Credit Card Interest Computation – Learn it Now!

Did you incur an interest/finance charge in your credit card account?

Do the charges seem to be much higher than you expected?

Well, maybe it’s because you were thinking of a different way of computing for the interest!  In an ordinary case, interest is computed as:

Interest = Principal x Rate of Interest

So if the amount borrowed is P10,000 and the interest rate is 3.5%, the interest should be:

Principal = 10,000

Rate =  3.5%

Interest =  P10,000 x 0.035 = P350

 

If your amount due last month in your credit card account was P20,000 and you paid a total of P10,000  on or before the due date, do you think you will be charged interest on the P10,000 and thus expect the interest to be P350 in the next bill?

The answer is a big NO!  Interest charges in a credit card account do not work that way.  You will be charged interest not in the P10,000 balance but in the average daily balance of all the purchases you made during that month and in the purchases that you make in the next (or succeeding) billing cycle.­­­

 

To illustrate the point above, refer to the interest charges computation (provided to me by my credit card provider which I requested for me to be fully aware of how I am being charged interest in my account) given to below:

 

Interest Rate:  3.5% per month                                   Statement Period       From:  19-Feb                   To:       18-March

	Transaction Amount		(A)	Posting Date		(B)	(A x B)
Transaction Date	Debit	Credit	Balance	From	To	No. of Days	Daily Balance
17-Jan	1,071.75		1,071.75	17-Jan	27-Jan	10	10,717.50
27-Jan	293.53		1,365.28	27-Jan	28-Jan	1	1,365.28
28-Jan	403.75		1,769.03	28-Jan	2-Feb	5	8,845.15
2-Feb	797.29		2,566.32	2-Feb	6-Feb	4	10,265.28
6-Feb	30,174.00		32,740.32	6-Feb	6-Feb	0	0.00
6-Feb	15,418.00		48,158.32	6-Feb	6-Feb	0	0.00
6-Feb	4,413.00		52,571.32	6-Feb	6-Feb	0	0.00
6-Feb	1,854.08		54,425.40	6-Feb	7-Feb	1	54,425.40
7-Feb	1,258.70		55,684.10	7-Feb	10-Feb	3	167,052.30
10-Feb	236.75		55,920.85	10-Feb	14-Feb	4	223,683.40
14-Feb	2,223.27		58,144.12	14-Feb	14-Feb	0	0.00
14-Feb	710.11		58,854.23	14-Feb	18-Feb	4	235,416.92
18-Feb	1,200.00		60,054.23	18-Feb	18-Feb	0	0.00
18-Feb	600.00		60,654.23	18-Feb	18-Feb	0	0.00
18-Feb	500.00		61,154.23	18-Feb	18-Feb	0	0.00
18-Feb			61,154.23	18-Feb	19-Feb	1	61,154.23
19-Feb			61,154.23	19-Feb	22-Feb	3	183,462.69
22-Feb	672.41		61,826.64	22-Feb	23-Feb	1	61,826.64
23-Feb	650.50		62,477.14	23-Feb	23-Feb	0	0.00
23-Feb	2,331.02		64,808.16	23-Feb	24-Feb	1	64,808.16
24-Feb	498.36		65,306.52	24-Feb	24-Feb	0	0.00
24-Feb	581.00		65,887.52	24-Feb	12-Mar	16	1,054,200.32
12-Mar		35000	30,887.52	12-Mar	12-Mar	0	0.00
12-Mar		25000	5,887.52	12-Mar	18-Mar	6	35,325.12
18-Mar			5,887.52	18-Mar	18-Mar	0	0.00
						60	2,172,548.39
Average Daily Balance =		Total Daily Balance/No. of Days in the Cycle
	=	2172548.39/60
	=	36209.14

Notes:

1.  My previous billing cycle started 1/17 and ended Feb 18.
2. Amount due me was P61,154.23
3. I paid a total of P60,000 on the due date of March 12.
4. My unpaid balance was only  P1,154.23.
5. I used my card just four times from Feb 19 to March 18, the first of which was on February 22, and the total amount purchased was P672.41 + 650.50 + 2331.03 + 498.36 + 581  = P4,733.29.
6. Balance from previous bill plus new charges = P1,154.23 + P4,733.29 = P5,887.52 only.

