A Story of a Tailor

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I had my pants repaired a couple of days ago and this morning I went to pick it up. While I was there, I decided to talk to the tailor. Knowing that he does not own the place, I asked him how he makes money. He said that the owner of the place has a store nearby and uses the space where the tailor works as a warehouse. The owner decided to make a small space in front of this warehouse as a small business. The owner bought 3 sewing machines and set-up a small tailoring/alteration business. This tailor said that he started out when he was still a young man and had already moved from place to place. This time, he landed a jackpot. This store never runs out of customers. In fact, work has been piling up and he even got his friend to work there.

Sok, I asked him how he makes his money. He said that he just provides labor and he gets a commission on that. For every P50 pesos he charges, the customer, he pockets P20. Not bad for providing labor only and work keeps piling in. They never run out of customers. However, I asked him why he does not work on Sundays while his other co-tailors keep working. He told me that a kind man has given him a sewing machine and he works at home during Sundays. He told me that he does this despite that his home business makes lesser money. He does this so he has an alternative. He said that if this store he is working at right now closes down, he still has a fallback plan. He will not starve. He said that nothing is forever, and from the experiences he gained from his earlier years, he needed a fallback if something goes wrong.

Wow, was I amazed at his answer. I know a lot of Filipinos who work during the week and spend their money over the weekend drinking and having fun. Start working again on Monday and the cycle repeats. Its like a rat race. I really admire people like this who have plans for their future.

How about you? Do you have a fallback plan?

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About Dodgy Online Investments “PONZI SCHEMES”

I have been recently asked by a friend about putting money in online business investments that have very good yields. Every P600 investment will give you P1000 back in 3 months. Thats 67% in 3 months. Wow. What kind of business in this world will give 67%  return in 3 months? If the business is paying you back 67%, they must be earning way more than that.

You can see lots of these in facebook, etc.

The questions I asked my friend were:

Q1) Who referred you to this? – A. My friend who has already gotten a return from his investment 3 months ago.

Q2) Do you know who owns the business?  A. NO

Q3) Do you know what kind of business is behind this investment scheme, how does this investment make money? A. NO, but I think it is online lending or something like that.

Q4) Do you know what the original business name is registered as? A. Online cellphone loading business. hahaha

Q5) Why do you want to invest in these kinds of things? A. It has a very high return and my friend already got paid.

Wow, I told her, please think twice before going into these kinds of investments. Research out the company what kind of business model they have. For all you know, these could be scams. This looks like a classic Ponzi Scheme where the scammer has an initial amount of money and invites a few of his friends to invest. He pays out his friends using his own money and therefore builds a good reputation. His friends spread the news to more friends, and more friends, invest. As the cycle continues, old investors are paid out with new investors money, until such time the cycle is no longer able to sustain itself, or the scammer cannot increase the number of investors. Then the scheme collapses and the investors cannot get their money back. Watch the video below from youtube to understand what a Ponzi Scheme is.

So friends, be wise and don’t let these people fool you.

 

 

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Can You Really Afford Getting a Car?

Have you ever met people who took out car loans but eventually had the bank repossess them? Look in the banks, there are listings filled with lots of repossessed vehicles. The main reason why people get their cars repossessed is not making the regular amortization payments. Some may have been laid off from work and don’t have money to pay, and some may not have done proper planning with the amortization exceeding their capacity to pay.

repossessed-car

So why do these people fail in planning? Simply because they did not have the foresight to include the other related cost of owning a car. They just simply count how much money the have left at the end of each month and use that to compute for the amortization they can pay. They simply forgot to include the following items:

  • Fuel Cost
  • Maintenance Cost – monthly checks, change oils, repairs, etc.
  • Cost of parking – when you go to a mall or your parking space at home
  • Insurance cost – you need to insure your car in case of accidents you will be covered
  • Tires, batteries, and accessories – you eventually need them when they wear out.
  • Annual car registration
  • Toll fees
  • More travel plans as you are now more mobile.
  • Family emergency forcing them to use the money set aside for car loan payments.

So some may now ask what is the rule of thumb of how much car loan amortization one capable of paying? I would say, roughly two thirds of what you have set aside for a car loan. For example, you are able to set aside P15,000.00 a month for the payments, get a car that has a payment of P10,000 a month and use the other P5000 for fuel, maintenance, etc. Set aside more if you are buying a second hand car as the maintenance may be higher.

And lastly, don’t forget that banks only allow you to loan up to 60% or 70% of the market value of the car. So you need to cough up the 30-40% up front.

Happy car hunting.

Photo from: http://www.thatericalper.com/2012/02/26/what-do-you-do-when-you-get-your-car-repossessed-with-a-half-tank-still-left-in-it-why-you-sue-for-5-million-of-course/

 

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