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27 January 2022
The Value of Insurance

I joined Etiqa Philippines in 2019, an insurance company, after almost a decade in banking. I find this career shift ironic considering that I wasn’t a believer of insurance which was further aggravated by an unfortunate incident that happened in 2066.

I accompanied my father to visit an insurance firm supposedly to receive a claim for a memorial plan of my grandmother. It turned out that the visit was just a bait-and-switch ploy by the insurance agents to lure us to their office to sell additional insurance products – a modus operandi capitalizing on the emotional vulnerability of losing a loved one. This experience turned me from a non-believer to a detractor.

But through the years as I gained broader understanding of the value of financial planning, I also started to appreciate the value of insurance.

I am here to share with you three realizations that transformed me from being a detractor into a believer, an advocate even, on the value of insurance:

Getting an insurance coverage magnifies financial capabilities

Based on the 2019 Financial Inclusion survey of Bangko Sentral ng Pilipinas, 55 million Filipino adults or 77% of the total adult population do not have insurance citing lack of money as primary reason. The irony here is that insurance actually functions as leverage that can magnify the capabilities of limited funds. With insurance, we can turn a small amount of money, the premiums, into new sources of funds in the future in cases of unfortunate events affecting an insured.

Engaging an insurance firm is akin to outsourcing

Purchasing insurance is like taking a cab when commuting. Instead of spending enormous amounts of time and energy walking from one place to the other, we pay a small amount so that a capable public carrier could bring us to where we want to go, with lesser time and effort from our part. Insurance works in a similar way - paying a premium to an insurance company protects you from potentially incurring large financial losses in the future -- in essence you are outsourcing personal risk management!

Insurance affords peace of mind

We all have a lot of things to worry about in life. Wouldn’t it be great if there’s a way to alleviate some of our mental burden? There is! For a small premium fee, our insurance provider allows us peace of mind by extending financial buffer for risks which may result to major financial losses. Our future self will definitely thank our present self for this.

In selecting an insurance partner, there are key factors to look into. Availability of products that fit your needs, financial resiliency especially during a pandemic, plus its network of clients and partners. And I am proud to say that Etiqa Philippines has all these attributes,and more!

To learn more about Etiqa Philippines and its unified insurance offerings, please visit our website at www.etiqa.com.ph, like our Facebook page and join us as we continue to turn more Filipinos in to believers in the value of insurance.

15 January 2022
Concept of time value of money

Imagine that you are given two options to choose from: option 1 is to get your one month’s worth of salary or business revenue now, while option 2 is the same as option except you get the money one month from now. Which one would you choose?

The most common expected response would be option 1. Why wait one month for the same amount of money when I can choose to receive it right now? Option 2 has no apparent advantage over option 1.

Now, let’s reoffer the two options again, but with a slight modification: option 1 remains the same, with you getting one month’s worth of salary or business revenue immediately today, while for option 2, you’ll still get the one month’s worth of money one month from now, PLUS 25%. Which option would you select now?

Adding that 25% in option 2 changes the considerations, and makes waiting for an additional one month a little bit more attractive and sensible than option 1. The pause you took to reconsider the modified option 2 in the reoffer explains pretty much what the concept of time value of money is.

Time value of money simply describes that a particular option’s monetary value changes depending on the timing of its cash flows. The earlier your money is returned from an investment, the higher its perceived value to you now, all other things held constant. While opportunity cost defines the monetary value given up because you chose one option over the other, time value of money defines the monetary effect of the cash flow timing of such decisions.

Waiting to get your money in the future rather than now also exposes you to financial risks, such as the risk of reduced value due to inflation or market fluctuations, and the risk of not getting your money at all due to unfulfilled obligations or worthlessness due to bankruptcy.

These financial risks you assume in exchange for tying down your money in investments should be compensated by the income you expect from such financial decisions, such as interest on fixed income or capital gains on investments in listed shares of stocks.

Next time you’re faced with an investment decision, don’t forget to factor in the time value of money effect of your options and choices.

02 June 2021
Financial wellness in times of a pandemic

By James Patrick Q. Bonus

As of June 2, 2021, the Philippines has recorded more than 1.24 million confirmed cases of Filipinos positive for COVID-19, 52,000 of which are still considered active. These numbers remind us that while the quarantine measures implemented since last year have largely been helpful in preventing the rapid spread of the virus, all of us should all continue to practice protective measures, such as proper wearing of face masks and shields, frequent hand washing and disinfecting of belongings, and maintaining safe social distance, among others, as our part in controlling the pandemic.

We agree that these measures are important to protect our physical health. But what about our financial wellness? What can we do for us to be healthy financially in this time of a pandemic?

We can find the answers from the same measures provided by health officials, but with a twist: Similar to wearing masks, we should protect ourselves, our loved ones, and our assets against financial risk. We should simplify our lifestyle to reduce excesses that drain our funds, the same way that hand washing and sanitizing clears out harmful bacteria and virus from our hands and belongings. And much like social distancing, we should invest to distance ourselves from our current financial standing towards a better tomorrow.

Protect yourself

We can protect ourselves, our loved ones and our valued assets in two ways: by building up our savings and through obtaining insurance.

In order for us to build our savings, we must first focus on maintaining regular net positive cash flows, be it coming from our salaries or from our businesses. This requires prudent re-evaluation and rationalization of our expenditures, identifying which ones are truly essential, and discontinuing the avoidable expenses. Cash savings generated through this financial pruning exercise, coupled with a pursuit to maximize earnings should allow us to set aside funds as a buffer for future situations such as unbudgeted purchases or disruption in cash inflows.