 

Credit card companies use weighted average in computing for the Average Daily Balance (ADB) of your account.  How is it done? Let me try my best to explain it to you.

1. From my first purchase (Jan 17) to my next purchase (Jan 27), there are 10 days.  That is why in the number of days column, you see an entry of 10.
2. Daily balance for my Jan 17 purchase is computed by multiplying the entries in Columns (A) and (B).   P1071.75 x 10 = P10717.50
3. Perform steps (a) and (b) to all rows in the table and you will get the Number of Days and Daily Balance values. This applies not only for purchases but also for payments made.
4. Notice the 2 blank cells in the Debit column dated Feb 18 and Feb 19.  Remember my previous cut-off date was Feb 18, right?  So treat Feb 19 as if I made a purchase (even though I have not), so from Feb 18 to Feb 19 that is one day (that is why the entry in the Number of Days is 1).  And then from Feb 19 to Feb 22 (my first purchase in the next cycle) that’s 3 days.
5. To solve the ADB, get the SUM of the entries in the Number of Days column (let us call it TOTAL), then get the SUM of the entries on the Daily Balance column (let us call this DAYS).  Divide TOTAL by DAYS.  The result is your ADB.

 

To compute for the interest, use the formula below:

Interest                =  ADB x Interest Rate x 12 (months) x DAYS / 365

=  36209.14 x 3.5% x 12 x 60 / 365

=  P2, 499.92

 

Therefore the interest I had to pay was P2,499.92 — for failing to pay P1,154.23 of the P61,154.23 bill that was due me.

If we’d compute the interest rate using the ADB as basis, it would be:

(2499.92/36209.14) x 100% = 6.9041131% or almost 7%. That’s 3.5% interest for 2 months.

 

I was lucky enough to have my request of reversal of the interest charge approved.  It pays to be a client with a good credit record.  I have been paying my bills in full and so asking for a reversal of the interest charges was not a big issue. Otherwise this would have been one of the worst things that I have done — getting charged P2499.92 in interest just because I failed to pay the P1,154.23 balance on time.

 

Would you still care not to pay your credit card bill in full on or before the due date?  Your answer is as good as mine!

 

Have a nice day!

Is It a Good Idea to Have My own Credit Card?

Are you asking yourself the same question right now?

Maybe you are wondering if it is advisable for you to have a credit card or not.  You have tried asking your friends for advice and they gave you mixed feedbacks.  Some of your friends tell you that it is perfectly fine to have one and that you would enjoy lots of benefits. Others say that you better stay away from credit cards and don’t even think of applying for one.

So who are telling you the truth?  The answer  is — all of them are!

Having a credit card has its own advantages.  Just like anything though, it has its own disadvantages.  Allow me to discuss both.

Advantages

1. Security.  You get to buy things even without bringing cash with you.
2. Margin.  You get to buy even if you don’t have money.
3. Pay later.  Payment Due Date can be 21 days up to around 56 days after your purchase.
4. Rebates.  Some credit cards give us much as 5% rebate in some specific type of purchases like groceries.
5. Points.  Most credit cards offer items that can be redeemed if you accumulate a specific number of points.
6. Free items.  Most credit card companies offer a free item for newly approved cards.
7. Promos.   There are promos offered by credit card companies that could save you a lot of money.

Disadvantages

1. You spend more.  You tend to spend more since you can buy things even if you do not have money.
2. You are tempted to buy.  You are tempted to buy unnecessary items because of what appears to be “great” deals, or use the card to pay for airline tickets and hotel bookings that are beyond your budget.
3. Finance Charges.  A number of credit card holders end up getting charged exorbitant fees for failure to pay the total amount due on time.  (There are a lot of credit card holders who pay either only the minimum amount due or a portion of the total amount due.
4. Risks.  (a)  The risk of losing your card and have other people use your credit card is there.  (b) The risk of indebtedness as a complication of continuous finance and other surcharges is there.

