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.

Cosmopolitan (Philippines) - - Contents -

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.

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