During this time of the year, many Pinoys have already created their New Year’s Resolutions for this year.
So, what’s on your list? This year, why not include changes to the way you handle your money and make a resolution specifically for that. Here are some of the most common money mistakes we commit:
1. Paying only the minimum charges on your credit card bill
According to the credit card statistics provided by the Bangko Sentral ng Pilipinas, the Philippine banking system had calculated an alarming amount of Php 157.394 billion of credit card debts. This is because many Filipinos have a misguided view on the value of owning a credit card.
A lot of Pinoy credit card holders tend to maximize their spending limit then pay only the minimum charge on their credit card bills every month. Paying only the minimum fee will increase your credit balance by 2.5% to 3.5% every month. The next thing you know, your credit card debt will have ballooned immensely, making it more difficult for you to pay off your debt for many months.
2. Making huge loans without any savings
Filipinos put a lot of value in owning properties like cars, condominiums, as well as houses and lots. While aspiring to invest in properties is a good thing, it is not wise to make huge loans when you do not have any savings or financial investments that provide you with an additional source of income to cover your loans.
Committing to a loan for five or more years may put you in a tight situation during the period that you’re paying it off. With all your income going to your basic expenses and loan payments, you won’t have anything left for emergency situations.
3. Spending all your money on travelling
Travelling is hugely encouraged nowadays. Travelling is good because it increases a person’s social and environmental awareness, widens your perspective, and exposes you to different cultures and people. However, some Filipinos take travelling to the extreme and spend all their money on accommodations and even on unnecessary travel expenses.
There are ways to see the world without emptying your bank account. The web is littered with tips on how you can experience the world without going broke, and it only takes a little patience and resourcefulness to score discounted deals on accommodations and plane tickets. So do your proper research and plan a trip without making a dent on your bank account.
4. Skip paying bills
One of the habits that Filipinos have is putting off paying the bills until disconnection notices arrive. They don’t allot a specific budget for their bills and do not prioritize paying them.
The problem with this is that bills usually pile up at the end of the month causing a mad scramble on what to pay first: is electricity or water? How about the broadband subscription? Sometimes, Pinoys end up borrowing money to pay for some of the bills as the paycheck at the end of the month won’t even be enough to cover what needs to be paid.
5. Living beyond their means
Filipinos love the luxuries of life. We like big houses and brand new cars. For some, having the latest cell phones and gadgets, or being able to keep up with the latest fads in fashion gives them a certain sense of comfort and confidence; even if it means spending more than what their salaries can afford them.
However, these are just temporary rewards that can only provide an illusion of abundance. Eventually, the expenses will catch up with you and eat into your budget.
6. Putting off savings, insurance, & investments for later
One of the most common mistakes made by Filipinos is to put off savings and insurances for later. Most 20-year-olds nowadays misconstrue the YOLO mentality as spending all of their money and having a good time while they still can, without thinking about their financial state in the future.
However, most of those who have done this can attest that this kind of lifestyle can lead to financial crisis and failures in the future. So change your spending habits and set a portion of your earnings directly to your savings account before it’s too late.
7. “Pakitang-gilas” attitude
We Filipinos cannot resist glossing over or being “galante” even when we can barely budget our money for our own basic expenses.
An example would be in Christmas potlucks. Many Filipinos are too embarrassed to admit that they don’t have that much to spend for potlucks and yet commit to bringing costly contributions and find ways to produce them, such as borrowing money from someone else or withdrawing money from your emergency fund.
Some even go to the extent of hosting Christmas parties when teased or in Pinoy slang, “nakantiyawan” even if it means pressuring a relative abroad to send money to pay for all the expenses.
Again, the problem with this is that when you borrow money to pay for unnecessary expenses, you are bound to pay for them after.
8. Taking on unnecessary responsibilities
Filipinos are known to value, not only their immediate families but also their extended families. Everywhere you go, you will meet people who send their nieces and nephews to school. Often there are people who break their backs trying to provide for more than just one family.
While generosity is a good trait, you should learn to say no to financial responsibilities that are not really yours to take on, especially when the people you are providing for are strong and able to provide for their own families.
And even when you are helping your loved ones get back on their feet, do not neglect saving up and investing in insurance policies for your retirement and the future of your own children.
9. Hanging on to utang na loob
Utang na loob has become a huge part of Filipino culture. It’s when we show our gratitude to someone who has given us or have done something for us and we try to return the favour.
Except that returning the favour usually extends for many years and often involves money. Sometimes, we feel pressured to spend money we don’t have to help out the “friend” who once helped us when we were once in need, even when it is not a life and death situation for the person.
It’s good to be grateful, but in principle, gifts are not to be paid for. Otherwise, it’s called a purchase. Give what you are capable of giving, but do not get into debt out of guilt.
10. Not learning how to budget your money wisely
The latest statistics on the state of financial literacy of Asian Countries shows the Philippines on the 68th place.
One of the major factors that contribute to why Filipinos are bad in managing their finances is because there’s no strong government program or strategy for financial education. This is why many of us reach the retirement age without any insurance plans to count on or why many of us tremble at the thought of hospitalizations.
Is there anything on the list that strikes you strongly? Perhaps you should start on that one. After all, learning how to manage your finances will benefit you and the future of your family.
Now since Christmas spending might have taken a lot out of your savings, you may find yourself short of money and in need of quick cash. Consider pawning your items at PawnHero where the interest rate is almost 50% lower than most traditional pawnshops. Start the new year with a positive outlook and remember to stay true to your resolutions, especially when it comes to your spending habits. Happy New Year!
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