If I were to asked a question regarding about a lesson I wish I have learned growing up, I would say, it will be about money. Yes, definitely! School taught us about English, History, Math, Science and etc. But they never mentioned about money.
Either my mom or the people around me talked to me about it. And since they never mentioned about it, I never bother learning about money. What they asked me to do, and I’m sure every single parent asked their child to study hard at school. Because education is simply the foundation to success.
Three years ago, when I found myself drowning in financial mess did I become so thirsty for knowledge about personal finance. Why do people go broke even if they’re making decent amount for living? Why do they live a paycheck-to-paycheck kind of life? And why are they drowning in debt?
These questions bothered me a lot and I finally found the answer of the many WHYS I have. Most people are financially illiterate. They were never given the chance to learn about money. On the contrary, we were always taught how to make money but not managing/handling it properly. Because, if we are, people will no longer live in debt. People will no longer work their whole lives.
I, myself, grew up as a poor. My mom is the only sole provider since my father died when I was still a baby. Back then, my mother worked so hard just to get us through everyday. I wonder how she did it but she was able to raise me and my brother on her own.
Yes, I admire my mom so much because she did an outstanding job, raising 2 kids of her own without going into debt. My mom is very frugal in nature and I wished she imparted some of her knowledge regarding money management when I was growing up. I bet, I would have valued and used money well, if she did.
However, if I were given a chance to go back to school and learn again, I would prefer to learn about personal finance: budgeting, savings, debts, and investments.
This one is really basic but the framework of a successful personal finance management. It is something that every single person that makes money should learn. A budget simply means an estimate, often itemized of expected income and expense for a give period of time.
This word, if not dreaded, is hated by people, especially for spenders like me. Why? Because, they simple don’t understand the real meaning of budget. They get the wrong impression. They thought that budget simply limits or restrict their spending. What they don’t know is that, a budget allows you to spend your money intentionally. It tells you where your money is going.
Budget is very essential in every persons life. It helps you get your finances in order and allows you to live a debt-free life and stress-free life without thinking about your regular bills that you need to pay every month.
This means an amount of money being set aside for a specific purpose. Now, do you know what is your purpose? Saving money just for the sake of saving isn’t enough.It defeats the purpose itself. But if you have a specific purpose, it will motivate you more.
Savings can be classified into different categories like emergency fund, sinking fund, house down payment, and kids college fund as well.
Emergency fund is the money that you set aside for unexpected like job loss, or some medical emergencies. It is advisable that you save 3-6 months worth of your expenses. However, if you’re just starting out, a $1000 is a good start to have especially if you’re paying off debt. You should also keep this fund in separate savings account and is easy to access.
Sinking fund is the amount of money set aside for the expenses that you are expecting every year. This includes holidays such as birthdays, New Year’s, Valentines, Easter, Canada Day, Summer, Christmas, Halloween, etc. Other things that you may include in your sinking fund is car ( maintenance/registration ), tax, medical/dental , back-to-school, and vacation.
House down payment is also another savings that you may consider. If buying a house is one of your goal after you become debt-free then you may want to save 20% at least for down payment. For us, we would like to buy one too but not until we’re totally debt-free.
College fund for your kids is another saving fund that you can get excited about. Why? Because I believe that this is one of the best give that you can give to your children. I know that every parent wants to provide their kids with good education so thinking about their future is a must. And as much as possible you want your kids to get through college without any student loan.
It is something that most people don’t want to talk about including me. I don’t want to discuss how much I owe simply because I am in denial. All I thought, it was normal to pay for car loans, credit card bills and the like.
Having debt could be the result of poor money management like not having a budget, no savings and living above your means. I often thought before that just because I am working so hard, I need to buy myself nice things and go on a trip to relax. Because I deserve it. Of course, I do but I shouldn’t have placed it on a credit.
Being in debt has taught me lessons I have not learned growing up. It taught me that it is possible to get out of debt and achieve financial freedom ONLY if I’m willing to do it. Also, having fun doesn’t have to be charged in credit instead it should be planned and budgeted.
It’s so nice when people talk about investment because they can see their money grow. However, when you lack knowledge about investing properly it can lead you to losing money just like me.
A year ago, a friend of mine told me about investing in a condo unit in Manila. He introduced me to an agent and we talked and I was convinced. I purchased the condo unit without really thinking the overall situation ( pros and cons ). What I know is that I DID A GOOD THING! However, it turned out that I am the biggest fool.
Earlier this year, I realized that the condo will be turned over next year and I need to come up with closing fees and that amount is not a joke. Although I can afford to pay the monthly fees, the closing fees stressed me out and not only that, I will be loaning a huge amount in the bank that will take me 20 more years to pay.
Therefore, I did a lot of thinking. I started figuring out the pros and cons of keeping or letting go of my condo. And it led me to a decision that it’s about time to let go of it. The money that I am using to pay for it, is big enough to put a dent on my debt every month so I can be debt-free the following year instead of burying myself into a deeper debt again.
It was the hardest decision I have made myself so far however, it was the smartest one.Did I felt bad about it? Absolutely! But I can’t move on if I’ll let myself dwell in my mistakes. That’s why I keep moving on.
However, it’s not yet too late! I have decided to make minimal contribution to my retirement savings plan again and will eventually invest it to the market.
Financial literacy is very important in all aspects of your personal finance. You don’t have to be expert in this matter but having little knowledge about your finances takes you to the next level. Asking help from experts like the financial advisor is very helpful. Also reading books is another thing that you can do in order to gain knowledge about your finances. I know this from my very own experiences that is why I am sharing to you my story.
Making mistakes with your finances is normal but make sure you learn your lesson from it. Gaining knowledge is very essential. There’s a lot to learn through reading financial books and also by asking people who have experience about it. Joining a community that helps you improve your finances in another way of gaining knowledge.
How about you my friend? Have you had lessons about finances that you wished you learned while growing up? If you do, can you share them too?