By Kendrick Chua, CIS
One quick look at Jackie and you?d immediately recognize an accomplished young professional. She does, after all, exude a confident aura that had helped her rise above the corporate ladder. Five years after she started working, she has already garnered several company and industry accolades, and three promotions that landed her a much coveted position in the multinational company she works for. There are other offers for her but Jackie is comfortable with the environment she?s in right now.
But Jackie has one embarrassing secret she dared not let anyone know about. Despite earning an enviable salary, Jackie is deep in debt. Each time her statements arrive, Jackie, with heart pounding, expresses the same reaction when she reads them?with shock and fear.
And she does not know what to do.
A different kind of generation
The 27-year-old Jackie belongs to Generation Y or what sociologists call the Echo Boomers or Millenials. Studies are diverse but those who belong to this generation are born between 1980 and 1995, so they?re between 15 to 30 years old today, basically from mid-teens to 20-somethings. They are characterized as being independent, idealistic, and competitive. They are achievement-oriented and most of all, tech- and Internet-savvy.
Bruce Tulgan, an internationally recognized leadership and management trainer list several traits of Gen Yers:
- High expectation of self. Gen Yers are confident. They challenge themselves to excel in their respective fields and they believe they are capable of delivering results and accomplishing the things assigned to them. They would scoff at the work if they don?t find it demanding and treat it as an insult on their abilities.
- High expectation of others. Since they think highly of themselves, Millenials expect others to keep up with them. This causes them to be competitive. Often, they would compare themselves against others. If a friend is earning more, a Gen Yer would find ways to increase his income so he can be at par or even exceeds what his friends earns. They see it as a challenge and not a threat and they thrive in that kind of situation.
- Ongoing learning. Those who belong to Generation Y see learning as fun and important. But they do not want to be restricted with lectures and traditional forms of education. They turn to their colleagues for professional advice. They are at ease with technology?another trait unique of them. Hence, they browse the Internet for additional resources that can enrich their lives. They also learn to shop online.
- Goal-oriented. Gen Yers know what they want and how to get what they want. If they do not know how, they would find someone who knows. If faced with a brick wall, they?d climb over it, walk around it, or even dig their way just to get pass it. They?re determined to succeed and that?s why they have a road map and blueprint for achieving their goals.
Jackie fits the typical description of Generation Y. However, when it comes to managing her finances, she?s not as confident as she wants to be. The vibrant and dynamic girl who?s very articulate during company presentations and meetings seem to have a loss for words when the topic is brought up.
?I only learned what unit investment trust funds (UITFs) and mutual funds are a couple of months ago,? confesses Jackie. With the low minimum investment requirement, usually only P5,000, Jackie can certainly afford to invest in these?if only there is some money left. Given her salary, there should be enough savings, but Jackie sheepishly adds she does not keep track of her expenses. ?Whatever is in my wallet, I spend it.?
For her debt, she reveals, ?At first I was paying everything in full because I was told that credit card companies charge high interest rates.? She?s right. At present, these credit card companies charge an average of 3.5% monthly interest. This translates to a whopping 42% a year! This is not just on the unpaid balance as most of people thought. The interest is based on the average daily balance of the bill. That means, if you do not settle everything in full on or before the due date, interest will also be applied on your subsequent purchases.
Credit card companies and banks have actually made purchasing through credit fun and convenient. There are a lot of promotions being offered: 12-month zero percent installment, swipe now pay three months later, free movie tickets and gas discounts, just to name a few. All designed to entice the likes of Jackie to charge everything.
And Jackie agrees. ?Later on, I started charging all my purchases, including things I used to buy in cash. It didn?t bother me back then because I was earning well and I knew I can pay my balances off.? True, Jackie was earning above average compensation and thus, easily fell to the myth that having a high income is enough. Unfortunately, her housemate moved out and her household expenses immediately doubled. It also didn?t help that her shopping also got out of hand because of these promotions the companies bombard the consumers.
?Once, I bought a new pair of shoes everyday for one whole week,? Jackie confesses. Estimated cost for all those shoes: P32,000. Shopping felt so good back then, she never thought of saving a part of her income. ?I wanted to enjoy every peso of my salary. Saving and investing a part of it never crossed my mind back then,? she adds.
One purchase led to another and before she realized it, her debt was equivalent to one month of her salary. Now, it has ballooned to two months? worth. This is causing Jackie unwanted stress. Even her current salary can only allow her to pay a little more than what the minimum payment is. What?s worse is that she doesn?t know who to turn to for help, and so she keeps all the anxiety to herself.
The other side of the coin
Jackie?s story is not uncommon. Although there are no official studies on how much this generation have in savings or in debt, a quick and informal survey revealed that there?s not much on the first and a lot on the second.
Not all are like Jackie though, but they are considered the exception rather than the rule. They have risen above the stigma and pressure and went on to build a strong financial blueprint. Among them is 27-year-old Celine Salazar.
?I initially started with nothing in savings. But after I realized I needed to start planning for my future, I started diligently saving 10 percent of my salary every payday,? Celine shares. She has been doing this since 2009 and not even her second pregnancy made her stop from her commitment.
This is on top of the two variable life insurance plans she had purchased. And what made it even more impressive is that Celine is, in her own words, ?a single mother of two beautiful baby boys.? Most recently, she just bought a property in Nuvali. ?I purchased it because I saw it as a community where I can raise my children and see them enjoy their childhood.?
