WHAT money mistakes can turn P20,000 to waste in a year?
While mistakes are normal (even so-called experts make them), it won't hurt
to know which ones you are committing and how to learn from them.
Putting your act together financially may prove especially useful when times
are tough and rocky because even little mistakes that happen again and again
can set you back thousands of pesos in a year.
Here are 10 money mistakes most of us make:
Mistake #1: Living beyond your means
Filipinos are consumed with "wanting to live a better life."
Are you trying to live "that kind of life" with income that cannot sustain
that lifestyle and ending up spending more than your monthly paycheck? Yes,
you can fund that lifestyle with debt. Don't. Spending more than you earn is
the surest way to keep that "better life" further away from reach.
Ralph Liew, chairman of the International Association of Regional Financial
Consultants (IARFC) for the Philippines, Thailand, Malaysia and India,
points out that the millionaires next door are the ones who save so much
more than they spend.
"They are the ones who are saving a lot of money," he says.
The fix: Put off expenses if the income for the month will put you in debt
or cause you not to save money for that period. Thinking twice about small
things like the cost of lunch, a frapuccino or dinner at a restaurant will
instill discipline and the habit of living within your means, which is most
valuable in fixing money mistakes.
Mistake #2: Not saving enough
You've heard of the expression "It's not what you make that matters, it's
what you keep." Saving monthly is the fundamental habit that makes any
person-- whether a Jollibee crew or a professional working in a posh office
in Makati--wealthy. Starting your first job and earning minimum wage may not
make it easy for you to save regularly, but P50 savings per week in a simple
jar near your bed is not a bad start.
As you mature, it will be easier to set aside a bigger chunk of money
because you've been used to the habit.
"I save half of my salary automatically and try not to think about it," says
Anna, a professional working in Ortigas.
The fix: Find a way to automate your savings to make it easier for you to
save. There are some banks that provide this service. Make it a goal to save
monthly, even if it's just a small part of your income--say 10 percent. Then
increase this regularly when finances allow you to squirrel away more of
your income.
Mistake #3: Being materialistic
It is common to see families in the provinces living simply with chickens
running around in the yard, pigs being raised in the backyard, malunggay and
other vegetables growing near the home. IARFC's Liew says when he saw
Filipinos living this way, he realized that living simply and not measuring
your worth by looking at what you have and what you can buy makes a person's
life more meaningful.
"Don't try to keep up with the Joneses and don't just keep looking at the
material part of life. Be frugal; don't overspend. Some of the people I see
in the provinces live simply and they are okay," says Liew.
The fix: Keep your attention focused on the things that matter most: health,
family, friends, and community. While money may make your children happy
because of the things that it buys, there are other things that will make
them equally happy, like loving attention, quality time and playing
together, among others. Sometimes, the returns from non-monetary gifts are
even higher.
Mistake #4: Giving in to greed
Billions of pesos every year are sucked into get-rich-quick schemes and
scams that easily separates a Filipino from his hard-earned money. Liew says
the reason for this is greed. Running after very high returns is a sure way
of getting scammed.
The fix: Don't be wowed by quick wealth. Lightning may strike for some
people, but the more stable and sure way to wealth is a slow accumulation of
savings and investments. How about that hot stock tip or "new investment
strategy" earning four percent in a day that made someone a millionaire?
Just walk away from it. They will never tell you just how quickly they lost
their money.
Mistake #5: Not knowing what you want
"People don't know what they want and then they end up wanting everything
they see," says Liew. One of the building blocks of wealth is to know
yourself and your limitations as well as your strengths. Husbands, wives and
children should take time to talk about financial goals (i.e. our own home
in three years, our own car in two years, studies in the United States for
Junior in 10 years, etc.).
The fix: New Year or this coming Christmas holiday is a good time to create
a financial road map for yourself or your family. Talk about what you want
and how you intend to get there. Think about how long you want to attain
your goals. Make a pact to revisit your goals every year to see how you are
doing.
Mistake #6: Failing to pay off debts
The Philippines owes P122 billion in credit card debt, P14.2 billion of
which have already fallen overdue as of June. Unfortunately, that's only a
small part of consumer debt, as loan sharks still abound. Debt is like a
Damocles sword that hangs over your head and makes you afraid to wake up in
the morning.
Interest from debt never sleeps; it doesn't take days off or holidays. They
are worms that eat voraciously at your financial dreams.
The fix: If you are thinking of borrowing money with no plan on how to repay
it, don't.
If you have debt or several debts that need to be paid, create a plan now.
Start paying the ones with the highest interest while paying off the others
with as much money as you can spare.
Then work on through that list until you have paid everything.
Mistake #7: Getting killed by advertisements
Glossy magazine inserts come in through the mail at a frenzied pace when the
holiday season draws near. There are flat-screen LCD televisions to buy and
new mobile phone models. Resist them if you don't need them or can't afford
them yet.
The fix: If you are vulnerable to advertisements, make the remote your best
friend and speed up your channel surfing. Don't even start flipping that
glossy magazine insert. Avoiding advertisements or keeping yourself
disciplined enough to enjoy them from a distance should help you keep your
finances secure this holiday season.
Mistake #8: Not having a plan
"One of our most common mistakes is not having a financial plan, not
following up on the plan and not implementing the plan," says Liew. He notes
that many people have New Year's resolutions- -for example, to quit
smoking--but find themselves still doing so when the next New Year's eve
arrives.
The fix: Give yourself the gift of your very own financial plan this
Christmas season. You can talk to a financial planner to help you out or do
it yourself.
There are many resources on the Internet to help you create a plan that will
save you from money mistakes and point you to the right direction when it
comes to understanding your money personality, how to save and invest, how
to prepare to retire wealthy and prepare to be pampered in your golden
years.
One of these is MoneySmarts
, the
personal finance blog of the INQUIRER.net.
Mistake #9: Not having financial education
People think financial education is only for those working in banks, mutual
funds or in the financial services industry.
Granted, mathematics or statistics are not easy subjects for all, but
knowing financial principles is useful to everyone.
Liew says that even children should have subjects on financial management.
The fix: Don't be shy. Ask among your friends if they know something about
taking care of finances. Invest in books and take classes. Personal finance
is a growing topic in local media.
Mistake #10: Procrastinating
Time doesn't stand still, not even for the Pope.
The best time to start making money moves that will save you from a life of
want and need is now, not tomorrow or next week.
The best time to start a budget is now. The best time to save for retirement
is now.
The fix: Stop reading and start doing.