As you can see above, there are great risks as well as great rewards in having a credit card account.

If you have the discipline to: (a) buy only the things that are necessary, (b) buy within your budget, and (c) pay the total amount due on time, then go on and have a credit card.
If you do not have the discipline or you are in doubt if you have it, then i suggest that you should not avail of a credit card.

If you already have a card right now and you are experiencing at least one of the things mentioned in the disadvantages of having a credit card, I recommend that you have your account cancelled and live with cash purchases instead.  Otherwise you’d slowly be buried in debt.

Good luck and I hope you make the right decision!

PAGIBIG (HDMF) MODIFIED PROGRAM: The Great Investment That Could Have Been!

During the middle part of June 2011, representatives from HDMF or PAGIBIG came and presented to us their new program called PAGIBIG Modified Program (or Pagibig 2).  In this program, members are encouraged to save for a minimum of P1000 (each investment/instalment, not necessarily for each month) for a period of 5 years.  Members will then earn a dividend of around 5.5% per year (based on 2010’s dividend rate) which they would get together with all their savings in the program at the end of the 5^th year.

The dividend rate of 5.5% per year seems to be small, but the catch was this:

The member’s savings/investments are not only tax-free, but the amount invested was also deductible from the member’s gross taxable income! Sounds great, right?!

I spent a couple of days verifying the information as I thought maybe either we misunderstood what the PAGIBIG personnel said or maybe the personnel made a mistake in her presentation.  I called the PAGIBIG hotline to verify and they confirmed the information.  I searched the internet for the Philippine law that cover HDMF and found a part in the Republic Act that is kind of vague and open for interpretation/s.  I searched for memoranda from BIR that possibly cover my concern and found none.

Finally, after around two to three weeks, I decided to join the program and asked for the form I need to fill out to signify my intent of joining the program.  Around a day or two before I made the decision, I have made computations that would give show me how much I could possibly save from taxes, and here is an example:

If I decided to save PhP4000 a month for just one year, my savings at the end of the 1^st year would be

12 x PhP 4000 = PhP48000 total savings in one year

I fall under the 30% tax rate bracket therefore my taxes on my savings should have been

PhP48000 x 0.3 = PhP14400

Which means I should have only PhP48000 minus PhP14400 in taxes = PhP33600.

But since it is deductible from my gross taxable income, I don’t have to pay any taxes.

I should only have PhP33600 but because of the program, I have Php48000 instead.

My 1^st year earnings without the dividend yet is:

PhP48000  –   PhP33600 = PhP14400

Rate of return = (14400/33600) x 100% = 42.85714%

Counting in the 5.5% dividend would yield

PhP48000 x 1.055 = PhP50640, which has a 50.71% rate of interest in 1 year.

Assuming dividend rate was 5.5% each year, the value of my investment at the end of the 5^th year would have been:

PhP50640 x (1.055)⁴ = PhP62734.08, which has an 86.70857% interest in 5 years.

An 86.7% return on investment in 5 years is not bad at all!

Unfortunately, during the day I was supposed to submit my form to the HR department I read a new memorandum from the BIR that all contributions (in SSS, GSIS, Philhealth, and PAGIBIG) beyond the compulsory are taxable.

This is a great case of what-could-have-been!

SAYANG!!!

Credit Card Dos and Donts

As I have mentioned in one of my posts, there are a lot of credit card holders who are indebted because of poor financial discipline.  I hope that this post would help them improve.

Some DO’s and DONT’s of credit card use.

You should:

1. Always pay your bill ON TIME.
2. Always settle your bill in FULL.
3. Never avail of cash advance as it automatically merits finance charges.
4. Know the various fees that the company will charge you in case of late payment, cash advance availment, or instalment payment/s.
5. Take care of your credit card.  Do not lose it. In case you did, call the hotline ASAP and report the loss to avoid unauthorized use of the card.
6. Secure your billing statements as they contain valuable information about yourself.  If you plan on throwing them, shred (rip) them first.

