Living above (and beyond) your means

Here’s one of the worst money mistakes you could be making: spending more than you can make. You either dig the money from what small savings you have or you tell yourself “Future Me can pay this off in the future.”  Your expenses should never be higher than your salary.

In your 20s or early 30s, it’s tempting to go all out every time you get your paycheck. But would you rather splurge for one day and crawl through petsa de peligro or would you rather be financially secure? Satisfying every food craving, splurging on your artisan coffee, and excusing your expensive hobbies can only get you so far.

Failing to budget for short-term and long-term expenses

Being smart about your money means giving every single peso a job. Whether that’s for savings, groceries, health concerns, or splurging. Every peso has to count because this is your hard-earned money we’re talking about.

Budgeting is looking at your finances from a bird’s-eye point of view and this helps you know where to put your money. It puts a fence around what you can and can’t spend on, what you should and should not purchase.

When you budget, you look at the future and you create plans on paying off debt, saving up for house repairs, and other long-term goals. You set aside money for your monthly expenses. Plus, budgeting lets you know if you’re in the red or if you can still afford to buy the latest Nintendo game.

Hopping on the latest phone/gadget trend every year

Smartphone giants release a flagship mobile phone every year. And every year, you find yourself lusting over it. Don’t even deny it! Here comes a truth bomb: you don’t need the latest smartphone or tablet every year. As long as your phone is functioning just fine for personal and work use, that should still work for you. Imagine how much you could save if you didn’t spend at least P60,000 every year on the latest gadgets!

Tip: take good care of your gadgets to maximize their use. I know someone who only changes phones every 5 years. Think about the savings! But also, think about the excitement of upgrading and knowing you deserve it.

Skipping out on savings and emergency funds

One of the BIGGEST money mistakes you could ever make is ignoring your savings or emergency funds. These are cushions for rainy days and everyone is going to experience rainy days. Treat your savings as a non-negotiable expense every paycheck. That means you set aside a fixed amount every month — NO EXCUSES! Ideally, your savings should be at least 20% of your salary but as long as any amount trickles in that account, you’re good.

Your emergency fund, on the other hand, could be separate from your savings. Experts say that this should at least be three times worth your current salary so you have something to tide yourself over with in case the unexpected happens.

Treating every online sale as a shopping spree

E-commerce and online shopping has got us wrapped around its finger. Especially now that we seldom leave our homes. Don’t you get excited when sales like 6.6 and 11.11 are announced? Deals galore! But most of the time that also means you spend money on things you don’t need or on things you’re only going to use once. You might want to answer these questions first before purchasing that item:

• Is this a splurge or a need?
• Is this an investment I can use for a long time?
• Do I have enough money for this?
• Can this purchase wait until a few months?

Think twice, thrice, and only hit that checkout button if you’re sure.

Getting credit cards and being buried in debt

Okay, I admit, there’s an exhilarating feeling going cashless and just swiping your credit card everywhere. Cool clothes? SWIPE! Eat all you can? SWIPE. New smartphone release? SWIPE! There’s unlimited power in that small plastic card… until you see your bill and it becomes your kryptonite.

Credit cards are an illusion of wealth. They aren’t called ‘credit’ for nothing — it means you’re spending money you don’t yet have. Used wisely, they could help balance your expenses but once you get buried in a ton of debt, that’s when it becomes a burden.

Not making every hour count to earn

Time is a precious resource and you can never get it back. This is why you should use it wisely and find ways to earn. If you have a full-time job, find gigs that will help you earn on the side. One of the worst money mistakes in your 20s is letting laziness and self-doubt win. Let’s hustle so we can retire earlier! If you need help landing a freelance gig, these Facebook groups might help you.

Letting your savings sit in banks with low interest rates

Your savings should earn you money. How? Don’t let it sleep in a bank with the lowest interest rates. That’s probably every major bank in the Philippines. BPI and BDO have a 0.125% interest rate per annum for their savings account. Compare that to the annual interest rates of digital banks like CIMB Bank (2.5% p.a.), ING Philippines (2.5% p.a.), and Tonik (up to 6% p.a.) your sleeping savings could earn. Deep dive into the world of digital banks here.

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