Unnecessary Finance Tips from a 20-something year old

I'm running out of blog post ideas. So I figured I'd write something that really interests me - finance. Being in my 20s, I admit I am not the most well versed when it comes to this topic. but it is also something I had to learn for myself for the most part. I'm not a financial advisor or a millionaire, but I am also trying not to mess up my future financially. Take them with a grain of salt, but I think you'd still learn something.

1. Your financial problems can't always be solved by budgeting and personal finance principles. Minimum wage isn't livable so if you only earn minimum wage and you are supporting a family, I am proud of you, but don't expect to be able to save. Ignore the 50-30-20 rule or the [insert age]% of investments in stocks. You're better off negotiating for a higher salary or finding another job. While it's still good to have personal finance principles, there's little you can do to be living on PHP 10k.

   In fact, if you tried every personal finance tip under the sun AND you're still struggling, your income is probably the problem. Get a side hustle, ask for a raise, or seek financial assistance from the government.

   Don't let yourself get guilt tripped by financial advisors saying you're not working hard enough. Know when the problem is the money that's coming in.

2. GSheets and Excel is better than any budgeting app. I've tried a lot of budgeting apps, but I keep going back to Excel. What makes budgeting apps good is the convenience as you can log transactions on the go or even automatically for some apps. However, I really don't find them worth it as Google Sheets is free (I use Excel because I like it). If you prefer privacy, there are many open source spreadsheet apps which can do it.

   You don't need a template to start doing so - you can simply start by recording the date, category, and amount of the transaction. If you need structure, Google Sheets and Excel provide templates and there are many websites where it is available.

3. Investing is good but be wise where to do it. Whenever you're investing, you will hear of the principle, "Invest early because compound interest". That's true, but don't limit yourself with conventional investing instruments like the stock market or bonds.

   While I invest in the US Stock Market, most of my investments is through trainings, workshops, or events I'm interested in. Investing in yourself properly is never a bad idea. Your relationships, skills, and health will still generate a huge ROI even if it's not apparent.

   Also, I think it's a good idea to say now that if you don't understand your investment, you're gambling. You should be able to explain entirely how your investment works and how it's supposed to generate returns.

   Yes. This statement is meant to be a stab on many crypto bros who don't do their research.

4. Don't be too in love with your money. Don't deprive yourself of things - that's what your money is for. Whenever someone who has cash thinks twice buying something they know they'll truly enjoy, I always feel bad for the person. Your cash is meant to give you freedom not to restrict it.

   I once read a comment on Facebook where a person foregoes birthday parties and vacations because "Sayang ang pera" (translated: "It's wasteful"). It makes me think of their children because it could make them resentful of their parents who denied them of those experiences.

   If you need a tip, go for experiences rather than things. The high lasts longer than a new physical object. Go travel, go to a concert with someone, go to a carnival, go to a tennis club, or whatever else tickles you fancy. If you know you'll enjoy it, go for it.

5. Don't try to avoid AMLA. I know the most annoying part of AMLA is the documentation but AMLC works behind the background and there are too many horrible advice on it.

   One thing I see is to split up transactions below 500k because that's the threshold for AMLA - which is false. In the Philippines, there are two types of transactions: Covered Transactions and Suspicious Transactions.

   Covered Transactions are those that are above 500k. Suspicious Transactions are, from the BSP's own words in Rule 3.b.1:

   1. There is no underlying legal or trade obligation, purpose or economic justification;
   2. The client is not properly identified;
   3. The amount involved is not commensurate with the business or financial capacity of the client;
   4. Taking into account all known circumstances, it may be perceived that the client's transaction is structured in order to avoid being the subject of reporting requirements under the act;
   5. Any circumstance relating to the transaction which is observed to deviate from the profile of the client and/or the client's past transactions with the covered institution;
   6. The transaction is in any way related to an unlawful activity or any money laundering activity or offense under this act that is about to be, is being or has been committed; or
   7. Any transaction that is similar, analogous or identical to any of the foregoing.

   So no - don't split up your transactions thinking that will make AMLC blind on you. AMLC still investigates Suspicious Transactions.

   Banks regularly transact more than 500k. I understand that the most annoying part of AMLA is the documentation but it's better not to risk getting a bigger headache. Imagine having your accounts frozen and the bank is unable to help you because they're not allowed to tell you you're being investigated for money laundering.

6. Pay your debt first. I'm fortunate enough to graduate without any debt but this isn't the case for many - even in the Philippines where it's expected for parents to pay for college. It's more important to pay your debt first once you get an income since if it is from a bank, it will just grow in interest and if you suddenly can't pay anymore, it will affect your ability to borrow in the future.

