10 Things I Wish I Knew About Money
Just almost a month ago, I met a financial adviser, Argel Tiburcio. We had a long talk about my current money situations, and after the talk, all I asked to myself was, "What the hell did I do with my money?" I know hindsight is 20/20,
10 things I wish I knew about money:
1. Delayed gratification is a step to maturity, and step to becoming wealthy.
To be honest, I haven't mastered this one, and this is the toughest job ever! Have you ever felt the need to shop because it's on SALE? Do you always have the urge to travel at least every month? Do you want to be 'in' and have the latest gadgets? I hate to admit, but my answer is yes to all of it. I get excited every time I see promos from every store - I always give in to temptations. If I started practicing delayed gratification, I probably have more money now. Now, what is delayed gratification?
As per definition,
Delayed gratification refers to the ability to put off something mildly fun or pleasurable now, in order to gain something that is more fun, pleasurable, or rewarding later. (Study.com)
This is probably the main reason why only few are rich. Mastering this is a long and hard process but my first step is to learn to say no.
Always opt for cheaper alternatives.
2. If you can't afford it, don't buy it.
It doesn't seem hard to do because we all know how much we earn. I'm always impressed by someone's net worth, not by their material possessions. I used to buy things that I can't afford paying immediately and my reasoning? That's why I have my credit card! So wrong! I learned my lesson the hard way.
What I do now is take note of how much I earn per hour, then every time I buy something I ask myself,
'Is my x hours of work worth it for this one?'
If yes, then I'll go buy it. If not, maybe next time. This is really helping me a lot in controlling myself from buying what I want.
3. Never get into credit debt.
Just like what I said in #2, I was very much dependent on my credit card. It came to a point that my monthly bill was more than my monthly income. Debt is a modern slavery. Avoid paying interest. Eventually, you'll pay back more than you borrowed.
4. Invest. Never underestimate the power of compound interest.
You can earn money by working, but know that you can't work forever. So, why not have your assets work for you? Just by keeping your money in your pocket, you will never have more money than you have. I'm not an expert in terms of investing but I know that it is important to make investments that will generate more cash in the future.
Money isn't everything, but happiness alone can't keep out the rain.
5. Save for retirement (start saving early).
When I talked to Argel, I was told that I need to save at least Php9,000 a month starting now to reach my retirement goal. It is important to start saving for retirement early to increase the odds of reaching financial independence at an early age.
6. Setup an emergency fund.
We will never know what will happen in the future. It's not always a question of "if", but "when" . Argel advised me to set aside three months (to six months) worth of living expenses. It may be difficult to some (including me), but you can start building that fund from your unexpected incomes.
7. Track your spending.
By tracking my expenses, I am able to see where my money is going. Do I spend more on clothes? Books? Shoes? Food? Transportation? The list goes on. What's more important is to know where the bulk of your income is going so next time you won't say, "I don't know where my money went.".
What do I do after reading my monthly income and expense report? I change the way I spend. For almost a year, I go to work by cab which is Php50 more expensive if I just ride a bus. I then opt for cheaper alternative, and I was able to save Php50 a day.
8. Always pay bills on time.
Falling off on paying the bills on time will greatly damage your credit score. This is a bad habit that I picked up last year. I started delaying my payments on a bill since I have more important stuff to spend on that I ended up paying other more costly bills late. It just keeps on adding and adding. I learned from this already (thankfully) and I now prioritize paying my bills before anything else.
9. Budget, budget, budget.
In terms of budgeting, I do the half payment method and cash envelope system. It is important to set aside money to ensure you don't spend money that you don't have. The half payment method is the easiest way to gain control of my budget and I combine it with a cash envelope system.
I have mentioned in my previous post that the cash envelope system is not working for me.. That's because I didn't have discipline. For a month, I lost control of my budget because of the unexpected occasions and thought I could borrow some of the money that I kept in my envelope (that will be used for future expense).
10. There's no way I can get rich in an instant. Work in getting rich slow.
Learn to be patient. Becoming rich is a process, there's no way you can wake up one day with millions of money.
BONUS - 11. Take advantage of unexpected income.
When I say take advantage of it, what do you have in mind? Did you think, 'Yay! I can finally travel to <insert a cool vacation spot here>!'? If yes, stop that. Stop grinning! What I'm trying to say is if you have an unexpected income, why not invest it? If not all, then maybe half of it. Or depends on you. Never take anything for granted. If I have another unexpected income, I'll surely add it to my emergency funds.
BONUS - 12. Higher income doesn't mean more spending.
Remember when you started working? If you were able to live by your budget before your increase, keep your budget that way as much as you can.
And that sums up the things that I wish I knew about money.