money management

Mar

2023

Are You Working for Money?

Reading Time: 4 minutes

Are you working for money? Most people are. Unfortunately, only a few people work because they love what they are doing. If you are one of those people who gave up their dream job for a high paying job, don’t worry there are ways on how to turn this situation around. But first, you need to first understand how money works.

By definition, an income is the money that you received from work or from your investments. Without income, you will not be able to pay for your living expenses.

There are two types of income: active and passive income.

Active Income

Active Income is the money that you received for the work or services that you rendered. Examples of this are your salary, commissions, wages and tips. It is termed as such because you actually need to be active, do something and spend your time, effort and energy before you can receive the income. If you stop working, then your income will also stop.

All salaries of employees are considered active income. Professional earnings of lawyers, doctors, architects, engineers and other professionals who have their own clinics or offices also fall into this category. The income of a managing member of a business is also considered active income.

Kinds of Active Income

There are two kinds of Active Income:

Salary Income – is the payment that you receive as an employee.
Profit Income – this is the money earned by entrepreneurs by selling goods or services for a profit. It is considered active as long as there is material participation involved.

The poor and the middle class mostly rely on active income. That is one of the reasons why they are stuck in the rat race all their lives. They think that hard work alone is the solution to their financial worries. Problem occurs when that one source disappears; which is one of the lessons people learned during the pandemic. Many were caught off guard. Because of the lockdown, a great majority of people were not able to worry. As a result many lost their single source of income.

Never depend on a single source of income.
– Warren Buffet

Statistics will show that many successful persons during their prime ended up broke upon retirement. Even if your income is high, it is never enough. You are still restricted by your age and your health. Thus, many people go broke once it is time for them to retire.

Active income also constricts your time. There are those who earn lots of money but they never have time for their families because their time is not their own.

Don’t let making a living prevent you from making a life.
– John Wooden

Do You Work for Money?

If you go to work because you HAVE to not because you WANT to, that’s an indicator that you are working for money. Even if your income is high, that does not change the fact that you are still a slave, only a rich slave. Don’t be a slave to money. Don’t let money control you. Learn how money can work for you.

Do You Let Money Work For You?

This is one of the ways in which rich people think differently. The rich understand that to become truly wealthy, you need to create multiple streams of income. Relying on a single source is simply too risky. And besides, they know that the more sources of income they have, the faster it is for them to reach their financial goals. That is why the wealthy focus on earning passive income.

Passive Income

Passive income is money earned where there is little or no active effort on your part. It is not directly tied to a certain number of hours at work. It is what they call “earning money while you sleep.”

Kinds of Passive Income

There are five major sources of passive income that you can choose from:

Interest income – is the money that you earn when you lend your savings to someone else. You can lend your money to an individual. You can also lend it to private corporations or the government in the form of a bond.
Dividend Income – is the money that you earn from being a partner, an investor or a shareholder to a business. Company earnings are also distributed to shareholders from the that you own.
Rental Income – is the the amount of money that you collect from your tenants from leasing your properties
Capital Gains – is the profit that you earn with the appreciation or the rise of value of your investment. You can earn capital gains from your real estate properties and other investments such as antique and vintage items, art work, jewelry, foreign currencies, luxury watches, and even luxury bags and some l imited edition items. You can also earn this from the stock market when the market price surpasses the average purchase price of your stocks.
Royalty Income – is the money that you received for the use of your artistic or literary works. It could be in the form of patents, copyrights or trademarks. You can also earn royalty income from your blogs or vlogs.

A wealthy person is simply someone who has learned how to make money when they’re not working.
– Robert Kiyosaki

So do you want to work for money all your life or do you want to make money work for you? If you want to have a life where money works for you, you need to have passive income. The key is to start with active income. Then, slowly build your wealth through the money jar budgeting system. And before you know it, you will be enjoying your retirement earlier than your contemporaries.

Good luck!

Updated version. First published in Pinoy Smart Living on 05.02.2019

Feature Image by Jose Conejo Saenz from Pixabay

Jun

2022

10 Gadgets That Help You Save Money

Reading Time: 4 minutes

Modern technology has allowed us to do much more than when we didn’t have our electronic gadgets and devices. These devices have become a necessity in our daily lives and we have many options to choose from.

Initially, these gadgets are major expenses. But with a little research, we can make the right gadget choices so we can still enjoy their convenience while saving money in the long run.

Here are 10 gadgets that can help you save money. Some of them will cost you a big chunk of your budget initially when you purchase them, but they will make-up for their cost with the money you save for the months, and even years that you will be using them.

