Insanity: doing the same thing over and over again and expecting different results. — Albert Einstein
IN one of my slack times while waiting for my wife (a good two hours’ wait) at a posh mall area in Makati, I was thinking of how to spend my time productively and, of course, with minimal expense.
I first thought of watching a movie. Price Tag: P180. This was way too much to spend for waiting. Then I considered having a coffee in one of those glorified coffee shops. Price tag: P120.
In a time of rising oil prices such as ours, these amounts could have already given me a bit more than two liters of gasoline which is about 28 kilometers on the road. So on with my quest for the holy grail of slack time.
Then an Internet shop beckoned at me. Price tag: P60 per hour. I have to burn two hours’ worth of time and it’s the same thing as having the movies or an expensive coffee.
Then, lo and behold! This bookshop loomed ahead: its doors opening like arms towards me its air-conditioning like a breath of paradise, and its books a horde of treasures waiting to be picked up by anyone and accompany his solitude like a guardian angel.
This is it. Price Tag: Free.
Into the bookstore I went and searched for my book companion. I was browsing through the second floor of the Management Section when I came across an unassumingly simple book entitled Bounce by Keith McFarland. It had a neat cover with just an image of a sphere bouncing in its crisp, white background. I was reading on when one lesson there hit me right on my face which is very true: that people experience two types of anxiety.
Anxiety 1 is “people’s fear of what might happen to them as a result of discontinuous change” or simply, the fear of “what might happen to us.” Anxiety 2 is “people’s fear of what might happen to them if they do not adapt to that change” which is “what might happen to us if we don’t change the path we are on.”
In terms of personal finance matters, I think that most of us operate with Anxiety 1. This keeps us from maturing financially, venturing out into the different financial instruments that can surely better our future. We often ask ourselves, and often peppered with doubt: What would happen to my investments? I could lose it. What would happen to my regular cash flow and expenses if I buy insurance? I might not live as comfortably and do not need it really. What is my guarantee that the company I want to put my retirement savings and educational plan would not fold, like the others? I could lose the money. What if I pursue my dream to be an entrepreneur and I fail in the process?
But we forget to ask ourselves, what might happen if we do not change? Here is where Anxiety 2 comes in. We then ask ourselves, if I continue my spending habits this way, will I achieve my dreams? If I keep all of my money in a savings account, will I keep up with the rising of prices? If I remain unprotected, with no insurance, how will my family live and get by in case something happens to me? If I do not set aside something for retirement, will my life be comfortable by that time?
All of us are up against the reality of numbers. Average inflation rate from 1995 is at 5.7 percent, having its peak at 9.3 percent for the years 1998 and 2008. At the very least, your money should be growing to beat inflation. Otherwise, you cannot afford to get that liter of gasoline anymore. The stock market does fall, but it rises even higher. For the period 1990-1997, it has risen to 528 percent; for 1997-2002, it came down to -71 percent; afterward, it had a stellar rise of 295 percent; from the market down of 2008 until now, the market has moved up more than 130 percent.
Age is a major factor. If you are in your 30s, then you have the next 30 years to prepare for retirement life when you might live for another 15 years. And money has its own time value, too. So do expenses. A P60,000 per semester college tuition now would be worth P400,000 (at a 12-percent annual increase in tuition) for those babies now who would be college students in 17 years.
These numbers are as real as the change in oil prices we see every day, or the rising prices of groceries we have during weekends. The question is, what are we doing to cope up and prepare for the future? What if we do nothing? Are we doing anything at all?
It’s high time to shift from a restrictive Anxiety 1 to the more proactive Anxiety 2 in our personal finances.
No later than now.
Rienzie P Biolena, RFP is one of the pioneering registered financial planners in the Philippines, having taken up the first RFP Program in 2005. He is a senior financial advisor in Philam Asset Management Inc., a former banker, a freelance writer and a resource speaker on personal finance. To know more about RFP program, please e-mail This e-mail address is being protected from spambots. You need JavaScript enabled to view it or visit www.rfp.ph.
