Gift yourself with stable finances this Christmas

MONEY TALK Fausto, Tiongson, Wurtzbach and Fernandez at the BSP Financial Education Stakeholders Expo. —CONTRIBUTED PHOTO

For Jackie (not her real name), 31, nothing compared to the joy of retail therapy. She was the quintessential shopaholic—until the pandemic came along.

She was among the millions of Filipinos who had been hit hard by the 2020 economic recession. When she lost her job as a technical assistant at a pharmaceutical firm, nearly all her compensation money was spent just to settle credit card bills. While she was decluttering her bags and shoes and saw the price tags, she thought, “What if I saved half the money I used to buy all those things? I would have been in a better financial situation.” It was then that she decided to take control of her financial health. “Losing money is self-inflicted pain. Nobody forces you to spend money. If you can’t control yourself, then you’ll eventually suffer the consequences,” she narrates.

She joined virtual seminars on financial literacy to help acquire the set of skills and behavioral knowledge to make better money decisions.

Among those she found most helpful was the Bangko Sentral ng Pilipinas’ Financial Education Stakeholders Expo. One session, ‘Financial self-care 101: boosting your financial health,’ dealt with a wide range of topics such as budgeting, managing debt and discussion of investment tools. It was moderated by former investment banker turned financial columnist Rose Fres Fausto and Randell Tiongson, a respected personal finance coach. According to the United Nations technical working group, financial health is defined as the extent to which a person or family can smoothly manage their current financial obligations and have confidence in their financial future.

There are four elements that shape a person’s financial health:

1) Day to day or the smooth short-term finances to meet financial obligations and consumption needs;

2) Resilience or the capacity to absorb financial shocks;

3) Goal-setting or financial planning; and

4) Confidence or being in control of one’s finances.

During the session, here are some tips shared by experts on how to uphold financial health as a form of self-care.

Tip No.1: Find the “why.”

In financial planning, the reason why you save money must be clearly stated. Goal-setting is important because it is like a blueprint on how to achieve financial security. Create goals that are practical and achievable. Break them down into smaller packages like daily, weekly or monthly goals so that you can easily follow them.

Tip No.2: Proper budgeting will help you achieve your financial goals.

Having a budget means tracking where your money goes. This is also useful in drawing the line when to stop spending. Admittedly, saving money becomes a difficult task if you are living from paycheck to paycheck. So you should apply the basic law of money: you have to pay yourself first. Automate your saving and investing. This is now easy, thanks to the advent of digital channels. Ask your bank if they have services like automatic debit transactions.

Tip No.3: Being a responsible borrower can help your debt management.

There are two kinds of debt: good debt and bad debt. An “acid test” is used to determine if a debt is the good kind. Ask yourself these questions before taking out a loan. Will the use of the debt proceeds improve my condition? Are the terms and conditions of the debt fair, such that when I fulfill them, will I still be in a better condition? How do you free yourself from debt? It all boils down to having a firm budget. Control your expenses and use the money you save to pay off your debts. Pay off your small debts first. These small victories can give you encouragement to eventually pay off the costlier ones.

Tip No.4: It is important to build an emergency fund because the future is uncertain.

An emergency is an unforeseen event like your car breaking down or someone in the family needing medical attention. Set aside a portion of your salary and place it in a fixed-income investment so you won’t be able to spend it right away.

Tip No.5: It is wise to get an insurance plan, especially if you are the breadwinner in your family.

The money that your family will receive from insurance will help them achieve their goals even if you are no longer around. But make sure that you fully understand what kind of coverage your insurance is offering. Find the one that suits you best and is affordable. It will cost you, but think of it as buying your own peace of mind.

Tip No.6: Let your money work for you.

Gone are the days when we just save, save, save. Now, we have to let our money grow through investments. Due to rising inflation, the money that you save now can easily lose purchasing power. Knowing where and why you invest your money will help you earn more. It is also important to understand the risks involved in your investment. Lastly, invest an amount that you are comfortable with.

Celebrity Pia Wurtzbach also offers valuable insights. The beauty queen, who recently became a finisher at the 2022 New York City Marathon, says investing is akin to preparing for a marathon. “You need to prepare for the long-haul when it comes to investing. You don’t reap the benefits right away. You have to be patient and trust the process,” she says.

Miss Universe 2015 adds that investing depends on your risk appetite. It is important to allocate your resources into different instruments. She says proper allocation/diversification also means shielding your money from the ill effects of recessions and market crash.

Tip No.7: The right time to think about retirement is as soon as you start earning money.

If you start to properly allocate and grow your assets now, you need not worry about money in your later years. It’s better to write down your short-term and medium-term goals. Consider what goals are meant for Yolo! (you only live once) and what goals should fall under Yago! (you also grow old).

As a parting shot, Wurtzbach says it’s okay to ask questions. “You learn a lot when you get advice from the right people and institutions. Their extensive knowledge will help you achieve financial stability,” she says.