Finance starter kit for millennialsSaving for the future is very important. Savings empower us to provide for our families, ensure the education of our children, support us on rainy days and even help us give back to society. However, if you are a millennial like me, you were not taught financial literacy at school.
Those who learned financial literacy were taught by family, instructed by books such as “Rich Dad Poor Dad” or encouraged by TV shows such as the Knowledge Channel’s “Estudyantipid” which teaches students how to manage money. Though targeting students, “Estudyantipid’s” content holds true for working adults as well.
1. Firstly, save as much as you can.
2. Pay yourself first. After receiving your salary, immediately set aside a portion for savings.
It is tempting to pay for expenses (necessary expenses and luho) before saving what is left. Sometimes, there may be nothing left to save at all. Inverting the sequence ensures that you save something. Set aside savings first, then pay for necessary expenses. Whatever is left will be for luho.
3. Make use of compound interest
Bank time deposits and UITFs allow you to safely take advantage of compound interest and stay ahead of inflation. This way, every peso you save makes more pesos for you.
4. Make a financial plan. Set short, mid and long-term goals to help yourself stay disciplined.
For millennials, a short-term goal could be putting 10%-20% of your salary in a bank or safe investment every month. A mid-term goal could be saving for the down payment of a condominium unit. A longterm goal could be saving to pay for your children’s college.
5. Pay the full amount of your credit card bill, not just the minimum. Even low interest-rate credit cards charge an effective interest rate of ~20% per annum.
6. Lastly, being financially literate means knowing to accumulate assets, not liabilities. Anything that loses value over time is generally a liability (new gadgets, more expensive car, etc). Focus on buying assets such as time deposits, mutual funds or real estate.
Stay tuned for “Finance Starter Kit for Millennials, Part 2: Investing.” Here’s a teaser: For a beginner investor, mutual funds offer the best reward for the least risk.
Dan Lopez Layug, CFA, founded PeoplePods which provides dignified and affordable dorms for minimum wage workers of Batangas industrial parks. PeoplePods was listed in the top “Social Enterprises to watch for in Asia in 2018” by DBS Bank (Singapore). His start-up won 1st Place at the 35th INSEAD Venture Competition (France) and the 2017 Kellogg Real Estate Competition (USA). For inquiries, proceed to www.peoplepods.co.
Layug holds a diploma in Building & Property Management from the College of Saint Benilde. He graduated from Georgetown University with undergraduate degrees in Finance and Chinese Studies and from an INSEAD MBA where he was recognized as exemplifying the school’s vision of “Using Business as a Force for Good.” (Story/Photos by: Dan Lopez Layug)