1. Rechargeable Batteries or High-Capacity Power Banks

We all know the inconvenience of running around with a gadget low on power. Having rechargeable batteries or a high-capacity power bank while on the go saves you the hassle of looking for an electrical outlet just to make an important call on your mobile phone. You can also use these devices to charge your gadgets even at home so you don’t need to suck up electricity each time you need to charge your device. The good thing is; there are high-capacity power banks that can power-up more than one device at a time, even your laptop. Some of them even have designs that are cute or sleek so you won’t be too embarrassed lugging them around.

2. LED Lighting

LED lighting are designed to last longer while consuming less electricity. So gradually replace your old light bulbs or fluorescent lights with LED lighting to enjoy a brighter home without the added cost. LED lighting is also available for other home fixtures such as desk lamps. Some even have dimming functions so you can switch between day light and night light; or white light for working and yellow light for reading.

3. Energy Star Appliances

When buying new appliances, be sure to check for the Energy Star logo. According to their website:

ENERGY STAR products are independently certified to save energy without sacrificing features or functionality. Saving energy helps prevent climate change. Look for the ENERGY STAR label to save money on your energy bills and help protect our environment.

This goes for kitchen appliances such as oven toasters, microwave ovens, refrigerators, even washing machines, as well as lighting fixtures like Christmas lights. So be sure to check the labels on the appliance or ask the sales person for products and brands certified with an Energy Star logo. This is one way to save on electricity in your home.

4. Smart Power Strips

One of the biggest energy leaks in the home and office are gadgets that are plugged in but not in use. Many of us often leave our mobile phone chargers still plugged into the electrical socket even if we are not charging our phones.

A smart power strip allows you to turn off the power for a particular gadget without having to pull it out of the socket. So you can just click a button to turn it on again if you need to use your kitchen appliance or to charge your device.

5. Tablet

Tablets can save you energy as well as money. Many of your favorite books have digital versions so instead of carrying around the actual book, you can have easy access to a ton of books as well as audiobooks with just your tablet. This means being able to carry more books with you on a lighter load. You even help save on paper and conserve trees! Plus, you can also carry scanned copies of your important documents with you and do many other things with your tablet that you can do on a desktop and your mobile phone.

6. Laptop

Just like a tablet, a laptop can also help you save money. It can do many of the things that a tablet can do but in a greater volume and capacity. Nowadays, when our busy schedules don’t allow us to sit in front of a TV screen to enjoy our favorite shows, a laptop is a great way to download your favorite videos and watch them later on. Newer laptop models also feature longer battery life and a ton of upgraded functionalities to help you work faster and accomplish more tasks throughout the day.

7. Vacuum Sealer

If you hate wasting food, then vacuum sealers are your best friend. Together with a ziplock bag and your refrigerator, you can extend the life of your favorite foods. You can cook a big batch of home-cooked meals and freeze them for future meals. This is one way to stretch your food budget.

You can also use a vacuum sealer for bagging your baon or bento to work or school. This ensures that you keep your food fresh and lessens the possibility of food spoilage due to bacteria build-up especially in warm temperatures.

8. Blender

Blenders are a great way to cut down on chopping veggies. You can also use a blender to make your morning smoothies for breakfast-on-the-go or to make soups out of your veggies.

You can also preserve food with a blender. For example, you can place a small amount of water into the blender and put in your peeled garlic. Blend for a bit for a course consistency or blend some more for finer pieces. Then store everything in a jar and keep in the fridge. You can just pull-out the jar and scoop out the required amount of garlic for your recipes. Also works with other spices like ginger, turmeric and onion. You can also use olive oil instead of water for herbs like basil, parsley, and other herbs.

9. Food Processor

For even more variety to your recipes, a food processor is a great kitchen companion. It can chop food finer than a blender and mixes ingredients better. You can also use it to make purees of fruits and veggies for baby food, chop vegetables finely as well as some meats for making veggie balls or meat balls and a host of other foods including ice-cream! It’s especially helpful for baking recipes.

10. Efficient Shower Head

You can also save money even as you shower! When shopping for a shower head, make sure to ask the sales person for a low-flow shower head. This type of shower head can save you gallons of water use per year and thus lower your water consumption bills in return.

Start saving more money now starting with these gadgets. There are many more gadgets that can help you save money; just do your research. They will cost much more but the initial investment will be worth the savings in the long run.

Updated. First published on Pinoy Smart Living on 2018.09.26.
Feature Image: Original Photo by Brooke Cagle on Unsplash.

Aug

2021

5 Reasons Why You Can’t Stick to Your Budget and How to Fix It

Reading Time: 3 minutes

Is sticking to your budget a big problem for you? Perhaps you are plagued by one or more of the common reasons why a budget is not working for you. Good news is, there’s a way to fix them.

