(Financially Independent Twenty-something)
My mindset has always been that your 20s must be the time when you need to learn and do as much as you can to prepare you for the rest of your life. Five years ago, life in the 20s welcomed me as I was pompously marching fresh out of college. I got hired for my first job months before graduation and stayed in the same company for a little over two years.
The moment I received my first paycheck, I realized the responsibility that came with earning one’s own money, and what I would do with that money was entirely up to me as well. I took full responsibility of my financial future right then and there, and made a commitment that I should get my first million pesos before I turned 30—this was my FIT goal.
As I said at The Global Filipino Investors Coffee Sessions, in collaboration with MoneyMax.ph, “Financial education is important because money is something that fuels every single day of our lives, and what we do with it determines the kind of life we will live.” Applying the money management principles you’ve learned can help you be a step closer to being a FIT.
Here are some money management lessons I’ve learned that you can apply in your own journey toward being a FIT:
Set a realistic personal FIT goal. The general rule on how to be financially independent is to increase cash inflows and reduce cash outflows simultaneously. The first thing that I thought to myself was that if I wanted to be financially independent, I had to develop a good relationship with money. I needed to be aware of my spending habits and commit to a plan on attaining my FIT goal. Ago-getting mindset is important, as this will set the nature of your next actions. Millionaire at age 24? Why not! You can do it—take it from me!
Find something you’re good at, and make money by doing it. Monetizing an activity that you’re passionate about could be tricky, but this does the trick in increasing your cash inflow. Whether your talent lies in photography, baking, drawing, writing, or dancing, there are plenty of opportunities to make money. Websites for freelancers and work-from-home individuals have plenty of projects. Social media is increasingly becoming a good platform for baked goodies and pre-loved items. Find ways on how to make money from your talents, connections, and existing resources. It just takes persistence, resourcefulness, creativity, and an internet connection.
Delay your gratification. Growing up with Ilocano parents that have always lived simply but wisely with money, I have long since learned the difference between wants and needs. My parents would always emphasize that needs are non-negotiable expenses—you have to spend money on them to live comfortably. Wants, on the other hand, can make you feel good, but you can live comfortably without them. The golden rule of identifying where and how you should spend your money is this: classify which ones are needs and which are wants, and spend only on things you need. Delay buying your wants until you’ve reached your FIT goal. The internal battle between needs and wants can plague you, but once you get to train yourself to resist spending on things that you do not need just yet, you will see how this significantly increases your savings, and seeing your savings grow is always a delightful feeling!
Follow an equation. The problem with many 20-somethings is that as their incomes increase, their lifestyles inflate, and they end up with no savings at any income level. The simple equation that worked for me for years is Income—avings = Expenses. Whatever amount of income you get, be consistent in appropriating a portion for savings before allocating money for expenses—not the other way around. Religiously set aside a portion of your income every payday and automatically place this in an untouchable “FIT goal” savings account.
Set a budget and stick to it. It is important that you are able to come up with a budget that best suits your needs; e.g., 20 percent for savings, 20 percent for food, 20 percent for transportation, etc. When companies do projects, they have a specific budget in mind and they do their best to operate within that budget. They haggle with suppliers, skimp on materials, trim down other costs. This is how individuals should operate as well. Keep track of your expenses to make sure that you are spending according to your budget. Otherwise, you’re hoodwinking no one else but yourself.
Achieving financial independence in your 20s should not be seen as an impossible task. In fact, if you keep in mind the general rule and take it to heart, being a FIT is a feat that all 20-somethings can achieve. It only requires you to be disciplined, creative, determined, and to never give up on pursuing your financial goals.
* * *
Ace Gapuz is an entrepreneur and financial literacy advocate. She is currently the Chief Executive Officer of Blogapalooza Inc., a company focused on influencer marketing, a part-owner of Woodchuck House, a restaurant in Quezon City, and one of the hosts of Wise Cash, the country’s first financial literacy podcast for millennials.