It’s a Sunday, so I picked a task that we can do from the comfort of our own homes. I also chose a task that can kill a few hours, since most people will be too busy during the weekday for a task like this one -

Today’s Task: Read one personal finance book.

If you already have a personal finance book at home but you haven’t read it yet, now’s your chance. You can also borrow books from friends or relatives, or buy from a second hand shop. Just make sure that whatever you buy, the information is up to date. Also, as much as possible, buy something local. The ideas in local books will be of more help, especially if they point to local banking and investing information.

Want some free books instead? Check out the following:

• Thriving on Less: Simplifying in a Tough Economy by Leo Babauta. It’s about adjusting your lifestyle to make it more sustainable and allow yourself to live well in a tough economy.
• Money Matters for All Ages, which I reviewed before, is a guidebook on financial planning for the rest of your life.
• Tips for Change from Money Management International. Just a collection of money-saving tips. Although written for a US audience, 98% of the tips are applicable everywhere (FP’s note: I wouldn’t drink tap water though, so know which tips to pick and use).
• Plan Z: How to Survive the 2009 Financial Crisis by Robert Pagliarini. An alternative take on how to deal with the financial crisis. (FP’s note: I don’t think it’s a good idea to avoid paying off credit card debt as early as you can if you have the means to do it, things are not as bad here as compared to the US. But if you’re financially desperate, it’s okay to just pay the minimum each month.)
• Building Wealth: A Beginner’s Guide to Securing Your Financial Future by the Federal Reserve Bank of Dallas. Meant for US readers but most of the ideas are basic enough to be applicable to the Philippines. Just like the title says, it’s for beginners who are just starting to be aware of their financial responsibility.

Remember: don’t stop with just one! Over the next few months, make it a point to read other financial planning and money management books. You’ll find that many writers contradict each other so it’s good to have multiple perspectives on a single issue. But for today, one book should be fine.

I’ve just finished listening to the audio book version of “The Millionaire Next Door” by Thomas J. Stanley and William D. Danko. I’ve heard good things about it, so I thought I’d check it out for myself.

The premise of the book is simple: the authors conducted a survey of self-made millionaires in the US, to see what characteristics they share and how they got to be millionaires.

In the first part, the authors share their discovery of a surprising fact: millionaires often did not look the part. They did not dress like millionaires, they don’t come from wealthy families, and most of them don’t even have an MBA or high levels of tertiary education.

Here’s an excerpt from the book (emphasis mine):

“In time we discovered something odd: many people who live in expensive homes and drive luxury cars do not actually have much wealth…. Many people who have a great deal of wealth do not even live in upscale neighborhoods.”

Then the authors move on to discuss the common characteristics of millionaires and how they acquired their wealth. Not surprisingly, it involves discipline and planning.

Here’s a brief summary of the book’s main points:

What is “wealth”?

“Wealth is not the same as income.”

The authors defined wealth as “Substantial amount of appreciable assets”. This meant a net worth of $1,000,000 or more.

One of the major points discussed in the book is that wealth is not the same as income. This means that just because you have a high-paying job, it doesn’t necessarily follow that you are wealthy. The authors gave several real-life examples of people who earned six figures per year (in US dollars) yet lived their life from paycheck to paycheck. If you added their net worth, it would amount to ZERO. Take their paycheck away, and they can’t survive. According to the book, most people who lived like this would survive only 2 months at most with no income. In contrast to that, wealthy millionaires can live without regular employment.

You don’t have to come from a rich family either. 80% of Ameirca’s millionaires accumulated wealth in one generation, not via inheritance. They are regular people.

But what made them millionaires?

