Your money-saving habits can either help or hurt your financial well-being. They can also be a reflection of your overall lifestyle and priorities. That’s why it’s important to take a close look at your money habits and make sure they align with your goals and values.
Learn more about the good money-saving habits every Filipino should develop as well as money habits you should avoid. We’ll also discuss how to develop good money habits to get you started on your journey.
Building good money habits is important because it can help you reach your financial goals and avoid debt. No matter your financial goals, you need saving, budgeting, and investing to help you reach them.
Saving
Learning how to save is probably the most effective money habit you need to develop. One reason is that it can help you in case of an emergency.
For example, if you get into an accident and need to suddenly have your car repaired or if you get dengue and need to be hospitalized, having savings can help you pay for those expenses without going into debt. You won’t have to take out a personal loan or use your credit card to shoulder your emergency expenses.
Another reason to establish this good money habit is for your future. If you want to retire someday, you need enough money saved up to cover your living expenses. Even if you don't plan on retiring, it is still a good idea to save for the future in case you lose your job or have other unexpected financial challenges.
Saving money is also an important money habit because it can help you reach your financial goals. For example, if you want to buy a house, you need to have money saved up, even if you’ll be taking out a home loan. Or, if you want to start your own business, you need money for startup costs.
Budgeting
Finally, you need to learn how to deal with your finances because this will help you save money. When you budget, you track your income and expenses so that you know where your money is going. This can help you find ways to save money by cutting back on unnecessary expenses.
One thing to note about budgeting is that it isn’t permanent! What once worked for you may not necessarily work for you in the future, especially if you’re planning on making a big purchase or getting a car loan. So, you need to regularly examine your budget to see if it still applies to your current living conditions or if there are areas you need to cut back on or add more money to the budget.
Investing
Investing is another tool you can use to reach your financial goals and is also a good way to grow your money. When you invest, you are essentially putting your money into something that has the potential to increase in value over time. This can help you build wealth and reach your financial goals more quickly than if you simply saved your money in a savings account.
Of course, there is always risk involved with investing, and you could lose money. However, if you diversify your investments by not putting all of your eggs in one basket, you can minimize your risk and still potentially make a lot of money.
You also need to be careful about the money habits you develop because some can cause you to lose your hard-earned money. Be mindful of these common bad money habits.
Impulse buying
One of the biggest bad money habits is impulse buying. This is when you buy something without thinking about it first or without considering whether you really need it.
With the rise of online shopping platforms, it’s now easier than ever to purchase items even if you don’t really need them. This is a money lesson a lot of people may have learned the hard way, especially during quarantine and lockdown seasons. To avoid impulse buying, take some time to think about your purchase before you make it. Ask yourself whether you really need the item or not. If you can live without it, chances are you don't need it.
Another way to avoid impulse buying is to make a list of what you need before you go shopping. This way, you can know how to avoid overspending and won't be tempted to buy things that you don't really need.
Living beyond your means
Another bad habit that can lead to financial problems is living beyond your means and now knowing where to use your credit card. This is when you spend more money than you make. To avoid living beyond your means, make sure you stick to a budget. Track your income and expenses so that you know where your money is going.
Not saving for the future
One of the biggest mistakes people make is not saving for the future. This can lead to financial problems down the road, such as not having enough money saved up for retirement.
To avoid this mistake, start saving for the future as soon as possible. The sooner you start, the more time your money will have to grow. Even if you can only save a little bit each month, what matters is you build the habit of saving regularly. A little goes a long way and in time, you’ll see your savings build up.
Identify your bad money habit triggers
The first step in developing good money habits is to understand what triggers your bad ones. Whether it’s emotional spending, impulse purchases, or neglecting to budget, recognizing the situations or feelings that lead to these bad money habits is crucial. Once you identify the triggers, you can work on avoiding or managing them more effectively.
Create a realistic budget
A well-planned budget helps you see where your money is going and makes it easier to allocate funds wisely. Start by tracking your income and expenses, then set realistic spending limits in each category. Stick to your budget by reviewing it regularly and adjusting it as needed to ensure it remains effective.
Use the “30-day rule”
If impulse spending is an issue, try the “30-Day Rule.” Before making a non-essential purchase, wait 30 days. This cooling-off period helps curb impulsive buys by giving you time to consider whether you truly need the item. Often, you’ll find that the desire to purchase diminishes over time.
Automate savings
Set up automatic transfers to your savings account each month. This way, you’re prioritizing savings before spending, making it easier to build your financial cushion. By automating savings, you reduce the temptation to spend and reinforce the habit of saving consistently.
Developing good money habits requires consistency, discipline, and mindful decision-making. By budgeting wisely, prioritizing savings, and being intentional with your spending, you can build a strong financial foundation. These habits, practiced regularly, will lead to greater financial security and help you achieve your long-term financial goals. For more tips on financial education, check out our other articles on Money Basics.