Being prudent in managing your purse is one of the keys to financial success. However, in times of economic crisis, personal finance management becomes an essential tool for survival. The job losses, business closures, and reduced earnings experienced during the pandemic highlighted the value of a stable income and adequate savings. For some, these two are the only things keeping them afloat right now. Unfortunately, there are also those who may come out of this crisis with a lot of debt in their hands. But perhaps some of these personal finance tips can help in dealing with money woes.
Strike a balance between earning and spending. One of the basic personal finance tips that you should always remember is to never spend more than what you earn. Sadly, this is often easier said than done especially with credit cards and “buy now, pay later” terms which allows you to spend money that you have yet to earn. To keep yourself from falling into these debt traps your first priority is to get an accurate picture of how much you are earning. This will at least give you an idea of how much you could afford to spend. Then take a look at your essential expenses. These are utilities, food, medicines, transportation, and other basic needs. You can use financial planning tools like the budget calculator below to help you get accurate figures.
Once your figures are in, check if your earnings are able to cover your expenses. At the very least you should have at least 10% to 20% of earnings leftover from expenses. This way you could afford to set aside savings and still enjoy some leisure in life. If your bottom line turns out to be heavy on expenses then you’ll have to find ways to augment your earnings and manage your expenses.
Secure your savings first. Setting aside funds for the future is also a must in our personal finance tips. As mentioned above some people are able to get by these days with the help of their savings. Otherwise, they may not be able to provide for their family’s needs. The prudent thing to do is immediately set aside a portion of your paycheck and deposit it in a savings account. Small amounts of cash deposited on a regular basis will allow your funds to grow and earn interest with little effort on your part.
Aside from saving for emergency needs, one must also save up for the future. The younger you start the better. This is because you’ll have more disposable income in your hands while you’re still single compared to those who have a family to support.
Explore investment tools or sources of passive income. Once you’ve got your savings and emergency fund squared away, you can now look for ways to make your money work for you. This can be done through investment tools that allow you to earn more without putting in a lot of effort. The easiest way to get a passive income is through high yield savings accounts or time deposits. But given the inflation rate, we have now, the interest rates of high-yielding savings account aren’t enough to combat inflation. (photo from https://www.bworldonline.com/headline-inflation-rates-in-the-philippines-april-2021/ )
Other investment tools that you may consider are government bonds or long-term stocks that give your money a better chance against inflation. However, these types of investments also come with risks which is why you should also be careful in choosing stocks to invest in. The nice thing about this day and age is that you’ve got apps and stock simulators where you can practice trading strategies or test the waters first before getting into the real thing. You can also easily find stock trading data at the PSE edge online to help you with your investment decisions.
The bottom line of our basic personal finance tips is to earn well, save more, spend wisely, and invest carefully. This could be your mantra for a financially secure future and financial readiness to face a crisis similar to one that we are facing now.