It’s easy to advice Filipinos that they should have money saved up, money to invest, and to get insurance for their financial security. Well yes, that is entirely correct. Having a savings account, investments, and insurance is a safety net for any financial emergencies. But, there’s something we don’t see behind the smoke and mirrors of every Filipino commoner’s financial situation and challenges- it is their inability to make ends meet. Not all Filipinos can afford to have money saved up after paying the bills and sometimes their income isn’t even enough to cover their monthly expenses. Some may live from paycheck to paycheck, and some even live off of borrowed money. And it is a bit frustrating to hear the same financial advice that doesn’t seem to fit your situation. In this article, we will talk about the common financial mistakes done by Filipinos and possible solutions that can help Filipinos in managing their finances better.
- Not Planning a Budget
Neglecting to create a budget is a prevalent financial mistake that many individuals, including Filipinos, often make. The absence of a budget can lead to financial chaos, as it becomes challenging to track income, expenses, and allocate funds effectively.
Without a clear budget, individuals may find themselves prone to overspending, accumulating debt, and struggling to achieve their financial goals. In the journey toward financial stability, establishing a well-thought-out budget serves as a crucial roadmap, providing guidance on spending, saving, and ultimately fostering financial discipline and control.
- Prioritizing Wants Over Needs
We know how it feels like to want something for a long time and even promised it to yourself to buy this specific “want” once you get your salary. It could be a gadget, new shoes, clothes, or anything that you desire to purchase. Yet, if your financial situation doesn’t allow you to buy this “want” it’s best to do a rain check.
Prioritizing wants over needs is a common financial pitfall that many Filipinos inadvertently stumble into. This subtle but significant misstep can have lasting consequences on one’s financial well-being.
- The “Deserve ko to” Mindset
The “deserve ko to” mindset is a trap! And I bet most Filipinos have encountered it before. The “deserve ko to” scenario is when you want to buy something, AND you can actually afford it, and you convince yourself that you deserve to buy it so you buy it anyways. There are times where you feel guilty after buying an item after the “deserve ko to” moment as sometimes you may be overspending or using your savings to purchase.
Note: There is nothing wrong with buying something for yourself especially if you feel you deserve it. It’s your hard-earned money! What’s bad is making it a habit.
- Failure to Set Boundaries
A factor in financial mistakes that is understimated or not talked about much is failing to set boundaries with your finances. Failure to set boundaries means setting boundaries with yourself and with other people in terms of finances.
A great example would be: a family member that needs financial help and you decide to help them otherwise without thinking about your financial matters. This puts you in a situation where your financials are compromised which can affect your budget, savings, or other financial endeavors.
Note: It’s perfectly fine to help your family or anyone financially, as long as it doesn’t compromise your finances and you voluntarily can provide financial aid.
- Utang na Loob or Debt of Gratitude
Utang na loob or translated as Debt of Gratitude is one of the most common types of financial mistakes that common Filipinos face. Utang na loob stems from the deeply ingrained Filipino values of reciprocity, gratitude, and interconnectedness within relationships. In the Philippines, “utang na loob” goes beyond a mere feeling of indebtedness; it embodies a sense of obligation and loyalty to reciprocate kindness or favors received.
Utang na loob or debt of gratitude as part of the Filipino culture can pose a threat to your financials when it leads an individual to make decisions solely based on reciprocating favors, whether it’s a desire, or your family guilt trips you into helping them financially. Speaking of guilt tripping, we will talk about that next.
- Giving in to Guilt Tripping
Giving in to Guilt Tripping in the context of common financial mistakes among Filipinos, refers to situations where individuals make financial decisions influenced by feelings of guilt, often driven by cultural or familial expectations. This could involve falling into financial requests or obligations out of a sense of guilt, even if it’s not financially prudent.
For example, someone might feel guilty about not helping a family member financially, leading them to make decisions that compromise their own financial stability. It’s essential to strike a balance between fulfilling responsibilities and ensuring sound financial management.
