Although there are various options for saving money and finding the best credit card for their needs, personal finance is a serious problem among Filipinos. So much so that their top concerns involve money issues, aside from fighting corruption and crime, according to a recent Pulse Asia survey.
If you’re worried as well about your financial situation, know that you can get yourself out of it. Here are three common money problems that Filipinos experience and how to address them.
Living paycheck to paycheck
Every payday, many Filipinos treat themselves to a splurge. But when come Petsa de Peligro, they skimp even on essentials like food just to get by until the next payday. And then the nasty cycle goes on.
The danger of depending solely on salary to cover all your expenses? Having no spare cash for emergencies (like an accident or illness) and falling into the debt trap.
How to break free from the paycheck-to-paycheck cycle:
- Track your expenses. List down every monthly expense on a spreadsheet. Consider downloading a free budgeting app on your smartphone, so you can manage your finances anytime and anywhere.
- Resist the temptation to overspend. Even when you get a salary increase or your 13th month pay, the economy is doing well, or you’re celebrating a special occasion, you don’t need to impress anyone with expensive gadgets or signature items.
- Learn to say “no.” If you keep on lending money to relatives and friends, your generosity won’t help them. Instead, when people borrow money from you for a reasonable purpose such as for education or starting a business, encourage them to find the best personal loan for their needs.
- Earn passive income. Start building passive income from sources such as mutual funds and stocks that allow you to make money with little investment in time and effort.
Poor savings habit
Having long-term financial security starts with saving. Unfortunately, only four in every 10 Filipinos have savings. And interestingly, nine out of 10 working Pinoys are worried about being short of money when they retire, according to a study by the Global Aging Institute and Pru Life UK.
Don’t let yourself become part of the statistics – get into the savings habit now. Your future self will thank you for it.
How to build savings for emergencies and retirement:
- Identify your financial goals. When you get the ideal job opportunity, it’s easy to forget about why you need to save and limit your spending. To motivate you to save regularly, set specific and measurable goals like saving a percentage of your salary every month.
- Make saving fun and creative. Ever heard about the 52-week money challenge? This strategy entails setting aside an amount every week for the entire year. Saving even a small amount of PHP 300 per week (PHP 42 daily) will earn you PHP 15,000 by the end of the year.
- Use the right saving formula: income – savings = expenses. Each time you receive your paycheck, deduct a portion of it (most experts recommend saving 30% of your salary) and deposit it immediately to your savings account. The remaining amount will cover your expenses.
- Start planning your retirement now. Ideally, building a retirement fund should start in your 20s, as it allows you more time to grow your savings through investments and protect your money from the effects of inflation.
Having too much debt
A 2015 World Bank survey found that 23 million adult Pinoys were short of cash for basic needs. Out of that number, a whopping 94% borrowed money from family, friends, or money lenders to cover their living expenses.
Living on borrowed money is bad for your physical and emotional well-being. So if you’re buried in debt, pay it off as soon as you can. It takes strong will, discipline, and sacrifice to eliminate debt.
How to get out of debt:
- Create an actionable debt strategy. List down all your debt and the corresponding interest rates, as well as the minimum monthly payments. Then pay off first the debt with the lowest balance or the highest interest rate.
- Automate your credit card payments. Have them automatically debited from your savings account so that you won’t miss out on paying your monthly dues.
- Look for sources of additional payments by adding income and cutting back on your expenses.
- Avoid borrowing more money. To better manage your debt, you can negotiate with your lender to lower the interest rate or to pay your balance in installments.
Both in the Philippines and abroad, real-life stories of cash-strapped Pinoys are all too common. But with financial planning and discipline, being short of money will be the least of your worries.