By Patricia B. Mirasol
Achieving life goals entails the proper management of personal finances. “But do you know where your cash goes?,” asked Camille D. Francisco, head of Insular Life’s InLife Learning Academy.
In the first part of “Shaping Her Future: Sheroes Guide to Financial Freedom,” Ms. Francisco explained basic personal finance concepts and shared tips on how Filipino women can take charge of their economic well-being. Here are the steps to achieving a healthy cash flow.
MINIMIZE BAD DEBTS
Good debts, such as business loans, increase one’s net worth. Bad debts, such as loans to sustain a lifestyle, do not. The road to becoming debt-free starts with asking these questions: How much of one’s income goes to debt? In what order should these debts be paid? How much is needed to pay all these? Creditors can be prioritized through the high-interest method (paying the debt with the highest interest first while just making minimum payments on the rest) or the small debt method (paying the smallest debt first while making minimum payments on the rest).
A crucial step in debt management is realizing that credit cards are not manna from heaven. Aim to pay credit card statements on or before the due date–and in full. Credit card companies earn from the interest of such statements not paid in full. Avoid cash advances and be aware too of any unauthorized purchases.
STICK TO A BUDGET
The struggle is not in creating a budget–it’s in sticking to it. As leadership expert John Maxwell said, “A budget tells your money where to go instead of asking where it went.” Setting oneself up for success involves simple actions like reviewing your monthly subscriptions (are you still utilizing a co-working space or are you now working from home?) and canceling the ones that are no longer applicable.
Download personal finance apps that help track income and expenses. Note that financial planning is not a one-size-fits-all. What works for a two-income family of five does not work for a single mother with a toddler. Create household budget targets that take into consideration the reality of one’s life.
Look for a suitable side hustle in line with one’s schedule, resources, and company policy. Do it outside of office hours.
Invest in yourself regularly through continuing education or new skills. This is non-negotiable because of inflation and a rapidly changing world. Workplaces are ever-evolving and there will be few “jobs for life.” Take advantage of free courses online.
Before investing, ensure an emergency fund of at least three to six months’ worth of living expenses. Ideally set aside at least twenty percent of one’s net income each month as savings, else start small. Never borrow to invest. Never borrow from your savings either. “Don’t touch it,” said Ms. Francisco. “This is the worst type of debt because you don’t pay it back.”
When investing, learn more about the product first. If it’s too good to be true (“Risk-free! Double your money in 30 days!”), then it’s not good at all. Choose among the most common ways to invest based on one’s financial goals and appetite for risk. Understand that all investments come with some form of risk. Do not put all your eggs in one basket.
Shaping Her Future: The Sheroes Guide to Financial Freedom is part of the InLife Sheroes Movement, a program that aims to empower at least one million Filipinas and expand their access to risk-mitigating solutions and investment opportunities. The aforementioned module was co-developed by the Philippine Business Coalition for Women Empowerment (PBCWE), Philippine Women’s Economic Network (PhilWEN), and InLife. The module comes in three parts: Basic Financial Literacy, Investment Planning, and Estate Planning.