- Making their Child as a Backup Plan
I’m sure you’ve at least heard other parents or old people say “kailangan makapagtapos ka, para maiahon mo tayo sa hirap” (translation: You need to finish your studies so you can lift us out of poverty.) This may sound a good thing, but this heavily puts their child into financial burden at a very young age.
The concept of making a child a backup plan in the context of common financial mistakes among Filipinos, refers to relying on children as a financial safety net or expecting them to provide financial support in the future. This often happens when parents don’t adequately plan for their own retirement or financial stability, assuming that their children will step in to support them.
Note: Sometimes, some parents don’t really have a choice but to put their children in that position as a way of getting out of poverty. This situation can yield either positive or negative outcomes.
Instead of inadvertently burdening their children with the expectation to solely focus on their studies to lift the family out of poverty, it is more advisable to encourage a perspective that values education as a tool for empowerment. Rather than relying on their children out of financial obligation, parents can guide them to view education as a means to secure a job and ultimately achieve financial independence.
This approach not only enables the children to help themselves but also instills a sense of genuine willingness to contribute to their family’s well-being when they choose to do so.
By fostering this mindset, families can work towards breaking the cycle of financial struggles while promoting individual growth and self-sufficiency.
- Neglecting to Talk About Finances More
Neglecting to have open conversations about finances within a family can lead to various challenges. This lack of communication often results in a limited understanding of each family member’s financial situation, goals, and concerns. It can create unnecessary stress, misunderstandings, and missed opportunities for effective financial planning.
To address this, it is essential for family members to initiate and encourage open discussions about finances. Sharing information about income, expenses, savings, and financial goals can foster a supportive environment where everyone is on the same page. This proactive approach helps in making informed decisions, setting realistic financial expectations, and working together towards a more secure financial future.
- The Endless Cycle of Debt
Sometimes, low-income Filipinos don’t really have a choice but to borrow money in order to make ends meet. Going into debt is an endless cycle and it is difficult to get out of it. Individuals find themselves borrowing to meet immediate needs, only to face the challenge of repaying high-interest debts. As payments are made, the cycle repeats, with the burden of compounding interest over time.
Breaking free from this cycle requires strategic financial planning, disciplined budgeting, and a commitment to reducing reliance on debt. Understanding the root causes and adopting proactive measures are crucial steps towards breaking the cycle of debt.
- Lack of Financial Literacy
Did you know that the Philippines is at the bottom 30 out of 144 countries in terms of financial literacy? This alarming statistic underscores a significant lack of financial literacy is a huge pitfall among Filipinos.
The absence of widespread financial literacy poses a substantial hurdle, hindering individuals from making informed financial decisions. Many Filipinos may find themselves navigating the complex world of money management without the necessary knowledge and skills. This can lead to a myriad of financial pitfalls, from accumulating unnecessary debt to inadequately planning for the future.
Is it okay to make financial mistakes?
Making financial mistakes is not only okay but also an integral part of the journey toward financial literacy and stability. Just like any learning experience, navigating the complexities of personal finance involves trial and error. It’s through these mistakes that we gain valuable insights into what works and what doesn’t in our unique financial situations.
Don’t be afraid to explore, take risks, and occasionally stumble on your financial path. Each mistake is an opportunity to learn, adjust, and refine your approach to money management. It’s this iterative process that ultimately leads to a deeper understanding of your financial landscape and helps you make more informed decisions in the future.
Remember, perfection in managing finances is an unrealistic expectation. Embrace the learning curve, seek knowledge from your mistakes, and use them as stepping stones toward achieving your financial goals until you hit your first million peso! In the grand scheme of things, making financial mistakes is not a setback but rather a forward-moving process of self-discovery and financial growth.
Takeaway
Everyone has a different financial situation and financial advice should be taken with a grain of salt. Perhaps you might be facing a different set of financial problems that require a different solution and some may benefit from advice that doesn’t necessarily apply to your situation. Recognizing the diversity of financial circumstances is crucial in approaching financial advice with nuance.
Filipinos should take the time to assess their unique financial situations, considering factors like income, expenses, debt, and long-term goals such as savings, investments, and insurances to avoid these financial mistakes. Tailoring financial strategies to one’s specific needs allows for a more effective and sustainable approach to money management.
