10 Money Habits to Leave Behind in 2015

Background image from exchangeratecalculator.com

Last time, I wrote about the things that I intend to not take with me in the new year. One of the things I wrote is this:

6. The mentality that being financially ignorant is cool
I've written personal finance posts for a year, but being the human that I am, I still succumb to temptation and forego saving and spend on unnecessary things. Looking at my account, which should've contained more, I learned that it is uncool.

But it is a little vague, isn't it? I thought about it yesterday and figured I should remind myself (and you) of the things we should stop doing if we care to have a financially independent lifestyle in the future. Here they are:

1. The One-Day Millionaire attitude

WHY: Because I've been like this and it has always led to buyer's remorse. Also, you won't have any money left for an emergency.

SOLUTION: Pay yourself (savings) first and give to the church or the community. Then pay all of your bills next. Invest some amount, and divide the remaining into categories of your budget. With the amount remaining, I doubt you'll still be in the mood to spend.

Source: popsugar.com

2. Disregarding emergency funds

WHY: Because so many people are unprepared for real emergencies, and this is the reason why so many people get buried in debt.

SOLUTION: Build an emergency fund by making an account (preferably without ATM) and depositing a certain amount monthly.

3. Spending so much to maintain an image or make an impression

What it Means to Live Within Your Means

Many of us have surely thought of ways to live a financially comfortable life. I know I have, and I have my reasons. But if we all have the same aspirations, why is it that only a few actually get - and stay - rich?

What separates those on their way to financial freedom from those who, let's just say, are on the totally wrong route?

The answer is simple - too simple actually. Those in one of the two groups live within their means.

C'mon. I must've heard of that a thousand times already. Can't you give me something new? A surefire way to get rich?

Unfortunately, no. You must have heard of the advice a thousand times, and the reason for that is that it works! Coupled with the practice of delayed gratification and having financial knowledge, the principle of living within your means is the surefire route to financial independence.

Why? 

Finance Friday: Your First Investment

Just a few days ago, a friend of mine asked for my help. She wanted (still wants) me to manage her finances.

Woah!

Who would have thought I'd ever be some informal financial adviser of sorts? The way I described it makes it obvious that I'm not taking myself seriously. And that is kinda true because, hello, I don't have certificates under my belt!

But the calling to help other people fix the financial aspect of their lives? I'm taking it very seriously.

This friend of mine, her financial life is not really in shambles. Let's just say she made a few wrong decisions along the way, and now it's time to right those wrongs. And I'm so excited! I can't deny the joy I feel to be part of someone's journey to financial freedom.

Carried Away

During that conversation, I wanted to give her a crash course of everything I came to know about personal finance! She already tithes, so I wanted to tell her about budgeting, emergency funds, investing. Oh I could go on and on!

But thank God for he kept me from getting carried away. He whispered, "Wait. Doesn't she need to go through the first step first?"

Oh yeah. I almost forgot.

Some People Never Look; They Just Jump

Finance Friday: Tips to Practice Delayed Gratification

 

You may understand "delayed gratification" and what it means, but do you practice it?

A couple of Fridays ago, we talked about this secret key to wealth that we call "delayed gratification." We found out how it works and why it should be your ultimate mindset if you want to achieve success in your life.

Let's admit it. Living this kind of lifestyle is easier than done. But another cliché that speaks truth is this: it always seems impossible until it's done. Oh yes, it's hard, but it's not impossible!

In fact, if you begin taking baby steps now, I'm sure your future self will thank you. And me. Haha! Kidding aside, if you're clueless and don't know where to begin, fret not because I'm about to give you practical and doable tips:

1. Create a budget and maintain it.

I firmly believe that writing down should be the first step in reforming your personal finances. This does not only tell you how you can save on your finances but also show you how much money you really have after taxes. The latter is important in keeping in mind how to live within your means.

For more information on budgeting, please click visit this post: Why You Need a Budget.