The 7 Factors of Wealth

The authors made a list of 7 common factors found in most of the millionaires they surveyed:

1. They live well below their means. This may sound strange to some people, but millionaires budget well. According to the authors “They became millionaires because they are good at allocating resources. They stay millionaires the same way.”
2. They allocate time, money, and energy efficiently in ways conducive to building wealth. From the book: “Millionaires spend significantly more hours per month planning their finances than high-income non-millionaires.”
3. They believe financial independence is more important than displaying social status. Surveys show that most millionaires don’t spend much on shoes, cars, and clothing – it’s the high-income non-millionaires that do.
4. Their parents did not provide economic outpatient care. This means that millionaires often did not receive financial support from their parents.
   
5. Their adult children are economically self-sufficient. Related to the point above, millionaires did not give financial support to their own children once they reached adulthood. In fact, the research shows that the more money you give your adult offspring, the more they will depend on credit, and the less wealth they’ll accumulate.
6. They are proficient in targeting market opportunities. Most millionaires are good at selling products and services to those who are also wealthy.
   
7. They chose the right occupation. Most of the surveyed millionaires are self-employed or run their own businesses.

What I think of the book:

If you get this book, remember that it’s an analysis of survey results. It’s not a step-by-step how-to guide on accumulating wealth. Don’t expect specific tips on where to invest and how to cut back on your spending.

While the data was eye-opening, I had a few complaints:

• Paulit-ulit. Some of the information is redundant.
• The book doesn’t take into account the value of time. For example, if there’s a promo, I’m not going to fill out a form for an hour if it would give me only $1 free. My time is worth more than that. If you’re absolutely broke, that’s probably fine.
• “Luck” is ignored. While I don’t believe in “fate” generally, I believe that there is an element of randomness involved regarding what opportunities you have. For example, if you’re unlucky enough to have parents who aren’t financially responsible, you’re bound to pay for their debts, retirement, and living expenses (esp. in Filipino culture). This is much harder if you are starting your own family.
• The research methodology was a little off. The millionaires were self-selected rather than, say, chosen from an existing list.

What I do like is that it focuses on frugality, investing, discipline, and planning. I believe that these things are a solid formula for wealth, and it’s good to see it backed up with data. It’s a good way to crush the get-rich-quick mentality.

Should Filipinos get this book?

Since 95% of the book is a presentation of data, and only around 5% are ideas and lessons you can act on, I wouldn’t recommend the average Filipino to buy it – especially since the research was conducted in the US. If the same survey was done in the Philippines, the results may be different. That book, I might recommend.

As for the things you might learn, the valuable ideas from this book can already be found on this review, along with other existing reviews of the book. It doesn’t have many solid “tips” or concrete steps you can take to improve your finances. As long as you’re aware of the 7 factors mentioned above, and you act on them, you’re good to go.

“In the middle of difficulty lies opportunity.” – Albert Einstein

Almost the entire world is facing a financial crisis.  During times like these, it’s important to cut back on our spending and save for the future.  But is it possible to do that without sacrificing your enjoyment of life?

Leo Babauta’s new free ebook, “Thriving on Less: Simplifying in a Tough Economy” addresses the steps we have to take to lead more enriching lives – and save money in the process. A much needed message in tough economic times.

Here’s what you’ll learn from the ebook:

• How to create a simple lifestyle
• How to focus on “enough” instead of “more”
• How to beat the effects of advertising
• Steps on how to make small financial changes
• How to look at large, long term expenses
• Tips on how to change spending habits
• How to get out of debt

If you want to download a free copy of this ebook, simply click here.

I just finished reading this excellent (and FREE) ebook by Yaro Starak and gideon Shalwick called “The Roadmap to Become a Blogger”.  It basically lays down everything you need to know about making money from your own blog (which I also discussed to some extent  in a previous post).

What I love most about Yaro and Gideon’s ebook is that it has action steps.  Meaning, there’s a list of stuff you have to do to implement their advice. I love action steps because they are practical, and they note down all the tasks you need to accomplish.  ( I used action steps in the post “How do I start as an online freelance writer?” to better explain what aspiring writers need to do.)

Anyway, going back to the ebook, you need to sign up before you can download it.  Don’t worry – if you don’t like the email updates you receive, you can always unsubscribe.  They carry out the mailing list using Aweber, which is a trustworthy, spam-free service.

