- Most Filipinos struggle financially because of their lack of knowledge about the responsible and effective management of money.
- Lifestyle inflation is the increase in spending when a person’s income goes up or his cost of living goes down.
- Achieving financial independence requires two things: action and time.
- Visit The Financial Today’s homepage for more stories.
Today, we are celebrating the 122nd day of independence of the Philippines from Spain. Just like how our brave heroes fought for our freedom, everyday Filipinos are also hard at work to achieve financial independence for themselves and their loved ones.
And for us to become victorious in the war against financial poverty, we need to be able to win the following financial battles:
Battle against financial illiteracy.
Most Filipinos struggle financially because of their lack of knowledge about the responsible and effective management of money. The root cause of this financial illiteracy can be found in many aspects of our society like the lack of proper education about the subject of personal money management and our culture of financial dependence in our family, relatives, and friends to name a few.
For us to win this battle against financial illiteracy, we need to arm ourselves with the knowledge and skills that will enable us to manage and grow our finances effectively. This can be done by reading books about money management, attending seminars about personal finance, taking online courses about financial & investment management, and even consulting experts about your finances.
Battle against lifestyle inflation.
Lifestyle inflation is the increase in spending when a person’s income goes up or his cost of living goes down, being able to pay off a house or car loan, for example. This results in a person’s increase in discretionary income.
Instead of being able to save and invest more, most people who experience an increase in their income gets into deeper financial trouble. This is because an increase in income enables a person to spend money on previously unaffordable things.
Lifestyle inflation is hard to detect. If left unchecked, people who experience this phenomenon can find themselves in deep financial problems. Clear signs of lifestyle inflation are when a person has a lot of disposable income but still having difficulties saving money or if his debt continues to pile up.
The best way to combat lifestyle inflation is to set a limit on your expenses by setting up a budget. Developing financial self-control and setting up a practical lifestyle can also help prevent you from falling into the lifestyle inflation trap.
Battle against impressing others.
In the age of technology and connectivity, it is easy to compare our lifestyle to what we see from other people through their social media posts. This could easily result in keeping up with our peers’ lifestyle that might lead us to unnecessary expenses our income could not possibly handle.
The best way to avoid falling into this trap of trying to impress our peers is to develop an inner scorecard. An inner scorecard is simply a way of measuring your own life, values, and success. Knowing what’s truly important to you, instead of what you believe will impress the people around you, will help you avoid falling into this financially dangerous trap.
Battle against financial inaction.
Achieving financial independence requires two things: action and time. If you are serious about achieving financial freedom, you need to take necessary actions and you need to do it now.
The earlier you start to budget, the better. The earlier you start saving up and building your emergency fund, the better. The earlier you get insurance, the better. The earlier you start investing, the better.
Winning the war against financial instability and achieving financial independence requires winning a few important money battles. Being able to equip yourself with the right knowledge, exercising self-control, developing your inner scorecard, and taking the necessary financial steps today will help you attain the financial freedom you and your family deserve.