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
end 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
“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
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 separate 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 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
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
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 (http://blogs.inquirer.net/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.
Source: Philippine Daily Inquirer, December 1, 2008
issue by Ma. Salve Duplito, Inquirer.net
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