Am I managing it, or am I being managed?

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Are you fairly clueless about how to start managing your money? If yes, that is understandable, since personal finance has not yet become a mandatory part of the curriculum in our educational system. One would even be lucky if the subject is taught or introduced at home. If not, keep in mind that the sooner you learn the art of delaying gratification, the sooner you’ll find it facile to keep your personal finances in order.

If you deem managing your personal finance as perplexed and something you cannot handle, then I’m telling you, you’re wrong. All it takes to get started and put you in the right path is to have the willpower and yen for knowledge through reading. You don’t even need to be a maven at math to manage your own finances.

After setting your SMART goals, the next significant step to financial success would be managing your money. This is a commanding stage that involves a variety of matter that needs to be realized and executed. You need to ask yourself and evaluate, am I managing the current situation and what lies ahead of me? Or is the situation and the negativity managing me? To put things simple, this would be about “self-control.”

Our mind has two thoughts. The first one is the immediate-pleasure seeker and the other one is the goal enforcer. The former only has one self-centered bourne, and that is a hostile takeover approach and serve its purpose, while the latter is the rational you.

There are three key questions that I have been using before I shell out cash that are associated with self-control in managing personal finance. The questions are:

  1. Do I need it?
  2. Do I have the means to procure it?
  3. What’s in it for me?

You may be thinking that this could be like one of those unrealistic strict diet regimens full of prohibitions. This is not about depriving yourself of the good stuff the world can offer, but more about knowing your current financial situation. This covers emotional stability toward money, conscientiousness and agreeableness. Why is it important to ask if you really need the item before actually buying it? Chances are, you could be buying stuff that you want but don’t actually need. We often confuse our “needs” from our “wants.” Again, to clear things up, there is nothing wrong with buying the things you want, as long as you have the surplus money to procure it. This, then, prompts the second key question that needs to be pondered.

Truly, we are captivated by things that quickly satisfy our need for gratification in an instant. However, in the absence of self-control, we often go overboard on our finances. We buy things we cannot afford, which result to a ballooning of credit, only to realize what we bought has no relevance or place in our life. And while some can afford it, they would be in financial bind due to the depletion of cash or savings, as the money spent was just enough to keep everything in order and live comfortably. These are some of the killer guilt feelings you would feel as an impulsive buyer. Doing things impulsively and without careful thought often leads to failure and regret.

To save you from this gigantic problem, the third key question should be diligently applied. The question is much more forceful and requires a deeper understanding, as the benefit or outcome is not too obvious. A good example is buying a flat or apartment. It is obvious that shelter is indeed a necessity, but do you really need a flat of your own or can you, instead, rent for the time being? Both meet the objective of owning a home, but differ vastly from the point of view of cost. The former may be right for someone with a cash flow not limited to a single stream of income (salary) but a burden to someone who is barely financially able or already in financial trouble.

There is no correct answer at this stage-as the proper response would vary on the needs and current financial status of an individual. The key questions serve as guidelines and the appropriate approach normally varies. Keep in mind you must always have control of the situation and not the situation controlling you. That is what matters most.

 

Earl Pagatpat is a registered financial planner of RFP Philippines.  To learn more about personal financial planning, attend the 55th RFP Program this August. To register, e-mail info@rfp.ph or text <name><e-mail> <RFP> and send to 0917-9689774.

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