1. Looking for Perfection

You want to create the perfect budget that will work for you personally so you keep crunching numbers; unable to decide what percentage to allocate for which category in your budget. Overthinking leads to analysis-paralysis hindering you from making any progress towards a solution because you keep going over the flaws in your budget system.

The Fix: Just create a budget and stick to it for a set duration. Don’t try to think of a permanent solution. Think of your budget as a work in progress and adjust it along the way as you learn more about your spending habits. Remember that it’s a system and it may have bugs at the start; so testing it in actual practice is the best way to achieve your ideal budget system. It might help to learn more about your money personality and make your budget accordingly.

2. Thinking It’s Too Complicated

Keeping track of your spending doesn’t have to be complicated. There are many applications on your computer or mobile device that you can use. You do need to test which one is the right fit for you and your lifestyle. But you really don’t want to test all of them do you?

The Fix: Keep it simple by going back to the basics. A pen and notebook is always handy so you can immediately jot down any expense you may have. This way, it will be easier for you to identify your money leaks. If you have to use an application, keep it as a back-up or a secondary method to monitor your expenses.

3. Indulging in Online Shopping

Online shopping is one of the easiest way to ruin your budget. All the sale items give you the illusion that you are buying them for cheap so you tell yourself that you can go over budget this time and just spend less on your next salary. But since you’re not paying in cash immediately or you’re paying via credit card, you don’t really feel how much it takes out from your budget.

The Fix: Always consult your budget. If it’s not in your budget, consider saving up for it. If it’s on sale, ask yourself if you really need it. Another solution is to take a break from your computer for awhile and think about it. You may realize that you can make do without it. Being aware of your spending helps you better stick to your budget.

4. You’re Good at Giving

Generosity is a good virtue but it is also most often abused. There are a lot of people who are frugal and are able to stick to a budget for their personal expenses but when it comes to their family and friends, they are unable to say no. This is especially true when it comes to giving gifts during birthdays for example, or when monetary assistance is requested by a relative or friend.

The Fix: Put “giving” in your budget. This way, you are still able to give them gifts or provide them monetary assistance and still stay within your budget.

5. Unexpected Events

Life happens and most of them are not in our budget. A medical expense, a job loss, a sudden change of residence, etc. Most people create a budget based on what they experience on a daily basis. They only see what’s currently in front of them and fail to plan for life’s unexpected surprises.

The Fix: Accommodate the unexpected in your budget. When creating your budget, make sure to include items such as quarterly and annual expenses. Also include in your budget a fund where you can stash a portion of your income for use during special occasions and emergencies.

We hope you are able to keep to your budgeting system with these helpful tips. There’s no right or wrong way to start your budget as long as you commit to following the system and tweaking it along the way. You might want to try out the money jar budgeting system and see if it works for you.

Updated. First revised on Pinoy Smart Living on 04.30.2019.
Feature Image: Original Photo by Kelly Sikkema on Unsplash.

Aug

2021

What is Your Money Personality?

Reading Time: 4 minutes

Your money personality simply means your attitude and behavior towards money. It is a reflection of your beliefs about money. Knowing and understanding your money personality will help you improve your financial life. It will help you spend, save, invest and grow your money wisely. So, what is your money personality?

There are five kinds of money personalities. Each one has different outlooks on how they handle money. It is possible to be a mixture of one or two personalities.

1.The Big Spender

As the name suggests, the big spender is someone who places value in their possessions. It is easy to spot one. Just take a look at the possessions that they own. Do they have the latest smartphone or gadget? Are they always wearing branded clothing? Do they have high-end vehicles? How big is their home? Do they own the latest and biggest television?These people are so comfortable spending money that they don’t care even if they end up in credit card debts.

If you are a big spender, make sure that what you are spending falls within your budget. If not, learn the art of delayed gratification. It is also important that you understand how credit cards work. Otherwise, a big spender is in great danger of falling into financial distress.

If you can’t buy it twice, you can’t afford it.
– Jay Z

2. The Savers

The savers are exactly the opposite of the big spenders. Savers shop only when necessary and they hardly ever use their credit cards. They generally have no debts. They are the cheapskates. If you know someone who tries to avoid paying and does not want to share expenses, then they are the savers. Unlike the big spender who derives satisfaction from the possessions that they own, the savers get theirs from looking at their bank accounts.

If you are a saver, congratulate yourself. It means you are already careful and aware of your finances. Chances are, you already have your emergency fund and probably a bit of retirement fund as well. However, money psychologists advise that you should also learn to allow yourself to enjoy your hard-earned money. In the same way, you should also learn to share your money with others. The money jar budgeting system allocates at least 10% for play and another 10% for title.