   That means if you need a car loan or a house loan, you most likely will get rejected because of the delinquency regardless of your income. Even if you will borrow from a different bank, that record can still come up. While our credit scoring in the Philippines is still immature, it's better not to destroy it because it could be a decision maker in the future.

   Second, if it's from an informal lender (e.g. your friend or parent), not paying your debt first can be disastrous to the relationship. You're basically selling the relationship for whatever the value of the debt was.

   Oh, and consider this as bonus advice: If you were unable to avoid the inevitable and racked up debt, you can consolidate debt. If it's from multiple credit cards, you can go to the IDRP. If it's from one credit card or bank, you can usually negotiate with the bank itself. If it's from multiple personal loans, you can try asking one bank to pay your other debt in exchange for consolidating it into one loan.

   Also, please understand your rights and don't let anyone harass you. Unfair debt collection practices are all over the place so know how to protect yourself if these happen. While it's true that no one can get into prison for being in debt, you can get into prison for estafa or fraud.

7. Don't loan out money to anyone. On that note, don't loan out money. You can give money to people but don't expect them to pay it back. That means, give them an amount that you're willing to bet will never return. Loaning out money will usually ruin relationships and you are in under no obligation to give money - regardless of your relation with each other.

   If this happened though and they haven't paid you back, consider the Small Claims Court. Just be aware it will likely ruin the relationship - but they probably already did that anyway.

8. Control your lifestyle inflation. This is something I'm admittedly having trouble with. However, controlling lifestyle inflation is still very much important when earning more. You don't want to still be struggling even after earning 2-3x your salary.

   This doesn't mean to avoid luxuries. However, choosing which parts you will upgrade and which ones you'll keep is important. If you bought something for convenience or to scratch an itch you had for months, it's alright. But if you bought something to simply show you have money, that's a problem.

   This is incredibly nuanced so I'm not going to give some tips on how to identify it. But if you are in doubt of a purchase, it's usually better to wait. If you still want it after a few months, it's likely fine to purchase it.

9. If you think you are too smart for a scam, you are gullible. Not enough financially literacy seminars in my college life talk about how to avoid getting scammed. Spoiler alert: It's not about being smart. You're incredibly gullible if you think you're too smart for one.

   However, don't be too cautious either. This is an extremely delicate balance because I also see a lot of people ask, "My bank called me and told me to go to a branch to carry some papers. Is this a scam?"

   But generally though:

   1. Think twice for any investment that generates returns more than 7% a year. Think thrice for any that generates more than 14% in a year.
   2. Never give out an OTP to another person. Never. There is absolutely no reason why a legitimate bank employee will need it.
   3. If in doubt, ask other people you trust. Otherwise, it's usually better to be on the safe side. And when you ask other people, please be open minded. Otherwise, you're just asking for validation.

10. Cashless is usually better. Cashless transactions are better than cash in the sense that they are way more convenient and easier to keep track of where you spend your money. There are advantages of cash obviously and it's why I still keep some in my wallet. But cashless is almost always better for figuring out where you spend it.

    In terms of credit cards, do note that one of the advantages of cash is that it makes you spend less. Shoppers are noted to spend more when they are using a credit card vs cash and is primarily driven by unnecessary purchases rather than credit card users simply having a different lifestyle. There are many ways you can curb this - the research I just mentioned noted that using a shopping list helps reduce impulse control. And if you have the idea that a credit card is simply a payment method rather than a license to spend, there is usually nothing bad with getting a credit card.

    I don't have research with other payment methods such as e-wallets but I doubt that they have the same effect. One of the reasons people spend more with credit cards is because they don't have to pay it immediately. E-wallets are different in that the money is directly coming out as soon as you pay it. Thus, I don't think they have the same effect but given that debit cards also have the same effect as credit cards, I'm not going to be surprised if I was wrong.

11. BONUS: Credit Cards are amazing if you have financial discipline. I put this in bonus because it's similar to the one above. However, I think it deserves mentioning because a lot of people are afraid of credit cards because it's debt. While I can't argue that it isn't debt, it doesn't work like most kinds.

    Most debt will already have interest if you avail of one. Credit Cards don't. You only pay interest if you don't pay the bill in full. So if you pay your bill in full, you're basically only getting the good parts of a credit card if you are able to waive the annual fee.

    Of course, I still have to emphasize that Credit Cards are still for people with financial discipline. If you lack self control, I recommend you use the multiple e-wallet apps rather than a credit card. Credit Card interest for missing a full payment is eye-watering.

That's all. Personal finance is still personal and just because I said something here doesn't mean it'll be true for you. Not every financial problem is because of irresponsibility - sometimes you can just be unlucky. But I hope that people my age can at least get something out of this because being in debt is never a nice feeling.