Being smart with money a must in ‘new normal’

Tweetie Grace Salas has vocal pipes that would make a crowd roar, but nowadays, she belts her way out of COVID-19-induced isolation in front of a computer, with a creative cartolina-sized printout taped to a wall as her background. It is a far cry from the strobe lights and big stage she got used to before the pandemic.

Even though she is just turning 24 in a couple of days, she has already cornered the grand finalist slot in the Wishcovery Season 2 singing competition. She earns a minimum of P20,000 a month by streaming on Kumu, a Filipino online platform for livestreamers.

A few days ago, Salas asked if she and her boyfriend Edmer Buen, 26, a senior multimedia developer based in Ontario, Canada, could consult me about financial matters. They met each other on Kumu and have been together for three months.

“Where can Tweetie open a good savings account there in the Philippines?” Buen asked. “Do Philippine banks offer accounts that have higher interest rates and zero taxes the way they do here?”

Pandemic reality

I asked if they were planning to get married. The answer was yes, in perhaps three years. Their parents approve, they said, but three years can feel like a long time to youngsters. “Miss Salve, he might back out after this meeting,” Salas said with a laugh. I couldn’t help but think these two would be so much better off than some couples for whom I had helped create financial plans so far.

One of the reasons for their seriousness about money matters is that the minuscule coronavirus has taught humans gigantic financial lessons. Salas and Buen have to deal with the reality of a world still in the throes of a pandemic—locked down instead of globally interconnected, economies shrinking instead of growing, companies shedding jobs instead of growing them. I remember how we used to have so much faith in the demographic story of the Philippines. Is that simply on hold now, or is it gone?

Debts that seemed easy to pay off before the pande­mic suddenly felt very poisonous to people’s finances. Cash flows trickled ever so slowly. Budgeting became a survival skill. Small businesses sprouted, but too many “ube pan de sal” meant these were born out of necessity instead of a clear strategy. When I was asked by the Pasig City government to provide financial literacy classes to those receiving additional “ayuda” (aid) with the help of the UNDP (United Nations Development Programme), I met business professors, civil engineers and teachers waiting in the long lines.

Need for additional income

One only had to look in their eyes to know that smart money moves have become essential in this locked world, just like masks, face shields and alcohol.

You could say Salas and Buen are lucky. Many are desperate for additional income. Those who used to complain every day about heavy traffic on Edsa now hope to experience it again, if only they can go back to their jobs. Filipinos are no stranger to financial problems, poverty and joblessness, but somehow, this almost year-old lockdown is different. Not a single person on the planet can say confidently when COVID-19 will become a thing of the past. And that carries with it a huge financial cost—to governments, companies and the breadwinners of this world.

As a financial adviser, I believe one of the biggest lessons from COVID-19 is about risk. Things we think can never happen, can. While we cannot control pandemics or the economy, we can control our personal economy and do it at the soonest possible time.

Paying debts a priority

The first and most urgent step would be to find a way to pay off debts. Interest rates will rise. Never underestimate the dark side of compounding interest. What you think is just P70 per day that you pay to an informal lender who lent you P1,000 is in effect costing you more than 330 percent per year if you annualize the returns.

Unsustainable debt is one of the biggest financial mistakes Filipinos make. Teaching yourself to live a consumer debt-free life is already a huge victory.

Most people get paralyzed by this challenge, simply because they think reduced income makes it impossible to pay off debts. Wrong. Increased creativity, even with reduced income, can help you evolve into someone who does not have a financial Damocles sword hanging over your head. Negotiate with your lender. Some of them give up to a 70-percent discount if you know how to negotiate. Sell some items you can do without, even if strictly speaking, you are still using them. Transfer your children to a public school. Accept that your current lifestyle is not a necessity. Rather, being debt-free is a necessity.

Multiple income sources

Second is to create multiple sources of income. Be a weekend warrior, no matter your situation in life. If you have been a highly successful executive and feel that selling ube pan de sal is beneath you, do it for your children who might experience more pandemics in their lifetime. Step out of the shadow of the very Filipino attitude that selling is “nakakahiya” (shameful). Create a small business you can do on weekends, but never allow it to kill the golden goose that lays your golden digital wallets full of cash.

Third, create a spending plan. No, I don’t like calling it a budget, because it sounds very painful. People quit every time they feel that something is too hard to do. Call it a spending plan instead. How do you do this? Set a limit for every major category like food, clothing, shelter, utilities, even including a little “luho” (luxury). If you cannot do a spreadsheet, then just list your expenses on a sheet of paper and put these in corresponding envelopes according to category. Print on each envelope the spending limit.

At the end of the week, bring the whole family together and let them guess whether you went over or under the limit. Challenge everyone to do better the following week.

Games make things easier and more fun—even when it comes to budgeting. If you overspend the first week, then cut back a little next week. No blame games, please.

Pay yourself first

Lastly, pay yourself first. Even before you fork out money for your electric, water bills or groceries, pay yourself first. You work hard. You deserve to be better off financially. Save that money right after you receive your salary or earnings from your business, then the rest can be divided among your needs for the week. Some people think this means there will be a shortfall. Most often, since you are more mindful of your spending, your remaining cash will be enough. Promise. But if it isn’t, be a weekend warrior and earn more.

The money you save may be used to build an emergency fund. This way, if someone gets sick or laid off, you don’t have to borrow. If you already have one, invest the money and benefit from the power of compounding returns. That is the sexiest and the 8th wonder of the world. It can grow your money more than you can ever imagine.

No shame in being poor

I have been conducting financial management classes for individuals and corporations for more than 20 years. I used to write a personal finance blog for Inquirer.net every day for years. I had so much fun writing for the business page about people who succeeded in getting out of payday-to-payday existence. That’s because I started out poor. And I know for a fact that people must never be ashamed of being born poor. There is only shame in not doing something about it. Now that I have finally started my own company called Empower and Transform, with the mission of making financial advisory services cheap and accessible to every Filipino, I feel that I am doing something not just about my own poverty, but also in removing the poverty mindset in our country.

At the beginning of the pandemic last year, thousands of employees of ABS-CBN, where I have a personal finance show, lost their jobs. One of them came up to me and said: “Miss Salve, if I did not listen to you last year [about] saving my money and setting up an emergency fund, I do not know where I will be today.”

COVID-19 has taught us that no one knows what the future holds. But we can protect ourselves from that uncertainty if we know this essential skill of being smart with our money. —CONTRIBUTED INQ

Salve Duplito is the president and founder of Empower and Transform, OPC. She is the host and managing editor of a personal finance show on ANC called “On The Money.” Learn more about being smart with your money through her YouTube channel SalveSays, and her Facebook, IG, Twitter and Kumu pages. Just search SalveSays.