3.The Security Seeker

The security seekers are careful planners. They research every option available before they start spending their money. However, unlike the savers, security seekers are willing to spend as long as they have the budget for it. They make sure that they have enough money to pay for the expenses before swiping their card or going on vacation. The downside is that sometimes, because of too much research; they end up not making the decision at all.

If you are a security seeker, it is best to lessen too much pessimism and anxiety over financial decisions. Be aware that life is all about choices. The key is to know your financial goals and make decisions towards the attainment of those goals. Yes, there will be better opportunities that may arise in time but be comforted in the fact that you already did due diligence. Your decision is the best decision at that point in time.

4. The Avoider

The avoider is someone who avoids thinking and talking about money. Avoiders are those people who have an untouched stack of bills lying in the counter. They don’t want to face their finances. They don’t take note of the due dates of their credit cards and bills.

If you are an avoider, it is best to start caring about your finances. Let’s face it, whether you like it or not; money is a big part of our lives. We need money in order to survive in this world. The first thing to do is to track your expenses. You will not be able to improve your financial life if you don’t know where your money is going. From there, you will be able to set up a plan going forward.

5. The Moneymaker

The moneymaker is someone who already perfected the skills of creating wealth. They spend most of their time and energy earning money. They believe that money is the key to happiness.

If you are a moneymaker, you have probably achieved financial freedom. You have enough money in the bank to live comfortably for life. However, do realize that although money is important; relationships are far more important than money. Because you were always busy creating wealth, you might have neglected important relationships. Now is the time to slow down and reestablish a deeper relationship with your family and loved ones.

6.The Gambler

The gambler is someone who loves taking risks. They get satisfaction from the thrill of risk with the promise of high rewards. They invest in anything that they think will give them high returns. Most of the time, they don’t even do their research anymore before investing. These are also the same people who are in danger of being addicted to gambling.

If you are a gambler before you start losing all your money; it is best to first understand the rules of investing. Be strict on where you invest your money before you make big financial decisions. And avoid borrowing money just to enter an investment that you do not even understand. Learn to guard your money.

The bottom line, understand your money personality and find a way to balance the personalities in order to help you achieve your money goals.

Feature Photo by Karolina Grabowska from Pexels

May

2021

Common Sense Money Advice That People Don’t Follow

Reading Time: 3 minutes

Money has always been a top source of stress for most people. If not addressed, too much worrying about money can lead to serious physical and emotional problems. It can even result in a breakdown in relationships. How to solve money problems then? There are tons of financial advice that people probably already heard or read about. In fact, most of these advices are simply common sense yet one the greatest mysteries about life is that no one really follows them. It sounds so easy to do but for most people, it is very difficult to follow. Here are some of the common sense money advice that people don’t follow:

1. Spend Less Than You Earn

This rule is so simple. Just live within your means. Obviously, if you spend more than you earn, that will only spell debt. Even a grade schooler knows that if you subtract more than you add, you will end up with a negative number. You need to have financial discipline; otherwise, it will be very hard to create wealth. Avoid keeping up with the Joneses.

There are many ways to reduce your monthly expenses. It helps to have a budget. The money jar budgeting system is a good money management technique because it not only helps keep your spending in place, it also helps slowly build your wealth. If spending less is really not an option, then you need to look for ways to earn more money.

2. Understand How Credit Cards Function

How many people are buried in consumer debt simply because they do not understand how credit cards function?

Credit cards are very useful. With credit cards, you don’t always need to have cash. You can purchase anything without having to worry of paying them immediately. However, if you don’t have a basic understanding of how it works, credit cards can turn into your worst nightmare. Always remember that you are not using your own money when you purchase items using your credit card but rather you are borrowing the bank’s money.

Credit card companies use the power of compound interest to their advantage. Compound interest is a very powerful mathematical concept that you can use to increase your wealth. Unfortunately, it is a two-edged sword. If used against you, it is a sure way to financial bankruptcy. That is why understanding how credit card functions is a necessity if you have a credit card.

Unless you know how to manage your credit cards, it is better for you to refrain from using your credit card altogether. Use credit cards only in emergencies. Buying because it is on sale even though you don’t really need it is not a valid definition of an emergency.

3. Automate your Savings

One of the lessons of this pandemic is the importance of having a savings account. Life is unpredictable. Saving money can ensure financial stability in case of emergency.

Pay-yourself-first has always been the initial advice that wealth managers will tell you as the first step towards building your wealth. Unfortunately, most people would rather spend or pay everyone else first before themselves. Savings always comes last. Usually, people save using whatever it is that is left (if there is any).

