Behavior, Not Knowledge, is Essential to Financial Success
by Celine on January 19, 2010
in Money and Psychology
Which would you rather get - P3,000 in three days, or P5,000 in three months?
Think about it for a while.
If you answered the P3,000, this usually means you are financially impulsive, since you’d be turning down an interest rate that is much better than what banks and most investments offer.
In a study conducted by researchers from the University College of London, nearly half of their respondents preferred the lower (but sooner) sum - and that these people also showed impulsiveness in other areas of their life. From the article (emphasis mine):
“…researchers suggest money savings or financial behaviors are linked to a set of other personal behaviors, rather than personal knowledge and experience with money.
…[they] discovered impulsive behaviors such as overeating, smoking and infidelity are associated with financial gullibility.”
This means that even if you know a lot about money, investing, and business, it doesn’t guarantee that you’ll be financially secure. What guarantees your financial success is your behavior. If you are consciously planning for the future and spend time evaluating your impulsive desires, then you have better chances of being financially successful - even better chances than someone who had formal training in finances, but doesn’t exhibit those behaviors. Perhaps this is why even the smartest people we know make stupid decisions regarding their money.
How do we use this information to our advantage?
- Acknowledge that you don’t have to know everything to start fixing your finances. One of the obstacles that most people face when it comes to fixing their finances is inaction. They think “Oh I have to read more about saving before I can actually save” or “I need to know more tips before I can start”. Being good with money is not always about facts - it’s also about behavior. While we need to study some things - especially when investing - we don’t need to know much to get started.
- Realize that managing money well is a habit. It’s something you have to cultivate and practice regularly. There is no one-off solution, magical budgeting program, or miracle investment that will save you. It takes regular, continuous work.
- Know that changing impulsive financial behavior may mean changing other aspects of your life as well. My mother was such an impulsive spender, but her impulsive behavior wasn’t limited to money. She was that way about almost everything. From her business endeavors to her anger. For those who are truly impulsive, it may be a more difficult journey to get your finances together - but it doesn’t mean you shouldn’t try.
If impulsive spending and investing was one of your problems, take a look at your past behavior and see how you’ve changed since then. How have these changes affected your finances? How do you feel about the research I quoted above?
Image by cobrasoft from sxc.hu
2009 in Review: The Best of Frugal Pinoy
First of all, I’d like to greet all Frugal Pinoy readers out there:
Happy New Year! Thank you for supporting and reading Frugal Pinoy. I hope that you continue to find this site useful in 2010. Most of all, may you have a healthy, happy, and productive year ahead of you!
Now before we leap into 2010, let’s take this opportunity to review Frugal Pinoy’s top 10 most informative articles for the year.
Does Frugal Pinoy apply to you?
At the start of 2009, I wanted readers to ask themselves if the articles I post here are relevant to them. This was my response to some comments from both friends and strangers that the site was not applicable to them.
A Different Way of Looking at Income
Do you judge or measure your income per month? If so, you may not be earning as much as you think. This article explores the reasons why we should measure our income by the hour instead.
Money Myths: Frugality Means Sacrificing Fun
In this article, I attempt to debunk the myth that a frugal life is a hard and boring life.
6 Signs That You’re Living Beyond Your Means
Don’t know how much you’re spending each month? Feeling guilty about using that credit card? Watch out. You might be spending more than you earn.
In this short post I talk about my decision-making process behind my investments. Hint: it has nothing to do with the hot stock tips.
Getting Out of Debt vs. Saving: Which Should You Prioritize?
When you’re trying to make ends meet as well as paying off debt, you might feel like you’re being spread too thinly. How do you choose between saving for emergencies and being debt-free?
When Listening to Experts Use Your Brain
Researchers found that when people are presented with an expert, they drop all attempts at decision-making - even if the expert is fake. Is it possible to make independent financial decisions despite all the “expert” advice we receive?
Money Myths: Can Money Buy Happiness?
Scientists learned that having enough money for necessities can buy a feeling of peace and security - but anything else beyond that is up to you.
The Hard Truth: 30 Money Questions You Should Ask Yourself
A no-BS list of questions to help you face the truth of your financial situation.
Free Download: Frugal Pinoy Budgeting Spreadsheet
I made a free downloadable budgeting spreadsheet for Frugal Pinoy readers. There’s a video tutorial to help guide you through it.
Also, let’s not forget that nearing the end of 2009, I launched the 25 Days to Healthier Finances series. In that series, I posted one article per day with an actionable task that readers (and I) can do to make our financial lives better.
That’s it from me for today. Again, I’d like to thank all the Frugal Pinoy readers (even the newcomers) for supporting and reading the blog this year.
All the best,
Celine
Day #4: Automate Your Savings
by Celine on November 23, 2009
in 25 Days to Healthier Finances, Saving
Here’s today’s installment:
For some people, saving is painful. When our paychecks arrive, most of us are excited to spend it. Which brings us to today’s task…
Today’s Task: Automate your Savings.
What does this mean? Basically, you’ll set up your bank accounts in such a way that a specific amount gets paid automatically from your payroll account to a savings account. Doing so has the following benefits:
- Ease. You don’t need to remember to save. “I forgot to save this month” won’t be an excuse again.
- Consistency. Saving becomes regular, and before you know it you’ve built a well-padded emergency fund for yourself and your family.
- Lessens temptation. Since money is automatically deducted from your payroll account, every time you look at your balance, your savings won’t be there anymore. You can’t say to yourself “I can buy a new iPod since I still have X amount in my account.”
Even if you’re only automating P500 worth of savings each month, its still better than nothing.
How to start: First, call the bank where you have your payroll account. (If you don’t know where to find their number, I’ve listed the phone numbers of major banks below, so you have fewer excuses to avoid calling them up.) Ask them if they have a special account that automatically deducts a specific amount from your payroll account each month and transfers it to your savings account.
If their answer is yes (it usually is), ask them how to activate this feature or how to open this kind of account. Also ask a list of the requirements needed and the actions you need to take.
Here are the customer support phone numbers of major Philippine banks:
- Banco De Oro . (+632) 631-8000 or email at callcenter@bdo.com.ph
- BPI. 89-100 for Metro Manila, 1-800-188-89100 for domestic toll-free calls (where available.
- China Bank. (632) 885-5555 or through their online form (I’m not sure they check it, though, as I sent a query last month and they havent replied)
- Metrobank. (632) 860-3000. For provincial areas, 1-800-10-860-3000.
- RCBC. (632) 894-9577, Domestic Toll Free# 1-800-10000-7222
- Security Bank. (632) 867-6788
- UCPB. (632) 811-9111
- Unionbank. 84-186
Have you already automated your savings? Do you have a similar system set up?
Frugal Pinoy is a personal finance website for the average Filipino. We discuss savings, frugality, and other money matters. To learn more about Frugal Pinoy and the author,