Money is generally one of the hardest topics for Filipinos to discuss, even with close friends and family. Yet young Filipinos do seek advice about it. A 2017 study on financial behavior showed that of the 83 percent of Filipino youth who rely on parental advice, 40 percent consult their parents before buying a home.
There is often more to financial knowledge than what family members can provide, however, so we turned to an expert for sound money advice for millennials.
1. Seek Expert Advice
While it’s a great thing for the young to seek advice from the more experienced, it would be even more helpful to supplement it with the nuanced viewpoint of a professional.
“I believe one should also seek the advice of a professional when it comes to serious concerns on their finances,” says Fitz Gerard Villafuerte, Registered Financial Planner, entrepreneur, and owner of finance website Ready To Be Rich. “We can rely on our parents’ advice on how to treat a headache, or a light wound. But if we’re really feeling sick, there’s no substitute to professional medical advice from a doctor.” (Unless, of course, your parents happen to be experts, too!)
So, as a millennial aiming for financial success, get the best possible results by seeking guidance from qualified and experienced professionals—people who have studied the field and can provide accurate and useful information. Even simple questions can help you avoid painful and preventable money mistakes, such as going over budget or availing of credit-to-cash loans for non-emergencies. As one Turkish proverb puts it, “Those who ask blush only once; those who refuse, twice.”
2. Earn, Save, Earn Some More
While starting out as a young professional, one’s highest priority is typically to earn and keep earning. But making money is only one portion of wealth-building. The other—saving—often goes neglected on payday.
Saving is the bedrock of wealth—without it, one simply cannot stay rich. Stories abound of instant millionaires sliding into debt and poverty due to financial mismanagement, and it’s not difficult to see why this happens. A wealth mindset does not automatically appear once you make extra money. You must cultivate that mindset through habitual saving, even when your earnings are still small.
Therefore, an essential item to have on your cash flow spreadsheet is personal savings, logged under monthly expenses. Save a fixed percentage every time you earn, not just when you can. This applies even if you currently have major financial responsibilities, like a mortgage. “It’s recommended to still work on being able to regularly save a portion of one’s income,” says Villafuerte. “One can choose to save 5% of their income, and using only 25% for the mortgage payments.”
By treating savings as a necessary expense—one that buys you your future—you ensure that you will have money when it counts, whether to invest or to use in emergencies.
3. Plan It Out
When it comes to managing money, planning is non-negotiable. Planning tells you where you are now and where you need to go. Without it, you’re just aiming in the dark and hoping for the best.
Take, for example, big ticket purchases like getting a home. “When it comes to buying a home, you should always do a simulation of your cashflow to check if you could actually afford it,” says Villafuerte. “If there’s one thing that millennials and everyone else should do, it’s to open a spreadsheet, list their income and expenses, and check if they could really afford the purchase. And if not, then at least you already have a list of your expenses, and it would be easy to pinpoint spending you can cut so you can afford it.”
A simple example of such a table would look like this:
|Monthly Income||Monthly Expenses|
|Salary…………………….Php xxxxx.xx||Item 1………………… Php xxxx.xx|
|Item 2………………… Php xxxx.xx|
|Item 3………………… Php xxxx.xx|
|Item 4………………… Php xxxx.xx|
|Cashflow (Income – Expenses)||Php xxxx.xx|
“If one can save at least 30% of their monthly income, then it’s a good indicator that they can afford to take out a loan,” Villafuerte adds, “because that 30% can now be used to pay the mortgage [without needing] to change their lifestyle.”
4. Start Today
When it comes to financial planning, the perennial question is, “When should I start?” The answer, as another financial expert succinctly put it, is—YESTERDAY!
Those who enact a financial plan at a young age stand a greater chance of financial success than those who do so later in life. For one, you have more time for compound interest to work, snowballing your investment income and giving you a better retirement fund. For another, you have more time to recover from serious money mistakes in your 20s than, say, in your 50s. You’ll also have more time to enjoy the fruits of sound financial decisions if you start early.
It’s never too late to get good financial advice. And once you get going, making investments would be easier. You could begin with real estate, where properties increase in value over time and are ideal for reselling or leasing. Visit Avida Land to find the right property to invest in when you’re ready.