Also, please note that some of the advice might not be applicable to Filipino bloggers, especially if your target audience is local. Still, it’s a great resource for beginning and veteran bloggers alike.

Click here to download this handy ebook.

Image credit: Graphic taken from Yaro Starak’s blog

WiseBread is giving away a free downloadable ebook titled “Wise Bread’s Wise Driving Guide: 108 Tips to raise your fuel economy”.

The tips range from the simple (make fewer left turns, keep tires well inflated) to the advanced (hypermiling, drafting). Anyone who drives a car can benefit from these tips.

To download the ebook, go to the site and subscribe to it via email or RSS.

You won’t regret the subscription.  Apart from the fact that it’s free, their tips are always practical and useful.  I’ve been reading WiseBread since they started, and I’ve learned so much from their blog.

Image Source: WiseBread.com

It’s no secret that I love books. I try to read at least 20 books a year (my former creative writing profs would argue that this isn’t enough). However, books are generally expensive. In fact, you’re very lucky if you find a brand new book from a major bookstore at only P 150.00. In fact, browsing through National Bookstore’s online catalog, the cheapest fiction book I could find was A Pocket Book of Short Stories from Simon and Schuster for 85 pesos. And guess what? You can actually download all those short stories from the internet for free.

If you’re an avid reader who doesn’t want to burn a hole in both your pockets just because you happen to love books, here are some frugal ways you can acquire them:

Where to find CHEAP books:

Used books stores. One of my favorite used books stores is Diplomat Bookstore in P.Tuazon, in the Daily Supermarket Complex. Scout and I acquired Robin Morgan’s The Demon Lover for a mere P149. When we went there this weekend, they even had a sale – some shelves were P99/book, and buy 1 take 1 to boot! That means P49.50 per book. We took advantage of this deal and added 2 new interesting books to our collection. Apart from the great price, many of Diplomat’s used books look good as new.

I also like the used book stalls in Riverbanks Mall in Marikina. There’s 2 of them there, and other stalls have a used books/magazine section as well. I found Michael Cunningham’s The Hours for P100 (it looked brand new) and a Woody Allen collection that was already out of publication (it looked new too, and cost me only P200).

The gigantic National Bookstore in Cubao (the one near Gateway) also has a huge used book collection at the top floor. Most of the books aren’t arranged correctly, but the collection is so vast that it’s unlikely you’ll walk away from there empty handed. They also have some great foreign language and art books that are at least half the price of their brand new counterparts.

If your local mall has a used book store, going through the shelves and grabbing a great find feels a lot like successful treasure hunting.

UP Diliman. There are several tiangge‘s within the UP Diliman campus, and I found most of my memorable purchases there, such as: A Small Killing (an Alan Moore graphic novel) for a mere P180, The Complete Hitchhiker’s Guide to the Galaxy by Douglas Adams for P200 (it’s even hard bound!), and The Old Man and the Sea by Ernest Hemingway for P10. Just take a stroll around the campus and you’re sure to find a used book stall with UP student prices.

Online book sales. I just stumbled upon Book City, and although I haven’t tried the service, it looks promising. The prices range from P20 to P80, and I already have my eye on some of their books.

MyBooks.ph is also an option, but the price depends on the seller and most of the prices I’ve seen are higher compared to the prices of the same books in used book stores. However, some of the books available in MyBooks are very hard to find in stores, so if there’s something you haven’t had luck in finding in an actual store, you might want to try MyBooks (personally I’m eyeing some of the Roger Zelazny books on sale).

Another online used book store is Avalon.ph, where you can buy books based on their listed price or bid for it. This seems like such a great find for me, since someone seems to be getting rid of her Jeanette Winterson collection. The prices are generally higher for this site, so if you’re going to buy from here, you should opt for the books that are very hard to find (even in major bookstores) for the price that it’s being sold for.

