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MANILA, Philippines - Financial security depends on crucial decisions that you make through the 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.
But what are the most common financial blunders that you could commit? There are many money mistakes that Filipinos normally practice but are unaware of. These little things, when ignored, can build up and haunt you for years to come.
1. Using your credit card
A credit card is a handy tool that anyone can use for everyday transactions. Using it is also necessary if you want to 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.
So before you use your credit card, make sure you’ve considered all of your needs and wants. Aside from this, you also need to understand the basics of paying for your credit card bill. Always pay on time and more than the minimum to avoid incurring even more fees, and always think of a credit card purchase as a loan to pay later.
Also, learn everything you can about your credit card. How much interest will you be charged per month? What are the penalties for late payments? Are there annual fees? The key is learning about the specifics of the credit card and being responsible in paying it on time.
2. 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. If they are borrowing money for a business venture, for example, advise them that they might be better off consulting with a bank. If it’s for something else, offer to help them research the best loans available. Even if you can’t help them financially, you can still give them helpful advice.
3. 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 such as Makati Medical Center, Medical City or St. Luke’s Medical Center.
To avoid these nightmare scenarios, look for a decent HMO that could get you and your family covered. You can get covered for as low as P700 a month, but always check the plan to see if it’s best for you.
4. Not investing
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, or by reading about investments. Consult with financial professionals to ensure that you’re investing your hard-earned money in the right places.
5. 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.
6. Not buying a house
Eventually, you will end up retiring and when this day comes, you may not have enough money to pay for the current rent that you are paying. Buying a house saves you this trouble; however, buying a house costs a lot of money, especially now that real estate development has boomed over the years. The appreciation of real estate has barred a lot of individuals from getting a house with decent land area enough to raise a family. So how do you effectively buy a house?
You can check banks for foreclosed properties that are up for grabs, check the current housing loan rates, or check the requirements of PAG-IBIG for a housing loan.
7. 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.
8. 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.
But of course, you need to know the terms. For instance, during the 2009 Ondoy typhoon, there were cars that weren’t covered by their insurance companies since it was an event of nature that caused the damages. However, it has been recorded that during the same incident, insurance claims hit a record high of P11 billion. So always check your coverage before making claims.
Avoiding all these mistakes might seem like a tall order, but if you lay out your financial goals and start cutting out these mistakes one by one, you can be well on your way to financial stability.