Alvin Taba?ag, a Registered Financial Planner and the author of the best-selling personal finance book 12 Steps to Build Wealth On Any Income, reveals that that Filipinos ?think? about retirement at early age ? in their 20s. However, he laments, ?Unfortunately, most young professionals just ?think? but don?t act. If every young adult starts to save for retirement and practices responsible money management when he lands his first job, then a majority of Filipinos would be able to retire in comfort and at a younger age.?
Celine has a strong financial blueprint and a concrete goal; and she acted on these. At the rate she?s going, it won?t be long before she can fully achieve financial prosperity.
Start young, start early
Money management cannot start too early for Chrystynn Francia-De Leon. A third year Electronics Communications Engineering (ECE) student at Pamantasan ng Lungsod ng Maynila (PLM), Chrystynn appreciates the Personal Financial Management course her school offers. ?I learned that I should invest my money to accumulate higher returns and to enjoy compounding interest on a long-term basis. I also became aware of different assets and liabilities, which later on I will make use of in order to increase my net worth,? says Chrystynn.
Just how many 19-year old, third year college student have the same awareness as Chrystynn does? ?To sum it up, it is very essential to have knowledge on personal finance so I can prepare myself in handling my future income to achieve my short term and long term goals,? Chrystynn quips.
But she has done more than just visioning. Chrystynn saves more than 50 percent of her allowance which sums up to P2,000 every month. She?s able to do this because she buys only the things she needs. When most people her age thinks of saving up to buy the latest gadgets, Chrystynn used that savings and invested that in a variable life insurance plan! She proudly shares, ?I already bought my own personal life insurance with investment component from my mother.?
Her mother, Sarrah Francia-de Leon has eight years of experience working as a financial advisor for one of the largest life insurance companies. And how does mom feel seeing her daughter being proactive with her finances? ?I was quite surprised when she told me that she wanted to get a plan out of her own savings coming from her monthly allowances and the scholarship fund; but I am glad that I have a daughter like her who is thrifty and gives value to her money,? Sarrah says proudly.
Chrystynn certainly displays financial maturity beyond her age; and it?s the students that Sun Life Foundation, through its It?s Time! advocacy, wishes to engage with. Product Marketing Manager Carla Gonzalez shares, ?We believe that it is best to start them young. Before these students join the workforce or become entrepreneurs, the value of money and the right attitude towards money must be taught. Because ultimately, the It?s Time! financial literacy advocacy?s aim is to inform and empower Filipinos so we can achieve financial security.?
It?s Time! is the first ever multimedia and multi-awarded financial literacy advocacy in the country. The recognition it has garnered include the Philippine Gold Quill and Anvil Awards. As part of its campaign, It?s Time! had toured several campuses already?all yielding exceptional results.
Carla proudly says, ?Students have actually expressed their interest in life insurance and mutual funds. Others even asked the financial advisors how the financial vehicles work; and in one instance, some participants opened mutual fund accounts right then and there!?
These Gen Ys have become receptive to this kind of promotion. Expose them to the right environment and they would make the right decisions.
Professional advice
Young professionals are more often than not, faced with a plethora of financial problems but these can be lumped into three categories: impulsive and/or excessive spending, piling debt and zero savings. All of which cause undue stress that can lead to less productivity.
What advice can they learn from Alvin and Registered Financial Planner J. Randell Tiongson, two of the country?s leading financial planners, then?
Impulsive and/or excessive spending
?Eliminate or reduce expenses for items that you can live without. Train yourself to buy only the things that you need and are really important.? Alvin says. The more expensive the things you want to buy, the longer the waiting period should be. He suggests an effective way of curbing unnecessary spending is to ask yourself this: ?Will this purchase bring me closer to my dream of financial prosperity or will this just make it more difficult to achieve.?
Randell even recommends allocating budgets even for gimmicks, gadgets, etc. but always ensure you spend less than what you earn. ?Kids will be kids,? he says.
Piling debt
To eliminate debt, Tiongson suggests, ?Prioritize getting out of it first. It?s the first order of the day. Bite the bullet, sell whatever you have and stick to using cash.? Alvin agrees. ?It would also help if you can find ways to earn extra income which you can use to pay off the debt faster.? Both also suggest to follow a simpler and less expensive lifestyle and not to live a life you cannot afford.
Savings and Investing
For savings and investing, Alvin suggests, ?Make it a point to save 10-20 percent of your income (or allowance) every month. If this is too big, start with a smaller amount, say five percent or even two to three percent, and then gradually increase it until you get to 10-20 percent. Saving is also like spending ? it can be addictive. Even if you started out with small amounts, you will soon be motivated to save more when you see your savings grow.?
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Alvin concurs, ?Know what your goals are, it will motivate you to save and invest.? Financial advisors, and even motivational speakers, have time and again emphasized on creating goals. Is it buying your dream car or travelling abroad? Is it your children?s education or your retirement dreams? Whatever they are, these goals can motivate you and inspire you to take proper actions.
?Then when you already have sufficient savings, try investing your money. There are more investment vehicles available in the market with better potential returns other than the deposit products offered by banks. Taking calculated risk while still young is advisable,? adds Randell.
To learn more about proper money management, both advise to read magazines and books about the subject, and even attend seminars on entrepreneurship, financial planning, and investing. You can also organize learning events inviting experts on the subject matter.
The Internet revolution has resulted Gen Y to live in a double-edged environment. It can either work for you or against you. The same technology informs you of the next investment or business trend, and the next big sale. One can help you get closer to achieving your goal; the other might just be a stumbling block. The decision is yours to make but hopefully, it?s the one that can help you be a financial success.
Source: http://money-summit.com/personal-finance-for-gen-y/
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