7. Always Have a Monthly Budget
If you are not 30, I am assuming you are not married. If so, it is the best time to start planning your monthly budget.
Create a summary of your current expenses; these are the ones that you cannot miss out on payment such as power, telephone, cable TV and credit cards.
Factor in a budget for variable expenses such as groceries, transportation, supplies and contingencies.
A monthly budget will keep you within your limits. Whenever you see it, you will feel less motivated to spend on unnecessary expenses.
8. Avoid Impulse Buying
It’s easy to get tempted to buy what you want especially when you have the money to pay for it.
If you find yourself in this situation ask yourself two questions:
- “Do I need it or do I just want it?”
- “If I were to lose my job tomorrow, would buying this thing affect my livelihood?”
For years, I had to depend on others for transportation. I knew I had to get my car but could not afford it.
I had to save up if I wanted to become independent with my transportation needs. I did not want to buy a second-hand car because a car is an asset that depreciates quickly.
When I finally saved enough money, I bought the best car I could afford at the time.
I wanted a car that was fuel efficient, had enough space, offered a comfortable ride and looked good. It cost more than I expected but I was fine with it. A car is an asset that you would want to maximize its value while you still can.
In the end, I had no regrets spending for the car because I had worked for it and it was a necessity for my family.
I was 43 when I bought my first car.
It was not bought out of impulse.
9. Learn to Compromise
Even when you have set your financial goals, situations can change without notice. You have to be ready to make compromises when things take the turn for the worse.
When I lost my client in 2013, I reviewed my financial position and cut down on a number of conveniences. These included:
- Disconnecting one cable TV extension
- Running the air conditioner in only one room and for only 6 hours
- Terminating the services of the gardener and did yard work ourselves
- Cutting out family Sunday lunch outs
- Cutting down my workout days to save gas
- Stretching our 1,500 Pesos budget for groceries to last two weeks
Personally, I was eating only one meal per day.
This was difficult especially for our son, but it was something we had to do to keep us going.
Be prepared to compromise certain conveniences if your situation calls for it.
10. Learn to Sacrifice
Compromise is one thing, sacrifice is another. Even before you turn 30, learn the benefit of sacrifice for the greater good. It will keep you sharp and ready should something untoward happen.
Compromising conveniences was not enough since we had to cover amortization on our housing loan.
My wife sold the car she had worked for so we could stay afloat. We also sacrificed our annual family vacation so we could save up and I could take more clients and generate income.
I had to sacrifice my Powerlifting career. I had just come from my first stint with the Philippine Powerlifting team and with the Bronze medal, I believed I was primed to get better.
But with a limited budget for supplements, food, and training, I had no choice but to cut my lifting career short.
You have to be ready for any eventuality life throws at you.
At a young age, challenge yourself and find out if you can give up things that matter to you the most.
Financial goals are just like any other goals. You have to be ready to sacrifice to attain them.
11. Set Aside Money For Your Children
Even if you aren’t married now, it’s a good idea to be mindful of your children’s financial future. For those who are married and plan to have kids, set up a fund for them now.
The fund doesn’t have to be specifically for your future children. It could just be a suspense account for contingencies or emergencies.
When we were able to regain financial footing, we started to set aside money for our son’s education. We are considering getting him an educational plan until college.
As a parent, one of the worst things you can go through is not having enough money to pay your child’s tuition. Save up for it while you can or get an educational plan from a trusted adviser.
12. Set Aside Money for Retirement
It’s never too late to save up for retirement. I am still two decades away from watching the grass grow, but I am already thinking of life as a retiree.
You may think it is trivial to set aside money for retirement at such a young age. But if you just save 2,000 Pesos every month for the next 240 months, you would have more than half a million pesos in savings because of compounded interest!
The SSS Pension Plan will not be enough to get by. My Dad contributed for 60+ years and only receives 2,000 Pesos every month.
13. The Savings Account Will Not Create Wealth
A bank savings account is only good for safe keeping your money. But it will not help you create new wealth.
How much interest does your savings account earn in 1 year? While the bank is paying you 2.75% interest per annum, it is lending out your money at 10% per annum.
By keeping your money in savings, you are only making the bank richer.
14. Look For Good Investment Opportunities
If you want to create wealth, you should look for good investment opportunities.
Ask a Fund Manager for advice on where to place your money to get better returns. If you have enough investible funds, you can try mutual funds. Or perhaps allocate 2%-6% to high-risk investments such as stocks or foreign exchange.
You can also explore venture capitalism. Invest in a business idea that you believe would be profitable in the future.
If you have enough capital, invest in real estate. Land appreciates over time, and you can easily double or triple your money if you buy property in a good location.