7.

Managing
Personal Finance

Mr. Christopher B. Cauan

Business Finance
Learning Objectives

This chapter aims to achieve the following:

discuss the value of savings and

investments, inflation, and the importance of
surviving a crisis in personal finance; and

Help students be more aware of the

opportunities experienced by some Filipinos
amid global crisis.

Mr. Christopher B. Cauan

Managing Personal Finance Business Finance
 7.1 The Value of
Savings and
Investments

Mr. Christopher B. Cauan

Managing Personal Finance Business Finance
 The money is the root of evil?

Good things money can do to you:

 Three-four meals that you are having
everyday;
 Clothes that you are wearing; and
 Tuition Fee
It is precisely for this reason, that money is not
the root of evil. Rather, the lack of money is the
root of evil.

Mr. Christopher B. Cauan

Managing Personal Finance Business Finance
According to Bo Sanchez, the ultimate
purpose of money is to help others.
But before we can help others, it is a must that
we have money first as we cannot give what we
do not have.
As student, you do not get to receive your
allowance during your breaks and classes
suspensions – no classes, no allowance.
As professionals, you will not receive it when you
call in sick or whenever you do not report to work
– no work, no pay.

Mr. Christopher B. Cauan

Managing Personal Finance Business Finance
 Both require to do something to get something.
At times, your time to get paid an allowance or
income is limited.
That’s why, as the golden rule of personal finance,
you need to save a portion of your allowance or
salary for future needs.

Income – Savings = Expenses 

Income – Expenses = Saving x

Mr. Christopher B. Cauan

Managing Personal Finance Business Finance
 Two equations are the same, what sets
them apart is the mindset that comes into
the situation.
In the first equation, savings is thought as
a planned expense – “paying yourself
first”.
In the second equation, savings is thought
of as leftover from expenses.
You may choose to save at least 20% of your
allowance or salary, the other 10% for charity,
while 70% can be used to cover your
expenses.

Mr. Christopher B. Cauan

Managing Personal Finance Business Finance
 By doing so, you have to differentiate your
needs and wants.

Needs – things that you need to survive

Wants – things that you just want, but can
live without.

Mr. Christopher B. Cauan

Managing Personal Finance Business Finance
 7.2 Inflation

Mr. Christopher B. Cauan

Managing Personal Finance Business Finance
 The ultimate goal of discussing the value
of savings and investments is to grow your
money through the interest earnings.
Therefore, interest rate is the friend of savings
and investments. However, the value of
savings and investments is affected by an
enemy called inflation
Why should we be concerned with inflation?
Because of the inflation, we will not be able
to afford the same amount of goods we used
to afford, therefore, we will not be able to
sustain ourselves.
Mr. Christopher B. Cauan
Managing Personal Finance Business Finance
If the prices of goods and services go up by 100%, it
means we will be cutting our consumption significantly
so that our budget can cover all the expenses. Monthly
budget of five members in the family below:
Food 15,000
Groceries/toiletries 8,000
Utilities 5,000
Gasoline 5,000
Clothing 5,000
Medicine 5,000
Others 7,000
Total 50,000
Mr. Christopher B. Cauan
Managing Personal Finance Business Finance
 If inflation goes up by 20%, prices of goods will
go up by about same amount.

Food 18,000
Groceries/toiletries 9,600
Utilities 6,000
Gasoline 6,000
Clothing 6,000
Medicine 6,000
Others 8,400
Total 60,000

Mr. Christopher B. Cauan

Managing Personal Finance Business Finance
 Cut Consumption/Cut Spending/Save and Invest

Plan A: Reduce consumption of all items

across the board
Plan B: Maintain consumption of some
important items and cut consumption on some
unnecessary items
Plan C: Look for another source of income to
augment expenses
Plan D: Save and invest to be able to grow
your funds faster than inflation

Mr. Christopher B. Cauan

Managing Personal Finance Business Finance
 Purchasing Power

Purchasing Power is the amount of

goods and services money can buy.
Example above dropped the purchasing
power of the family budget of 5 due to
the 20% inflation rate. ₱50,000 budget
can no longer pay for family expenses.

