“pinoy Financial quotient”, pass or fail?
Sounds like a school examination, isn’t it? Yes it is an examination, But it’s actually beyond that. In my previous article, I roughly mentioned about Filipinos having low “financial IQ”. We are aware of the term IQ (intellectual quotient) and EQ (emotional quotient), But are we aware of this term Fin-Q (Financial Quotient)? This Fin-Q actually pertains to determining whether we are financially healthy; being financially secure and functioning well. Being financially healthy has to do with the intelligence of how to manage our finances, having the right attitude towards our finances; budgeting, saving, and financial planning.
Based on a study made by Citibank last January 2008, Filipinos have very low financial quotient. We have scored 47.8 points out of the possible 100 points. Some of the findings according to the survey are as follows; budgeting is not a habit for Filipinos. They don’t have monthly budget, and if they do, they do not stick to it. Secondly, insurance is not a priority-making us vulnerable to a much higher financial crisis. Savings is not automatic; they do not set aside money during salary day. In addition, Filipinos don’t have retirement plans, some have not started planning. It is either they don’t have an idea of how much they need for retirement, or they have some savings but don’t know if it is enough. The lack of this plan can be attributed to our culture of tending to look after or depending on our family especially to the adult children in case of need and retirement. Most of us also have savings that are not enough in cases of emergencies or retrenchment.
Do you share the same habits and attitudes as the rest of our countrymen? Personally, I felt very sympathetic when I saw the figures. This maybe one of the reasons why Filipinos seem to not better their condition. The scope of the result of the survey is very broad to tackle each and every aspect of it. The main thing here is that we should start examining ourselves and find steps to better our financial standing. Below are just some steps to consider to at least improve our Fin-Q individually.
Initially, it is necessary to assess our financial status. Determine what you have and how much you are getting monthly. Planning is the key to any goal that we want to meet. Sit down and figure out a budget for yourself/family monthly. Take control of your finances. Get a grip on your day-to-day spending. Take a look of what needs to be improved. The more you learn about how to manage your money, the more power you’ll have over financial pressure . . . and the less likely you are to succumb to that giant bag of potato chips or branded items. Write down everything you spend for a month, cut back on things you don’t need, and start saving the money left over or use it to reduce your debt more quickly.
It really pays to have a systematic savings program. Set aside money for savings then put a limit on your spending. Some of us save only after all the expenses have been incurred. Make it a habit to save on a monthly basis before you spend the rest of it. As much as possible, do not incur debts. Spend within your means. Pay on time if you are using a credit card so that you don’t have to pay for the charges and unnecessary interests. The recommended amount of savings is 20% of your salary. You can put this first in your savings account then you can opt to invest later in instruments that can give you a much higher returns. Build a cash cushion worth three months to six months of your living expenses in case of an emergency. If you don’t have an emergency fund, a spoilt fridge or damaged laptop can seriously upset your finances.
Another strong point that was stressed in the results of the survey is the insurance coverage. This term if not strange for Filipinos, suggests negative connotation. But we should leverage on this industry. The risk that we may encounter especially if there are people depending on us is very high. Taking up insurance coverage will transfer these risks to these companies. If something happens to us, we will not be thrown into much financial crisis. It is also a way of protecting our assets and our hard-earned monies, so we don’t need to spend and worry if something happens to us.
Lastly would be retirement planning. This is also something that does not concern most of our kababayans. They don’t plan at all and they are not aware of how much they need to have for a comfortable lifestyle. Take out the mindset of depending on our children to take care of us someday. Find out how you can start to save for your retirement and how much you need. It is better to start early and leverage on the compounding interest. The first thing to do would be determining what kind of retirement lifestyle you want to have. Seek the help of a financial consultant with this matter.
Financial planning is the key to financial health. However, a plan will remain a plan unless you take action. More importantly, review the changes that you may have along the way. Change your plans to suit your current status and needs, and then start again at the basic step. It is never too late to take steps to be financially healthy. Start today! Achieve your financial freedom. Let us start to do our part personally and in turn affect the nation in a much wider sense.