Tuesday morning, my agenda after work included meeting with two friends over breakfast to discuss something a lot of women, working women, for that matter, give little attention to – money management.
I find it liberating and utterly satisfying that in these discussions, friends take away an essential concept they know by heart but haven’t gotten around to seriously considering – tomorrow starts today.
Image courtesy of Stuart Miles / FreeDigitalPhotos.net
Yes, in the money world, the future starts today. Just like planting a tree, wealth accumulation, or financial freedom, if you will, starts from lowly beginnings, from saving that little peso until over time, peso it is no more, but a good enough amount to make a person feel financially secure.
Financial security, as they say, is knowing that in the event something untoward happens financially, there is a backup plan in place.
Now, to set the record straight, I’ve heard countless women declare they DON’T need sessions on money management because given the difficult economy, they SHOULD know how to manage their money. Good news? Budgeting to make ends beautifully, or otherwise, meet is an integral part of money management.
And the bad news? Budgeting isn’t all there is to money management. Money management, as a matter of fact, involves a three-pronged approach – EARNING, SAVING and GROWING.
Earning
This, I guess, is pretty self-explanatory. To start the money management process, one has to earn money, either through employment, commissions or business ventures. Otherwise, there is no money to manage.
Saving
Somebody I’ve spoken to the year before declared with conviction that for some time puzzled me, “Savers are losers.” Because I took this declaration at face value, it felt like an upper cut to the solar plexus.
He didn’t explain his point, and I didn’t ask him to. He intended to get me to join his business network, but right there, I decided I would be better off without him.
I saw myself a saver, and him saying savers were losers was tantamount to calling me a loser, too. (Now this was during the time I haven’t started reading personal finance books yet. As it turned out, it was Robert Kiyosaki who said that line.)
The moment I completely understood what this acquaintance of mine was trying to convey, there was no other course to take but to agree. It’s a known fact that saving and frugality are the backbones of wealth accumulation. So how can savers be losers?
That I will briefly explain in a second. But for further reading on saving, please refer to my previous post entitled Budget 101: Pay Yourself First.
Growing
Savers are losers ONLY if it meant putting ALL of a person’s hard-earned money in a savings or term deposit (more commonly referred to as time deposit) account and watch it eaten away by inflation. In a developing country like the Philippines, inflation is pegged at an average of 5% to 6% annually in contrast to the 3% to 4% in most developed nations.
A regular savings account, on the other hand, earns an interest rate of about 3%, oftentimes even less, minus the 20% tax that goes to the government. Then again, make no mistake. I’m not saying to do away with the savings account all together.
What I’m saying is to keep adequate amount of cash in a savings account for emergency purposes, and the rest to invest in assets that grow.
Bottom line, savers are losers ONLY if they fail to consider other options available to them. Yes, there are risks associated with other investment vehicles, but perhaps the greatest risk of all is knowing the facts and not doing anything about them.
Conclusion
Lesson #1: Money management, generally speaking, is something we don’t learn in school. Schools will teach us skills, skills that will render us employable in the long run. But the moment the money starts flowing in, we’re left on our own to figure out how best to deal with it.
Without the proper money management know-how, at the end of the day, the question we probably all ask ourselves is: “Where did my money go?”
Without the school to help us “unlearn” the money ideology our parents – especially if these parents were not financially successful themselves – had passed on to us, taking a step towards financial literacy can be a daunting and challenging feat.
Remember, doing the same thing over and over and hoping for a different story is insanity.
Lesson #2: I’ve said this before, and I’m saying it again. Although a big salary is a big help, it doesn’t guarantee wealth accumulation. What carries more weight on the financial weighing scale is how much a person saves and how long he gets to keep his savings.
Lesson #3: Lastly, young or old, it’s never too early or too late to invest in the mind. Read books on personal finance, listen to audio books, download free e-books. If a person is really determined, there are a myriad of ways to accomplish this goal.
Cliché, yes, but knowledge is, and will always be, the wind beneath our wings.
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If we are not gonna think for the days to come and we just keep on minding what we have in the present, the risk of failing will be inevitable. 😀
Right you are, Herbert! 😀
nice blog..you’re right
Hi Cel,
I stumbled on your blog. I agree with you. It is true. It is not about how big our salary is but it is more of how much we able to save.
Though I learned my lesson in a hard and painful way, I am still thankful that it happened. I am now a better person (than before) when it comes to personal finances.
Cheers
Frugal, yes, you’re definitely right. And I’ve been stressing that out to friends over and over, especially whenever I see people stressing themselves over promotions and all that stuff. Really, even if you do earn a ton of money but spend two tons (like Michael Jackson, according to news reports, did in his lifetime), you still have a negative net worth.
I am very much interested to talk about money and money management. I find the topic not just interesting but very liberating. Although I am learning a lot, I am still a work-in-progress when it comes to implementing it. 🙁
Rovie recently posted…She Made The First Ever Sale
Having a good grasp on money management IS liberating, sis. It is a journey, something that cannot happen overnight. But the fact that we’ve taken the first step should get us where we want to be eventually. All we need to do is continue plowing ahead. Good luck to us, sis!