Money is dumb | Inquirer Business
Money Matters

Money is dumb

/ 05:23 PM January 27, 2015

QUESTION: I am a professional trying to make an honest living. How can I increase my income when it is just me working for myself?—asked at “Ask a Friend, Ask Efren” free service at
Answer: Just by your question I can already tell that you are feeling the dangers of having just one source of income (i.e. your own efforts). Like flying an airplane, you will be climbing very slowly and seemingly taking forever to reach cruising altitude if you rely just on yourself to earn.
In life, we all need to practice creating, growing and preserving (CGP) wealth to reach cruising altitude. At the center of it all is not money but you and your goals. Remember, money is but a tool. In itself, money is dumb. Just like all tools, money is meant to be used.
Contrary to the saying, money cannot be made to work for you because it does not have a life of its own. But when used properly, money can help you diversify your sources of income.
You are currently stuck at creating wealth. That wealth is probably consumed in a year, which brings you back to square one at the start of the following year. What you can could do is reinvest a portion of your earnings in your own business. This may mean getting other professionals to work with you or making your staff do routine tasks while you perform high value-added ones.
Two things are required: you must lower your consumption so that you will be able to set aside money for reinvestment, and you must do the math to see if reinvesting in your business will bring you your desired growth in earnings. If all goes well, you will see your one-man practice morphs into an operation producing a cacophony similar to that in a busy manufacturing plant.
Philippine law requires companies to provide retirement pay for their employees. Since you and your business are one, you may not pay yourself any retirement pay. But if you opt not to, you will not graduate from growing wealth to preserving wealth.
Based on the sentiments of many, people generally do not want to stop working in retirement. They just want to take it slow. And you will, too.
Making your business a true going concern, one that would survive even without you, facilitates your retirement. If your business has become profitable and large enough, perhaps you can sell it lock, stock and barrel and use the proceeds to live (and work in) the last one-third of your life.
You may also opt to hold on to your business, collect retirement pay and dividends, and just pass your business on to the next generation of managers. For this to happen, you must also take into consideration business succession and the possibility that your successors may not be your children.

Under Philippine law, retirement pay is equal to “one-half month salary for every year of service, which shall mean 15 days, plus one-twelfth of the 13th month pay and the cash equivalent of not more than five days of service incentive leaves.” Don’t forget that your employees must also receive the same benefits.
In collecting retirement pay from your business, your business may shell out the cash on the day you actually retire, which is called pay as you go. You may opt to create a fund that when invested could lower the actual cash your business shells out for your own retirement. And where do you invest this fund? You may want to invest in a combination of financial securities such as money market instruments, bonds and stocks.
Of course, you can also forget about the complications of reinvesting in your business to expand its earnings and go straight to investing in a combination of financial securities to diversify your sources of income. But the rules remain the same: lower your consumption so you can set aside money for reinvestment, and do the math to see if investing in particular securities will bring your desired growth in earnings.
Remember that money is dumb. But with your intelligence, you can use money to engage in the growing and preserving phases of CGP wealth.
To know more about investing in financial securities or a business, visit There is a wealth of free tools to allow you to hit the ground running with financial planning. You may also want to attend our Financial Planners’ training in the cities of Mandaluyong, Baguio and Davao, the details for which can be found in our website.
(Efren Ll. Cruz is a registered financial planner of RFP Philippines, personal finance coach, seasoned investment adviser and author. Questions about the article may be sent by SMS to 0917-5050709 or e-mailed to To learn more about the RFP program, attend a free orientation on Feb. 5, 2015, 7 p.m. at the PSE Center. E-mail or text <name><e-mail><RFP> at 0917-3464126 to register.)



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