If there’s an affordable bookstore I missed out on, please share it via the comments section and share it with other Frugal Pinoy readers.

Where to find FREE books:

Although there’s many ways to get books cheaply, you can also manage to get them for free.

Library. If you’ve got access to a public or school library, maximize it. Who says you have to own a book to enjoy it? Besides, if you borrow a book, the less you’ll fall into the trap of “buyer’s remorse”. If you absolutely want a copy of a book after borrowing it, then you can buy a copy of the book without guilt.

Swap with friends. If you’re friends with other bookworms, odds are they’ll have something in their collection that you don’t have. If they’re looking for new books and so are you, you can agree to swap books. You can take books from your friend’s collection in exchange for your own books that you’re willing to give away.

If your friends aren’t looking to swap, you can always borrow. I’ve discovered so many books I wouldn’t have read if my friends didn’t offer to lend them to me. Just make sure that you take care of your friends’ books while you have them (I even had a friend who’d wrap my books in plastic cover as ‘payment’ for the book loan).

Online. Websites such as Project Gutenberg, Wowio, and 2020ok have vast collections of free ebooks. You can download them and read them in your computer, PDA, or even your cellphone.

There’s also LibriVox, if audio books are more of your thing (a good way to spend your commuting time).

Other tips for frugal bookworms:

The following are general book-buying tips that don’t fall in the above categories.

Buy books from local authors/publishers. Generally, Philippine-published books are cheaper than imported counter parts. Not only are you supporting local writers and publishers, you’re getting books for a much cheaper price too.

Use the ‘balikbayan’ system. If you have relatives or friends abroad, you can ask them to buy used books for you (you’ll pay for them, of course). This is only cost effective if the book is really hard to find in the Philippines. Sometimes, you’ll find these ‘rare’ used books on sale for less than a dollar on Amazon.com (so that’s roughly P40 or less, plus shipping). Just wait for them to return to the Philippines (or wait for one of their friends) and you can get your books then. It’s amazing how many balikbayans return each year, so it’ll be relatively easy to find someone willing to carry these books home to you.

Being a bookworm can be expensive, but it doesn’t have to be. If you can enjoy books without breaking the bank, it’s likely to make for a better, guilt-free reading experience.

Do you know other ways to get free books? What’s your favorite used books store?

There’s a free personal finance ebook available at Mytwodollars.com . “Money Matters for All Ages: A Guide to Taking Control of Your Finances from Birth to Retirement” is a comprehensive collection of personal finance and frugality tips that may prove to be useful, no matter how old you are. This includes infants and young children, teenagers, college-aged people, and people in their twenties up to the sixties. This ebook also covers advice for retirees. This series was even featured on MSN Money.

Here’s a description from the website:

This e-book is the culmination of sixteen different personal finance bloggers who got together and decided to write a financial guidebook that spans an entire lifetime. From the innocent little infant to the older retiree, all the different stages of life are covered here. Whether you are in your 20’s or 30’s or any other age — you can benefit from reading this book.

I’ll be taking a quick look myself, and I might even post a review. So far, it looks like we can all learn a thing or two from this handy resource.

Click here to download the ebook. Once you’ve read it, feel free to share your comments with us.

To recap the previous post, here are the questions you need to ask yourself to determine if you have what it takes to be a millionaire (at least, according to David Bach’s Automatic Millionaire):

1) Do you pay yourself first?

2) Do you have an emergency basket of cash?

3) Do you know what your latte factor is?

Now, on to the remaining 3 questions.

4) Do you own your own home?

According to The Automatic Millionaire, statistics say that most renters have a low net worth (roughly $4000) and home owners have a higher net worth ($140,000 and up). However, this isn’t necessarily true if you have a long-term mortgage you haven’t paid off yet.

If you already own a home, you need to learn why it’s an important asset and investment. According to David Bach, You can leverage the value of your home, especially when real estate values go up. (I’ve seen this happen in Marikina, especially over the last few years.) Also, nothing compares to the sense of security you feel when you’re owning a home. Overall, David Bach says that whether you rent it out or hold on to it, a home is a good investment.

