8 Financial Mistakes You Want to Avoid
Financial security depends on crucial decisions that you make over many years. From the degree you take in college to the job opportunity that presents itself because of your background and education, the choices you make can have a profound impact on your financial security.
There are many money blunders that Filipinos normally practice but are unaware of. These little things, when ignored, can build up and haunt you for years to come.
Using your credit card unnecessarily
A credit card is a handy tool that anyone can use for everyday transactions. It is also a useful toolto help build your credit score. It can give you the freedom to purchase things, but if you let your spending go out of control, it can send you into a crippling spiral of debt.
Aside from this, you also need to understand the basics of paying for your credit card bill. Always pay on time and don’t leave any unpaid balance to avoid incurring even more fees, and always think of a credit card purchase as a loan to pay later.
Also, make it a point to learn everything you can about your credit card. From the interest will you be charged to the penalties for late payments and the amount annual fees, you should know the details.
Try to window shop first. You can see which credit card fits your needs and lifestyle using our credit card comparison tool.
Allowing friends/relatives to borrow money
Helping friends and relatives when they’re in need is a strong trait of the Filipino culture. But when the help they need is financial, you should step back and consider the circumstances.
Filipinos tend to have difficulty saying no to most requests of relatives and friends. This includes financial requests. Even if they don’t have enough funds, they still tend to help relatives looking for financial assistance. The sad reality is that there are instances when you don’t get paid back.
If this happens to you, it might help to ask what they need the money for. Borrowing money for a business venture, for example, should be better offfor them to consult with a bank. Perhaps offer to help them research the best personal loans available. Even if you can’t help them financially, you can still give them helpful advice.
Not having a safety net for your health
How much does a visit to the ER cost in the Philippines? If you will be headed to a competent hospital such as Makati Medical Center, don’t be surprised to have a P9,000-P10,000 bill for just a 2 hour visit. In these types of hospitals, the professional fee is almost at P4,000 in the ER. As for consultation fee, you will be paying at least P500 per visit, and pay more for the diagnostic procedures.
In the Philippines, the out-of-pocket mode of payment is a common scenario. Though you can visit public hospitals, be prepared for long lines, and at times incomparable service compared to the private hospital facilities.
To avoid these nightmare scenarios, look for a decent HMO that could get you and your family covered using our health insurance comparison tool. You can get covered for as low as P700 a month, but always check the plan to see if it’s best for you.
You may have heard the saying ‘a penny saved is a penny earned.’ But is it really the case? With inflation, your money saved today may no longer have the same value the next day, so it’s important to learn the basics of investing. Investing in the stock market, bonds and other sources of passive to active income can come in handy especially when you are about to retire.
You can start by putting aside a little money every month to invest. Consult with financial professionals to ensure that you’re investing your hard-earned money in the right places.
Not pursuing further education
Whether it is a new trade, or a master’s degree, you should always try to grow as an individual through further education. You want to always update your skills in order to present yourself as an asset to your company.
Additional skills gained from education can increase your market value. And at times, achieving certain positions requires specific qualifications. Though further education can cost you some money, if it is relevant to your career goals, you should see it as an investment in yourself.
Not planning for retirement savings
Eventually, you will end up retiring and when this day comes, you may not have enough money to pay for your current lifestyle. If you have dependents like children and a spouse, the financial burden is even greater. Don’t expect your children to support you as they will have their own responsibilities as adults by that time.
If you have just started working, this is the best time to start saving. Start by saving 10% of your monthly income and slowly work your way up to 30%. If 10% is too high a bar, even 2% is better than nothing saved at all.
And you should start right away. Just start contributing small amounts to your retirement fund now and let the magic of compound interest do the rest of the work for you.
Not knowing good and bad debt
Do you know the difference between good and bad debts? A good debt is an investment that increases in value over time, such as a student loan, a mortgage, or an auto loan (if a car is necessary to your work or life).
In contrast, a bad debt is for things that quickly lose their value and don’t generate income over the long term, or debts with punishingly high interest rates, such as credit card debt.
To avoid bad debt, just keep in mind: if you don’t need something, don’t put it on your credit card. And before taking out a loan, consider whether your debt is going to be good or bad.
Not getting the necessary insurance
Car insurance, health insurance and even life insurance are some things that a lot of Filipinos view as added expenses. However, when faced with actual risks that turn to unfortunate events, it is the only time they realize that prevention is better than a cure.
There are a number of insurance companies that can provide the necessary safety net for different aspects of your life. Make sure you’re covered for any eventuality by insuring your car, your home, your health and your life. A few monthly payments now can save you a lot of trouble later.
Avoiding all these financial mistakes might seem like a tall order, but if you lay out your goals and start cutting out these blunders one by one, you can be well on your way to financial stability.