2. Know the difference between needs and wants.

This is a no-brainer. I'm sure this is self-explanatory. No, a pair of Raybans is not a need.

3. Stop acting on impulse!

Finance Friday: The Secret Key to Wealth

So I guess many of us have already heard of the famous Marshmallow Test.

You know, the study conducted by Stanford University in the 1960s on 600 4-year old children. A child was given a marshmallow and was told that if she doesn't eat it right away, she'll have another one later.

Basically, the two options were these: one now or two later?

Image from Youtube

It sounds like a no-brainer, but to 4-year olds, that's tough. I mean, who wants to wait? But only 30% passed the test. Later in life, the researchers also discovered that this 30% are the more successful of the group. Interesting, right?

So what's the point I'm driving? Simple. The secret key to wealth is more than self-control; it's more than sheer will-power. The secret to wealth is this:

Finance Friday: The Social Climber

Photo: http://www.andbethere.com

The social climber, for me, is someone who "needs" to have the latest and the current best. She feels the "need" to upgrade her lifestyle to keep up with what's new. Thus, while she earns more, she also spends more and saves less, a decision that only she and her family will suffer.

If you're looking for a blog post that badmouths a certain social climber (or, well, gold-digger), I'm sorry; you're in the wrong place.

It's not that I don't write about gossip (which is somehow true).

It's because the social climber can be easily you. And me.

Now that I have your attention (I hope), come to think of it. Since you started earning money, how many times you have received a raise? From that answer, how many times have you upgraded your lifestyle? Once? Twice? Each time your income increased?

Because let's face it:

Social-climbing is dangerously easy.

I'm confident to ask you these questions because I am on the same ground. Just recently, I realized that on good months, I am now earning almost 50% more of what I used to earn last year. As a freelancer, I technically don't receive a raise. However, as Yuri becomes more independent from me, I am also able to do more work in a day. Hence, more income.

And I'm not complaining at all! I'm praising God for this increase in His provision! The problem is that there is no increase in my savings. On the contrary, there is a big increase in my spending.

Things I Want to Buy for Yuri But Can't (Yet)

There are things we can afford and then there are things we can buy if we wanted to but choose not to (yet) because it's not a top priority.

I seriously hope I'm not the one who thinks like that. Otherwise, it would just confirm my suspicion that I'm inherently kuripot. Hahaha. Well, my mom's an ultimate kuripot, so I shouldn't wonder!

Now I really don't have any problems about buying anything for myself. I'm well-trained at delayed gratification. For example, mason jars are really cheap and I first got fascinated by them May of last year but actually bought them last April. What a long wait!

But for "Yuri Stuff" or things that Yuri doesn't really need but mama wants, I can't wait for too long. I hesitate to shop for my own clothes but would buy Yuri ones even if he doesn't need them just as long as it fits the budget!

Now I'm hoping that you're secretly agreeing with me all along. Most moms siguro do, right? If you don't have a secret no-occasion list for your kid, I'm pretty sure you'll get some ideas from mine below. I apologize in advance! Hee hee!

1. Stainless Steel Cup

This is more of a need than a want because Yuri's cups need to retire. However, I can't buy one yet because, frankly, they are not exactly cheap and I want to choose the best one.

His straw cup is icky (ew, that's what you get from buying cheap), while his 1 1/2 year old Avent is starting to leak. Also, I just found out that even BPA-free plastics are still dangerous. I will save the details for another post.

Image: http://www.zebebe.com

My options are CamelBak Stainless Steel (pictured), KidBasix Sporter Cup, and Thermos Foogo.

2. Milk jars

I'm not veering away from the drinnking cup topic just yet. The one above should address his on-the-go drinking needs but I also need a new non-plastic cup to use at home.

Image from Instagram account, kitchencountermnl

My first option was a Tramontina stainless steel cup - but it's too pricey! 600 for a small cup! No way, Jose. So maybe I'll buy small milk bottles and try to look for covers. I'll hope for the best.