Ideally, our savings buffer should be at least three to six months’ worth of essential expenses.

Obtaining insurance coverage for ourselves and our loved ones’ lives and health, as well as on our properties, is like entering into outsourcing agreements. For a relatively small fee, we get to outsource to our trusted insurance provider our worries and anxieties about all financial risks and perils on our lives and assets, freeing up more of our energy and focus and unburdening our minds so we can focus on what matters most in our day-to-day lives.

Having insurance is also like having leverage, where we get to do more with our assets by worrying less, because we know our trusted insurance company will cover for us in times of need when something untoward happens.

Simplify your lifestyle

The ongoing pandemic and the resulting quarantine measure has forced most of us to remain at home, which gives us an opportunity to re-evaluate our lifestyles and focus on what is truly essential.

Marie Kondo said in her book The Life-Changing Magic of Tidying Up, “…discard everything that does not spark joy.” We can apply a modified version of her advice to our financial well-being, discarding everything that does not add value, like items that we deem as non-essential, from our spending and lifestyle habits.

For those struggling with a lifestyle built on debt, we can start by admitting to ourselves our current situation, make a full accounting of our financial obligations and proceed to pay down systemically, gaining payment momentum along the way, with a goal of further reducing, if not outright eliminating, debt from our lives.

Invest for tomorrow

Investing has always been critical in ensuring financial well-being, with or without an ongoing pandemic. Decisions to invest now in ourselves and in financial assets allow our future selves better choices and expanded financial capabilities.

Investing in ourselves include dedicating more time, effort, and money towards self-learning and development, such as attending webinars, purchasing and reading books, or even joining and participating in cause-oriented movements. Likewise, investing in activities that can generate lifelong learning and valuable experiences, such as actively contributing and participating in professional associations, or setting aside time and energy on side projects and gigs, can prove valuable in building our intellectual and experiential capital that we can bank on for higher cash flows in the future.

The pandemic has depressed asset prices in financial instruments such as publicly traded stocks and mutual funds. Now is a great time to evaluate and invest your available funds through bargain hunting undervalued stocks with significant upside potential that can be realized once the pandemic is over.

We continue to wish everyone health and safety in these trying times. Please remember to always wear face marks and shields, to frequently wash your hands, to sanitize your belongings, and to keep a safe distance from others. Protect yourself, your loved ones, and your assets through savings and insurance. Simplify your lifestyle by reducing non-essential expenditures and reducing reliance on debt, and invest for a better tomorrow, in financial assets and most importantly, in yourself.

James Patrick “Japs” Q. Bonus is a Executive Vice President and the Chief Financial Officer of Etiqa Philippines.

03 November 2020
Questions to Ask When Investing

By James Patrick Q. Bonus

I often get asked by friends and acquaintances about investing: ’Where should I invest?’, ’How much should I put in?’, ’What’s the perfect timing to enter the financial market?’, and so on. You may have the same queries or concerns when it comes to financial decisions, particularly on investments.

In response, I always ask them to answer the following four questions to serve as a guide in addressing their most pressing financial investment concerns.

What is your overall objective?

Is it to build up emergency funds? Money to spend for travel? In preparation for your child’s education? Or just to earn income on excess funds? Whatever it is that motivates you to explore investing, it is critical to adequately and clearly establish your objectives and goals first in investing. Your objectives will guide you in answering the rest of the questions. Determining your objectives also helps you define the amount of money you’ll need to invest now or in the future, and will also provide you with the parameters for making future decisions relating to your investment, such as investment withdrawals or sales of invested assets.

What is your time horizon?

How long can you wait until you get your money back? If your objective is to fund a future activity or event, such as a wedding ceremony, then the timing of your investment’s maturity must be factored in. Long-term plans such as setting up a child’s college tuition fund will dictate not just the amount of funds or type of investment you’ll need to proceed, but also the timing and frequency of your investments to achieve your defined goal.

What is your risk appetite?

How much money are you willing to lose? If your objective is to preserve capital while earning income, then investing in assets that are volatile in nature may not be the best investment outlet for you. I remember back in 2011 when I was quite anxious because our money that was earmarked for our wedding was invested in an equity fund, which saw its value fluctuate wildly due to the market’s reaction to the credit rating downgrade of the US government after a failed vote on budget deficit reduction plan. That was such as stressful moment! Knowing how much money you’re willing and ready to lose will help you determine which investment fits your financial goals.

What’s your investment aptitude?

How familiar are you with the different types of investment outlets? Did you know that certain insurance products also have investment features that can address your needs? Who can help you further improve your financial quotient? It is incumbent upon us to improve our knowledge in order to make better decisions, whether it be investment-related or not. Being educated in all things financial might be cumbersome or daunting for some, but learning the basics, such as the time value of money and risk management, are critical before making any investment decision. We should not select investment options where we currently do not have a full understanding or appreciation of its attendant risks and features. Having the right information protects us from being taken advantage of by scammers and unscrupulous individuals.

No share of stock, bond or other investment medium is perfect as an investment to anyone. But determining your objectives, defining your time horizon, establishing your risk appetite and gauging your investment acumen will help find the most appropriate investment solution for you.

James Patrick "Japs" Q. Bonus is a Senior Vice President and the Chief Financial Officer of Etiqa Philippines.

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