The best strategy to avoid this scenario is to automate your savings. By regularly setting aside a fix amount through automatic savings, you will soon be able to build up your emergency fund. One of the wealth rules of the richest man from Babylon is to always save 10% of income.

4. Seek Help from Qualified Persons

If your financial woes are already big enough for you to handle on your own, then it is time to seek help from other people. If your problems are about money, ask a professional in financial planning to help you. If you cannot afford your own financial planner, then ask a friend who is an expert in handling money.Don’t just ask any friend.

The problem with most people is that they normally seek advice from friends or relatives who are close to them. However, they fail to consider if these people are also having financial problems of their own too.

Think of it this way, if you are in school and you are having problems with your Math subject, obviously, you will not ask your Filipino or Science teacher to help you. Instead, you will seek the help of your Math teacher or a fellow student who is good in Math because they are the ones who can help you.

Remember to always ask the correct persons for advice.

So, If you want to have a better financial life, it is best to follow the common sense money advice that people don’t follow.

First published in Pinoy Smart Living on 03.26.2019.

Photo by Monstera from Pexels

Apr

2021

3 Types of Expenses You Need to Manage

Reading Time: 2 minutes

There are 3 types of expenses you need to manage in order to be successful in your financial goals. These can be applied to any items you have on your monthly budget. Identifying these kinds of expenses helps you schedule your expenses. In this way, you don’t fall victim to little money leaks that can ruin your budget.

1. Fixed Expenses

Fixed expenses are the types of expenses that you incur in predictable amounts and in consistent intervals. These usually happen monthly such as utilities, rentals, loans, insurance, subscriptions and credit card payments. These can also include your tithes, savings and investment funds if you add to them monthly.

Since these expenses occur on a regular basis, you can schedule them automatically. This one of the 3 types of expenses that is the easiest to manage in your budget.

With a fixed amount and schedule, it is easier for you to decide which expenses to reduce or remove. This allows you to maximize other items in your budget. For example, you can downgrade your mobile plan subscription. Then, you can add more to your savings or investment fund.

2. Periodic Expenses

Periodic expenses are similar to fixed expenses but they occur less frequently. These kinds of expenses can also be scheduled quarterly (every 3 months), bi-annually (every 6 months) or annually (every year).

The dilemma with periodic expenses is that they are usually necessary. That’s why it is hard to remove them from your budget. These expenses usually include maintenance costs. Examples include oil change for your car, car registration fees, annual membership fees and annual tax fees for a business.

Unlike fixed expenses, we tend to forget periodic expenses. This results in paying penalty fees which ruins your budget. It is very important to include these types of expense in planning your budget. The advantage is that you have more time to prepare for them.

3. Variable Expenses

The trickiest type of expense to manage are variable expenses. These types of expenses don’t occur regularly but they are still important. Variable expenses can be subcategorized into necessary and discretionary.

An example of a variable but necessary expense is gas for your car. This does not occur regularly but you have to budget for it when it becomes necessary. A discretionary, variable expense includes a new pair of shoes or travel funds. These don’t occur regularly but they are important for your well-being.

Discretionary expenses are usually items that you reward yourself with. Sometimes, they can be impulse buys which you incur because you are feeling down and you want to feel better. Your behavior and priorities will define what variable expenses you cut out or save up for in your budget.

Which type of expense do you usually have trouble managing? If you haven’t started budgeting, then the first step is to track your expenses. Then try out the money jar budgeting system and adjust as you need. This will help you control the flow of your money. It is also helpful to know more about the money lessons you didn’t learn in school. Get more financial inspiration for own financial goals with these books on wealth and success.

Feature Image: Original Photo by Sasun Bughdaryan on Unsplash.

Apr

2021

Money Leaks That Can Sink Your Budget

Reading Time: 3 minutes

There are little money leaks that can sink your monthly budget. Most of them are unnoticeable unless you track your spending. If you’re already budgeting but still end up overspending, then check out for these money leaks in your spending habits.

1. Transaction Fees

Late payment fees and other financial transaction fees can leak money out of your budget without you noticing it. These are small amounts that you don’t think will affect your budget that much. Once they accumulate, that’s when you realize they already ate a huge chunk out of your monthly budget. This applies to credit card fees, insurance fees, loan fees and online money transfer fees. Check your monthly statements so you can plan ahead.

TIP: Make it a habit to always check your transaction receipts for any hidden fees or charges. Also, pay your bills on time to avoid incurring late payment fees and other penalty charges.

2. Impulse Buys

Little purchases that you make several times a month won’t be little once added up. Especially if these items are just trendy for a time or they’re for one use only. That one cup of coffee a day can eat a big chunk of your budget. This is one of the little money leaks that can sink your budget. It can be avoided if you plan and list down what you’re actually going to buy in a supermarket, for example. The best way is to set aside a budget for it so you’re prepared for it. You can set aside money for fun that you can spend however you want.