EDIT: Just ordered a set of the milk bottles. Sorry.

Finance Friday: An Excerpt from 'Rich Dad, Poor Dad'

I wasn't able to prepare a full post for this week's Finance Friday mainly because I just discussed a "heavy" topic over the last couple of weeks: the emergency fund. 

Here are the two posts in case you missed it: Why You Need An Emergency Fund Right Now and The Emergency Fund: Tips on How to Build It.

Also, I've been stressing over our internet connection. It has been five days since the last day we had a connection. We've called PLDT twice already and still haven't seen any action. Hello, PLDT?

Anyway, last night, I was reading this very short e-book sent to me via email. It's called Managing Your Money, and it is written by Robert Kiyosaki. Yes, the Robert Kiyosaki who wrote Rich Dad, Poor Dad. 

Image from store.richdad.com

Unsurprisingly, it contained an anecdote from the latter, and I'd like to share it with you because it reminded me so much about our discussion on emergency funds. (I don't think it's illegal to do so since this is just a mini-book that is shared freely over the internet.) Here it is:

I remember asking my rich dad about the habits of the rich. Instead of answering me outright, he wanted me to learn through example, as usual.

“When does your dad pay his bills?” rich dad asked.

“The first of the month,” I said.

“Does he have anything left over?” he asked.

“Very little,” I said.

“That’s the main reason he struggles,” said rich dad. “He has bad habits. Your dad pays everyone else first. He pays himself last, but only if he has anything left over.”

“Which he usually doesn’t,” I said. “But he has to pay his bills, doesn’t he? You’re saying he shouldn’t pay his bills?”

“Of course not,” said rich dad. “I firmly believe in paying my bills on time. I just pay myself first. Before I pay even the government.”

“But what happens if you don’t have enough money?” I asked. “What do you do then?”

“The same,” said rich dad. “I still pay myself first. Even if I’m short of money. My asset column is far more important to me than the government.”

“But,” I said. “Don’t they come after you?”

“Yes, if you don’t pay,” said rich dad. “Look, I did not say not to pay. I just said I pay myself first, even if I’m short of money.”

“But,” I replied. “How do you do that?”

“It’s not how. The question is ‘Why?’” rich dad said.

“Okay, why?”

“Motivation,” said rich dad. “Who do you think will complain louder if I don’t pay them—me, or my creditors?”

“Your creditors will definitely scream louder than you,” I said, responding to the obvious. “You wouldn’t say anything if you didn’t pay yourself.”

“So you see, after paying myself, the pressure to pay my taxes and the other creditors is so great that it forces me to seek other forms of income. The pressure to pay becomes my motivation. I’ve worked extra jobs, started other companies, traded in the stock market, anything just to make sure those guys don’t start yelling at me. That pressure made me work harder, forced me to think, and all in all, made me smarter and more active when it comes to money. If I had paid myself last, I would have felt no pressure, but I’d be broke.”

“So it is the fear of the government or other people you owe money to that motivates you?”

“That’s right,” said rich dad. “You see, government bill collectors are big bullies. So are bill collectors in general. Most people give into these bullies. They pay them and never pay themselves. You know the story of the 98-pound weakling who gets sand kicked in his face?”

I nodded. “I see that ad for weightlifting and bodybuilding lessons in the comic books all the time.”

“Well, most people let the bullies kick sand in their faces. I decided to use the fear of the bully to make me stronger. Others get weaker. Forcing myself to think about how to make extra money is like going to the gym and working out with weights. The more I work my mental money muscles out, the stronger I get. Now I’m not afraid of those bullies.”

I liked what rich dad was saying. “So if I pay myself first, I get financially stronger, mentally and fiscally.”

Rich dad nodded.

“And if I pay myself last, or not at all, I get weaker. So people like bosses, managers, tax collectors, bill collectors, and landlords push me around all my life—just because I don’t have good money habits.”

