Wednesday, October 28, 2015

10 Money Mistakes Every Beginner in Personal Finance Will Understand

First time into the world of financial literacy?


Here, let me hold your hand. 

I'll gladly scribble these money mistakes on the palm of your hand using permanent ink just so you won't commit the same mistakes I did. 

I'm kidding. We can use henna tattoo instead? 


Kidding aside, the reason why I made this blog post today is because whenever people send me PMs on Facebook...

Random text messages on my mobile...

Or comprehensive emails...

It seems like majority of the people I talk to think that I just magically learned about money - and snap! - instantly made all the correct money decisions that gave me to push to be where I am today. 

You couldn't be more left. 

(Get it? Because the opposite of "right" is "left", so I wrote that instead? Sorry, I drank too much chamomile tea today...)

The reason why I'm able to give practical and relatable money advice - RFP title and license as insurance and investment solicitor aside - is because I've had first-hand experience about handling money.

I'm great at handling money today, because I was bad at handling money yesterday.

What were these money mistakes I encountered when I was still a newbie in the world of financial literacy? If you're still a beginner, you may be guilty of these, too:

ON EARNING 

1. Blaming your low income for your poor cash flow

Your income - no matter how small or big it is - is only a small part of the reason why your cash flow is poor. 

The greatest factor? It's what you do with your income. 

I have clients who are house helpers who earn P5,000 a month.

I also have clients who are OFWs and businessmen who earn as high as P500,000-P600,000 a month.

What do they have in common?

They both have an emotional cause to start managing their money.

And they both have a budget that they're working on. 

READ: The First Thing You Should Focus On Starting Your Journey to Financial Freedom



2. Putting a stop to your potential to earn more money 

All of us are born with talents. I sincerely believe that. (Mike in Monsters University isn't a good Scarer but hey, he's a wonderful Coach!) There is no such thing as an untalented person, or monster. 

All of us have the potential to be financially free "sa tamang panahon"...

Therefore, when it comes to earning money, we really do have the ability to earn it. 

What differs is our desire and belief to earn it. 

Yes, you may say that you want to earn money, but if you're not putting the effort to do so, it's still your responsibility. You have to desire, believe and actually work. 

When I started working, I was earning an allowance of P5,000 a month. 

Now? Let's just say I earn just enough for myself, my loved ones and my tithing endeavors. :) 

But I'm not putting a stop to my potential anytime soon - and so should you! 

Aim to earn more, so you can bless more. 



ON SAVING


3. Saving 80% of your income agad-agad 

Familiar with crash diets? You starve yourself so you lose weight in a short span of time. 

I did the same with my savings when I was just starting up. I saved 80% of my take-home income agad-agad because I wanted to get to my destination as soon as possible.

And just like crash diets, it's not sustainable. You end up gaining more weight than you originally had because you'd feel deprived. 

Three months later, that happened to me, too. I felt deprived. 

So I had to withdraw all my savings. And when I did? 

I spent them all in one weekend! 

Saving money should be a change in lifestyle, not just a temporary fad. 

If you're just starting out, it's best to save at least 5% of your take-home pay every month - and then gradually increase that amount as you go along life. 


4. Saving without a financial goal in mind 

Saving without a financial goal in mind is like travelling without a specific destination.

Sure, it may sound thrilling and invigorating at first.

But when you're running around in circles with no place to go to, you'd kick yourself wishing you had planned better in the first place. 

If you don't have a financial goal yet, SELFIE may inspire you to start: 





5. Placing your emergency fund on high-risk investments

An emergency fund can be used if you encounter medical emergencies, loss of job or sudden accidents that would require you to access your money within 24 hours or less.

As such, it needs to be liquid and easily accessible whenever you are, wherever you are. 

And you can't just do that with investments, can you?

If your grandmother needed to be sent to the emergency room right now, will you tell her to wait for the stock market performance to increase so you can redeem your investment?

"Lola, wait lang. The stock market is down pa ngayon. I can't send you to the emergency room yet. Pwede ba next week na lang? Parang hindi naman malala 'yang loss of breath, e..."
Have at least 1 month worth of expense safely stored around the house. 

Place at least 3 months' worth of expenses on a savings account with ATM.

Emergency fund is for emergencies. You could care less about its interest! 

Stay tuned for Part II! 

How about you? What are money mistakes that you're guilty of? 

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