Some of these are related to the ones I mentioned above but just the same,  allow me to list them down:

You should NEVER:

1. Pay annual fees both for the principal and supplementary cards.  Most credit card companies have their own criteria (requirements) that a cardholder has to meet to qualify for waiving (or reversal) of annual fees.  All you have to do is ask.
2. Provide the security code of your card to anyone.
3. Forget the due date of your bill.
4. Pay just the minimum amount due nor pay any partial amount of the total due as it merits finance charges.
5. Use your card online on websites/merchants you are not familiar with.
6. Charge anything that is not within your budget.  If you are not sure if you have enough budget for the purchase then don’t buy it.
7. Buy items that you wouldn’t buy if you didn’t have a credit card.
8. Charge somebody’s purchase to your card unless the person gives you the payment on the spot.

If you have any comment, question, or you would like to add something to my list, feel free to post it through a comment so I can include it here by updating this entry.  Thanks.

Are You Unable to Save Money?

Everyone wants to save money.  Every person I know does (well, everyone except one person I happen to know).  Ask anyone the question “Do you want to save money?” and for sure the reply would be: “Yes, of course!”

The thing is, everyone would like to have savings but the problem is that not everyone, I don’t even think that the majority of people, is doing it.  It seems so easy and yet so hard to do.  Why is it then that a lot of people are not able to save money at all?  Each one has his/her own reasons why he/she does not have savings.  Not earning enough money, I believe, is the common denominator.

One who earns P20,ooo a month thinks it’s not enough to support his needs. One who earns P40,000 a month thinks the same.  Another person who earns P100,000 thinks the same.

The one who earns P20,ooo a month thinks that: “If I only earn P20,000 more than what I earn now, I would have a lot of savings.”  The other who earns P40,000 a month would say: “If I only earn at least P20,000 more than what I earn now, I would have a lot of savings.”  The third person who earns P100,000 a month would say: “If I only earn P20,000 more, I would have a lot of savings.”

It’s funny how they all say the same thing.  No matter how much a person earns in a month it seems to be not enough to support one’s needs.  Everyone is saying the same thing so does it mean that it is true?  NO.

You have to understand that as you earn more money, your way of living is also getting more expensive.  Think about the time when you were just starting. Compare how you lived then with how you live now.  Can you see the difference?  Let us look at some possible scenarios:

• You used to commute before but now you either a) ride a taxi each time, or b) drive your own car.
• You didn’t go out with friends every weekend then but now you do.  And you now go to classy, expensive spots.
• You seldom went on vacation before and when you did, you stayed in inexpensive resorts/hotels.  Now you go on vacation at least once a year and you stay in AAA or 5 star hotels/resorts.
• When you dined out then, you ate at Jollibee, McDo, KFC, etc….now you dine out at Outback, TGIF, etc.
• Your car then was a 1.3L or a 1.6L sedan but now it is a 3.0L or bigger SUV a V6 or V8 engine at that!
• You only had one cellular phone then (e.g., 3210, 8250, 8910, etc.) … now you have at least two and they are of the iphone4 and galaxy type.
• You used to spend P500 or less monthly in cellular phone load but now you have a P1.8k or higher monthly postpaid plan because you availed of a high-end phone in Smart/Globe/Sun.
• Your vice/s became more expensive.
• And of course, commodities are just way more expensive now.

As you can see, the way you live now is much more expensive than before.  But that does not mean that you cannot have savings today. All it takes is discipline and the will to do it.  Understanding/realizing the need to have savings would also help.  So why save?  I can think of a couple of reasons but all of them would touch the concept of preparing for your future.  In fact the reasons all seem to be the same.  You can save in order to:

• Prepare for your retirement.  You might want to retire early and enjoy the fruits of your hardwork or put up your own business and do away with being a fulltime employee.
• Have money in case of an emergency (like job loss, accidents, natural disasters, etc.)
• Having the assurance that no matter what happens, you have some savings to fall back to.
• Secure a good future for your family.

