By Efren Ll. Cruz, RFP®
In the many years that I have been in the financial services industry, I have come across mistaken beliefs on managing personal finances. The following lists four of the more common ones.
1. Buy one, take one is always a great deal.
Our mind is hard-wired to think that getting freebies is a great deal. This belief is not necessarily wrong. In fact, it can lead to a lot of savings. It is when this belief is applied blindly to all situations that things begin to go haywire. For instance, I found a suitcase in a mall in Taguig that was selling for Php1,400. Seeing that the suitcase was value for money, I bought it. Weeks later, I found the exact same suitcase selling under a buy one, take one promotion in aQuezon Citymall. It is always a good thing to do a little investigation before freaking out in such a situation because I found out that the buy one, take one suitcase was selling for Php2,800. And this is not the first time I have encountered such a situation.
2. If it’s about food spending, don’t scrimp on it.
If you eat to live, the above rule should be fine. But if you live to eat, you will not only lose money fast, you will also grow many fats. Food, even essential ones is good only up to a certain point. For example, water when taken in excess amounts can be fatal to the human body. One way to avoid taking in too much is to eat slowly to allow your body to digest the food and your stomach time to tell your brain that it has had too much already.
3. If you can pay your balance in full, go ahead and charge purchases to your credit card
Credit card revolvers are people who do not pay their credit card balances in full and get slapped the high interest rate. Credit card “transactors” pay their balances in full. Still, because many merchants pass on the fee (i.e. merchant’s discount) they pay to credit card companies for credit card purchases at their store, cash many times is still the cheaper way to transact. So pay in cash as much as possible. And if you have to borrow just to buy an item, ask yourself first if you truly need to have it now.
4. It is easy to earn the coverage that insurance policies promise
No, no, no. The moment you pay your first insurance premium, the amount that you want your family to get in case of your untimely death is already guaranteed. Can you say that with your first pay? You will probably need a good number of years before you can save enough to match the death benefit that insurance policies guarantee. So don’t fool yourself. Go buy life insurance. The earlier you do, the better.
Efren Ll. Cruz is a Registered Financial Planner of RFP Philippines, personal finance coach, seasoned investment adviser and bestselling author of “Pwede Na! The Complete Pinoy Guide to Personal Finance” and bestselling co-author of “Pwede Na! The Complete Pinoy Guide to Retirement and Estate Planning”. Questions about this blog may be posted here, sent by SMS to 0917-505-0709 or emailed to efren@personalfinance.ph.