Why financial awareness is key to a secure future

Metrobank

Posted at Dec 23 2020 12:45 PM | Updated as of Dec 23 2020 12:56 PM

You probably have heard this saying many times, but it is undeniably true that knowledge is power. This is especially applicable when it comes to growing your wealth and having a financially secure future in tumultuous times. 

In order to face current and future challenges, there is no better way than to be well-educated in these matters and to have a reliable support system that can help protect your assets and grow your wealth. 

Metrobank, one of the leading banking institutions in the Philippines, knows how equally important it is to provide solid financial services alongside useful money management tips. As part of its mantra to provide Meaningful Banking to its stakeholders, Metrobank sees value in educating rather than just selling. 

The bank wants all its customers to be educated and equipped with the right solutions and advice so they can make the right financial decisions. 

Here are some things you need to know and handle well to have a financially secure future.

Debt

Be aware of your debt. Know how you are incurring it, which ones do not benefit you, and which ones you should prioritize in paying off. These can include things such as credit cards, mortgages, car loans, etc. Debt is not all bad, there is something called a good debt that can potentially improve your life. The one that you have to be careful about is bad debt - it must be avoided and cleared immediately. 

Debt is bad if: 
- It goes beyond your budget
- You are unable to pay it on time
- It takes money from your savings or emergency fund
- You borrow money to pay back money 
- The value of what you borrowed for lasts shorter than your loan term (ex. Luxury clothing or expensive gadgets that you will be paying for years longer than its usage or worth)

If you have bad debt, prioritize paying it off. If you have multiple, choose the one with the highest interest rate first. If you have good debt, it should be part of your monthly budget.

When it comes to debt, another thing that some people are having difficulties with is the proper use of a credit card. Being one of the most common contactless products widely used since the current health situation started, Metrobank offers its guide on responsible management of this tool because if managed correctly, there are almost no downsides to having a credit card.

First, you have to assess if you are ready to have a credit card. Do you have enough budget to pay your credit card bills? Look carefully at your current salary and your monthly expenses and see if you have enough leftover cash to pay for the added expense of a credit card. 

Are you going to pay the credit card bill on time? Will you refrain from impulse buying? Having a good credit record will allow you to borrow more money from financial or lending institutions in the future and that is why you need to pay your bills fully and on time.

If you already have a credit card, here are some suggestions to better manage it:
- Set up a reminder for your due date or set up your bank account for auto-debit
- Check or track your credit card purchases
- Manage your credit card limit
- Pay your credit card bills on time and in full as much as you can

Checking your purchases regularly and being careful when using it, especially online, are some ways to avoid being a victim of fraud. Never share your one-time password (OTP) and keep an open line with the bank to verify transactions. 

It is not overly complicated to own a credit card, but it does come with a big responsibility. Think carefully if you want to have one and if you can afford to manage everything that comes with it. When you have managed to master the art of credit cards, you can start making the most out of this handy tool. 

Budget

Tracking and budgeting your expenses is one of the basic things in financial management, but also one of the most crucial. Especially with the uncertain nature of the world, it is better to know what your essentials are and how you can cut down on the non-essentials – remember that needs always come before wants. Budget your money well to cover debts and prioritize savings.

When you do your budgeting, try to follow this order:
- Portion out payment for bad debt
- Put 10%-20% of your salary for savings 
- Allocate money for bills
- Leave the rest for whatever you want to spend on or make it grow

This prioritization is important since you will need your savings to build an emergency fund - so you will be ready for whatever comes next. 

There are plenty of other budgeting methods that are also useful, it will really just depend on what will suit you best. Here are other budgeting methods that you can try to get you started:

1. Zero-sum Budgeting

The zero-based budgeting method encourages people to assign every single peso to an expense or savings goal, meaning every single cent of your monthly income is properly allocated and given a purpose. At the end of the month, nothing should be left in your payroll account because everything has been distributed.

2. Envelope Budgeting

This method involves distributing your money in different expense categories and putting them in labeled envelopes. Physically portioning out your monthly income towards different expenses and putting your daily or weekly budget in an envelope will help prevent spending over the budget. 

3. 50/30/20 Rule

This is a pretty straightforward guide where you divide your salary like a pie - 50% for bills, 30% for personal expenses, and 20% for savings.

4. Pay Yourself First

Pay Yourself First is a reverse budgeting method where your budget prioritizes allocating money for savings goals such as retirement before other expenses. This will be useful for people to see far ahead and make less impulsive spending decisions since a big chunk of your salary already goes to you. 
 
Metrobank also offers its financial services online to aid in tracking and budgeting. Convenient services such as bills payment and fund transfer will help you manage and track your payments better without stepping a foot outside the house. 

Understanding personal finance is just the first step in building a secure future. It will also help you get ready for the unexpected curveballs of life. After you have understood how to handle these things, you can then proceed to improve your quality of life with the money you have properly managed. 

Learn how to manage your debt, track your expenses, and grow your wealth with the help of Metrobank. 

For more financial tips and better money habits, check out this page.

To know more about Metrobank and its services, visit its website and open an account today. You can also follow its official Facebook account for updates. 

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