Rich dad nodded. “Just like the 98-pound weakling.”

I haven't read Rich Dad, Poor Dad yet, but now I'm interested. What are your insights on the excerpt above? I'd love to hear them!

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Finance Friday: Why You Should Track Your Finances

I'll tell you a secret.

The only way to achieve prosperity is to be conscious of every penny.

Oh diba, it rhymes? Haha!

Well, unless you're the heir of Henry Sy or plan to marry some millionaire dude. But you and I know that's not what I mean.

Photo: brucegerencser.net

I was supposed to write about the importance of building an emergency fund when God made me realize that, hey, all the blog posts in the world wouldn't make these people tithe and save if they're not aware of their spending habits.

Without stressing the importance of tracking money, it is hard to know what your true money habits are. Then you'll be forever trapped in the web of lies that tells you you can't give or you can't save because you don't have enough.

Thus the domino effect of not tithing and not creating an emergency fund.

Thus the absence of prosperity and the presence of a poverty mindset (which, again, keeps you from giving). It's a vicious cycle!

It might seem like such a small detail, but tracking where every peso is spent goes a long way. Trust me. Here are the things you need to know.

1. What is money tracking?

Simple. As the name implies, it's the act of tracking your money. It means being conscious of your spending, giving, saving, and, in some cases, borrowing.

2. Why should I track my money?

Finance Friday: Why You Need to Budget

Background image from http://www.moneymanagement.org/

Okay, scratch that. This isn't really about budgeting. Well, we're still gonna talk about personal finance, but I'm loosely using the term "budget" to refer to handling your money correctly.

So why do you need to handle your money the correct way? I mean, why bother if you're going to get paid in another two weeks' time? This is precisely the mindset that you need to get rid of - unless you want a paycheck-to-paycheck lifestyle. In Filipino, isang kahig isang tuka. Unless that's precisely your plan (seriously!), please consider these reasons why you need to handle your money wisely beginning today:

1. Because you owe it to yourself.

Let me tell you a secret: budgeting or handling money wisely isn't as restrictive as it sounds. Sure, it can be hard at first especially if you need to get rid of many bad money habits - they are, indeed, a bad habit to break. However, it's called financial FREEDOM for a reason.

a. Because you shouldn't have to worry about money.

I haven't achieved that ultimate status yet, but this early, I'm already reaping little rewards here and there. For example, I don't have debts of any sort. If one of my stuff at home breaks (such as my blender, my camera, and Yuri's crib, well almost), because I have a little bit of cash saved, I can easily replace them. No debt or installment plans needed.

b. Because you don't need to keep up with the Joneses.

For me, the best part about instilling good money habits is never having to worry about paying for something I don't afford. I don't anymore bother with keeping up with the latest trends and gadgets because I try to live within and below my means.

c. Because you need to be faithful with little before you can handle the large.

Apart from that, if you aim to live a more comfortable life, you need to be faithful with the finances you are handling now (Matthew 25:23). I believe we get even more blessed if we achieve the right amount of wisdom to handle the upgrade. Now it's no wonder why lottery winners lose all their money so fast: they haven't gone through the test of being faithful with little.

d. Because what you are in the future depends on what you do NOW.

To be completely upfront, I've never heard of anyone with bad money habits who became truly successful in life. There was never a gambler or a squanderer who lived a truly successful life. And before you tell me about tycoons and politicians, what I mean by "true success" is personal, financial, and relational success. The works. If you want a bright future for yourself and for your family, the first step begins now.

It's very liberating once you realize you're not a slave of money after all. Au contraire, money should be your slave! And this is a benefit you should not deny yourself.

2. Because you owe it to other people.

Have you ever heard of the saying, "Live simply so that others may simply live?" I never understood this saying until I got into personal finance. Slowly but clearly, I began to understand it. We are stewards of God's blessings. We often say this but don't take it to heart: God blesses other people through us. How? Through the money we earn!

