In the Philippines alone, only around 50% of adults actually know why and how inflation works, and only around 30% of them know the correct answers on interest rates (the 2019 Financial Inclusion Survey). This only shows that no matter how much one accumulates income and grows wealth, whether it is an individual and company, they are still prone to losing everything if their wealth and income is not managed properly (Source: Metrobank Website).
If you still remember what I shared about my horrible experience in my last entry, to end up having a huge amount of debt because of fear of getting short of money for any kind of emergency is because of my lack of financial literacy. Two weeks ago, I attended a short course on financial literacy when I learned all the mistakes I did when it comes to handling my financial needs and obligations.
Most of us (yes I include myself being obviously financially illiterate) already heard of the term ‘financial literacy’ or ‘financial education’, but sadly, not all of us take those terms seriously — until we experienced the outcome. Most of us would think saving money is the most effective way to combat sudden poverty — if you’re diligent enough not to touch what you’ve already saved. There will always be emergency situations that cannot be solved even by your own savings like medical expenses or worse, funeral services. Of course, no one would want to end up getting bankrupt.
Financial Education is as important as learning the basics of reading, writing, mathematics and domestic chores as this has been mostly shoved off believing in the traditional way of handling money. As such, the Savings and Investments Act of 2021, also known as the HB 9058, has been proposed, with the aim to prepare students to be financially smart and prepared, using the right tools to help them face uncertainties involving their savings and their future income should they be hired for their choice jobs.
I’ll be frank, just as I said, I am still financially illiterate, and for me to understand more about financial literacy and just for you not to end up like me, if you know what I mean, I came up with tips that I’m currently working on for myself as a way for me to combat my own financial situation, which you can also use in the future:
- SAVE, EVEN A LITTLE. Okay, I just said that saving money is not as effective as being financially secured, but that doesn’t mean that you shouldn’t save. At least a little, like let’s say P10 a day, or if you want to increase your daily payments, you can accumulate enough to help you in case of minor emergencies. A tip: try to create two or maybe more “savings accounts” whether with your actual bank or your piggy bank where you can use one for any emergency that might come to you and you won’t touch the other. If you will keep the other savings in your bank untouched, chances are your savings will accumulate a high interest rate, as some bank offer that feature to their savings products.
- PRIORITIZE. If you’re someone like me who heavily spends on food and mostly random things out of impulse, I think this is the best time to control our impulses. Prioritize what you really need and want. IMHO, there is a difference between a need and a want in terms of degree, like you need to eat but you have no time coming home on time to cook so you have to buy something to eat, or if you need to stack up your groceries. Going to a concert of your favorite artist or going to a beach vacation are just samples of things you want.
- NEVER TAKE A LOAN, IF POSSIBLE. If loaning cannot be helped, be sure to borrow only what you can pay in a short time. Whether you want to pay it in full or in installments, you need to make sure you will be able to pay it out as soon as you could. And if you have already paid it out, as much as you can, never loan again, because you’ll never know what will happen in the coming days, including if you didn’t expect any emergency that will require you to pull out some cash instead of saving it to pay for your debt.
- DO NOT GIVE TOO MUCH. This may sound selfish, but if you’re prioritizing you and your family’s future, sometimes you need to become a bit stingy. Give enough to your family’s daily or weekly expenses at least every payday cut-off and save some for yourself. Your own emergency fund can save you in the future.
- NEVER GAMBLE. Gambling, as we all know, is based on pure luck, with or without a strategy. It is never a win-win scenario. Most of the time you will lose, but it will immediately push you to gamble more to push your luck, which is starting to get more dangerous as you keep on doing so. This will not only guarantee income loss, but also relationship loss with your own family and friends.
- INVEST. If you’re into business, or if you’re aiming into something big, investing is your best way for you to earn aside from saving alone. Although returns are not guaranteed since it depends on the market’s performance, if you earn an interest, no matter how big and small it is, you can then say that money is already working for you — but that doesn’t mean you’ll just leave your investment grow by itself. It’s like a tree, it still needs your help getting its nutrients by giving it water, letting the sunlight in, and lots of love and care. If you will abandon your own investments, you will not get the yield you’re expecting. And if you will invest, don’t put all of your money in one investment alone. Try to split it up into different investments and watch them grow — that’s better than just throwing your only money into one investment and end up not gaining anything at all.
- BE FINANCIALLY LITERATE – LITERALLY. If you’re an avid reader, maybe you can try out reading some inspirational books that will help you become financially smart, like from Robert Kiyosaki’s “Rich Dad, Poor Dad” and the like (but ironically I haven’t read any of these but this will be a good start for me). Stories from these books came from those people who may have been in the same financial woe as we do and shared with us how they were able to overcome those obstacles.
- TAKE CARE OF YOURSELF. Sure, we work in order to earn money and hoping we could save a bit for ourselves and our loved ones, but everything stops if we suddenly get sick. Of course, if we don’t come to work on a day, we don’t expect to get paid that day — what more if we called in sick for a week or worse, a month? It’s definitely best to take care of yourself if you don’t want to get your stream of income uninterrupted, even if you know there are some people in your family who also works for income. Having two or more jobs might not help you, either, if you will get sick.
- INSURE YOURSELF. Speaking of taking care of yourself, what if something inevitable happens to you, like if you got struck with a critical illness, got into an accident, or worse, die? Or what happens if you retire? The biggest question for yourself is that if you managed to save something for your family, or if you have saved enough for your hospitalization and medical bills? Obviously, if you’re gone, so with the income. So it’s best if you get yourself an insurance to protect not just your income, but also your family, since we don’t have any power to avoid these events at all. Look for an insurance product that is best for you and for your family, and at the same time look for an insurance that you think that you can afford. Having an insurance is the best option to keep your income going even after accident, sickness, retirement or death. There are a lot of insurance companies and products to choose from for your security, such as AIA. For Philippine visitors, you can visit here.
Just a disclaimer: I am just about to do these things, some of them were already done before, such as being insured recently. Being insured, for me, is so important for me and my family as I know this will protect me from the unexpected, making sure that they won’t end up walking in the dark. I am still in the process of lessening my current debt and I’m fully determined to take it off of my system. And I thought, I have to take another step for me to combat financial illiteracy and help people realize the value of the income they generate for the people they love — by becoming a financial advisor.
But then, becoming financially literate is more than just learning the technicalities and definitions, it’s also more into putting simple saving and investment tips into practice. In this way, you will learn the true value of what you’re working for and how this will help you and your family in the long run.