Why Financial Ignorance is Expensive?

A couple of days ago, I was invited to listen to a #LiveBrighter forum organized by SunLife Philippines. One of the most important points that struck me is “Financial Ignorance is Expensive”.  Financial has obliterated wealth of many people and it is a major cause why many endure an unhappy retirement. Since I studied Business in college, I basically know the concepts that insurance companies are preaching about.  Come to think of it, nobody is immune to financial ignorance. Here are thoughts and concepts that can somehow reduce our final ignorance.

 

Destroy Financial Ignorance: 5 Basic Things to Know

Inflation

In economics, inflation is defined as a general increase in prices and the decrease in the purchasing value of money.  It means that your 10,000 pesos now will be worth less in the future due to the increase in the prices of goods.  Twenty years ago, if you drive a car worth 1 Million pesos, you are considered very rich.  Now, 1 million pesos is just enough to buy you a decent sedan.   What does this mean for the working people?  Well, most of us are just relying on paying Social Security for our future retirement.   As of now, the average retiree receives 8,000 pesos and that amount may not be enough to have a decent life in your 60’s.  Can you imagine what 8,000 can buy 20-30 years from now?

Interest

Interest can be your friend and enemy.  If you put your money in the bank, it can accumulate some interest.  Your money “grows” while it is in your bank account.  The bank deposit interest rates have been very low in the past decade which led a lot of people to seek out higher yielding instruments like mutual funds. If you are an investor, interest is definitely a friend.  The opposite is true if you are a debtor. Loans and credit card debts carry interests and penalties should you pay less than the agreed installment amount or miss your monthly payment.  You have to be conscious always about the cost of money when borrowing.  You also need to read the fine print about penalties and other hidden charges.  Millions of Filipinos are burdened by interest payments due to spending beyond their means.

Income

Before one can talk about investment and spending, one must have a source of income. It could be a regular job, a sideline, business, or income from assets like having your room rented.  Unemployment and underemployment is still a problem in the country although there are new industries like BPO that has given Filipinos more opportunities.  To fight financial ignorance, one must have a secure source of income.  In fact, many experts propose that one must have multiple sources of income to become rich.  One good example of a good “sideline” is becoming a financial advisor.  Not only you can earn money by helping people manage their wealth but you can also learn how to manage your own finances.  Companies like Sunlife provide free training to individuals who want to explore a career in financial planning.

Risk

One day, some guy might offer you a get rich scheme or other investment.  Each investment option like bank, stocks, mutual funds, and insurance carry a certain risk.  You have to keep in mind that the higher the return promised, the higher risk of losing money.  Just like when you go to a casino, you could win a million pesos in one night or you lose everything in just a couple of hours.  You have to study the possibility of losing your investment. One great sign of financial ignorance when you just sign on the dotted after a sales talk.  You have to read up and understand how your money could increase or decrease when you invest in a specific investment.

Professional Help

One of the best shortcuts in fixing financial ignorance is to consult a professional.  Just like when you are picking a car, you have to know the track record of the company or professional that you are dealing with.  That person also must satisfactorily answer all your questions and not fret when you have more questions.  A lot of people lost money because they failed to ask questions.  When picking an investment, you can now check the performance of funds over the years and it is available for everyone.  A lot of good insurance companies have been operating for over a century and longevity is definitely a strength in the financial world.

Hopefully, these five terms can help you in your journey towards beating financial ignorance.  Financial ignorance has a cost and many of us might realize in our 60’s and 70’s when you can do anything about it anymore.  Hopefully, you may continue educating yourself on how to prepare yourself in your prime and most of all, in your sunset years.  Somehow the #LiveBrighter forum with Sunlife made me realize that we can never be complacent about managing our finances to have a brighter life.

 

#LiveBrighter with Sunlife

Sunlife is giving Cebuanos an opportunity to become a Sun Life advisor and help fight financial ignorance.  A high performing Sun Life advisor will be well-compensated and are granted opportunities to see the world. The company has been the number one and longest-standing life insurance company in the country.  The company has been operating in the Philippines since 1895. If you are interested to explore opportunities with Sunlife, you may visit www.sunlife.com.ph.

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