Mr. Christopher B. Cauan

Managing Personal Finance Business Finance
 7.3 Surviving a
Crisis in
Personal
Finance
Mr. Christopher B. Cauan
Managing Personal Finance Business Finance
 It is important to manage our personal finances
– getting into a savings and investments
program.
Suggestions and steps to keep your financial affairs
in order:
1. Set up an emergency fund
Normally, the fund will be three-six months
living expenses.
2. List all debts
List all your debts and the amount required
for payments and which must be paid first.
“Big ticket items” first will be put in order.
Mr. Christopher B. Cauan
Managing Personal Finance Business Finance
 3. Cut back on unnecessary spending
Cut back on spending and reduce only to the
basic necessities. Eating in a restaurant to
preparing meals at home, three times vacation
to two a month.

4. Pay off credit card debts

Target paying your credit card bills in full each
month. Discipline in paying your debts on time
becomes habit-forming.

Mr. Christopher B. Cauan

Managing Personal Finance Business Finance
 5. Apply for a credit line for emergency use
Cut back on spending and reduce only to the
basic necessities. Eating in a restaurant to
preparing meals at home, three times vacation
to two a month.
6. Talk to a financial adviser
For any problem on payments of your bills, let
your financial institution know about the
situation – lower interest rate or reduced
monthly payments.

Mr. Christopher B. Cauan

Managing Personal Finance Business Finance
7. Monitor all your accounts’ cash flow
Monitor your bank account, investment and
retirement account and track the value of your
investments, this way, you will be reminded of
your cash flow.

8. Trust that things will work out in time

Do not panic, just be aware. Tap all the
resources around you to keep your finances in
order. This will keep you in good disposition.
Keep in mind that bankruptcy should be your
last resort.

Mr. Christopher B. Cauan

Business Finance
Increasing Opportunities for the Filipinos amid Global
Crises
Disasters can bring in opportunities to discover
what solutions to calamities are available.
 Mount Pinatubo in Zambales erupted in 1991, a
whole industry on figurines made from ashes had
blossomed and for some, it has become a regular
source of revenues till this day.
 Mary Grace Café of Mary Grace Foods Inc. tells
how increasing opportunities can happen from
vey small start-ups where she first had her branch
in the bustling Serendra, Taguig City and with 9
kiosks in eight cities providing cakes and goodies
and most especially employment.
Mr. Christopher B. Cauan
Managing Personal Finance Business Finance
Products and Services
As typhoons and disasters have more often visited
the country, the entire nation has come forward to
be more helpful to each other. Calamities have a
way of softening us to the point that our usual way
of doing business becomes more personal
considering the situation that hit the country.
Pope Francis Visits Manila, January 2015 in the “Year of
the Poor”
Pope Francis offered Manila and the whole world a
look back at the basic rules in the life of his church
that really matter.

Mr. Christopher B. Cauan

Managing Personal Finance Business Finance
 Stripped off of complexities and luxuries, he
chooses the name Francis, after St. Francis of
Assisi, who comes from a prominent family and
chose to live with to the poor and be poor, to
understand fully the life that Christ’s offers to all.
spool
Pope Francis is a Rock Star
Manila was swept off its feet with the visit of Pope
Francis. Seven million Filipino Catholics braved the
storm and the rains to hear Pope Francis say Mass
at the Quirino Grandstand in Luneta. Pope Francis’
message, there is a need to put family first, to give
the family priority, to be like a child.
Mr. Christopher B. Cauan
Managing Personal Finance Business Finance
His Message at Rizal Park
To uphold the family and to continue the spirit of
mercy and compassion. It came at an appropriate
time, when international conflicts, a clash of
religion, natural calamities, and disasters are on
the rise.
During personal calamities, and most often, in
business challenges, we were made more human
when we practice mercy and compassion. Notice
that results, targets, and business solutions which
do not find in our traditional business management
and financial strategies, are suddenly coming out
to offer more ways of addressing business hurdles
and difficulties.
Mr. Christopher B. Cauan
Managing Personal Finance Business Finance
 End of
Chapter 7
Mr. Christopher B. Cauan
Managing Personal Finance Business Finance