Managing your finances can be quite tricky, especially with rising prices and unexpected emergencies. Many tips for money management focus on saving up and investing in stable business ventures. Amidst all this is the key consideration of whether your choices suit your lifestyle and location.
In the Philippines, managing your personal finances can be quite difficult. Many Filipinos manage their budget based on common practices and baseline financial literacy. But without tailoring your personal finance practices, the various hacks and tips you follow won’t be as effective.
In this article, learn more about money management, effective personal financial management tips, and how you can leverage alternative credit data and your own practices to make the most of your finances:
What is Money Management?
Money or financial management refers to the overall process of budgeting, investing, and saving in order to achieve your goals. These activities contribute to your financial wellness and help you build your mobility. When approached with logic and tailored for your needs and priorities, money management and financial planning work incredibly ensures efficient and effective growth for your finances.
When managing your money, there are three things you need to plan: budget, investments, and savings. The three dictate the flow of your money and will affect your present and future prospects. But how do you prioritize between the three?
Creating a budget is one of the very first tips you’ll ever hear for money management. Without a budget, people have a bigger tendency to overspend on wants or under prioritize essentials. Budgeting usually takes precedence in money management as it sets boundaries and dictates how much you should spend on your essentials, needs, and wants.
Spending money isn’t inherently bad, but you need to spend money wisely. Whenever you hear experts say take your time to consider investments, this is what they mean. Investing in assets, properties, businesses, and other personal opportunities are vital. But more importantly, these investments will vary on several things, such as interest rate factors, personal finances, and your priorities.
“By 25, I should have…”
Planning ahead and setting goals were two things you did when you were younger. But now that you’re older and wiser, you probably know that saving up comes with the two. Whether you’re saving up for a new house or an out-of-town trip, learning how to keep what you earn is one of the most important personal finance hacks you’ll learn.
How Money Management Helps Your Personal Finances
Knowing how to manage your money is a skill and art. After all, money management tips aren’t a “one size fits all”–especially if they’re for beginners. Growing and using your finances is based mostly on your personal circumstances and current objectives.
Learning how to manage your personal finances is always a good step. In the long run, following effective money management tips ensure benefits with no sizable downsides. These benefits are also long-lasting and highly impactful in both financial and personal
Some of the benefits of money management include:
Everybody dreams of financial stability, but achieving it takes practice and patience. Thankfully, achieving your money goals can be done with consistent work. Budgeting, saving, and investing efficiently and effectively are key.
Financial experts weren’t kidding when they said good credit opens up doors and opportunities for you. While familiarizing yourself with the different types of credit will help, good money management is a must if you wish to build your credit score. A good score puts you in the good graces of many financial institutions and gives them more confidence in you and your applications.
Money Management Tips for Beginners
Let’s face it: following personal finance tips is difficult–especially if they’re not tailored for your situation. Advice for a student won’t necessarily work for a doctor. In the same vein, personal finance hacks for a minimum wage earner will look different for a manager.
So how do you even start managing your finances?
We’ve listed down 8 personal finance management tips that are perfect for beginners and veterans alike:
Make a personal budget
A personal budget is the backbone of any money management plan. With a well-balanced and realistic budget, you should be able to have a good baseline for your expenses and savings. It also allows you to prioritize major personal and financial goals.
Since each individual will have their own circumstances, creating a budget will be highly personal. However, a good rule of thumb to follow is the 50-30-20 rule. This rule refers to the allocation of your monthly income to three major groups: essentials, wants, and savings.
Once taxes are accounted for, the 50-30-20 rule allocates money using the following scheme:
- 50% goes to essentials, such as utilities, groceries, and loan payments
- 30% goes to wants, such as hobbies and travel expenses
- 20% goes to savings and emergency funds
The 50-30-20 rule is one of the easier tips you can follow for money management since it allots percentages rather than fixed values. Of course, these percentages may change depending on your finances and priorities.
Track your expenses
Have you ever experienced losing money extremely fast?
Well, you’re not the only one. Many workers tend to complain that money from their wages simply slip through their fingers like water. And while prices may be going up, that feeling usually comes from when you don’t know where your money is going.
The best way to avoid this is to track your expenses. Not only is it one of the more doable money management tips for beginners, it’s also one of the most calming financial practices around. With a detailed expense tracker, you’ll be able to have a clear view of your expenditure and monthlies.
Include savings in your monthlies
Setting aside money for your savings is a constant in most lists of personal finance tips. After all, you never want to be strapped for cash. Including savings in your list of monthlies makes the process of saving up much easier.
Generally, there are three things that you should save for: personal savings, emergency savings, and goal-related savings.
Personal Savings: This category refers to long term savings. For many, it is similar to a retirement fund. Personal savings may be something you touch or do not touch at all. If you do decide to spend some of your personal savings, make sure that you’ll replenish it and that you only spend it sparingly.
Emergency Savings: Emergencies are a part of life, so it’s important to be prepared for them. This is where emergency savings come in. Having enough stored for unexpected situations will help you maintain your financial stability to some degree.
Goal-related Savings: If you’ve seen something you want to splurge on but don’t have enough money for it, then you can save up for it. Whether it’s a brand new phone, an overseas trip, or even your dream home, goal-related savings are specifically for things that you want.
Have a cash-only budget
These days, many individuals have turned the cashless route. From utility payments to dining out, many institutions also offer cashless transactions for their products and services. It’s incredibly convenient–but it also makes overspending and keeping track of your spending a bit trickier.
Having a cash-only budget mitigates these problems. When you designate several expenses to be cash-only, you make sure that you don’t overspend on such expenses. This personal finance tip is particularly useful for those who commute or travel a lot daily.
Pick the right insurance
Insurance has become a necessity these days, as more and more Filipinos vouch for its benefits. With several types of insurance available, deciding which insurance to get becomes confusing. Thankfully, you don’t need to get all insurance types to give yourself protection.
A good money management tip is investing in the right kind of insurance. While life insurance is the most common kind available, it isn’t necessarily the most appropriate for you. Do your research, talk to experts, and check your priorities before investing in any type of insurance.
Avoid the “payday splurge”
“Treat yourself” becomes the worker’s mantra whenever payday comes. And while you truly deserve the best, sometimes checking out and splurging isn’t always the best option. If you’re building your money management habits, then one of the best tips for money management is to avoid the payday splurge.
Pay off debts
Outstanding debts are something that you should always cross off as soon as possible. Many financial institutions look at your credit history when you apply for loans and credit cards. Having unpaid debts usually puts a damper on these applications.
Pay off any debts you have as soon as you can and make sure to get a Certificate of Full Payment from the lender. This alerts financial institutions of your credibility and it also clears any liabilities you have. Remember, the less debt you have, the less financial worries you’ll encounter.
Establish good credit habits
Many institutions employ fraud detection analytics in their processes, but that’s not where their background checks end. One of the many things financial institutions check is your credit and spending habits. From bank accounts to credit card payments, credit data is something that financial institutions and alliances share.
Depending on your financial situation, building your credit score can be quite difficult. But that doesn’t mean all is lost! With alternative credit scoring, institutions can still have a baseline of your financial habits even without an extensive credit history.
Moving Forward: Beyond the Personal Financial Management Tips
Money management is an important step in your financial journey. After all, budgeting, saving, and investing are pillars of financial wellness. Learning how to do these activities efficiently will benefit Filipinos nationwide.
Beyond money management lies the greater world of financial literacy and development. Anybody on their journey may aim to get there, but beginners must start with baby steps. These tips for money management are great starting points to ease your journey to financial success.