Why is it hard to be financially responsible?

Infographic from the Money Summit & Wealth Expo 2012

Infographic from the Money Summit & Wealth Expo 2012

How do Filipinos rank in financial literacy?
News from Rappler, 16 July 2013

The Philippines recorded 68 index points and ranked 8th among 16 Asia-Pacific countries covered by the latest MasterCard Index of Financial Literacy.

The Philippines’ score in MasterCard’s 4th annual survey is almost the same as the Philippines’ index score of 68.2 in 2011.

“This Index of Financial Literacy is a good measure of whether and how people in the Asia/Pacific region are making informed decisions around their home finances,” said Georgette Tan, MasterCard’s group head of Communications, Asia/Pacific, Middle East & Africa.

The recent survey, released on July 3, was conducted with 7,756 respondents aged 18 to 64 from Asia/Pacific markets between April and May 2013.

Three major components are considered in the calculation of the final index score: basic money management (50% weight), financial planning (30% weight) and investment (20% weight). Regional Aggregates had been calculated via the average of the components of individual countries before these weights were applied.

Philippine respondents rounded up 67 index points for basic money management, 74 index points for financial planning and 58 index points for investing.

The ability to manage money involves skills such as day-to-day budgeting, paying up bills, handling credit commitments and saving up for big purchases. Investment proficiency includes understanding bank statements and complex investment concepts.

New Zealand remained at the top of the list, with 74 index points, and also in matters related to fundamental money management skills. China has come out as the most proficient in investment, Myanmar in financial planning.

Japan fell at the bottom of the chart with its overall financial literacy at 57 index points.

“There are divides across our markets that reflect the gap between the developed and the developing. Financial literacy is a concern where a large proportion of society are without the support and education that is taken for granted in the developed world,” Tan added.

A developing country, the Philippines was the sole market from the list to have low levels of financial literacy from the demographic of 30-year-olds who are married at the same time. Becoming financially savvy is more pronounced with marriage and increasing family obligations, such as household expenses, education and financial commitments.

Link to original site here

saving is a bitch

saving is a bitch

How about you? Do you find it easy to arrange your finances and set it in order?

For almost five months now, putting my finances in order has been my sole obsession. I don’t know what prompted my quest to scrimp, save and invest aside from the fear of dying and leaving nothing to my family in spite the crazy hours I spent working.

As embarrassing as this may sound, my financial IQ is nil and almost non-existent. I lack the discipline to save my money and look the other way when it comes to my wants and not needs. I am currently trying a lot of ways to save, invest and keep. I’ve read somewhere that 10% of our salary should go to our savings, 20% to our investments (different from the rotating money in the bank) and 70% should go to our day-to-day expense.

I wish I could tell you that everything is going according to plan and that all my savings are growing according to the same gaant chart that I prepared with gusto. However, the reality is that, like any other Filipino, my monthly expense sometimes outweight my monthly earnings. Instead of allotting money first for my investments (mutual and emergency fund) and savings (revolving fund) accounts, what happens is that I am forced to pay for my bills before I set money for my savings. According to the many investment and financial websites I have studied, what is correct is to pay yourself first before you pay others.

Here are some financial literacy tips from Investopedia

1. Responsible use of credit cards
If you have a credit card and you’re barely paying the minimum payment due per month, then there is something seriously wrong with your financial spending. Credit cards are convenient tools and provides you financial flexibility but they shouldn’t be taken in as substitute to cash. Stop using your credit cards to pay for your wants (yes, very easy to say when there’s no H&M, Forever 21 or GAP near your office). Credit cards should be used for emergency expenses only (thing is: a plane ticket qualifies as an emergency to me).

2. Pay yourself first
As mentioned earlier, make it a habit to pay yourself first before you start paying your bills and other obligations. Since this is the part of my financial journey where I struggle the most, I am planning to do something to improve how I do this. One plan is to NOT use my money, and not withdraw anything unless I have paid myself using the medium I discovered — 10% savings (revolving funds) and 20% (investment/emergency funds).

3. Have an emergency fund in hand
Shit happens — people get sick, appliances get broken, unemployment happens and insane discounted tickets to Japan gets announced (kidding on this one); it’s best to always have money in store to use for instances such as these. Since I was young, I was told that one must have at least three times the worth of her salary in her bank account. But apparently, amount should be equivalent to six times your salary in order to cover living expenses and even cases like hospitalization.

4. Stop keeping up with the neighbors
Just because your neighbor happened to buy a new car doesn’t mean you have to line up to the dealership also. Be contented with what you have. Your neighbors do not pay your bills, so their opinion doesn’t and shouldn’t count on how you live a financially-independent life.

5. Have a budget
…and stick with it.

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