importance of having an Insurance, you might get overwhelmed with the options available today. Even when I was about to pick what type of insurance I'll be getting, seeing new types got me more and more confused.

Anyway, here are the most common types of Insurance that are available in the Philippine Market.

Just remember that I won't be specifying any provider here and I will not go technical here so as not to overload you with information (those stuff would be reserved for later as I need to do a lot of readings too)


1. Traditional Life Insurance

Also known as ordinary life or straight life, this is a type of insurance that provides coverage for your entire life. This kind of policy is sometimes described as plain vanilla insurance.

These includes Term Life Insurance, Whole Life Insurance, Endowment Life Insurance among the most common in the Philippines.


2. Non-Traditional Life Insurance

This is usually linked with investments. For instance, unit linked insurance plans allows the insured to choose between equity, debt and mixed market investment vehicles.

Depending on the risks involved, the insurance plans will differ for every customer. The premiums for these plans also differ. You should be aware of this information before investing in these plans.


I told you, I'll just share the most common types of Insurance here in the Philippines. While there are a lot more to choose from, that would be all for now.

See you soon. And please do comment if you wish to add something or share something.