Sharing my last column for the Business Mirror. It has been a great 3+ year writing for the RFP Personal Finance Column but its time to let the younger and more talented writers take the helm. When we step aside, the next generation levels up and takes over!

Randell T.

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I AM pondering a topic to write as this is the last time I will be writing in this column to give way to newer and more talented personal finance writers; then I realize that I should write on something close to my heart, family finance. The issue of family finance is always an interesting one to discuss. In all my engagements, I get the most fun discussing issues that revolve around family finance. Given a choice, I’d prefer discussing and writing about family finance issues as against the stock market, macroeconomics, fixed income securities and the like.

The topic on family vacations is always a tricky one to discuss. You will see that personal finance books and speakers/writers look at family vacation expenses with much disdain and its budget would be one of the first things that get axed whenever one is in a difficult financial situation. There are many families that do spend a big part of their budgets on vacations and when left unchecked, it can wreak havoc on one’s finances. I once counseled a couple who wanted to increase their savings and investment fund but found it difficult considering both had substantial incomes. Upon closely looking at their cash flow, I immediately saw the reason for the shortfall—very expensive family vacations. In such extreme cases, I do agree that family vacations should be placed under scrutiny.

However, worldly pressures always prevail upon our senses and we often equate cost with quality and we find ourselves stressed for taking family vacations and therefore have a negative feeling towards it. It is sad when we would look at family vacations as obligatory activities rather than opportunities to further strengthen the bonds of the family.

In reality, vacations are perfect opportunities for parents to really bond with their children, and spouse to spouse and sibling to sibling. My fondest memories growing up are those trips I took with my family. My wife, kids and I often reminisce about our vacations. Family vacations are actually excellent investments we make. These are opportune moments to better learn about each other and create memories that will forever be etched in our hearts. We should invest on memories.

Are family vacations an excuse to be financially irresponsible? Nope. Cost does not equate to quality. You can be in a posh island resort or in a nice city in Europe but it doesn’t mean that you are forging bonds with your children if you are distant, pre-occupied and refuse to focus on your family. Likewise, you can just be in the outskirts of Manila swimming in a small pool and devoid of luxuries but you can have a grand time because you know what your priorities are. Here’s a tip: prepare, plan and save for family vacations properly. Be prudent, watch out for promos or try to scour for friends or family who can help you get good deals or even use their facilities for free.

My family and I just spent five glorious days in Palawan, something we never thought we can experience, let alone afford (an unbelievable blessing from the Lord). Thanks to airline promos, I was able to get a booking late last year for a flight for the whole family and spent a fraction of what you would normally spend on fares. I really love how Cebu Pacific comes out with promos; you just need to plan ahead of time and be quick in getting a booking. We were also blessed to get a very good deal for our accommodations at the beautiful Marina Gardens (www.mgelnido.com) in El Nido, Palawan. The owners were very accommodating and very compassionate towards families wanting to spend time together that they gave us really good deals and even helped arrange our transfers and a breath-taking island hopping around El Nido.

When I was updating my Twitter that we were in El Nido, people were amazed since they always associate El Nido as posh and expensive—not so. There are two resorts in El Nido that are very exclusive and very expensive but the other resorts are really inexpensive despite being just as nice, like Marina Gardens.

Yes, our recent family vacation cost a bit more than our usual ones but my wife and I believe in putting money where it counts most, into our relationships. Proper planning, bargain-hunting and creativity allowed us to have a great time and yet not break our piggy banks.

Here’s a thought, spending some money to have better relations with my family will save me more money in the end – we probably will not have to buy the affection of our kids when they are older by buying them more expensive items just to please them. We spend money where it counts, and when it counts the most.

This is Randell Tiongson, signing off.

Appeared at the Business Mirror, 02.08.2010

You often hear the word “diversification” when investments are discussed. Diversification is important; in fact, it is considered one of the most effective risk-management tools, minimizing investment losses.

What does Investopedia (a favorite online site for investment stuff) say about diversification?

“A risk-management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio.

“Diversification strives to smooth out unsystematic risk events in a portfolio so that the positive performance of some investments will neutralize the negative performance of others. Therefore, the benefits of diversification will hold only if the securities in the portfolio are not perfectly correlated.”

Diversification is often misunderstood and its execution has always been a mystery to many. To many of us, diversification is just putting your money in different banks or buying different pieces of property in different areas. However, diversification is much more than that and here are some ways to diversify:

1)                  By asset class—Cash or near cash (savings or checking accounts, time deposits, treasury bills or money market accounts); fixed income (government securities, corporate bonds); equities (stocks); real estate; collectibles (paintings, jewelry, etc.); enterprise (business)

2)                  By time frame—short term (about a year); medium term (up to about five to seven years); long term (over seven years)

3)                  By risk—conservative, moderate, high or speculative

4)                  By liquidity—highly liquid vs. nonliquid

Above are just a few ways to consider classifying your assets/investments regarding diversification. Here are some diversification tips: vary your asset classes; combine short-, medium- and long-term investments; combine highly liquid and nonliquid assets.

By practicing diversification, you are also practicing sound risk management. A properly constructed diversification strategy will minimize the risks of your investments and, at the same time, give you better yields as compared with taking an ultra-conservative position. With a good diversified portfolio, the risk of totally wiping out your wealth is highly unlikely, but at the same time, allow you to experience better growth which will be more than inflation.

But diversification also has its downside. Sometimes, a portfolio that is too diversified can also prevent you from earning properly, as the volatility of many of the players in your portfolio can cancel each other. However, having a very risk-averse position can be just as dangerous as taking a risky option, as inflation can erode the value of your wealth. The more prudent option then would be to learn diversification.

Do not be too afraid to try out diversification, it is not rocket science. Come up with a diversified program that is consistent with your investment objective, risk tolerance and time frame and you are on the road to achieving financial peace.

I really like the way the Bible talks about diversification. Yes, the Bible is a good source of investment wisdom and here’s proof: “But divide your investments among many places, for you do not know what risks might lie ahead.”—Ecclesiastes 11:2 (New Living Translation)

Since the Bible advocates diversification, I am assured that it’s a great idea.