Wazzup Pilipinas!?
Money isn't everything, but it is undeniable how necessary it is for everyday life. As early as you can, whether that’s while you’re still a student or while you’re in the starting stages of your career, you’ll want to master some necessary financial life skills so that money-related worries won’t always be on your mind.
It mostly boils down to learning how to budget, save, and invest in ways that set you up for a secure and fulfilling future. But, like with anything else you want to do well, it takes practice.
The good news is that developing good money habits is easy if you start small and stay consistent. To that end, here are seven financial life skills you can start practicing to take control of the money you have. There is a learning curve, but it will set you up for long-term success.
1) Budget Like a Pro
Most people spend money as soon as they make it and sometimes spend more than they can afford. Solid budgeting skills will help you avoid money issues and give you a better shot at financial stability.
In principle, budgeting is relatively simple. You track your income and expenses to see if you're spending money you haven't earned yet. But there's more to it than that if you want your budgeting efforts to be effective—you need a plan.
The first thing you need to do is prioritize your spending based on your income. Set aside what you need for essentials like food, rent, financial obligations like a personal loan Philippines monthly payment, and utilities. Food and utilities are variable, so make sure you have a little wiggle room.
Next, find a way to make your finances more visible and easier to account for. Even a simple spreadsheet can make you better at budgeting. And if your bank offers this option, set up automatic payments for utility and credit card bills to save time and to avoid late fees. Automation reduces the temptation to spend money meant for savings and cultivates the habit of paying yourself first.
When you have all the essentials covered, you can allocate funds for other financial goals, like building up your savings or an emergency fund. Whatever you have left is discretionary spending, meaning you don’t need, but want these things. An example would be going out to dinner or to the movies every week or two weeks. That’s not to say you shouldn’t spend on those things, but make sure you have the money for them.
2) Save for the Future
It should also be like second nature to you to allocate a percentage of your income to savings. Many people don't think they have the bandwidth to do that, especially if they have children or are supporting other people. But remember that you might not always make the same money as you do now, so having something to fall back on during hard times is essential.
You can get into the habit of saving by putting it in the essentials bucket of your budget. Start small, say, 5 percent of your income, and build up to 20 percent as you get more control over your spending.
Cut back on things you don't need, like a phone plan with unlimited data when you work from home or a gym membership you never use. Clawing back these small amounts can add up to a fair amount of money, and the more you observe the habit, the better you’ll be at the skill of saving for harder times.
3) Set SMART Financial Goals
Writer and philosopher Thomas Carlyle once said, "A man without a goal is like a ship without a rudder." That makes sense for life in general, but more so when it comes to money management. Specific, measurable, achievable, relevant, and time-bound or SMART goals will give your financial journey direction.
For example, instead of saying, “I want to save more money,” which sounds very abstract, set a goal like, “I will save PHP 10,000 for a holiday by the end of next year.” That might seem like a lot in one go, but breaking your large goals into smaller, manageable steps will make them feel more attainable. You could save PHP 1000 a month for 10 months just for the purpose of your holiday, for instance.
You can keep yourself on track by opening a separate account for these goals. That way, you can watch the money grow and avoid the temptation of spending it on something else. In that respect, goal setting will be one of the most important financial skills you can start practicing now.
4) Track Spending
The only way you can curb unnecessary spending is to figure out your spending patterns. Tracking your expenses can help you understand your habits a little better.
Do you buy most of the stuff you don’t need online, for example? If that’s the case, it might be time to delete those shopping apps. Knowing where your money goes can help you identify areas where you can cut back.
A budgeting app can help you see exactly where you're spending your money. Some even offer tools to analyze your behavior. You might be shocked at how much of your money is going to non-essentials. Over time, you'll develop a clearer picture of your financial habits, and then you can then apply the practice of adjusting your habits to better align with your goals.
5) Build Credit Responsibly
Cashless transactions are now the norm, and it’s much easier to use credit or debit cards than before. The catch is that you can go overboard with your spending because you don't feel it going out. That makes it incredibly easy to overspend, especially with a credit card. The problem is, you’ll only get the bill at the end of the month.
Using a credit card or two can help you build your credit, which can in turn increase your eligibility for certain loans or help you land certain jobs. But you need to be smart about it, too—paying your credit card late or with only the minimum balance will have the opposite effect on your credit history.
Pay your bills on time, avoid maxing out your limit, and only charge what you can afford to repay. These habits will keep your credit score healthy, your debt manageable, and your attitude better poised towards practicing good financial discipline.
Take Charge of Your Financial Future
Building an arsenal of strong financial life skills won't happen overnight, but small steps can lead to huge changes over time. These five skills, if practiced diligently, can do a lot to help you take control of your finances and achieve your dream life. Every little bit counts, and again, the sooner you begin, the brighter your financial future can be.
Ross is known as the Pambansang Blogger ng Pilipinas - An Information and Communication Technology (ICT) Professional by profession and a Social Media Evangelist by heart.
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