Money has always been a top source of stress for most people. If not addressed, too much worrying about money can lead to serious physical and emotional problems. It can even result in a breakdown in relationships. How to solve money problems then? There are tons of financial advice that people probably already heard or read about. In fact, most of these advices are simply common sense yet one the greatest mysteries about life is that no one really follows them. It sounds so easy to do but for most people, it is very difficult to follow. Here are some of the common sense money advice that people don’t follow:
1. Spend Less Than You Earn
This rule is so simple. Just live within your means. Obviously, if you spend more than you earn, that will only spell debt. Even a grade schooler knows that if you subtract more than you add, you will end up with a negative number. You need to have financial discipline; otherwise, it will be very hard to create wealth. Avoid keeping up with the Joneses.
There are many ways to reduce your monthly expenses. It helps to have a budget. The money jar budgeting system is a good money management technique because it not only helps keep your spending in place, it also helps slowly build your wealth. If spending less is really not an option, then you need to look for ways to earn more money.
2. Understand How Credit Cards Function
How many people are buried in consumer debt simply because they do not understand how credit cards function?
Credit cards are very useful. With credit cards, you don’t always need to have cash. You can purchase anything without having to worry of paying them immediately. However, if you don’t have a basic understanding of how it works, credit cards can turn into your worst nightmare. Always remember that you are not using your own money when you purchase items using your credit card but rather you are borrowing the bank’s money.
Credit card companies use the power of compound interest to their advantage. Compound interest is a very powerful mathematical concept that you can use to increase your wealth. Unfortunately, it is a two-edged sword. If used against you, it is a sure way to financial bankruptcy. That is why understanding how credit card functions is a necessity if you have a credit card.
Unless you know how to manage your credit cards, it is better for you to refrain from using your credit card altogether. Use credit cards only in emergencies. Buying because it is on sale even though you don’t really need it is not a valid definition of an emergency.
3. Automate your Savings
One of the lessons of this pandemic is the importance of having a savings account. Life is unpredictable. Saving money can ensure financial stability in case of emergency.
Pay-yourself-first has always been the initial advice that wealth managers will tell you as the first step towards building your wealth. Unfortunately, most people would rather spend or pay everyone else first before themselves. Savings always comes last. Usually, people save using whatever it is that is left (if there is any).
The best strategy to avoid this scenario is to automate your savings. By regularly setting aside a fix amount through automatic savings, you will soon be able to build up your emergency fund. One of the wealth rules of the richest man from Babylon is to always save 10% of income.
4. Seek Help from Qualified Persons
If your financial woes are already big enough for you to handle on your own, then it is time to seek help from other people. If your problems are about money, ask a professional in financial planning to help you. If you cannot afford your own financial planner, then ask a friend who is an expert in handling money.Don’t just ask any friend.
The problem with most people is that they normally seek advice from friends or relatives who are close to them. However, they fail to consider if these people are also having financial problems of their own too.
Think of it this way, if you are in school and you are having problems with your Math subject, obviously, you will not ask your Filipino or Science teacher to help you. Instead, you will seek the help of your Math teacher or a fellow student who is good in Math because they are the ones who can help you.
Remember to always ask the correct persons for advice.
So, If you want to have a better financial life, it is best to follow the common sense money advice that people don’t follow.
First published in Pinoy Smart Living on 03.26.2019.