The importance of managing your money wisely

Money management is one of the most important skills that everyone should know. Unfortunately, a lot of people don't take the time to learn how to manage their finances properly. This can lead to a lot of problems down the road. If you're not careful with your money, you can end up in debt or struggling to make ends meet.

Let’s take a look at the importance of managing your money wisely as well as some of the most common financial problems faced by Filipinos and offer some practical tips on how to solve them.

Why is managing money important in your personal life?

Money management is the process of budgeting, saving, investing, and spending your money in a way that helps you meet your financial goals. It can help you stay out of debt, save for emergencies, and reach your long-term financial goals. Money management is important because it can help you make the most of your money and get you where you want to be financially. It can also help you prevent financial problems in the future. Managing your money wisely can be a challenge, but it is worth it to ensure your financial security.

Common financial problems faced by Filipinos

1. High levels of debt

In September 2021, household debt in the Philippines reached a near-record high of over P2 trillion or the equivalent of about 10% of the country's pre-pandemic economic output.

The situation is further complicated by the fact that the Philippines is currently in the middle of an economic recession, with record levels of unemployment. This can create a devastating impact on household finances.

As individuals lose their primary source of income, they are unable to pay off debts and may even fall behind on payments. This can have long-lasting consequences, such as lowered credit scores and potential bankruptcy. Unfortunately, this cycle is all too common in periods of high unemployment, as individuals struggle to secure new employment with their decreased financial standing.

If you find yourself with high levels of debt, don't panic just yet. There are effective ways to manage debt you can try to ease the financial tension you're facing. The first thing you should do is track your expenses. This will help you get a better idea of where your money is going and where you can cut back on expenses. Once you’ve determined how much money comes in and goes out every month, you can create a budget to help you control your spending. You should also try to pay off your debts as quickly as possible by making higher payments each month. Finally, avoid taking on any new debt until you have managed to get your existing debt under control.

2. Difficulty saving money

One of the most common financial problems faced by Filipinos is difficulty in saving money. This is not surprising, as living expenses in the Philippines continue to rise while wages remain stagnant. To make matters worse, many Filipinos have a habit of spending money as soon as they receive it, without setting aside any for savings.

There are several reasons why saving money is so difficult for Filipinos. Firstly, the cost of living in the Philippines is relatively high, especially in urban areas. Despite this, salaries in the Philippines are often low in comparison to other countries.. Many Filipinos then have to live paycheck to paycheck, making it difficult to put any money away for savings. Additionally, there is a widespread culture of consumerism in the Philippines, which encourages people to spend rather than save.

If you are finding it difficult to save money, there are a few things you can do. The first is to try to set aside a fixed amount from each month's income for savings. This can be difficult to do if your income is irregular, but even setting aside P500 per month can add up over time. Next, make use of technology to help you save. There are numerous apps and websites that can help you track your spending. You can also try to find ways to reduce your living expenses so that you have more money available for savings.

3. Lack of retirement planning

A lack of retirement planning is a serious financial problem facing many Filipinos. This is because most Filipinos are focused on short-term goals, such as buying a house or car, rather than long-term goals such as retirement planning. As a result, many Filipinos may find themselves without enough money to support themselves in retirement.

This can have serious consequences, both financially and emotionally. Retirement should be a time when people can relax and enjoy their golden years. However, without adequate planning, many Filipinos will be forced to continue working well into their retirement years.

If you have not started planning for retirement yet, it is never too late to start. The first thing you need to do is calculate how much money you will need in retirement so that you can start saving accordingly. It is also important to invest your money wisely so that it can grow over time. Don’t forget to factor in inflation when planning for retirement, as the cost of living is likely to increase over time! If you are facing any of these problems yourself, don't despair – there are ways to solve them. Just remember to start planning early, use digital banking services to your advantage, and be mindful of your spending habits.

Learn more about financial education from Metrobank's Money Basics! Find tips and advice to help you reach your financial goals.