How can I save money?  It is a matter of methodology than anything else.  Maybe you are the type who would say, “No matter how hard I try to cut down on my expenses, I always end up not having any money left to save!”  For sure, a lot of others think and feel the same way as you do.

The conventional way of savings is:

INCOME minus EXPENSES =  SAVINGS

Makes sense, right?  It is logical.  The problem is, when you do it that way, not only does saving money become the least of the priorities but you always end up not having any money left from your income.  What most fund managers would tell you is (and I totally agree with them):

INCOME minus SAVINGS = EXPENSES

You may be apprehensive with the formula because you are thinking that maybe the difference between income and savings would not be enough to cover your expenses.  You are well-trained on making the money you have fit your budget.  You tend to make adjustments on what and where you buy and what you do based on the money you have.

Believe me, you can do it.  Start with a small amount.  The hardest part is the start.  Once you get used to setting aside a certain amount from your income and using the money left as budget for the month, you should be able to do it with a bigger amount set aside as savings next time around.

HAPPY SAVINGS EVERYONE!

Oh, I almost forgot.  Go back to the list I made above, the one about the changes in the way you live now with the way you lived then, and try to find ways to cut your expenses.  That should help you adapt.

Trading Mistake 1

From my start in July 2010 until early October 2010, almost all my stock transactions (around 9 out of 10) were giving me profits.  I can’t seem to make a mistake other than selling a little prematurely once in a while.  Although the profits were not much, when accumulated, the amount, at least based on my standards, was significant.

Around that time I thought that stock investing was easy.  Imagine, with almost no experience and without attending seminars/talks about stock investing, I had around 15% gains in less than three months.  I was thinking, “I could make a lot of money here!”

Then came my first major test as a stock investor.  After selling shares of FPH and earning around 12.67% in around 28 days, I decided to buy back FPH shares on September 29, 2010 at P69.5 each. Bought EEI shares  at an average price of P4.39 per share on October 6, 2010.

Unfortunately, FPH and EEI, and PSEi in general, went on consolidation.  After two months, the price went down to around P61 and P3.86, respectively.  I had a 12.38% and 12.29% loss respectively for FPH and EEI.  I lost 93.56% of my prior gains in FPH.

I failed badly in my first true test because I did not have what traders call as stop loss.  This is a price of a share of stock that you have to set to sell your stock position to avoid further losses. (For example, I could have set my stop loss for FPH at P67 and P4.20 for EEI.  That would have put my losses at a minimum.) I was praying and hoping that the prices of FPH and EEI are going to go not only back to my buying price but even higher so I will make a profit.  Unfortunately, it did not happen.  Had I set a stop loss price for each of the two stocks, I would have minimized my losses and my gains from prior transactions would have been almost intact.

There you go, my first mistake as a stock investor. I hope you don’t make the same mistake as I did.

Credit Card – Things To Do and Things To Avoid

Are credit cards evil?

Some people would tell you that credit cards are evil.

Credit cards could send one into debts so deep that it is almost impossible to get out. This is true if the credit cardholder has no financial discipline.  I will provide a list of some practices of a person with no financial discipline later.

Credit card is Good

Now, if you have discipline, credit card in general is good.  This cannot be true enough if you live in a country where credit rating/score exists.  The amount of money you can loan from banks and other financial institutions is highly dependent on your credit score.

In the Philippines, credit rating is not used.  Borrowing money is solely based on your financial capabilities — salary, other income, assets, etc.

So what made me say that having a credit card in the Philippines is good even though credit rating/score is not used and therefore not important unlike in other countries? Allow me to mention a few situations wherein having a credit card helps:

1. When you charge something to your credit card, usually it’s payment will be due at least a few weeks after the purchase date.  This will allow you to:

• save money to pay the amount; or
• if you have your money in an interest-bearing account, you earn more interest because of the additional days that your money is in that account; or
• you could use the money you would have paid for the purchase in some interest-bearing transactions (like in stocks for example)

2.  During emergencies and you don’t have cash.

3.  Earn rebates (some offer 5%) or points to claim a corresponding item.

4.  Some credit companies give a free item (e.g., a cellphone) for new accounts.

5.  There’s not need to always bring a lot of cash when you go to the mall.

6.  You could have friends’ purchases charged to your card to earn points.*

* Just make sure that you get your friend’s payment on the spot before you charge his/her purchase to your card. The reason?  You would know as you read on.

