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What would you do with the money if you won in a lottery? You see longer
lines of people in lotto outlets every time the prize money goes up when no one
wins in the previous draw. Have you calculated the probability of winning one of
the draws of the national lottery if ever you will buy a single ticket or
combination?
Even so, a local TV sitcom features a story which revolves around a family
that won more than 700 million in the lottery. GMA 7s Pepito Manaloto is a
situational comedy show that showcases the lives of their family members after
becoming instant millionaire.
Many Filipinos see the lottery as the ultimate shortcut to financial freedom.
They see it as a great escape from poverty. Some of us may personally know lotto
winners and how their lives have changed ever since winning the lottery. We saw
them buy expensive houses and multiple cars.
We might also have heard of a few winners who went from rags to riches
and back to rags again. We probably wondered how they squandered that huge
amount of money. Some stories tell us how lavishly they spent their winnings and
how quickly they went back to poverty.
This same story is common not just for these lotto winners but also for some
individuals who have mismanaged their finances. Their predicament could have
been avoided if they had adhered to some basic principles in personal finance
management.
This holds true for all individuals, not just for these lotto winners. Personal
finance management is everyone's concern.
Forbes Magazine listed the Philippines Richest Individuals in 2005.
Included in the top 10 are the following:
Ranking Net Worth
1. Henry Sy $14.4 B
2. John Gokongwei, Jr. $5.5 B
3. Andrew Tan $4.5 B
4. Lucio Tan $4.3 B
5. Enrique Razon, Jr. $4.1 B
6. George Ty $4 B
7. Aboitiz Family $3.6 B
8. Jaime Zobel de Ayala $3.5 B
9. David Consunji $3.2 B
10.Tony Tan Caktiong $2.2 B
Sources: Forbes.com
Looking at the list, we could assume that none of them won the lottery and
not everyone inherited their riches from their ancestors. Probably, some of them
started from scratch and worked their way up. Not everyone is expected to join
these individuals in the richest list but everyone may be guided to emulate the steps
they took to success and avoid the pitfalls of those who failed.
Objectives
1. Explain basic personal finance principles.
2. Provide examples of sound practices in earning, spending, saving,
and investing money.
Summary
Personal financial management requires an understanding of basic finance concepts
such as time value of money, risk-return trade-off, etc. It is a prerequisite that the individual
reads the fine print of investment schemes offered to him before deciding to allocate part of
his funds in these schemes.
It is also important that he must assess his ability and willingness to take on risk in
order to properly set his investment objectives. This includes evaluating his present stage in
an individual's life cycle.
With these considerations in mind, it is then up to the individual to simply decide and
put in to action his financial plan. Developing this financial plan is not exclusive to a certain
age range or financial standing. Everyone, including high school students, should simply start
now.