April 19, 2010
Financial future of a 50-year old jobless widow
Dear Mrs. Colayco,
I am in my 50s and have recently been widowed. I received a little over Php1 million in cash benefits as a result of my husband's death. We were not blessed with children and had hoped to retire together. Now I am contemplating how I can possibly start over without a steady stream of income from my husband. I have never been employed, but I do have my own home. I was hoping to have suggestions where I could put my money. Should I start a business or should I invest it or put it in the bank? I know I am too old to start doing this kind of thing but I was hoping there would be something I can do.
Thank you
—Tess
Mrs. Colayco replies:
No doubt about it, your situation is definitely a challenge. Don’t despair. There are many things you can do even if you have never been employed.
If Php1 million is the only cash you have at your age 50, you cannot afford a risky investment. Going into a real business using your Php1 million as capital is very risky especially if you are just starting and have no real experience. Investing in Government Securities or a bank time deposit is the least risky but will probably earn you only 4 to 5 per cent per year. That means you can only afford to spend Php40 to 50k per year.
You may therefore have to find a way to generate more cash to invest to provide you the regular cash that you need. Before anything else, you must do the following:
1. Make your Personal Statement of Assets and Liabilities (SAL). Make it as detailed as possible for your own enlightenment. You don’t have to be an accountant to do this and you can get instructions from the Pera Palaguin Workbook authored by Francisco J. Colayco.
2. Make a realistic Personal Income and Expense Statement (PIES). Use very strict assumptions initially sticking to only Needs, meaning the bare minimum you will need to keep on living. Knowing your strict budget, you can then compute how much you need to invest to get your regular interest income.
3. You can make another list of your Wants in your order of importance. But set this aside for the time when you are already successful in earning and investing.
Here are some thoughts you can consider after you have made your SAL:
• Examine your listed assets closely.
• List down those that you can possibly sell and the realistic amount you can get for them.
• Choose the assets that you do not really need and could consider selling. With the cash increase your investment for more interest income.
• Can you sell the house that you live in and buy a smaller house? This requires careful analysis considering taxes, commissions and moving costs.
• If your house will require repairs and maintenance that you cannot afford, you may consider selling while it still has good value.
• Can you consider renting it or taking in bedspacers? Analyze the income versus the cost of maintenance and the security aspects.
• While investing your Php1 million in a business is very risky, you can still consider small “sideline” businesses with no or only minimal investment. For example, taking orders to cook/bake your favorite recipes, babysitting, teaching, etc.
Remember though that you still have to save for your old age, especially for your medical bills, unless you have other relatives and friends who will take care of you. Even if only for 10 to 20 more years of productive life, you still need to put aside whatever you can and follow the rule: Income minus Savings equals Expenses.
You may never have a chance to use your Wants List but you may need to make that sacrifice if you wan to continue to be self-sufficient through your old age.
Knowledge is key in managing investment risks! We will be giving INVESTability: The Stock Market Seminar only to those who have undergone seminars and workshops of the Colayco Foundation. We want to give you more knowledge about investing in the stock market. This is on April 30, 2010, Friday 6:00 p.m. to 9:00 p.m. (registration starts at 5:30 p.m.) at the 2/F Philippine Stock Exchange, Tektite Bldg., Ortigas Center, Pasig City. Learning Fee is Php500. To those who have not attended previous seminars and workshops of the foundation, the learning fee is Php1,000. To reserve a slot, please call Jamir at (632) 637-3731/41. This seminar is a partnership of Colayco Foundation for Education, Inc., Philippine Stock Exchange, Businessworld, Herword.com and Kapatiran sa Kasaganaan Service & Multi-Purpose Cooperative.
Mary Anne B. Colaco is a happy wife, fulfilled mother of three beautiful ladies, helpful mother-in-law of two handsome gentlemen, doting grandmother of two adorable girls and the diligent President of Colayco Foundation for Education (CFE). For over 40 years, Mabsi, short for MAB-C, was in executive-level finance-related positions, as well as general management positions in Ayala Corporation subsidiaries (then, Pure Foods and Globe Telecom among others) and also served as a Commissioner of the Energy Regulatory Commission.
She joins her husband, author-entrepreneur Francisco J. Colayco in their common advocacy of teaching financial literacy to income-earning Filipinos. Herword.com draws from Mabsi’s wealth of life experiences in giving advice on personal money management.
If you have any questions about personal finance, e-mail feedback@herword.com.
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