Have you saved up for your retirement yet? Do you have an emergency fund? Can you survive financially if you were to lose your job tomorrow? If you said “no” to any of those questions, then it may be time to rethink your savings strategy.
Here’s a helpful tip to get on top of your finances: divide your income by following the 70-20-10 rule
20% for savings
This is your top priority every time you get your paycheck. Set aside 20% of your salary for retirement or insurance, emergencies, and specific goals:
10% - retirement (it’s never too early to start your retirement fund! This gives you peace of mind in the long run)
5% - emergencies (unexpected medical expenses, unemployment)
5% - specific goals (car, vacation, tuition, etc)
10% for debts (credit card bills, car loans, mortgage)
The infamous “Filipino time” mentality is not a good habit when it comes to paying debts and loans. Loans accumulate interest over time so it’s better to start paying them off now. Consistently trailing behind credit card bills would brand you with bad credit as well. Always set aside a portion of your salary to pay these off. You’ll thank yourself in the future!
70% for living expenses
After setting aside your income for savings and investments, you can live with the remaining 70% of your income. This includes rent, bills, transportation, food, and other expenses.
Learn to prioritize your expenses based on needs vs wants - and how to distinguish between the two. You NEED to pay your rent and bills. You WANT a fancy dinner and a new phone. After setting aside your money for savings and paying off your debts, why not pay your bills in advance? You wouldn't want to pay the unnecessary late fee right? Or worse, get your electricity disconnected.