Photo courtesy of Nolan Espenilla
1. Concentrate on needs rather than wants. Thinking of buying an iPad or an iPhone 4, or maybe even both? Thinking of replacing your five-year old Honda City with a brand new Accord? Think again. Spending on big-ticket items that you don't really need is the surest way to deflate your savings and maybe even get you neck-deep in debt. Two things are key: prudence--question the rationale behind every major purchase until every bit of doubt is resolved; and self control--spending on more “important” things in the future (e.g., a house, top-notch education for your kids, your own business) should provide more lasting rewards than succumbing to short-term temptations.
2. Only buy things you can pay for with cash... then pay with your credit card. It almost always does not make sense to borrow money to buy stuff since debt interest rates are almost always higher than what you can consistently earn from any investment. But if ever you decide to buy something big that you have enough cash to pay for, charge it to your credit card if you can, earn reward points and get the instant freebies, and pay your entire credit card balance on the due date.
3. Start with a clean slate--wipe out your credit card debt, NOW. It’s something you’ve been putting off in the last couple of years, so by now all that cheap talk should have already cost you tens of thousands of pesos in interest rates. It’s time to stop the bleeding now--not tomorrow, not next month, not next year, but NOW. And don’t tell me you don’t have the dough to pay off your credit card debt when you seem to be loaded enough for regular night outs, expensive dates, and extravagant holidays. Scrimp and tighten your belt for a couple of months and reap the rewards of being debt-free forever.
4. Time is gold--don’t waste it. It is probably the most valuable but also most overlooked scarce resource that we have: there's never enough of it to do all the things that we need and want to do, yet we spend and waste it like we'll live forever. I’m not saying we should all work our collective asses off and exhaust ourselves to death, but rather find joy in being more productive. Spend less time with your iPad consuming, and more on your laptop creating. Better yet, get your hands and feet dirty and do something worthwhile irl.
5. Make your money work for you--invest. Worst thing you can do with you money: spend every cent. Second worst thing: keep everything under your mattress. Third worst thing: keep everything in the bank. In the past 11 months, we have learned the whys and hows of investing; this new year, it’s time to put our money where our mouth is, take the plunge, and actually invest.
