It's Time!

by: Kendrick Chua, CIS, The Wealth Warrior

We all make money mistakes once in a while and in my years of financial planning practice, I have come to realize the 10 Money Mistakes people often commit.

1.)    Spending all income. I know of people who spend their income down to the last peso the day before their payday. It’s as if they can’t stand having the money carried over to the next payday. As a result, when a glitch in accounting system delayed the pay, the solution: cash advance or buy on credit.

2.)    Spending more than you earn. What is worse than spending all your income? It’s spending more than what you earn. So if the cash runs out days before the next batch of funds come in, the result is incurring debt. You can always be a free-loader but then you won’t have any friends left.

3.)    Paying only the minimum amount due on the balance. Some credit card companies allow you to pay only 5% of your amount due and people take advantage of this much to the delight of these companies. It’s okay if you really don’t have the cash at the moment but don’t do it every so often. You’ll dig a hole so dip even the devil will have a hard time climbing out.

4.) Not getting life insurance early. In one of my previous posts, I mentioned that the best time to buy life insurance is when you don’t need it. I repeat: when you don’t need it. When you’re young and healthy (hopefully) your premiums are low, your accumulation rate is longer and you can fully-paid up the insurance earlier.

5.)    Not investing early for retirement. One of the 7 habits Covey taught is to “Begin with the End in Mind”. Once you start working, prepare for your retirement. You can never plan too early for this stage. Aim to belong to the 3% Filipinos who are either financially independent or wealthy at age 65. The rest of the 97% are dead, still working or dependent on charity. Choose your side and choose it wisely.

6.)    Not investing aggressively while still young. Some of the baby boomers I have talked to regretted that not only did they not start investing early, they did not invest aggressively. Now, even if they do want to, they cannot afford to invest as aggressively as they would want to. Follow their advice, start young and start aggressive.

7.) Not planning for major financial obligations. Giving birth is not an emergency. It is something being prepared for. Nine months is a good duration to set up enough funds for it. Same goes with education and wedding. Prepare well financially. It can let you enjoy the fruits more.

8.)    Not doing proper research before investing. Some people happen to be scammed more than others. No it is not bad luck as they always thin. Rather, it is the gullibility that resulted from lack of proper research before getting into the investment or joining the company.

9.) Not preparing for rainy days a.k.a. not saving. At some points in our working career, emergencies and unexpected financial circumstances will happen: getting laid off, getting sick and hospitalized, etc.  Although not often, but they are bound to happen. Not having a contingency fund is planning a project without a plan B. You need to have an emergency fund to prepare you for these “disasters”. Otherwise, you’ll be left with no choice but to borrow and be in debt. A good rule of thumb is having three to six months worth of cash easily accessible.

10.) Not giving back to the Lord. This may well be the biggest financial mistake. The Lord, in all His graciousness, provided for all our needs and at times, even some wants. Isn’t it just right we give a part back to him through our tithes and offerings? Seriously, the Lord doesn’t need our money but it is our own way of submitting and thanking Him for all the blessings we are receiving bountifully. The Lord did promise that when we offer Him the first fruits of our labor, he will provide us with blessings so full, we won’t even have enough containers to store them.

Bonus

11.) Not having hospitalization or medical insurance. The paradox of medical insurance is that you need to get sick and hospitalize for you to find this investment worthwhile. But it is better that you have one and not use it at all rather than having none and need to have one. It will greatly mitigate a lot of your expenses which can be allocated for other purposes.