It was a "duh" moment for me. Some people need to depend on other people just for their basic needs. Fortunately, many of us are blessed to have more than what we need. Unfortunately, the extra money we have goes to financing our wants.

Congratulations! You just made Henry Sy even richer!

Think about this: how many people could have been fed by the money you used to buy the latest iPhone model or for that payday shopping spree? One? Twenty? The number doesn't really count; what counts is that we selfishly prioritize upgrading our lifestyles over feeding a hungry mouth.

Mark 10:21
Jesus looked at him and loved him. “One thing you lack,” he said. “Go, sell everything you have and give to the poor, and you will have treasure in heaven. Then come, follow me.”

It's so sad when God's blessings do not go to those who really need them. That's why the call toward wise money management should not be ignored.

3. Because you owe it to God.

Finance Friday: How to Budget Using the Envelope Method

Hi there! So last Friday, we talked about the basics of budgeting. Here's a recap:

Identify your source/s of income, identify whether it's fixed or not, list down the fixed non-negotiables, list down the fluid non-negotiables, list your debts, create flex, save for short-term stuff, allot for leisure, and make sure all of these are not more than what you make.

Easier said than done, right? Now, I hope you were able to get the basics of budgeting down to pat, but that's not the hardest part. Not even close. After you had made a budget, you need to implement it. In other words, you need to stick to it. How?

One of the easiest - and my favorite - methods of budgeting is the Envelope Method. It's really easy. The principle is to separate your money into different envelopes, which stand for the categories you had created. This way, you only spend what you allotted for each category.

For example, if you allotted P1000 for your leisure money, and you already spent P500 for a movie, it means you can only spend another P500 for leisure for the rest of the month. You cannot borrow from other envelopes. No cheating!

What I like about this method is that I can immediately see what's left of my allocations for my budget categories. It's different to see P6000 all bundled up together. I might be fooled into thinking I have budget for a cheap camera (which I really need). However, when the same amount of money was rightfully separated into envelopes, I would know that I still need to deposit half of that amount for stock investments, a fourth for groceries, and so on.

Plus, in the absence of a tracking app or a planner, envelopes can readily serve as money trackers. What I used to do before was each time I get money from a certain envelope, I write down the details on that envelope. I write the date, the amount I "withdrew," and the reason. This way, I wouldn't wonder where my money went!

Finance Friday: How to Make a Budget Plan

Because we all need to plan our spending and saving!  I have yet to meet a person who doesn't want to save money. In fact, it is rare to meet a person who doesn't need to save money. Well, maybe Gretchen Barretto, but that's beside the point. I bet (metaphorically speaking) Henry Sy's grandsons also save money.

However, it is even rarer for me to find someone who is actually saving money - consistently, faithfully. More often than not, we do not have a lot money left at the end of the month. Instead, we have a lot of month at the end of the money.

Why? Because we fail to make a budget and keep it. I'm not at all a finance or a budgeting expert, but I've always been interested in budgeting. I've done this since I began earning money 6 years ago, and I find it therapeutic (just like writing and listing). Keep in mind, though, that making a budget is different from keeping it, but that's another topic for another day. Today, let me teach you how to make a budget plan.

1. Identify your sources of income.
The first thing you need to do is note your income, which we will later divide into categories. But before that, you need to answer this question: is your income fixed or not? If it is fixed, you also need to work with fixed amounts. If not, like mine, you can work with percentages, which are more flexible (except for the non-negotiables, which we will discuss later). If you have multiple sources of income, and praise God for that, identify all of them.

