Fortunately, the subject of Personal Finance will finally find its way to our school system very soon. I am hoping that students’ early exposure in this subject will help them properly manage their finances when they enter the workforce. Unfortunately, for you who never encountered the subject, you may find yourself struggling right now to keep up in managing your finances. The task of budgeting income can be daunting especially if you’re just starting out in your professional career. If you are clueless about what to do, just hoping that things will turn out fine won’t help. Therefore, something needs to be done.
The first thing to do is learn about the subject, that is personal finance. If you think it is difficult, it is not. All you need is a little bit of reading and willingness to execute what you have learned.
Personal finance is mostly practical; you don’t need to be a math genius to be good at it. The most critical part is your discipline and commitment to follow through with the principles.
Below is some money and personal finance lessons to help you get started with your learning journey towards a comfortable financial life.
1. Practice procrastination. Don’t be late at work, don’t delay work assignments but one thing that you can do to improve your finances is to procrastinate on your spending. Mastering the skill of delayed gratification is a sure ticket in developing the right spending habit that will help put your financial house in order. It’s easy to be tempted in buying items on credit the moment you desire it. However, it’s better if you just delay the purchase until you have saved up the amount. The last thing you want is to tirelessly work month after month and end up exhausting your salary just to pay off your credit card bill. Learning self-control will lead to exponential positive results in the future.
2. Start saving for the rainy day. Rainy days can come in many forms and always unexpectedly. Financial emergencies can happen anytime and anywhere. They often happen when you least expect them like sudden job loss, home and car repairs, medical emergencies and natural disasters like major typhoons. Experiencing these emergencies affects not only the physical and emotional aspect of life but they also leave a big dent in your finances.
Regularly allocating a portion of your income towards an emergency fund will not only give peace of mind but will also help build a habit of saving money, treating savings as a necessary expense. Soon it will become easy to save up for your other financial goals like travel fund, down payment for owning a home and even retirement money.
3. Create a realistic spending/budget plan. List down all your expenses on a monthly basis and separate them into two categories: Essentials like food, rent, transportation expense, etc., and non-essentials like dining out, entertainment, etc. Try to keep your expenses on necessities and wants to 70 percent of your net income so you can have 30 percent left for your savings and investments.
4. Don’t wait for extra money to save for retirement. Time is your ally when it comes to investing. Start early and don’t wait until you feel like you have the extra money to fund your retirement because if you do so, you might end up not affording to retire. Fast track your retirement nest egg through investments. Putting your money in pure saving accounts won’t cut it when building retirement funds; inflation will just eat your money out. Educate and expose yourself to investment instruments that are moderate to aggressive in nature like stocks, mutual funds and UITFs. These instruments bear more exposure to market volatility compared with your traditional banking products like savings and time deposits but have great potential to give you higher yields in the long run and ultimately help build your retirement fund.
5. Invest for personal improvement. Continue in cultivating your skills and competencies. Spend on classes that will help you with your career advancement that will eventually help in increasing your future earning power. Join seminars that will teach you on personal finance and guide in your journey towards financial success.
Jesi Bondoc is a Registered Financial Planner of RFP Philippines. He is the Director of My Wealth MD and Partners, Inc. specializing in investment advisory and oversight. You can send your money questions at firstname.lastname@example.org or email@example.com and they’ll be answered on his next article. To learn more about personal financial planning, attend the 55th RFP Program this July 30 To inquire, e-mail firstname.lastname@example.org or text <name><e-mail><RFP>at 0917-9689774.