Want Financial Freedom? Get Rid Of These Habits
Filipinos today may be free from colonizers and oppressors, but many of us are struggling to achieve a different kind of freedom – financial freedom – or simply being debt-free!
While we are known for being warm, hospitable, and happy, what we are not known for is financial literacy. According to a report by the Bangko Sentral ng Pilipinas (BSP) only 37.0 percent of adults started saving more for emergencies in 2021. This points to an alarmingly low financial literacy level, as respondents only got three out of seven questions right about key money management areas such as inflation fundamentals, investment diversification, and even basic numeracy. In addition, the BSP says that in 2018, only 15.8 million Filipino adults have bank accounts; there are almost 53 million Filipino adults who don’t.
A big part of the reason for these disappointing statistics is rooted in the way that many Filipinos were raised, which helped shape our habits as a nation that prevent us from achieving financial awareness and, from there, financial independence.
Fortunately, we can always start changing the numbers and our lives – starting with identifying the most significant habits that we can do without, if we want to improve our money management. Here are some of them.
Bahala na or come-what-may attitude
Chief of the habits that we may want to break, as a population, in regards to the way we approach financial management is our “Bahala na” or come-what-may attitude” to everything in life.
Many Filipinos are so laidback that we find it normal to live our life always at the spur of the moment, without any strategic plan for anything. In finances, this manifests as buying things that we don’t really need out of a whimsical urge or going on a trip that our bank account really can’t handle.
you find yourself practicing this a lot in your life, one of the most important things that you can do to change it is to hold off on making financial decisions right then and there. If there is something that you want to buy because you were scrolling through an online shopping site, give yourself a few days to think about the necessity of the purchase before you add it to your cart. Similarly, track your spending so that you can have a better idea of where you’d need to improve on, so that you can take better control of your finances.
Not budgeting according to priorities
Many Filipinos know that health, education, and food are among the key priorities that they need to allocate their money towards – yet many Filipinos fail to accordingly streamline their budget towards these areas. Instead of using our money towards lodging and managing healthcare insurance accounts, we spend it on gadgets.
Instead of saving up for our children’s education, we wing it and take things day-by-day and tell ourselves we can splurge on their birthdays. And instead of taking care to stock up on food for the week, we go out to eat and eventually run out of money.
It takes a lot of mindfulness to know what you need to do and stick to it. To manage your finances and gear your life for eventual financial independence, it is important to spend your money according to your priorities. Getting health insurance, for instance, may seem like a cumbersome process that will require you to shell out money every month – but in the case of an unfortunate medical illness or emergency, that money that you paid towards your insurance will make sure that you don’t suffer any more losses from the situation. Similarly, you can automate certain processes such as transferring money to your savings account to ensure that you don’t shortchange yourself by not doing what you know you should do.
Not having financial discussions with family
For many Filipinos, money is a central instrument in the family. However, it is not something that is always openly discussed, so that it may help encourage better management from every member of the family.
For instance, if a partner or a sibling earns more than us, it is almost a duty for that partner or sibling to bail us out if we need them to. While it is never a bad thing to be somebody’s financial safety net, especially if it is well within their means so they can offer help, it also burdens those that we rely on and create an unhealthy dependency in those that are not as financially able or responsible. Similarly, many of us treat money conversations as inappropriate, particularly if they touch on setting up boundaries or giving advice on better management.
To steer the whole family towards financial independence, it is helpful to have financial discussions that can educate the whole family on how everyone can implement more effective money management. If someone has it easier financially, for example, they may be able to share tips on how they do it to motivate everyone into getting started on it, on their own.
Taking out unnecessary loans because we can
Filipinos grow up knowing that there are always easy ways to take out a loan, if we so desire. These fall under two main categories: legal and illegal. There are regulated avenues that we can go to if we need money, and then there are convenient but unregulated money lending funnels that impose hefty interest charges. Also, it is possible for many of us to buy things that we want even if we don’t have any money, such as getting a phone through paying a minimal upfront fee and paying off the balance in monthly installments.
It’s a good thing to have easy access to loans, but we should be more careful about using them. If you want to take out a loan because you want to buy something that you can’t even afford with your own resources at the time of the purchase, it may be best to hold it off until you can pay for it yourself. Similarly, if you fail to pay off your loan on time, you may be subject to compound interest charges that will make it harder to get back on your feet financially. Remember to use these convenient lending companies only if you really need to, and only for as long as you need to/
Not taking care of our credit score
Filipinos are well-versed in taking out debts, but surprisingly, do not care much for ensuring good credit from those debts. Many Filipinos take out loans and default on their payments, which affect their credit score. On the flip side, those who do have good credit do not realize that they can make use of that to further their financial goals. For instance, if you are in good credit standing, you can find it easier to get a business, car, or house loan.
While we don’t have a universal credit score in place in the Philippines, banks have their own record and are mostly shared with other financial establishments. If you don’t run away from your debts from one bank won’t be traced back to you when you apply for another loan in another bank, think again!
If you have a good credit score, read up on how best you can use that to advance your life. If you don’t, be proactive in setting it right so that you can free up access to financial resources that can improve your life.
Mindless spending after pay-day (one-day millionaire)
Are you familiar with the phrase ‘petsa de peligro‘?
It is in our consciousness, for a reason. Many Filipinos are irresponsible with their spending that they eventually get to a petsa de peligro, or the few days before payday when you’re running out of money and barely have enough to survive. It happens because right after payday, many fall prey to the lure of money in their wallet that some end up mindlessly splurging.
Don’t spend more than what you need to, and don’t make unnecessary withdrawals. For many people, if they have extra cash in their wallet, they almost always invariably lose that cash for no important reason. In addition, make a budget and stick to it. Allocate it towards your priorities, treat yourself to something nice but reasonable, and leave the rest of your money alone.
Lifestyle inflation
Getting a promotion or finding a new financial stream is always a cause for celebration – but don’t celebrate too much that you end up falling prey to lifestyle inflation. In such a case, you overstep your financial boundaries because of the false promise of easier access to money that you end up living a life that is too expensive for what you can afford.
One common example is upgrading to a new car when you move up the corporate ladder. Unfortunately, the car turns out to be too expensive compared to the salary increase. Most of the time, this ends in getting into more debt.
Being able to advance in life financially is a privilege that, if handled well, can bring in more opportunities that can lead to financial independence. If you get promoted, that’s good! That only means that you have more money to allocate to what is necessary and have the luxury of maybe venturing into investments. Stay in your financial lane, don’t get carried away, and work on expanding that lane so that you have more space to navigate in the future.
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