When I started my first job at 21, I was so excited about finally earning my own money. But little did I know that it would teach me a lot about the importance of financial planning. At that time, I was blinded by the idea of traveling more. Every time Cebu Pacific or Air Asia had a seat sale, I was quick to book a trip without thinking about how much it would actually cost me. On top of that, I loved treating myself to good food and shopping for new clothes. By the end of the month, I would have little to no savings earned. If you’d like to know more about the importance of financial planning and avoiding debt, here are some tips I’d like to share.
List Down Your Monthly Payables
It was only after a few months of working that I did this. I created a Google Sheet of my monthly expenses. Since I still lived with my parents at that time, I only paid for my own phone bill. My then-boyfriend-now-husband also drove me to work and brought me home every day. So I didn’t have transportation expenses! Looking back, I should have taken advantage of the situation more. I could have saved so much had I learned the importance of financial planning early on. But listing down my monthly payables disciplined me to always set aside money for that. To this day, I still do it.
Use Your Credit Card Wisely and Responsibly
I always tell younger friends to never get a credit card unless they’re disciplined and responsible enough to own one. This was me speaking from experience because it was always so tempting to use my credit card for online shopping. My first credit card was an extension of my godmother’s. The credit limit was P15,000, which at that time, was practically the same amount I was earning each month. I made sure that every time I had a credit card bill to pay, I had enough savings. I didn’t want to pay any interest rates, which would be such a waste.
Now, I own and maintain two credit cards. But I treat them more like debit cards instead. I have a separate Google Sheet to track my credit card expenses for the month so I know how much total I have to pay every cut-off.
Start an Investment and Insurance Fund Early
Another tip I tell my younger friends is to start an investment and insurance fund as early as possible. This way, the premium they have to pay won’t be as high yet. There are a lot of insurance companies that offer 2-in-1 investment and insurance plans. You can discuss it with a financial advisor to learn more. If you need a financial advisor, send me a message and I can recommend mine! Currently, I maintain two investment funds. I have a peso bond fund with ALFM Mutual Funds, where I invest money every time I have extra from my blog earnings. I have another one with SunLife, which I started when I was 26 years old. It’s an investment and insurance fund for when I retire. Every quarter, I set aside P9,000 for it. This also teaches me to save so that future me can benefit from it!
Use an App to Track Your Expenses
Back in 2014, I started using an app to help me track my expenses. This always gave me an idea of how much I was spending on food, beauty products, credit card bills, and more. There are a lot of free apps available or you can simply create a Google Sheet as well!
Follow the 50-30-20 Rule
If you have a fixed income, a good rule to follow would be the 50-30-20 rule. A maximum of 50% pays for necessities such as rent, groceries, and utilities. Meanwhile, 30% is for discretionary items like vacation and travel expenses, car expenses, and entertainment-related expenses. Lastly, 20% should go towards your savings. This provides a quick and easy way to budget your money!
I hope that these tips help you learn more about the importance of financial planning to avoid debt. If you have any questions, please don’t hesitate to place them in the comment section! I’ll be sure to answer right away. Do follow me on Facebook, Twitter, Instagram, and YouTube to stay updated with all things beauty, home, pets, and lifestyle.