How Financially Prepared Are You For the Future?

This article was shared to me by my sister. She read it on Yahoo! I hope Mr. Mark Aragona wouldn't mind if I'll share it with you. I believe this is not only worth reading and sharing with your loved ones but will also inspire you to start planning ahead.

 How financially prepared are you for the future?

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Recently we’ve seen some surveys in the media indicating that we Filipinos have increased our financial literacy. For example, the study shows that 90% of Pinoys have created a monthly budget with 65% sticking to it, and a larger number of the population aged 18 and above own bank accounts. A 2012 survey by TNS Consumer Spending Barometer showed that 40% of the surveyed population were hopeful that they would soon be financially better off.

This is encouraging news. Right now we are at the most money literate we’ve ever been, a confidence that coincides with our burgeoning economy. However, a closer look at the situation shows a sobering and not-very-pretty picture.


Without proper savings for retirement

According to Asian Market Research, our “domestic savings as a percentage of GDP declined from 19% in 1994 to 17% in 2000.” Now we stand somewhere between 12% to 16% according, to NEDA. The TNS survey showed that 8 out of 10 Filipinos do not have savings in case of emergencies, rating far below that of our neighboring Asian countries like Singapore or Malaysia. And with regards to having money for worst-case scenarios, around only 14% of the population carry insurance.

What about those who do save? Another study shows that Philippine banks hold over P5 trillion in cash. One might think that’s an enormous amount of money saved, but considering today’s low-interest environment (which as of this writing stands at less than 3.6%), that money in your savings account is simply languishing in the bank vault, being slowly overtaken by inflation.

This paints a very bleak scenario of a typical working-class Filipino’s life during the retirement age. Without proper savings for retirement, it is likely that Pinoys will still be working past the age of 65. Worse, it is also likely they will wind up partially or fully dependent on their children or other relatives in order to get by. Of course, this is a cultural aspect and an honorable one as well—many workers today grew up providing and caring for aging parents—but that doesn’t make it any less thorny for both the dependent and the provider. Because these children are burdened with taking care of their parents, they save less and may even be forced to become reliant on their own kids after they retire. And the cycle continues.

Poor financial planning
What this indicates is that while Filipinos today are becoming more aware of the need to save for their future, we are not taking enough steps to ensure that we’ll succeed. It’s not simply due to lack of income but poor financial planning.

Average Pinoys are not aware of how much they need to regularly set aside for important life events like retirement and the education of their children, and as such wind up spending money on non-essentials like gadgets and luxuries.

The TNS study mentioned that Filipino households prioritize communication and entertainment for their expenses: while only 65% of surveyed Pinoys have access to something as essential as running water, 73% own mobile phones.

Despite the current rise in financial awareness, a lot more needs to be done. True, it starts with government efforts towards job creation and pay equality. But above and beyond that, there should be an organized and concerted effort to educate the populace on their financial options. Moreover, Pinoys themselves should actively seek out ways to be financially ready for their future. This includes seeking extra means of income, saving every payday, buying investments and financial instruments to make their money work for them, and most of all, having a clear, solid, and measurable financial goal, particularly when it comes to retirement and healthcare.

None of this is easy. As a Pinoy worker, there’s a great temptation to just focus on the present, on the near term, because that’s what’s easiest to see. But if we want our lives to genuinely change, if we want that dream of a house of our own and a comfortable life to come true, then we have to start with changing our spending habits, instead of forging ahead and hoping for the best.

When it comes to building wealth, as with anything, hope is not a strategy.

Money Matters asks: When it comes to planning your finances for the future, how prepared do you think you are?

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