1Saving is URGENT, even for a CENT. Whether you have excess unused funds or little income for your daily needs, you need to save and invest for your future –be it for your dream house, dream car, capital for business, education for your kids, retirement fund, or for estate taxes that your family pays after you pass away. If beggars can theoretically save say P20 a day, or about P7,300 a year, but just don’t have the vehicle, mechanism and discipline to do so, SEAFARERS can potentially save more say P50, P100 a day, P500 or P1,000 or more a day. All the more, seamen must save for their future as their contractual jobs do not offer them long-term security of tenure.

But saving is not enough, it must be done long-term that will allow for passive income, where you let money work for you as it earns on a compounded basis, as opposed toactive income that one earns from business or employment that may totally stop anytime once you get sick or face the inevitable–death. Of course, we hope this doesn’t happen, but because death certain, one cannot ignore this probability.

2You may save for this in a bank, but no matter the amount it will not offer you protection. Moreover, keeping your money in a bank, will earn very little at the current 0.125% in average savings rate and about 0.5% for time deposits. If you’re an employee saving, for instance, only P83 a day, equivalent to P2,500 a month or P30,000 a year, you would have saved P300,000 in 10 years.  But at the savings rate of 0.125 percent (%) less withholding taxes of 20%, your P300,000 will only earn for you P2,379.60 after 10 years. At an inflation rate of say four percent (4%), which is 32 times the 0.125% bank savings rate, you lose P32 in purchasing power for every peso of investments. Thus, your P300,000 in total saving-investments will only be worth P290,284 in real terms, including already interest earnings. For your time deposits at 0.5% interest, your P300,000 less the 20% withholding tax will only earn for you a total of only P6,679.84 after 10 years. And against an inflation rate of 4%, this is only worth P294,412.

3LEARN and EARN More. In contrast, if you invest the same in so-called investment-linked products (ILP), like an Equity fund of some insurance firms, to which we are affiliated with, it will gain theoretically as much as P508,986.32 in those same 10 years given the fund’s average returns of say 17.5 percent per annum. If you continue saving the same amount, this could reach P4.26 Million in 20 years, assuming the same interest rate. In the initial years, portion of savings is spent first for insurance protection. Once insurance costs are fully covered, 100 percent of your succeeding savings will go to your investments of choice based on your risk appetite (i. e. bonds, equities or a combination of both), which in our example here is the equity fund that is invested in about 30 different blue-chip stocks.

If returns hit 17-21 % a year, which is the average the past few years, it is extremely good. But even if they plunge by a negative 90% in a worst-case scenario like a long recession from say P100 per unit share to P10 per unit, this may even be better over the long-run because if you continue saving or even investing more as you are buying more units 90% cheaper. And if prices inch up to only P20 per unit, this is a whopping gain of 100 % more than the P10 per unit of your succeeding investments. This means it really doesn’t matter whether prices are high or low when you first invest, because over the long-run, one still ends up a winner due to cost averaging. You may earn more in business, but it does not provide you any protection when your business turns bankrupt. or when you face the inevitability of Death and leave nothing behind for your family.

54Be SURE to INSURE for your FUTURE. So apart from what you gain in financial or “LIVING BENEFITS,” this kind of investment with insurance enables your family to receive insurance protection or “LIBING BENEFITS” or death benefits, which are 100 percent tax-exempt. A savings-investment plan with insurance as a bonus is the best gift you can give yourself and each of your loved ones. Always be sure as more than 1 in every 3 Filipinos die before they reach their retirement age. And if you’re a parent, the time to invest for your kids is not even now, but yesterday, mainly because the costs of. education increase 5-12 percent a year, says CHED. This means tuition fees double every 6 to 14.4 years, according to Einstein’s Rule of 72 of dividing 72 by the interest rates to get the number of years they would double. But because most parents don’t save for their kids’ education, statistics show that only 14 percent finish college.

You have the option to get an add-on health insurance, which is cheaper being a mere rider cost on your financial plan. You also need to prepare for the inevitable as World Heallth Organization 2008 statistics show that “out of 100 Filipinos aged 25 today, 36% would have long died before reaching 65 years old, while 54% would depend on their children or other people upon retirement. Owing to the higher risks they face, statistics show, SEAMEN face a higher probability of death. We just hope you won’t be one of these statistics.

67Avoid DEBT after DEATH. If you have assets worth much more than the exemption bracket of P200,000 and below, your only problem is the estate taxes your family will pay after you pass away. BIR’s 2010 “Oplan R.I.P.” is now strictly collecting estate taxes from families of the deceased. There are varying tax rates per asset brackets, but for those with total assets valued at over P10 Million, including bank accounts, stocks, bonds, house and lot, condominiums, farm property, cars, etc, the estate tax is 20 percent. Your surviving families can’t withdraw bank accounts, or sell assets, unless estate taxes are paid first, thus some are forced into DEBT after your DEATH. Thus, the importance of estate planning/ insurance, which is tax exempt. To avoid estate taxes after death, some transfer assets to their children prematurely, but still pay a donor’s tax or an inheritance tax. The best option therefore is to convert some assets into insurance investments in the names of your heirs with you still in control as payor-owner, but which allows you total tax shelter from estate taxes. Thus, you do not only conserve your assets after death, but you also generate more wealth for your family if you pass away, or enjoy the “Living Benefits” while still alive. It is ironic but true that while all the assets we treasure are insured—i.e, our bank accunts are insured by PDIC, our cars have accident or comprehensive insurance, our offices have fire insurance permits, our homes and loans have mortgage redemption insurance, etc.—, many of us who build all these assets do not have our own insurance to protect our families and loved ones. Whether you take an insurance policy or not, some one will still pay later for the costs of not having one. We hope it is YOU and not your family who will be burdened later unnecessarily. Take your pick, but you actually only have one choice—plan your life financially.
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