TIP: Make a wish list of big and small items that you need and want to buy and set aside money for them. Don’t buy it if it’s not on your list and it’s not covered in your budget yet.

3. Discount Buys

Just like impulse buys, discount purchases are also a common cause of overspending. Sale items are often packaged attractively and the festive spirit of the “sale day” event makes it even more enticing. Making transactions online only makes things easier to splurge. Not all discounts are great buys though. If you’re buying an item only because it’s on sale or because you have a coupon, then you might be wasting your money.

TIP: Having a wish list and the budget to buy the item on that list is one way to avoid spending on discounted items that you don’t really need. If you get an item on your wish list at a discounted price, then consider it as savings.

4. Wasting Products

Sometimes we buy in bulk because of the huge discount. Then we find out that we’re not really fond of the product so we end up giving them away or disposing of them in the trash. Or they expire before we can use them so they end up in the trash. This is why a list of what you need to buy is important. It is also important to list down exactly how much you need so you maximize your use of the items. Subscriptions to services that you don’t actually use regularly is also a leak in your budget. So review your subscriptions and see which ones you don’t need or you can downgrade.

TIP: Preparation is key to ensure that you use up perishable goods before they expire. Meal prepping is one way to ensure that you don’t end up throwing away produce. It also allows you to control what you eat so you can choose to eat healthier meals.

Do sometimes feel that you are living beyond your means? These money leaks could be part of the problem. To ensure that you don’t fall victim to these little leaks that can sink your budget; become more aware of your spending habits. Learn how to discipline yourself so you can figure out how to spend your money wisely.

Feature Image: Original Photo by Andrea Piacquadio from Pexels.

Apr

2021

Get Out of The Rat Race

Reading Time: 4 minutes

Do you want to get out of the rat race? Do you know the reasons why you are stuck in the rat race? People stuck in the rat race don’t even realize it. Most people have accepted this situation as their fate. They have become resigned to living with the situation for the rest of their lives. They are teaching the same belief to their children as well. The bad thing is; they believe that there is no escape. Actually, there is a way out; they just haven’t taken the time to learn about it.

What is the Rat Race?

Have you heard the term “the daily grind”? People use this term to describe the rat race. The rat race is the constant struggle of going to work to pay your bills. Your salary is never enough, you borrow some more, you work harder to pay more. Your hard work makes your company rich. The company doesn’t do anything to help you as you continue to struggle to make ends meet. The struggle only gets more difficult as the days go on. This cycle is similar to a hamster running on his wheel. No matter how fast it runs, it doesn’t go anywhere.

Are You in the Rat Race?

The rat race is where we usually go to after graduation. We start to work and we enjoy working. Earning our own money makes us feel independent. After some time, we see and feel the signs of being stuck in the rat race.

Devaluation – You work hard for a fixed hourly or daily rate. Extra work is minimally compensated or recognized.
Repetition – You do the same thing every day and you derive no satisfaction from it.
Justification – You keep coming up with excuses for staying in your job.
Boredom – You can’t wait to do something else.
Disconnection – You don’t feel that your work contributes to any significant difference in other person’s lives or your own.
Drawing Board Syndrome – Your plans to take a leave from work never pushes thru.
Lifestyle Creep – Any minimal increase in your compensation/salary leads to lifestyle creep. You end up burdened with more debt.

The vicious cycle of the “daily grind” is what it’s like to be in the rat race. If you can figure out why you are stuck; you are in a good place to start transforming your life.

In his popular book Rich Dad, Poor Dad, Robert Kiyosaki describes the rat race as a situation where individuals “work for the owners of their company, for the government paying taxes, and for the bank paying off mortgage and credit cards.”

Why Are You Stuck in The Rat Race?

Most of us have parents who have been stuck in the rat race. This makes it seem almost impossible to get out of it. The rat race is a cycle that provides a false sense of security. Here are some reasons why you feel secure in your current job; and why you can’t seem to get out of your current lifestyle.

Your job offers you a monthly income. This provides you the money to support yourself and your family’s needs.
You want to keep up your government contributions to maximize your retirement pension.
You’re putting your dream job on the shelf. Your reasons include: (a) it doesn’t fit in with your current job, (b) it will take special training which you don’t have the money or the time to spare at the moment, and (c) it is not guaranteed that you will succeed in it.
You want to start a business. You need to do and learn many things. Raising funds is necessary to start.
You want to create extra income and save money to invest. Work prevents you from having extra time or energy for a side job.
Your work and salary doesn’t leave room for you to volunteer or support a charity, a friend or a loved one.
You have plans to get a house and/or a car in the future. You have to take care of tuition fees first, loans and other expenses.

