In this day and age, money comes and goes in a blur. We do not even have the time to look closely at our bank accounts and check our position relative to our targets. Sometimes, we just spend and acquire something not knowing that we cannot really pay that up, and in the end, it is our retirement that is being sacrificed. This is my common observation from my friends and sadly, some of my family.
I would hear that “X needs to buy this gadget for school since this would make his life easier” commonly followed by “X no longer has capacity to shoulder his other expenses.” I am not castigating nor pointing fingers for faulty decisions here but this is the reality. We live in a very fast-paced environment and sometimes, we forget to set boundaries and goals in every day with breathe on this green planet. And this is why most of the people I know usually face a dilemma in the end, usually in this wise: X buys the gadget then ends up borrowing money from Y with a% interest per annum for his utilities. Honestly, I don’t want to be in X’s shoes, nor do you, because you and I know that borrowing money can cost us a lot – extra financial burden, friendships get strained, and STRESS. This has to stop.
I remember reading one of Warren Buffet’s advice list and one struck on me hard: don’t save after you spend. At first I thought that’s hard, but upon deeper reflection and understanding of the mechanisms involved, I realized this is the right thing to do since it really flows from the basic principles of budgeting which is setting a maximum for a particular class of expenses that is derived from a limited source of income, e.g. work, allowance, profits, etc. As we can easily see, either X does not have his budget set or X does not have the proper discipline to follow his budget.
Ladies and gentlemen, budget and discipline is only a part of the bigger picture of financial literacy. We may all know what financial literacy is but what is not emphasized in the usual course of things is the fact that financial literacy itself can help save hundreds, thousands, or even millions of dollars. Moreover, it can help us chart our retirement years and how we can enjoy those years better. However, in most countries, mine included, financial literacy is just taken for granted. People just don’t take this seriously, commonly saying that financial literacy is only for the rich and with overflowing money. But I firmly believe that that is not the case. Wise spending, budgeting, setting up daily savings goals, developing proper financial discipline are all aspects of financial literacy.
It is strongly argued by the fervent opposition that financial literacy is meant for the big markets like stocks, foreign exchange and the like. Yes, that may be true but we have to first learn how to walk before we could start to run. Before we enter into these money markets so to speak, we must first learn the basics of how does money grow – and it starts with the person you see at the mirror.
Financial literacy can help us beyond the metes and bounds of our sight. It can help us not only to get through a particular day but also help in building financial security for times to come, just like the ant that is stocking up food in preparation for the winter. We don’t know when our financial winter will come, so we must prepare immediately.
Miguel Dimayacyac is a law student based in the Philippines with an interest in forex trading and the global financial markets as a whole. Having completed a Bachelor’s degree in Management at Ateneo de Manila University, he is currently working towards a Juris Doctor graduate Law degree and expects to graduate in 2017. Outside of his university studies, he has also attained a Basic Trading Diploma from Global Capital Market Solutions and was a member of the Junior Fellowship for Financial Literacy in 2012.