1. Spending more than you earn
People fall into a deep financial trouble when they start to spend more that what is earned. This is what I call the credit card dilemma. Credit card companies want to entice you by saying “You can borrow money from us and pay as little as this amount every month.” People who don’t compute fall on the bait and start spending on credit.
Unless you pay your credit card bill in full every month no interest will be charged. Practice living below your means.
2. Not planning ahead
When a person says “God will provide” he is actually strengthening his faith that God is the source of everything. But he should also realize that God will not provide unless he works for it.
A plan is laid before a goal is achieved. No man ever achieved anything without it. The simple task of going to a place has a plan. For example you want to go to Makati City from Quezon City. You envision yourself riding on a jeepney going to the MRT Station then from MRT Station you will ride the train going to Ayala Station. From there you can walk around Makati City. Another option is to ride a bus going to Makati City. Depending on your goal (time of arrival), you will arrive at your destination because you plan how to get there.
Same is true in your finances. No plan simply means that your goal is not a goal. It is just a dream.
If you don’t know how to plan financial goals, sit with your friend who knows. It only takes a little bit of courage to say the words, “Can you help me?” Analyze the goal and plan the path. Don’t worry it will not require algebra or trigonometry. Simple addition, subtraction, multiplication and division will do.
3. Buying wants over needs
Do you really need 20 bath towels stocked in your cabinet?
Do you really need 20 rolls of tissue paper seated in your stock room?
Do you really need 10 rags lying on the floor every single day?
Do you really need 2 cars even if you use only 1 car going to work?
Do you really need a large house even if there’s just the two of you inside?
Do you really need 10 boxes of cereal stocked and rotting in your pantry?
Do you really need to shop for 5 pants and 5 blouses/shirts every month?
Do you really need to buy a pair of shoes every pay day?
Do you really need that expensive coffee fix everyday?
Do you? Really now!
A want is something you can live without while a need is something you cannot live without. Differentiate the two and you’ll go far.
4. Not having proper insurance/Canceling an insurance policy without replacement
Seldom do people think about the importance of having an insurance. To know more about the benefits of having an insurance please click here.
Get yourself insured especially when you are the provider of the family. The rule of thumb is multiplying your annual income by 10 and you’ll get how much insurance coverage you need. I always recommend term insurance.
If you have an existing policy, analyze it first before deciding to get rid of it. Moreover, talk to your agent and ask further questions. I’m sure he will be willing to help you. If you are not satisfied, research and do the math.
5. Not having time for financial education
Financial education is more important than the basketball game, more important than the drama series, more important than idling on Facebook or Twitter. But people are so fond of doing the opposite because they are not aware with what they are losing every time they postpone learning about their finances.
Make it a habit to listen to business news instead of celebrity news. Celebrities will just make you feel inferior because they display high social status which makes you want to spend more to “be like them.” Read at least one financial literacy book every month. Apply the concepts learned. Attend financial workshops. There are so many free financial seminars and workshops in the Philippines. Not attending one can actually loose you millions after a few years. Talk to people who are financially literate. If you want to be like them mingle with them. Ask for guidance. Believe it when the Bible says, “As iron sharpens iron, so one man sharpens another.” (Proverbs 27:17)