There are other advantages but I’d limit my list to what I enumerated above.

Some Bad Practices

Now let me enumerate some of the reasons why a lot of credit card holders end up with big debts.

1. Failure to pay on or before the due date
2. Not paying in full the amount due for the month. Most of my friends and colleagues do this.
3. Related to Number 2 only that this is much worse: Paying only the minimum amount due.
4. Charges things that one won’t buy if he/she has no credit card.  Things like high-end cellular phone, iPod or iTouch, appliances, etc.
5. Purchases will be charged to the card without setting aside the necessary funds to pay the bill.
6. Plane tickets and hotel/resort accommodations will be charged to the card — trips one would not take if he/she does not have a credit card.
7. Charging purchases of friends who promise to pay when the bill comes only to end up getting finance charges and interests because the friend failed to pay on time.
8. Spending way beyond one’s income (e.g., dining in a restaurant, partying, etc.).

Allow me to discuss numbers 1 to 3 further.

In number 1, you will be automatically charged late payment fee plus interest**.

In numbers 2 and 3, you will be charged with interest**.

** Our knowledge of interest is that we simply multiply the amount of money that we owe (in this situation, the amount of money we did not pay in our bill) to the interest rate and that would give us the interest charge that we have to pay.  So that is how credit card companies would charge us if we pay only a portion of the amount due in our credit card, right?

WRONG!

One fact that every credit card holder should know is this:  if the full amount due is not settled, you are charged interest not only in the unpaid balance but also in your succeeding charges for the next billing cycle.  Credit card companies have their own way of computing your weighted mean amount borrowed.  I requested my card issuer for a copy of an illustration on how they compute for interest (you can request one too — it’s free of charge) but unfortunately, I can’t find the copy at the moment.  I’ll post it in this entry once I find it.

As I remember it, the way they compute interest (I’ll correct myself later if I am wrong) will be illustrated below.  Assumption here is you have a P10k unpaid balance from our previous bill, and that your billing cycle is March 1 to March 30.

Date                      Amount Charged             Balance                      No. of Days             Credit

Mar 1                    P10000                                  P10000                  1                              P10000

Mar 2                    P5000                                    P15000                  5                              P75000

Mar 7                    P10000                                  P25000                  3                              P75000

Mar 10                  P4000                                    P29000                  4                             P116000

Marc 14                P2000                                    P31000                  16                           P496000

Total                                                                                                      29                           P583000

Average                                                                                                                            P26,620.69

So you will be charged around 5% of P26, 620.69 which is P1331.03 in interest.   Take note that the unpaid balance in the previous month’s bill was only P10k.

Imagine if you only paid the minimum amount due!

Annual Fees

There are a lot of credit card holders who are not aware that you can request for the cancellation of annual fees.  You have to meet some requirements (which in most credit card companies are not really hard to meet) to be qualified for reversals of annual fees. Ask your provider about this feature.

Imagine how much you could save (especially if you have multiple credit cards and with supplementary card holders as well).  Most credit cards charge around P1200 per card, including supplementary cards per year.  So if you have two credit cards with your wife/husband as your supplementary card holder, that’s P1200 x 4 = P4800 in annual fees — money you can save just by being aware of this feature of annual fee reversals.

The first thing I do when I receive a new card is call the hotline and inquire about finance charges, interests, annual fee reversals, point system, and other matters that I deem important fro me to know before I start using the card.

I hope this blog entry helps in your credit card use experience.  Good luck!

How I Got Into Stock Investing

Saving Money

How did I save money?

