Tuesday, July 28, 2009

Financial Literacy 101

Last Sunday, Bro. M gave a wonderful talk on financial literacy and taught us very important lessons on managing our finances well. The talk made me realize that life is not all about SSA. There are other things as equally important that we need to attend to – and one of them is finance. Bo Sanchez has said it very nicely in one of his books: “Money is not the most important thing in the world, but it affects every other important thing.” How true this is. As long as I am in the world, I will need money at least for my basic needs like food, shelter (rent and/or utilities), clothing, and of course cell phone loads!

Why am I bringing up this topic by the way? Well, partly because I think this is a special concern for us people with SSA. Apparently, there are some gay men who lavish money on wrong priorities including but not limited to their ‘boy toys’ and paramours. Many end up broke in the end – both financially and emotionally – because as soon as they are no longer capable of providing support, they are all by themselves, feeling used and abused.

In the meantime, here are the possible worst case scenarios to think about:

Case#1: What if I live long enough, say until 80 years old and still a certified bachelor, how will I be able to support myself financially beyond the age of retirement? Social security? You’ve got to be kidding me. I don’t think the pension from my social security will be enough to cover all of my basic needs including my medicines. It’s ‘mabuti lang sa wala’ but then is that the kind of life I want to have in my old age? Good thing I’m still young now and I still have time to save up for the rainy days. Can you count on your siblings or relatives to take care of you? Forget it. You might end up as a charity case.

Case#2: What if I die too soon and I am the breadwinner in the family, who will sustain my family’s needs? Who will continue to provide for the responsibilities I leave behind? Whenever I watch the news about a tragedy, most of the time the survivors are weeping bitterly not because they miss their loved one, but because they are left with the heavy responsibility of feeding the family and raising the kids the breadwinner has left behind. Even the cost of dying and providing a decent funeral is beyond the reach of many, most especially the poor.

Case#3: What if by some misfortune I contract a debilitating disease or suffer from an accident that will require long-term health care and render me invalid for the rest of my life? What now? I have seen this type of cases in nursing homes where their family/relatives have abandoned them because the cost of providing medical care is simply too much for them to bear, and it is really tragic because now they cannot do anything but to accept their fate.

As morbid as my case scenarios are they can happen to anyone. It can happen to you. On our part, it is our responsibility to know the ways and means that are available to us to improve the current state of our financial health. The bottom line here is what kind of life do you want to lead when you retire? Basically, the lessons I learned are:

1. Save, save, save. This is a matter of discipline for many of us. You may complain that what you’re earning presently is just barely enough. Well, try to do this simple exercise. Track your expenses for a month or two and then at the end make an evaluation report. You might be surprised to find how much money goes into your “trivial spending list”, which you could have saved instead. I tried doing this for a month and guess what’s on my top list of expenses? – FAST FOOD. By the way, you can use the Expense Manager feature of your cell phone to do this. Just give it a try because this will give you a graphic representation of your monthly expenditures and where you can cut down if you want to save more. Again, it’s not really how much you earn that matters; it’s how much you save.

2. Eliminate debt. Fortunately, I don’t have credit cards because if I do I would be drowning in debt neck deep by now. It’s just too tempting to spend the money you haven't even earned yet on so many things including the useless ones. If you can do away with those credit cards I highly advise you to do so.

3. Invest. Do you know how banks profit from the money you deposit in your account? While you earn a measly interest of 1% per annum, they earn many times over by investing your money at 10% to 12% interest! In effect, they are profiting more on your own money than you do. What is worse is that the value of your money depreciates over time due to inflation if you just let it sit in the bank. Therefore, it is wise to find avenues where you can invest your money and earn at a higher interest rate.

4. Insure yourself. This is related to case#3 above. Sadly, this is not so popular among Filipinos. Life is full of uncertainties, but just in case of any eventuality would you not feel relieved that you’ve got yourself covered and your hospital bills paid?

5. Increase your income. Times are hard and the income from your regular full-time job may not be enough especially if you are raising a family. Find a part-time job. Turn your hobby into an enterprise. Upgrade your skills for better paying jobs. Sell something. Etc, etc.

Apart from all the things I have mentioned above, I believe that the most important step is to educate yourself on financial matters. There are many excellent financial books out there, but I recommend reading Robert Kiyosaki’s Rich Dad Poor Dad series and Francisco Colayco’s Wealth Within Your Reach. On the internet, you can also visit a number of blogs but I recommend Fitz Villafuerte’s blog Ready To Be Rich and Frugal Pinoy .

I hope my post today has made you realize your money’s worth. This has nothing to do with being materialistic or greedy. This is a practical lesson on financial stewardship. You are doing this because you want a better life not just for yourself and your loved ones, but also because you want to be a blessing to others as well.

"By failing to prepare, you are preparing to fail." - Benjamin Franklin

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