How I Became Financially Literate

I lost my parents, including my eldest brother, due to early deaths. Unfortunately, they did not leave me and my youngest brother with any health or life insurance, much less any savings which we could have used for our daily sustenance. So, we decided to sell all our properties until we were left with nothing. And this started our financial difficulties.
 
It took me a long time before I learned to manage my finances better. This was because of three main reasons.

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First, I was taught and made to believe that focusing on money making and wealth building are not good for my soul. If I will have plenty of money, I will be tempted to do things which might lead me away from God. I would live an immoral or unethical life, a life of damnation and punishment. (That was how influential my religious upbringing was!)
 
Second, I did not want to earn more money because I was already content with a regular job where I received a steady stream of income every 15th and 30th of the money.
 
Third, I knew and felt that in cases of calamities or hardships, I could count on my relatives and friends.  I also thought that when I would retire, I would be sustained by my monthly SSS pension and from the retirement money that I would receive from my employer.

​However, as time passed by, my personal experiences bore out that these long-held assumptions about money were not altogether true!

 First, money can be a source of good deeds. I witnessed rich people whom I even personally know who perform good deeds and support worthy causes in society. This is not to mention that they are very religious and deeply spiritual people. They are very kind, thoughtful, loving, friendly, and God-centered people. 

This only reveals that money is neither good nor bad. It is how we use or employ this powerful tool that would result in either good or bad. Money has, in fact, built so many charitable institutions such as orphanages, homes for the aged, and public hospitals, among others. On the other hand, money has also damaged and destroyed lives such as what happens in cases of a robbery, theft, and the likes.

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Second, I realized that my regular pay every 15th and 30th of the money could not fully support my little and big joys in life, which resulted in borrowing money from our school credit union and using my credit cards. (I used to have four credit cards.) My regular pay could not support my dream vacations, locally and internationally. It could neither fund for my dream townhouse or a car.  So, I needed to look for avenues to earn extra income 

Third, there is really the presence of helpful people in my life. But when it comes to finances, it would somehow be a different story. 

I remembered I borrowed money from a good friend to pay for my monthly townhouse amortization because at that time, I mismanaged my budget. My good friend said he will still have to ask his wife about my request to borrow some money. However, when he finally decided to lend me money, it was just one fourth of what I asked for; and he told me to pay it immediately. This quite slighted me and hit my ego because of his demand to pay him after one week. 

However, on hindsight, that incident would have taught me a very great lesson in life, i.e., I needed to save, most especially for emergency situations. In reflection, I did not have the right to be slighted, or even angered or irritated by my good friend’s behavior because he, too, has his own financial concerns. It was my fault why I was in a financial trouble because I mismanaged my budget and did not save.

Because of this event, I swore to myself that I will start saving money, not only for emergency purposes, but also to support my life goals and to pay for the little joys in my life such as eating Chao Fan with fried siomai toppings in Chowking.

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My enlightenment

What helped me greatly improved my financial standing was when a registered financial planner came to our school and talked about the steps to financial freedom. I expected there will be many employees who would attend the session. But only less than ten employees attended even if lunch was served for free. This only showed that financial wellness was not actually the priority of many of my co- employees. But in my case, I took advantage of that opportunity which significantly changed my financial life. 

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​As far as I could remember, these were the simple steps that the financial advisor shared to us.

1.    Stop borrowing money. Always spend below your means.

2.    Pay all your debts. If your debt is too big, negotiate with the creditor to pay your debt according to your means. This may take several months or even years, but at least there is the intent to honor your debt.

3.    Once you have settled all your debts (except for monthly amortizations for a car or a house), save for the rainy days. This means that you need to build your emergency fund which is equivalent to 3-6 months.

How is this done? If your monthly expenses or operational costs are equivalent to Php30,000, you need to start saving for your emergency fund between Php90,000.00 to Php180,000.00. This is very important because in case something happens to you and or you lose your job (either you or your partner), you can still continue to operate and pay for your expenses in the next 3 to 6 months because you have your emergency savings to dip into. It is expected that during these months, you will search for a new job and hopefully will find one before the sixth month ends. 

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​4.    How do we save? Just use this very simple formula:

The typical behavior of many people as with  regards to savings is this:

Income – Expenses = Savings

If you are going to use this formula, then you may not be able to save because you may not be able to control your expenses. You may use up all your savings for things which you like to buy and this leaves no more money for savings. 

So, the best formula for saving money is this: 

             Income – Savings = Expenses

This means that when you receive your income, immediately keep a portion of that for savings. Normally, it is 10-20%. Whatever is left will be used for the daily or monthly expenses. 

5.    You need to invest in a health insurance (especially if you are single so you can financially provide for yourself when you reach old age) and life insurance (especially if you have a family who need to be financially capable in case of your death or disability).

6.    In case you have extra money, do not spend on unnecessary items or services. It is also encouraged that you do not anymore place this amount in the bank due to very low interest rates. Instead think of putting these extra amounts into various investment portfolios like investing in stocks, setting up a business, putting it in mutual funds, and buying properties like a farm or a house which you will rent out, among others.

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​In his recent book, Diary of a Pulubi, Mr. Chinkee Tan, a very popular and sought-after wealth and life coach, cited some reasons why many Filipinos go broke such as the following:

1.    Bonggang Bakasyon Now, Pulubi Later,
2.    Sobrang Matulungin Now, Pulubi Later
3.    Upgrade Gadgets Now, Pulubi Later
4.    Tambay Now, Pulubi Later
5.    Pasalubong Now, Pulubi Later
6.    Bonggang Date Now, Pulubi Later

Many of us can truly relate to these scenarios, which are too very
common among typical Pinoys.  But there is hope if we decide and choose to perform financial planning and investment. 

    To learn about Financial EQ and how it can benefit your group/association, please click here. 
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Doc Ron Motilla is a licensed psychologist, and at the same time a certified specialist in clinical psychology. He received his PhD in clinical psychology from the Ateneo de Manila University. He teaches psychology courses, both in the undergraduate and graduate levels, at Miriam College and is also currently the head of the Integrated Lifestyle and Wellness (ILAW) Center of the same school. Doc Ron Motilla is a founding member of the Psychological Empowerment to Resources and Aspirations (PERA), Inc and is also one of the most sought after motivational speakers in the field of psychology.