Money. We hate talking about it, but it also makes the world go round. It’s high time we stop making it taboo and instead start talking about it more out in the open. Financial literacy has been an increasingly hot topic over the years, but the amount of information to tackle can be overwhelming, especially since people are at different stages of their life. So where does a young adult even begin? We’ve broken it down to the basics with these tips:
Set Your Financial Goals
What do you want out of life? A loaded question, for sure, but not unwarranted. To begin your financial journey, you have to determine your goals so you’ll know how to invest your money. Do you want a house? Cars? To retire early or travel the world, maybe? Or something medium-term, like getting a Master’s Degree?
Maybe it’s something less tangible, like taking care of your parents. How do you define that? For most, that would entail having a roof over your heads as well as a steady stream of food. Can’t forget about medical and/or leisure expenses either. It’s all up to you. Just keep in mind that it’s different for everybody, so best to put some blinders on and sit down to assess what you really want. Think of it as a bucket list!
Set a Budget
Track your expenses. Just do it. It’s super easy. Use an Excel sheet, write it down in a notebook, or use an app. All you have to do is log an expense every time you make one. It’s a particularly easy habit to develop, and this helps you understand where your money is going. Try this for a month or two, and take a look at the results. Are you happy with it? Do you think you need to cut down on a few things? Maybe you had too much milk tea again? Assess your expenses properly, and set your budget from there.
Most people recommend the 50-20-30 rule, where 50% of your income goes to needs, 20% goes to savings, and 30% goes to wants. This is flexible of course, but yes, you do not need to live like a hermit. While you can always save more, it’s also important to enjoy the present, or at the very least, don’t create problems for your future self (more on this below).
Build an Emergency Fund
Take your income and multiply it by 3, 6, or 12 months, depending on your comfort level. That’s how much should be in your emergency fund. Easy enough, right? Now, let’s define what an emergency is not. A sale is not an emergency. Neither are celebrations.
So when do you use it? You use it when your cash flow runs dry as a result of job loss or misfortune, when your car breaks down, or when someone is in the hospital. The money is invisible up until then. You can stash it in high yield savings accounts and digital banks to earn high interest since you won’t be touching this money for long periods of time. Do not invest this money, that would be like gambling your life away. It has to be liquid.
People also often recommend dividing it for accessibility. For example, you can keep Php 25,000 at home, Php 25,000 in a regular bank account, and Php 50,000 in a high yield savings account. The important part is to keep it accessible with ways to get it quick in case of, you guessed it, emergencies.
Secure Yourself
Now that you have a monetary safety net, let’s talk about a physical safety net. There are many different types of life insurance, but the most common form is in the death benefit. This is perhaps one of the best investing tips you’ll get, as it’s also one of the most practical. You pay monthly/annual premiums to an insurance company so that your loved ones receive a certain sum of money in the event of death. It is not something that everyone needs immediately, as taught by this handy chart but if you can afford it, why not?
If you’re young with no dependents, opt for health insurance instead and make the most of it by getting yearly check-ups just to see if everything is running smoothly.
Invest
Finally! We’re at investing 101. There are many, many ways to invest, and most of it hinges on your risk appetite. This is where your financial goals come into play. How patient are you? Are you aiming to earn enough money for a particular purchase? Can you stomach big losses? These are great basic questions to ask yourself. Safer investments include online investments such as digital banks with high-interest rates, time deposits, bonds, and other passive income vehicles. The riskier investments are stocks like FMETF, and owning your own business. Mind you, this will require heavy reading, or it might result in loss. You can refer to resources with investment tips for beginners like Pesolab, Investagram, the subreddit r/phinvest, or YouTuber Nicole Alba for more in-depth information and investing tips.
Don’t think we’re done yet. We’ve still got more tips for smart investing. Investing is also personal, and self-improvement is a major component. Career-wise, invest in workshops to improve or learn a new skill to get a job that pays better. It can be new shoes for work, so you look presentable. Or a bag that won’t fall apart after 5 uses. In terms of lifestyle, you should also invest in exercise and healthy eating. Much like a car, maintenance is also key, and it would serve you better to splurge on vegetables rather than fast food, so you don’t have to deal with any health issues in the future. Buy that ergonomic chair! Future-you will thank you for it.
Do It Consistently
You’ve set yourself up (in a good way). You have an emergency fund, you’re protected, and you’re fighting your way through inflation with investing tips you’ve picked up. The wise thing to do would be to keep it up—proper financial hygiene if you will. Continue to invest in yourself, increase your cash flow, pay your dues, and replenish the emergency fund if it gets used. Finally, try to open more conversations about money, so that you and everyone around you can find themselves in a better financial position.
Eager to learn how to invest in uncertain times and explore new experiences to help with your self-improvement? Check out SHOOR’s catalog of experiences to discover workshops, classes, and other online experiences to help you achieve your goal.
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