The lack of financial literacy is plaguing young Filipinos all across the country. As a result, a lot of Pinoys often fall short on cash every now and then, and for many, it’s a recurring problem.
Experiencing budget gaps is sometimes acceptable, especially in a country where contractual jobs are the norm. However, when running out of money is a constant occurrence, it could be a sign of financial irresponsibility (unless if you don’t earn a stable income). This guide aims to correct those irresponsible actions by pointing out some of the most common money mistakes that young Filipinos make and how you can avoid them.
Not getting insurance
Insurance is cheaper when you are young, so the best time to sign up for it is now. Alife insurance with investment planis a must if you want to secure your family’s future (and grow your money in the process). Health insurance is also crucial, given the fact that healthcare is very expensive in the Philippines if you don’t have coverage.
Many young Filipinos make the mistake of not getting insurance because they believe that they don’t have any use for it yet, and would rather spend the money on something else. If you have the same mindset, remember that insurance premiums get more expensive as you get older (and thus become a risky client), so it is certainly more beneficial if you get coverage while you are still young and healthy.
Getting a credit card before you’re ready
A credit card can be a dangerous piece of plastic if you don’t know how to spend responsibly. Having one is great for emergencies and increases the convenience of paying for stuff, but it is also a potential debt trap. So if you know that your spending habits often lead you to go over your budget, put off getting a credit card until you are sure you can spend responsibly.
Borrowing money from high-interest lenders
When you’re short on cash, the quickest and easiest way to get money is by borrowing from high-interest, short-term lenders. These lenders have minimal requirements and can get cash in your hand in a short amount of time, making them a saving grace for Filipinos who suddenly find themselves in a financial pinch.
Unless it is a dire emergency, avoid borrowing from high-interest lenders as much as possible. Furthermore, eliminate the need to borrow money in the first place by establishing an emergency fund and spending below your means.
Inflating your lifestyle
Your 20s are usually the decade wherein you experience a significant increase in income. Most of us enter the workforce with relatively small starting salaries, but as you climb up the ladder and make yourself a more valuable employee (or candidate, if you’re changing jobs), your income will most likely increase.
Lifestyle inflation is one of the worst financial mistakes you can make while you’re progressing in your career. Just because you’re earning more doesn’t mean you should start spending money on things you don’t need, especially if they are just a means to climb the social ladder. Instead, spend your additional income on things that matter, such as basic expenses, investments, personal development, savings, and retirement plans.
Not having a retirement plan
You may be thinking: “I’m still young. Why do I need to think about a retirement plan?” If you are in your 20s now, you have around 40 to 50 years of working years left. That’s a very long time and it’s all the more reason to start planning for retirement as early as you can. And no, your future kids don’t count as a retirement plan.
Think about how you’re going to fund your living expenses after you leave the workforce. Relying on a pension is not a good idea. You should have enough savings to support the lifestyle you want after you retire, as well as insurance coveragein case you become critically ill. The earlier you start planning for retirement, the more secure your future will be and the more your mind will feel at ease as you grow older.
Spending on impulse
Is a ‘50% off sign’ enough for you to get your wallet out? Do you have a hard time saying ‘no’ to sudden invites to get milk tea or coffee? Do you often click the ‘check out’ button on your online shopping apps before you even think about it?
Impulse spending is a habit that you need to get rid of as early as now. To do this, practice delayed gratification, wherein you wait at least a few days before deciding if you really need or want an item.
Too many Filipinos are incurring a lot of debt and failing to prepare for their future, and at such young ages. Don’t make the mistakes that are on this list–instead, work on your financial skills and increase your income in ways that you can manage.