I have been working since 2001 — a year after my graduation.  My idea of savings then was, and most probably you and I have the same ideas, to put whatever amount of money I can, and this happens once in a blue moon, to my Multi-Earner Savings Account in BPI which during that time gave (I am not sure if I remember it right) 6% interest with additional 1% if you did not withdraw funds within one year.

Notice that at that time (around 2002 or 2003), you earn 7% per year in interest if you put your money in the bank and not touch it.

The problem with this type of savings is that you end up making saving money the last of your priorities.  You’d spend money for food, watching movies, going out with friends, and other things that are not really that important.

(The most that I had in that account then was I think P50k.  During that time, P50k for me was quite big already since it was  almost 3x my monthly salary.  I was a bachelor then.)

Putting One’s Savings in a Regular Bank Account

Until July 2010, most of my savings were in my bank account which, year after year, gave smaller interest rates (rates that eventually went down to 1% p.a.).  Inflation is around at least 4% yearly for the last couple of years.  If you subtract this to the interest rate, you’d get a negative rate.  This means:

Our money’s value depreciates if we put them in a regular bank account.

Search For  Other Sources of Income and Ways to Save Money

When some of my friends got into networking business, they convinced me to avail of a pension plan with some networking attached to it (which turned out to be a good investment since I am already fully paid as of this writing.  Networking was not my forte). I also joined another networking ‘business’ without much thought and lost around P10k in the process.  I lent money to some of my friends to help them start their won networking venture and lost  more money because they haven’t paid until now. 

After getting married (it comes with considerable expenses) and having a son after 2 years (via C.S. operation), I saw my savings get depleted.  I had to borrow money from my brother to pay for the hospital bill (I was around P30k short).  With no savings to turn to and with our (my wife and mine) salaries just barely enough, I decided to look for ways to: (a) augment our income and (b) to lower our expenses.

Since cellular phone is something that we use everyday to call or text people, I decided to buy a retailer SIM so that I could have around 12% discount from my wife’s load expenses (I am using a postpaid plan).  Then it got me thinking: “Why don’t I sell load to my friends, relatives, neighbours, and officemates?”  That’s when I decided to buy retailer SIMs of each network.  My earnings and savings combined were around P500 to P1000 per month.

After around a month or two, I got curious about the eload dealers who load my retailer SIMs.  I searched the internet and found multiple advertisements offering load dealership. I started with one network and it gave me at least P2k income per month during the first few months.  I got lucky and got big clients and my earnings was big enough that it was bigger than my take-home pay in my full-time job. I thought of possibly quitting my job and going full-time but decided against it for long term security. (My wife quit her job to attend full-time to our son.)

At around this time, I have a coworker, Albert, who invested in the stock market.  He was encouraging me to invest in stocks. Although I was kind of interested, I did not think of it much since during the time we talked, I was earning big in my loading business and it (the loading business) was taking most of my free time.  Besides, I didn’t think that  stock investments would outperform my eloading business (which was true during that time).  I saved money and put some in our credit cooperative who gives 5% interest for my savings (for the first P115k) and 11.6% for my share capital (but is limited to a maximum of P30k only).

Then the worst thing happened.  Eloading business became so unstable that I ended up losing my eload dealership.  What I had retained was my retailing business which has become limited to personal and family consumption and to some of my friends.  This time around I knew that I cannot afford to have my money stuck in a bank that gives me 1% interest per year. Now all of a sudden, stock investing made sense — it would give me a chance to earn returns higher than what my bank would give me!

My Start in Stock Investing

So I talked to Albert and inquired how to invest in the stock market. Eventually I was able to open an account in July 2010 and was able to buy some stocks.  I started small (just P5k) and just kept on adding funds to my account.  I was a newbie (and I still am) so I almost zero knowledge about the stock market.  I just based my trade decisions on my stockbroker’s write-ups and researches.

I had around 15% return on my investments in stocks from July until November 2010.  Not bad for a novice like me.  This is 15x better than what my bank would give me. Wondering why I only had my story up to November 2010?

I’d have the answer in my next post.