Financial literacy is not taught in schools, and so a lot of people grow up emulating the poor spending habits in the Philippines. As Filipinos go without proper financial literacy, they hand down bad money practices from one generation to the next. Let’s look at some of the most common Filipino money habits and examine whether they are good or bad.
How do I know if I have the right money habits?
There are a few key indicators that separate right vs wrong money habits. The first is whether or not you have a budget. A budget is a financial roadmap that tells you how much income you have coming in and where it needs to go. Without a budget, it's easy to overspend and get into debt.
When it comes to personal finance, there's no greater indicator of sound money habits than living within your means. This means budgeting effectively and only spending as much as you can afford, rather than going into debt for unnecessary purchases.
Another key indicator is having an emergency fund in place in case of unexpected expenses. This means constantly saving and setting aside a specific amount each month in case of unexpected expenses or job loss. It can be tempting to dip into this fund for non-emergencies, but it's important to resist the urge to do so for the sake of financial stability in the future. Not only does an emergency fund offer peace of mind, but it can also help prevent excessive debt accumulation during tough times.
Don't forget that good money habits also include investing for the future. This could mean saving for retirement or your child's college tuition or simply investing in yourself by taking courses and learning new skills. If you're doing all of these things, then chances are you have good money habits. If not, it's never too late to start making changes.
Now let's examine some common money habits in the Philippines.
Common Pinoy money habits
Here are the most common Filipino spending habits that often lead to poor financial health. Are you guilty of any of these?
Living beyond one's means
A common money habit people have is living beyond one’s means. You may not realize it, but if you use a credit card and don’t pay off the bills in full each month, you’re already spending more what than you have. And it's not just credit cards. Living beyond your means can also include buying a home that's too expensive for you or taking out loans that you can't afford.
The good news is that there are ways to stop yourself from living beyond your means. One of the most effective ways is to create a budget and stick to it. This may sound like common sense, but many people don't realize how much money they spend each month. When you create a budget, you'll be able to see exactly where your money goes and make adjustments accordingly.
It’s better to live within your means or even live below it. This may seem counterintuitive, but if you can learn to live on less money than you make, you'll be in a much better financial position. This doesn't mean that you have to give up all of your luxuries, but it does mean that you need to be mindful of your spending. If you can cut back on some of your expenses, you'll be able to save money and avoid debt.
Failing to budget
Planning and sticking to a budget is one of the most important things you can do to stay financially afloat. But even if you're the most disciplined person in the world, there can still be times when you overspend or fail to budget correctly. When that happens, don't beat yourself up - just take corrective action immediately.
One way to combat going over your budget is to create a buffer. This is a portion of your budget where you allocate a little extra money each month so that if you do go over in one category, you have some wiggle room. This will help to keep you from dipping into other areas of your budget or going into debt.
Another helpful tip is to track your spending very carefully. Several apps and websites can help with this, or you can simply write everything down in a notebook. By keeping a close eye on where your money is going, you'll be more likely to catch areas where you're overspending and can adjust accordingly.
Not saving for retirement
One of the biggest financial mistakes that people make is not saving for retirement. A lot of Filipinos think that they don't need to start saving for retirement until they're older, but that's not true. The sooner you start saving, the more time your money has to grow. If you don't start saving for retirement early, you may find yourself struggling financially when you retire.
One of the best ways to save for retirement is to open a retirement account with a local bank or investment firm. These accounts offer tax breaks and other incentives that can help you make the most of the money you invest.
Another way to save for retirement is to create a budget and stick to it. Make sure you allocate a portion of your income each month towards your retirement savings. You may also want to consider investing in a mutual fund or index fund, which can offer potential growth without the risk of investing in individual stocks.
Lets transform Filipino spending habits
If you want to avoid these unhealthy Pinoy money habits, it's important to learn about personal finance and develop good money management skills early on in life. Financial literacy is not something that's taught in schools, so it's up to parents and guardians to teach their children about money matters from an early age.
Learning to budget, save, and invest can set you up for long-term financial success and reduce stress in the present. Good money habits also lead to being able to make smart financial decisions. It's important to remember that good money habits take time and dedication to form. It's not always easy, but having control over your finances can bring peace of mind and a feeling of empowerment.
Metrobank’s Earnest is an excellent resource for learning about good money habits. If you want to learn more about personal finance, be sure to check out our other articles on Earnest. We have tons of tips and advice to help you take control of your finances and reach your financial goals.