MAKE IT RAIN To make money, you have to break a few financial rules.
Some long-standing financial truisms are total bunk. Feel free to rebel against these.
RULE 1 Credit cards are evil
Nope. A little plastic can go a long way towards establishing a good credit score—something you’ll need to buy a car, a house, and make other big purchases. When you skip getting a card, lenders have fewer ways to confirm you’ll pay your bills on time. Worried about sinking into debt? Start small. Keep your balance low, or use your card only a few times a year to build up a charge history. Pick a card with no annual fees and opt for a rewards one (they have higher interest rates and lots of fine print) only if you can pay off the balance each month, says Beverly Harzog, author of The Debt Escape Plan.
RULE 2 Buying always beats renting
Not always. To buy, you need to have a large chunk of change handy for a down payment, which can be up to 20 percent of a home’s cost. Blowing all your cash upfront can spell disaster later on, when, say, you need to replace a suddenly leaky roof. Another issue: yes, owning a place turns out about 37 percent cheaper than renting…over time. The dreamy savings on profits don’t kick in unless you stay put for around seven years, according to data from US real-estate listings website Trulia.com. If you’re likely to city-hop for work, it might be smarter to stick to lease life for a while longer.
RULE 3 your love of lattes is why you’re broke
Keep sipping, girl. Your P150 morning habit could add up to over P50,000 a year, but depriving yourself of small pleasures can make you less likely to stick to bigger savings goals, explains Cathy Derus, CPA, a financial planner and founder of Brightwater Financial in the US. Pinching every penny may eventually lead to a big spending binge. Rather than fixating on each cost you can cut, shift your attention to how you might earn a bit more, whether that means seeking out some extra part-time work or investing in a skill-building class now to become a more competitive candidate later.
RULE 4 six months’ emergency savings is a must
Don’t stress! In a recent survey, 53 percent of respondents only survive for three months or less on their savings (especially when paying the more expensive debt is a priority). Instead, start off with a smaller nest egg, advises Sophia Bera, CFP. Put P2,000 or five percent of each paycheck, whichever is easier, into an online savings account until you accrue a one-month safety net. Set up a direct deposit so you don’t rely on willpower or memory to add to your rainy day fund.