These are just some of the most common excuses we tell ourselves which is causing us to stay in the rat race. These thoughts usually interrupt our plans for change.

Fear is Keeping You Stuck

One common factor in these thoughts or excuses is fear. We all fear failure. No one wants to feel rejected. We don’t want to disappoint the expectations of our family and friends. We all fear that things won’t work out in the end.

All these fears had been instilled in us by our parents. Their parents did the same. Fear stems from doubts. Your doubts grow into fears. Fear of what if’s is what paralyses you from doing something to change your situation. The best way to combat doubt is to stop it right at the start by learning.

Get Your Self Unstuck

Most of us adults have lost our curiosity as children. Curiosity is an important component to learning new things. The best way to combat doubt and fear is to educate yourself and your loved ones. Learn what options you have to get yourselves out of the rat race. You don’t always have to stay where the money is. There are other ways to achieve financial freedom.

Start educating yourself by learning from those who have already succeeded. You can start incorporating positive morning habits into your daily routine. Financial literacy is very important to create a better life for yourself and your loved ones. Start managing your finances better. Learn and apply a budgeting system. Tailor your budget to your circumstances. Learn more about how to reboot your finances so you can get out of the rat race.

Updated. First published on Pinoy Smart Living on 2018.08.15.
Feature Image: Original Image by Brian Merrill from Pixabay.

Mar

2021

How To Reboot Your Finances

Reading Time: 3 minutes

What stage are you in in your financial life? If you are not happy with where you are right now, the good news is that you can actually reboot your finances once and for all. True, your financial woes will not disappear overnight but it will give you a chance to change your financial future. In the computer world, a reboot means the act of instantly shutting down your computer and restarting right away. The same is true with your finances. You can actually shut it down and restart right away. Don’t wait until next month, next year or when things start going well again. Do it as soon as the clock strikes zero o’clock . So, how to reboot your finances?

1.Abstain from Spending

The first thing to do is halt all spending at once. Unless it is a necessity, stop all unnecessary spending for now. A cup of coffee, a pack of cigarettes or a can of soda may be little expenses but it is actually these kinds of small expenses that is harming your budget. While you are at it, refrain also from using your credit card. Until you have fully understood how credit cards work, it is best to put your card use on hiatus.

Beware of little expenses, a small leak will sink a great ship.
– Benjamin Franklin

2. Track your Spending

The next thing to do is to track your expenses. Why do you need to track your expenses? The main reason why you should write down all your spending is for you to be able to identify where your money is going. Record everything that is going out of your pocket even small ones like a piece of candy, tips or parking fees. Don’t miss anything. Only through knowing will you be able to control your finances and eliminate bad spending habits.

3. Set Financial Goals

Now that you know where you are right now in your finances, the next thing to do is to define where you want to go from here. Thus, it is important to set your financial goals . Identifying your short-term, mid-term and long-term goals are crucial in your journey towards financial freedom. Your goals will help you make better financial decisions in the present. For example, you will not do an impulse buy on a new handbag that you see on the display window of a mall when you have an upcoming spring trip to Japan or New York for example.

4. Follow a Budget Plan

A budget is a financial plan on how you plan to spend your money. Since it allows you to plan your expenditures, following a budget will help you define your limits as far as spending is concerned. A budget will help you know if you can afford something or not. T. Harv Eker, best-selling author of Secrets of the Millionaire Mind introduced the money jar budgeting system. It is a simple money management system that will not only solve your finances but you can actually lead you to wealth accumulation.

A budget is telling your money where to go instead of wondering where it went.
– Dave Ramsey

5. Pay-off Bad Debts

Once you have your budget plan in place, you must first focus on paying off your bad debts. You see, not all debts are created equal. There is such a thing as good debts and bad debts. Good debts are money that you owe that can help you build your wealth over time. A housing loan is considered good debt. Money that you loan to use as capital for your business is also considered good debt. Bad debts on the other hand, drags you down. Examples of bad debts are consumer and credit card debts. Thus, it is important to prioritize paying off bad debts first.

6. Start Investing

Saving money alone is never enough. In order to grow your wealth, you need to learn to invest. As opposed to working for money, investing allows money to work for you. There are so many investment vehicles to choose from depending on your risk tolerance. You can invest in bonds, funds, stocks or stock options. You can also invest in real estate, jewelries, antiques, art pieces, even luxury watches and bags.

7. Raise Your Financial IQ

And last but not the least is you should make an effort to raise your financial intelligence. Financial literacy equips you with the knowledge and skills that you need to be able to manage money effectively. There are many things that you wish you learned in school. Unfortunately, most schools do not teach money management. Thus, it is up to you to fill the gap.