5) Do you give to charity?

Some people give for tax deductions, while others give because they’re feeling guilty. They wait until the end of the year, ask themselves how much of their money is extra, and that’s what they give. David Bach doesn’t recommend this. He suggests that we make giving automatic – just like when you automatically pay yourself part of your income.

This part is all about feeling like you’re coming from a place of abundance. Some people may have multi-millions, but if they don’t give away a single peso to anyone, for a cause larger than themselves, they probably feel cheap inside. From David Bach’s research, most multi-millionaires have one thing in common: they were giving part of their income for charitable causes, even when they weren’t wealthy yet. It’s all about the mindset rather than just the measurement of how much money you have stashed away in the bank.

I can’t say that this is something I do on a personal level (I’m not in the best financial shape), but my business partner and I have agreed that part of our company profits should go to charity. We have yet to decide the beneficiaries, but it’ll probably go to causes that we truly believe in.

6) Is your financial plan automatic?

Wherever your income goes – to the bills, savings, retirement, emergency funds, debt payment, charity – you need to make these payments automatic. Not only will it save you time, but it strengthens your commitment to distribute your income properly. It lessens the spending temptations you may encounter along the way.

Personally, my financial plan isn’t automated. The main reason for this is because I get paid in cash (via remittances, because I’m an online worker). However, several banks offer bill payments (via phone or online). So if it were convenient and possible for me to automate distributing my income, I would. It’ll certainly save me a lot of stress doing personal accounting. Also, it’ll force me to save more.

I’ve been listening to David Bach’s “The Automatic Millionaire” audio book. At the beginning of the audio book, he wants you to find out if you have what it takes to be a millionaire. You can find out if you do by answering these questions:

1) Do you pay yourself first?

David Bach recommends that as soon as you get your paycheck, you should pay yourself first. Not the government, not the electric company, YOU. He also recommends that you pay yourself at least 10% of your income.

Personally, I think it’s important to pay yourself. After all, it doesn’t make sense to work really hard and have someone else take your money.You need to make it possible that YOU receive a percentage of your income. He recommends that you set it aside on your savings or retirement account.

However, it’s not as easy as David Bach portrays it. When PLDT sends you that notice of disconnection, you can’t exactly tell them “I’m sorry, I can’t pay you now because I had to pay myself first.” It’s very, very important to pay yourself, but make sure that you can survive with what’s left. I’ve had my own experiences where I had to pass up paying myself first to pay the “Big Guys” (PLDT, Meralco) and for other necessities (food, school supplies).

2) Do you have an emergency basket of cash?

I’ve talked about emergency funds in the past (specifically, in my pinoy money talk post). David Bach recommends that you have at least 6 month’s worth of living expenses stashed away in an emergency fund. Personally, I have 3-4 months worth of living expenses in mine. My goal is to have a year’s worth of expenses.

Why is an emergency fund important? To prevent you from digging yourself into a financial hole, should emergencies arise. If you want to learn about emergency funds, click here to read the post I wrote about it.

3) Do you know what your latte factor is?

Throughout his books, David Bach often talks about the “latte factor”. This is the small amount of money that we spend regularly for little things. An example – if you buy a latte every morning before going to work. Let’s say that latte costs P150. For an entire work week of 5 days, you spend P750 on that latte. After a month, you would’ve spent P3,000 on lattes alone. You need to figure out what unnecessary regular expense accumulates to a lot over time.

For me, my latte factor is fast food chains. That’s why I have a No Fast Food Goal for the entire month. For other people, it might be their cellphone credits, idle chatting on internet cafes, etc. Figure out what your latte factor is by writing down your daily expenses as you’re paying for them. that way, nothing slips by your radar.

There are 3 more questions you need to ask yourself if you want to know whether you have what it takes to be a millionaire. Click here for part 2 of this article.