When I started working in 1991, my salary as a training assistant was 2,898.00 pesos. Back then, the Love Bus fare from North EDSA to Ayala costed only 9 pesos and a complete canteen lunch meal set me back less than 20 pesos. Credit cards were not common in those days but we had small-time creditors like SQ Palad and MM Ortiz that gave us credit for establishments like National Bookstore and Landmark. Every pay day, Mr. Palad would come by the office to collect a quarter of the debt.
With the occasional after-office night-out in Glorietta and obligatory Fortune Duck purse bought paiyakan-style from the in-house byahera, I was all set. Everything was smooth sailing until I discovered credit cards. Being young, I didn’t realize the responsibilities of owning a credit card. I started using it mindlessly to acquire useless stuff. When due date came, I obviously couldn’t pay the entire amount and would only pay the minimum amount due. The charges and fees piled up and very early in my career, I was buried under a sizeable credit card debt and my cash flow was completely messed up. I was so poor that, one time, I skipped lunch because the only cash I had in my wallet was for my fare going home. I also had to sell some old jeans and shirts at Eloy’s, a used clothes thrift shop, to come up with cash for everyday expenses. Being in very dire straits, I asked my Dad for a loan to settle my debt so I can start fresh. After this harrowing experience with my personal finances, I swore I will never be in this situation ever again.
Today’s starting salary for new college graduates is between 13,000 to 25,000 depending on the role, company and industry. While newbies enjoy 4 to 8 times more money than us in 1991, there seems to be more stuff and experiences to spend on today compared to our time. There are mobile phones and gadgets to show off; mobile data and load to maintain; designer coffees to be drank; and, #squadgoals and #travelgoals to achieve. It is no wonder that today’s young professionals are struggling to manage their funds.
To the new college graduates entering the corporate world today, maybe you can learn a thing or two from my earlier failures at managing my personal finances. I offer you a few tips so you can start right in handling your money and be on your way on the road of greater financial freedom.
Tip #1: Learn to differentiate want and need.
Before making a purchase, ask yourself: How practical is it to acquire this item? Will it serve me well or will it satisfy a mere passing fancy? Think twice before giving in to your craving for a Starbucks coffee or clicking BUY from Lazada, Zalora or Shoppee.
Tip #2: Use credit cards responsibly.
A credit card gives you immense purchasing power but with this power comes great responsibility. It is easy to forget your last spend and remember it only on due date. Believe me, seemingly small and insignificant spends can rack up into a monstrous total amount due come payment time.
Today, I use only one credit card for regular expenses like groceries, gasoline and occasional night-outs. I am what credit card companies call a “transactor.” A “transactor” pays the entire amount of the monthly amount due. This way I don’t have to pay finance charges or other fees. I used to be the other type of credit card user — a “revolver.” A “revolver” pays a fraction of the total amount due and ends up paying more on finance charges and other fees. This month’s debt also gets carried over to the next month thereby accumulating more charges and fees and so on. Without careful management, a revolver can get overwhelmed by credit card debt in no time.
Tip #3: Start saving and investing now.
When I was starting out, I bought my first insurance policy from a retired colleague only because I felt sorry for him. Since I was young, the premium for a 1 million coverage was about 1,500 pesos per quarter. At some point, I was tempted to stop paying my premiums but well-meaning colleagues convinced me to keep at it. And I’m so glad I did. Today, there are dozens of options for savings and investments like VULs, UITFs and mutual funds with very affordable terms and plans. Start now while you’re young. Your older self will thank you for it.
Tip #4: Don’t spend more than you earn and keep to a budget.
Keep track of your expenses so you can be sure that you are living within your means. I used to have a little notebook where I would jot down all my expenses for the day. This discipline helped me see where my money is going and ensure that my priorities are aligned with my money management strategy.
Ignore the urge to be a one-day millionaire on pay day and don’t splurge your salary just because you want to live in the moment. Living in the moment does not necessarily mean you to have to blow off your entire pay in one night! Life is not lived by stringing together “happy moments” but enjoying what is here today, happy, sad, difficult and everything else in between. Have a strong discipline to commit to your budget no matter what.
Tip #5: Live simply. Bring baon to office and don’t be ashamed to wear hand-me-down clothes and shoes.
Bringing baon is definitely more economical than eating out or even eating at the canteen. Imagine: If your cafeteria lunch costs 80 pesos every day and you save that by bringing baon, you can save 1,600 pesos for the month and 19,200 pesos for the year. You could very well invest 19,200 in UITF that can get you started right toward your financial freedom.
I was also fortunate that my former boss would give away her used but still functional clothes and shoes. A lot of them were even designer items. Although today’s social media obsessed society is all about appearances, there is no shame in wearing pre-owned clothes as long as you don them with pride and dignity.
So dear corporate newbies today, I hope you heed these advices. Live simply and within your means. Be responsible with your credit. Start saving and investing early. Times may have indeed changed from 1991 and you are facing different challenges. But when it comes to managing personal finances, these time-old principles remain true. May you be financially free and happy!