Financial literacy rate in the Philippines is dismal. It is close to zero. This means that most Filipinos know nothing about effectively managing their hard-earned money.
Unfortunately, a number of Filipino traditions and cultural norms do not match well with the basic principles of financial management. To name a few, Filipinos’ culture of “pakikisama”, “pasalubong”, and “blow out” are top sources of financial pressure. Filipinos go overboard just to save face and end up spending more than they actually can dispose.
Let us look into these more. What are the reasons why people in up in financial hardships.
GoBankingRates talked to 23 personal finance experts, asking them all the same question: What is the No. 1 reason people end up poor or in financial hardship?
Don’t worry, we will not discuss all 23 of them in details, but we will flesh out the most important points everyone must be aware of.
Without further ado, here are the 23 top reasons why you may probably remain poor for the rest of your life (unless you avoid all these):
1. Getting stuck in a vicious cycle of debt (also known as a debt trap).
“When you’re poor, it’s easy to get stuck in a debt trap because you’re desperate,” said Kristin Wong of Brokepedia. “Whether it’s a payday loan, debt settlement scam, or even just using a credit card for an emergency, it’s easy to make rash decisions when you’re stressed, and these decisions usually keep people broke.”
This is common among Filipinos. Some resort to getting loans just to pay off an existing debt from another person or firm. This is not a good idea. If you are incurring debt just to pay off another debt, you are not actually paying off any debt. You are just transferring the burden from one person to another.
Instead of looking for another loan, look for investments you can make in order to increase your disposable income.
2. Ignoring bigger debts pretending they would eventually go away.
Debt is a source of anxiety. It really is. And it is a pain in the ass. Of course, when you are broke and the bills and overdue notices stack, it become a real source of stress, anxiety, and dread… or worse, depression.
Some people choose to ignore these problems. Thinking that by ignoring them, they would eventually go away. Wrong. Failing to manage your debts only make them worse. Of course.
“A lot of young adults are burdened by student loans and other debt, yet they don’t realize there are a lot of options out there for them,” Robert Farrington of The College Investor said. “For example, for student loans, there are tons of programs that can help with lower payments and even forgiveness. But you have to take positive action and seek out these programs.”
Also, you can try to talk to the the person who you have debts from and negotiate a more amicable payment option and work hard to stick to it and eventually get yourself out of debt. Yes, easier said than done but hey, you gotta do something about your debt!
3. You feel powerless, hence you do nothing.
Yes, if you are broke and in the middle of a financial hardship and you are feeling all anxious, stressed out, and depressed, it is easy to feel powerless or helpless.
But you are not. You are not powerless. You are not helpless. Giving in to those feelings of helplessness will only hurt you, said AJ Smith, vice president of content strategy and managing editor of SmartAsset.
“By getting accurate, unbiased knowledge and advice, people can feel empowered and confident in their personal finance decisions,” Smith said. “They can then takes steps to make a better financial future.”
4. You do not know anything about personal finance.
“Most people are broke because they don’t learn about personal finance,” said the founder of Lazy Man and Money. He added that one example of the dangers of debt is that it has compound interest working against you instead of for you as it does with investments.
“I think the psychology should shift from ‘How can I spend money to make me happy now?’ to ‘How can I use this money to buy me financial freedom in the future?’” he said. “If you are able to make that shift, you should be able to overcome most reasonable hardships.”
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