Money Matters: How Financially Savvy Are You?

Image: Sujin Jetkasettakorn / freedigitalphotos.net

Money, money, money, why do we have to talk about money? We often hear money cannot buy happiness. There's a degree of truthfulness to it. But whether we admit it or not, having money (or lack of it) has a big effect on a person’s happiness. Having money is connected to our dreams and passions. We all want to build our dream house, spend vacations around the world, help the less fortunate people to name a few. But, how can we reach our dreams if we don’t have money? It's important especially for women to be financially knowledgeable these days. Single women should be smart about handling money because gone are the days when women will just rely on their future husbands to provide for the family. That should be the case unless your main goal in life is to marry what we commonly refer to as the 4M kind of guy – Matandang Mayamang Madaling Mamatay. :)

The question now is, how financially savvy are you? Normally, we acquire our spending and money habits from our parents or anyone we grew up with. The people around us highly influence us on how we handle our money. The issue is that they don’t really teach money matters in school. So whether your parents' financial habits are right or wrong, it is highly likely you'll adopt those which you have been exposed to. Due to lack of financial literacy, a lot of people have wrong spending habits or acquired misconceptions on money matters.

If you think you have financial issues or you don’t know if you’re spending or investing your money the right way, here are a few tips on gaining financial literacy.

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List where all your money go. 

After every payday, you wonder where your money went. Sometimes it seems that your salary is not enough for all the expenses you have - rent, phone bill, groceries, electric bill, and of course, the occasional nights out, coffee breaks, and that cute pair of shoes you bought on impulse. Have an expenses journal. Break down all expenses and write everything down! It's important to know where all your cash went so you can identify a pattern and assess if you are spending wisely or not. If not then, proceed to the next tip. 

Image: Stuart Miles / freedigitalphotos.net

Modify your spending habits. 

There are many ways on how to cut down expenses without the feeling of depriving yourself. For example, do you really need to buy that branded coffee everyday which costs P100+ per cup? Can't the regular 3-in-1 coffee mix in your office pantry suffice your need for a caffeine kick? When having nights out, opt for happy hours to get discounted rates. Read articles and features on online magazines instead of buying hard copies. Look for carpool buddies to save on gas. Bring home cooked lunch instead of eating out every day. Buy items on sites that offer discount vouchers (eg. cashcash, metrodeal). These may seem small but when you add all these little efforts, you'll realize you've saved a lot each month.

Image: Grant Cochrane / freedigitalphotos.net

Save 20% of your salary every month. 

Set aside at least 20% of your income as your savings fund or invest it. It's important to save for the future. Open an “untouchable” savings bank account. Better yet, invest it in mutual funds, stocks or other money vehicles and watch your money grow. Time is money! It's better to start early on for your retirement. Below is a video teaching us the benefits of investing early on in life. 

Live within your means. 

Now you ask, with all the expenses how can you save 20% of your salary? The answer is simple: live within (or below!) your means. Spend only what is left after saving 20% of your income. Want is different from need. When you are tempted to buy that dress or new pair of shoes, assess if you really need it now or you just want it. It’s all about prioritizing. Try to evade shopping temptations but if you can’t avoid the malls, leave your credit card at home. Don’t withdraw your salary in full, get only the amount you need weekly. 

Image: Grant Cochrane / freedigitalphotos.net

Write your money and savings goal and check it regularly. 

How much money do you want to earn monthly? How much money do you want to have 5 years from now? 10 years from now? It helps to have a financial goal. Write it down and check what ways you are doing to reach that goal. It can also help if you can write a short-tem and long-term target. An example of a short-term goal is saving for a trip abroad. Write how much money will you need for that vacation and where can you get the extra money. A long-term goal can be having a retirement fund. Estimate how much money you think you will you need when you grow old and won’t be able to work anymore. Keep in mind the approximate value of money by that time. 

Image: Scott Chan / freedigitalphotos.net

Look for financial mentors and support group. 

Since handling your money is still not part of the local school curriculum, seek successful people and learn from them. Attend seminars on financial literacy and study the different money vehicles that can help you achieve your dreams. Always remember that knowledge is power.

Image: Grant Cochrane / freedigitalphotos.net

There is a financial literacy seminar by Aya Laraya, host of Pesos and Sense, that we highly recommend you attend on May 26, 2012. Learn how to grow your money and which type of investment is right for you. Check out the poster below for more details.