MANILA, Philippines – When it comes to managing your own money, there’s a lot of good advice out there that we intuitively know to be true – but it’s all so much easier said than done.
We know we should spend less time and money on frivolous things, and try to move towards meaningful long-term investments, where the value is likely to increase in the future – but that’s not how it usually turns out, right?
Self-awareness is key to understanding our money habits. Here are a few things to consider as you re-evaluate yourself.
1. Are you well-informed?
You just graduated from college and started earning your first income. What do you do with it?
Not being sure about the concepts, being unfamiliar with money terms, even some bad advice and negative influences may lead to difficult scenarios, like getting a credit card you can’t afford, or drowning in unnecessary debt along the way. Yikes!
It seems that falling short on knowledge can cause you to become short on cash, as well.
Action Plan: Don’t do anything drastic. Start inching your way towards financial freedom by investing in knowledge first. Read personal finance books first, like Bo Sanchez’s 8 Secrets of the Truly Rich –a light read with basic financial concepts presented through meaningful anecdotes and simple analogies. There’s also Alvin Tabañag’s 12 Steps to Build Wealth On Any Income, a step-by-step guidebook on everything you’ve ever wanted to know about money management.
Browse financial websites, like Pinoy Money Talk. There are many resources available for free online – just look for it.
You can even attend finance-centered conferences where you can learn how to set up your own saving, investing and spending plan or innovative new ways to save your money.
2. Do you find yourself spending mindlessly or caring less about your money?
‘Who cares?’ shouldn’t be your mantra. It’s your money, you should care. You can only depend on yourself to provide for you when you suddenly lose your job or when you land in the hospital.
So what if you’re the breadwinner of your family and you still have no life insurance? Who cares if your dependents are left to fend for themselves when you’re suddenly called by God? You should. You know what they say: Life insurance isn’t for the dying – it’s for loved ones who have to keep living after you’re gone.
Action Plan: Awaken the sense of urgency within you! Have an emergency fund. Put it in a liquid account that you can access anytime, just in case.
Deaths occur all the time, too. If you have dependents such as your aging parents, your young siblings or your children, get a life insurance policy with any of the top insurance companies in the Philippines.
Choose to make a powerful difference in your own life.
3. How much do you depend on others to bail you out of trouble?
It’s normal to seek help when times get tough. Sometimes, we may ask help from our parents when things spin out of control.
Asking help from others when facing the unfamiliar is normal.
However, when you depend on your parents to still give you money for your restaurant dates, for your nail polish collection, or for your basketball tickets, then you’ve got a problem right there, my friend.
Action Plan: Be accountable for the decisions that you make. At this age, you’re a young adult – not a small child. It’s time to stop depending on others and start being responsible for the choices we make in life.
The first step to responsibility? Try any one of these simple exercises:
For two months, try writing down your daily expenses. Get a pen and paper or use MS Excel. There, list the items that you bought and the amount that you spent.
For two months, try saving 5% (start with only 5%!) of your income. During these two months, don’t borrow money from anyone.
For two months, try purchasing by only using your cold, hard cash. Don’t use your shiny credit card. In fact, leave it at home when you’re going out.
Observe the results, get the momentum going, and build from there.
4. Are you active or passive when it comes to monitoring your spending?
Inaction is often a result of the phenomenon that we call “analysis paralysis.” When you get caught up in too much information, making a decision to actually do something can be difficult.
You know the formula for saving money but you don’t do it. Subtracting your savings and investments from your income is easy on paper, but committing to it and implementing it in real life takes a whole lot of effort.
Making a budget is a piece of cake. Sticking to it, on the other hand, is not.
Action Plan: All the personal finance knowledge in the world is good, but you need action, too. After reading this article, are you just going to say “Nice,” and go about your life as usual?
The difference between a financial winner and a financial loser isn’t the number of books they read. It’s the amount of money they set aside and the effort that they put in towards managing their money.
After reading this article, go ahead and schedule a free meet-up with a finance expert you trust. Simply visit the website of the company of your preference and fill out the contact form. If you’re proactive enough, you can even contact the advisor of your choice and ask them out for a cup of coffee. Just don’t wait around. Do something.
Don’t find time for it – time isn’t missing! Make the time to do so.
5. Have you been consistent with your action plan to protect your money?
You’ve started tracking your expenses but you gave up after two weeks because it felt like it was such a stressful chore. If that sounds like something you’re going through, consider the tracking tools that you’re using. You can either use a more convenient mobile app, a beginner’s budget template or a simple pen-and-paper combo to monitor them. Experiment with what works for you.
Why is it that it’s always easy and exciting to start something, but when the finish line is still nowhere in sight, we tend to give up?
Action Plan: To maintain consistency, actions must turn into habits. Commit to doing a small action repeatedly.
You shouldn’t do something just because it’s the trend right now.
You do something consistently because it’s easy, effortless and empowering for you.
For example, for you to make saving into a consistent habit, try setting a fixed amount that you can manage. In this blog post, P150 a week is the starting figure. (There are no hard rules about this. Feel free to tweak this figure to an amount that works for you.
Remember, he who plans (and acts!) succeeds.
You don’t start managing your money when you’re already financially free.
You’re financially free because you already started managing your money. – Rappler.com
Lianne Martha Maiquez Laroya writes to empower you to take charge of your finances. As a financial advisor, Lianne is also the founder of The Wise Living, a website dedicated on money management and early investing for 20-somethings. She is the author of OMG! Where Did Your Sweldo Go? Ask her your finance-related questions via Twitter or via email at firstname.lastname@example.org.
Piggy bank photo from Shutterstock