From Fear to Freedom: Conquering Money Blunders and Starting Fresh

We all have been there. Many of us have regrettably made past mishaps in our financial decisions. They can range in intensity and form, from making rash purchases to spending beyond our income. These tend to put us in a financial bind and make us anxious about what might happen next. We get worried and fearful of making further errors. Fear frequently prevents us from making wise financial decisions.

It doesn’t always have to be like that. With a willingness to learn and make changes, we can overcome our financial anxieties.

Here are some typical financial blunders people make and how to avoid them:

Living Beyond Your Means

Keeping up with others is tempting, but overspending can lead to serious debt. Buying things you can’t afford just to fit in can only cause stress. It's so tempting to upgrade your life when you get a raise, but that can quickly lead to lifestyle inflation. This tendency to spend more as your income increases can silently drain your finances if you’re not careful.

To avoid excess spending as you make more money, you must save and invest a healthy percentage of your increased wages first. On top of that, being mindful of the differences between needs and wants can help you manage lifestyle inflation before it ends up managing you. By being conscious of your spending habits and prioritizing your financial goals, you can enjoy the benefits of your increased income without falling into the trap of lifestyle inflation. You might even get to save more and have some extra to contribute to charity or help a family member or friend in a tight spot.

Ignoring Budgeting

It's simpler to identify where your money is truly going when you can categorize your spending for expenses like groceries, entertainment, utilities, and more.

Managing your financial flow is the goal of a budget. Otherwise, you could be caught off guard at the end of the month, and lose track of where your money is going if you don't have one.

Budget wisely by establishing definite financial objectives to prevent squandering money on pointless expenses. Set a regular time to go over and update your records. Feel free to utilize a straightforward method, such as writing it down in your notebook, using a spreadsheet, or using budgeting apps like Mint or Spending Tracker.

Mishandling credit cards

Ignoring high-interest debt and making minimal payments on high-interest credit card debt can trap you in a debt cycle that lasts for years. Despite the convenience of credit cards, it's very easy to lose sight of them and find yourself stuck with unanticipated interest payments.

Watch your balances carefully because swiping for items you don't need can swiftly spiral out of control. Paying these down as soon as possible will help you avoid accruing further interest. Make sure to pay on time and in full each month. Irresponsible credit card use can result in excessive debt and lead to a poor credit score becoming a long-term financial liability. When used responsibly, a credit card can be a very helpful financial tool that is both convenient and rewarding.

Overlooking an Emergency Fund

Many people neglect this stage, yet you never know when emergencies happen, whether it's auto issues or unexpected medical expenses. Lack of a financial buffer can cause fear and bad choices when life throws you a curveball. By having an emergency fund, you can avoid the additional stress (and expense) of having to take out a loan when unforeseen circumstances happen.

Setting aside an emergency fund is simply cash you have stashed in an account to protect you from urgent and unexpected expenses. To help you build your emergency funds, set up a separate savings account specifically for this purpose at your bank, and automate regular money transfers to this account. Make this a habit and not an option. If you have not done so yet, take this as a sign and do it now.

Delaying Investing

Time is your most valuable resource, but it's easy to put off retirement savings when you're young. However, your money has more time to grow the earlier you begin investing. Over time, even the modest amount you set aside for investing can have a significant impact. You may say to yourself that you will begin investing when you "make more," but by starting now, even with little sums, compound interest will give your money a lot more time to grow. In the long run, waiting can be very costly.

If you don’t know where to start, consider investing a small sum of money in an all-weather mutual fund, such as the COL Strategic Growth Equity Unitized Mutual Fund (XCOLCSG). If you have already done so, be consistent by utilizing the automatic investment facility through the COL Easy Investment Program (EIP), and regularly buying XCOLCSG. To know more visit bit.ly/COLguide-CSG.

A healthy financial life requires adjustments and positive actions. Learning from past mistakes and making smarter choices can make a huge difference. Free yourself from financial fears by growing your financial knowledge. The overall goal is to gain control over your finances, make informed decisions, and work towards a healthier financial future.

COL Investment Management Inc. (CMI) and COL Strategic Growth Equity Unitized Mutual Fund Inc. are subsidiaries of COL Financial Group, Inc. This information is for reference only. Securities’ prices fluctuate, and there’s a risk of losses. For the full list of disclosures, go to bit.ly/COL_disclaimers. For concerns, contact helpdesk@colfinancial.com. COL is regulated by the SEC at msrdsubmission@sec.gov.ph.