2. Note the fixed non-negotiables.
After you identify your income and whether it is fixed or not, begin listing your payables. Begin with the fixed non-negotiables. I am using this term loosely to refer to payables with fixed amounts and need to be paid regularly. For example, internet bills and mortgages incur the same amount every month. For both fixed and non-fixed income, you need to list these categories using fixed amounts. Here's an illustration:

3. Note the fluid non-negotiables.
After the fixed non-negotiables, you need to list the more flexible payables. Take note that this doesn't necessarily mean you can choose not to pay this category. I would discourage you from doing that. What I mean here are the payables without fixed amounts. Examples are tithes, donations, and savings for emergency and retirement funds.

Why would I discourage you from skipping this category? Many of us follow the notion of saving what is left from our salary. The formula we usually follow is this:

Income - expenses = savings

This is wrong, wrong, wrong! Ask yourself: when was the last time you were actually able to save somethibg from what was left of your salary? Usually, this never happens because before the month (or kinsena) ends, we've used up all the money already. Not incorporating a savings category into our budget is one of the reasons why we can't save at all. In contrast, the formula we should follow is this:

Income - savings = expenses

See the difference? Now, for people with fixed income, you should cite fixed amounts, too. However, for people without fixed income, I recommend using percentages. In my case, I usually allot 10 - 15% for savings no matter how much I earn. In tithing, a good guideline to follow is to give 10% of what you earn, but if you can give more.praise God! Here's another illustration:

4. Create a "debt" category.
If you have a debt or are paying something on credit or installment, create a new category for that. Cite the amount you need to pay per month plus the interest if applicable.

5. Create a "flex money" category.
I got this idea from The Simple Dollar. You see, no matter how meticulously you track and budget money, there will always be times when you need to pay something you didn't account for. For example, one day, a package from the US arrived here and the postman asked me to pay P50 for it. I certainly didn't know about that! This category allows you a bit of freedom and flexibility and prevents unnecessary stress because it allows you room for unseen expenses which are not necessarily life-and-death. (Keep in mind that this is different from the emergency fund).

6. Identify your short-term saving goals.
Next, you need to create another category for an item or a vacation you're saving up for. You should create another entry for this because this doesn't fall under the long-term savings illustrated in number 2. For example, I usually begin saving up for Christmas in September. You can do this when you're saving up for an iPad or to go to a summer getaway in Siargao.

7. Create a "leisure fund" category.

Top 5 Apps I Can't Live Without

Okay, that's a hyperbole. Of course, I can live without these apps. Only I'm not sure if I would want to! My phone is a low-end Android phone (I just have to say low-end), but I enjoy it and make the most out of it. Here are my five most favorite and most used apps:

5. Quick Note

As an impulsive writer and list-taker, a note app is a must-have in my phone. Quick Note must be the nth notetaking app that I've downloaded but so far, it's the best. Surface-wise, it is clean and easy to navigate. The fontface is visually-pleasing and readable. It's also light and doesn't take up too much space in my low-tech Android phone.

What I like here is that I'm able to draft a post in my downtime, while Yuri is sleeping, or before I sleep.

PS: I'm typing out this entry on Quick Note, which I will just share to my Google mail account.

4. Pocket

One of the biggest eaters of my time is reading. Because I work online, I'm very open to temptations of interesting blog posts and articles.

But instead of wasting my time reading, I just click on the Save-to-Pocket plugin of my Chrome browser. It is automatically saved in the Pocket app of my phone. Then, I can read as much as I like before sleeping.

By doing this, I will not miss out on informative and interesting reads without sacrificing worktime. The articles saved inside my Pocket app are usually about the following topics: motherhood and parenting, recipes, budgeting, trivia, and home & living.

3. BPI Express Mobile

I'm a loyal BPI account holder. Even though I only have an ATM account, I like BPI because of the services they offer to make my life more convenient.

For example, I receive my monthly salary via BPI. I can easily check my account using the app. When I need to pay the internet bill, I just transfer the amount using the app. I can also transfer money to other BPI users, which make online shopping hassle-free. To this day, I only buy stuff from sellers who have BPI accounts! (I learned my lesson when I got scammed.)

2. MoBill Budget