What are you waiting for? Reboot your finances now. Good luck!

Feature Image by Amit Karkare from Pixabay

Mar

2021

Money Lessons You Wish You Learned in School

Reading Time: 4 minutes

Did you know that the number one cause of stress is money? According to several studies, more people worry about money compared to health, family, work or relationships. This is true regardless of age, citizenship, gender, career, educational attainment and even amount of income. There is only one explanation to all this, most people do not have a deeper understanding on how to handle money. After all, not all parents teach their children how to handle money. In addition, money management is not part of the school curriculum. If only it was taught in school. We would not have to learn the hard way. For this reason, there are some money lessons you wish you learned in school.

The Rat Race

Have you heard of the rat race? In finance, a rat race is the endless pursuit of money. It is called a rat race because it is likened to a mouse who keeps on running around in circles chasing the cheese. People in the rat race will have financial difficulties if they stop working. Unfortunately, most people are in the rat race. Worldwide statistics show that out of 100 persons who will retire, only 3 persons will be comfortable and only one will retire wealthy. Life would have been financially better if only we learned about financial literacy long before we started earning. How about you, what will your retirement look like?

Money Lessons You Wish You Learned in School

1.Money is Just a Tool

Mindset is the single most important thing that makes a person rich or poor. Thus, personal finance lessons should always start with instilling the proper mindset. Our mindset is a product of our environment. It is our belief based on what our parents and teachers taught us. Do you have a millionaire mindset or a poverty mindset?

In order to be wealthy, you got to think like the rich. One of the ways in which rich people think differently is the way they view money. For the rich, money is just a tool.

Have you heard of the saying that “Money is the root of all evil”? Most people believe that money is something bad and that rich people are greedy. This belief came from misconceptions on some bible passages. It is not money per se which is bad; rather, it is the love for money. It is people’s attachment to the trappings of wealth that makes it bad. Money should be viewed as just a tool, not as something negative. If you have money, you will be able to buy things that you need and want. Money can also be used to help other people.

2. Money Buys Choices

Money does not buy happiness, what it does buy are choices. With money, you will have unlimited options. You can choose the job that you want, where you are going to live, what car you want to drive, where do you want to go and how you are going to spend your days without constraints and worries. In short, money gives you freedom to choose.

3. There are Other Streams of Income Aside from a 9-to-5 Job

Since young, we have been programmed to do the following:

Study Hard.
Get Good Grades
Earn a Degree from a Prestigious University
Get hired into one of the Top 500 Companies
Climb the Corporate Ladder
Save Money
Buy your Dream House and Car
Retire and Receive Retirement Money from Company

There is nothing wrong with this formula except that it is NOT the only roadmap to success. There are many other streams of income aside from being an employee. You can earn a living by starting your own business. You can earn from different kinds of investments like stocks or stock options. Nowadays, you can even earn money by becoming a professional blogger, YouTuber or online gamer. There are endless possibilities available out there.

4. You can Make Money Work for you

Schools teach students how to work for money. In school, students learn different knowledge and various skills. Most of them are catered towards the specific field of your choice. Engineering students learn technical and problem-solving skills. Medical students study about the human anatomy and physiology and illnesses. Law students specialize about the laws and legal issues. After school, students are well- equipped with all these technical skills, but how many are really ready for the real world? As a result, many people ended up working for money. Unfortunately, a diploma from a prestigious university is never a guarantee of wealth. But rather, it is all about understanding how you can make money work for you opposed to learning how to work for money.

Out of all the graduates, how many actually learned about money management? How about debit and credit? How about investing? These are crucial finance lessons that one needs to know to be successful in the real world.

Without any formal personal finance instruction in our high school or college curricula, many college seniors who graduate in the red continue to make common financial mistakes that only exacerbate their debt burdens.
– Alexa Von Tobel

5. Saving Money Alone is Never Enough

We were taught the importance of saving money even at a young age. However, did you know that saving money is never enough because of an economic phenomenon called inflation? Inflation is more than just a number. It affects all of us. That is why it is important that you understand what inflation is and how it affects your finances.

Inflation happens when there is a persistent increase of the prices of goods and services which will ultimately lead to the decline of the purchasing power of your money. This means that every year the value of your money is decreasing. That is why savings alone is not enough. You need to learn to invest your money too. As a rule of thumb, the interest rate of your investments should be greater than the inflation rate.

Click here to read more money lessons you wished you learned in school.

Edited Version. First published in Pinoy Smart Living on 09.17.2019

Photo by Karolina Grabowska from Pexels