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Personal Finance 101: The Basics for Next-Gen Filipinos

Terms, tips, and tricks.
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When we think about personal finance in the Philippines, we know that the country is pretty young. In a survey back in 2019, the Bangko Sentral ng Pilipinas (BSP) financial inclusion survey found that only 25 percent of Filipinos have some form of investment.

During the pandemic, however, younger Filipinos entered the stock market and others had suitable returns on their investment. According to data from Manulife, roughly 67 percent of millennials have started investing in financial instruments and about 81 percent of both millennials and Gen Zs have began taking steps to secure their personal finances for the future.

This means that each has had a set of objectives when it comes to financial management. What these numbers say is that there is interest among next-generation Filipinos to be smarter with their cash. Of course, it can all be intimidating at first. But once we get a hang of some basic terms and tips, we can start building a good portfolio that can set us up for the rest of our lives.

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The Basics

Budgeting

Let's start with budgeting. You can be do this by basically earning more and spending less. Having a budget and sticking to it is one of the simplest ways to handle personal finances. It also helps if we can reduce our debt, from our credit cards to our personal loans.

Insurance Planning

Find a good life insurance and medical insurance provider. These are two of the most important coverages we need, especially if we have dependents. A disability insurance cover, on the other hand, would mean that the cash flow continues even after our unfortunate demise. One of the key objectives of financial management, after all, is preparing for all risks.

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Investing

An investment can be defined as an asset purchased with the hope of generating income or appreciating in the long run.

Most Filipinos have actually shown interest in investing. They just don't know how and where to invest in the Philippines. This can be as simple as enrolling in an auto-debit program at our bank. We can start investing for as low as P1,000 in things like stocks, mutual funds, and state investment programs. GInvest, meanwhile, can get us started in investing for only P50.

Regular Reviews

Inspect your personal finances carefully and regularly. Check on the weekly or monthly progress you've been making. Also check to see if you have had desirable returns on your investment.

Where We Can Invest in the Philippines

It's best to nvest about 10 percent to 15 percent of your monthly income.

Ownership Investments

Cash equivalents basically contribute to a company's capital. It means the ownership depends on the assets you pour into it. Money grows as the company goes, with an increase in contribution, profit, or interest.

These things can be stocks, which makes us part owners of a corporation, a business, which focuses on products and services, or real estate, which also appreciates over time, among others.

Lending Investments

Yes, lending money is a good way we can invest in the Philippines, too. We may lend a company money and expect returns on our investment.

A good example of this type of investment is our savings accounts. This is perhaps the most popular among lending investments and it is a decent investment for beginners. The returns on these things are, unfortunately, lower. We can purchase bonds, too. With bonds, we loan money to a company and get paid with a fixed interest rate.

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Cash Equivalents

Improve your personal finances with cash equivalents. These kinds of investment assets are the total value of cash on hand. This is best for those who are short-term investors.

Commercial papers, which are issued by SEC-registered Philippine corporations, can fund short-term obligations, including payrolls and inventory. Treasury Bills, which are issued by the state, can have us investing with a minimum of P50,000.

How About Crypto?

It is estimated that there are about 4.3 million Filipinos investing in cryptocurrency and many pundits consider it the next big thing. Some cryptocurrencies include Ethereum, Ripple, Bitcoin Cash, and LiteCoin. GCash will soon be offering a platform for this, too. If we can handle the risks, we shouldn't stop ourselves from entering the crypto game.

Trading is a much more complicated matter, and we'll be discussing that next time.

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