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How to Weather Financial Woes in the Philippines

June 11, 2014 | SERVCORP

Philippine economy continues to grow at a steady pace. In the first quarter of 2014, economic growth was pegged at 5.7%: however, this figure is slower than the market expectation and is attributed to the super typhoon that hit the Visayan region in November 2013. According to the secretary of Socio Economic Planning of the country, that in spite of slowdown, the Philippines is still ranked as the third fastest growing economy in the whole of Asia.

In relation, a survey conducted by the Social Weather Stations (SWS) during the first quarter of 2014 showed that 9 out of 10 Filipinos were experiencing cash shortage in the past 12 months. About 1,200 adults were interviewed for this purpose and the survey indicated that the root cause of cash shortage is primarily caused by inflation and/or the rising cost of basic living expenses such as shelter, food and the incredible cost of their children's education.

Causes of Financial Shortage

The SWS survey indicated that 74% pointed out that their cash shortage is due to regular household expenses such as food, utility bills, and rent while only 41% pointed to school expenses for their children. Some 25% indicated medical treatment expenses while another 25% have difficulty paying loan payments or debts.

Out of 10 Filipinos, 7 cited the rising cost of basic commodities as the cause of their financial woes whereas only two out of five pointed to their reduced capacity to earn or irregular employment as the root cause of their cash flow shortage. Three out of 10 Filipinos are experiencing cash shortage due to unforeseen expenses.

The survey presented that both upper-income and lower-income classes have financial difficulties which is an indicator that the major cause of the financial woes of the population is the lack of personal financial planning. (Doris Dumlao (2014, May) 9 out of 10 Filipinos Short of Cash in Past Year, says Poll. Retrieved from http://business.inquirer.net/171750/9-out-of-10-filipinos-short-of-cash-in-past-year-says-poll#ixzz33UzxwRLF)

Battling Financial Woes 

Inflation is a very real problem.  Unexpected expenses and price increases definitely affect one's finances: but with the proper financial planning, these can be prevented. There seems to be no stopping inflation as it is a yearly or quarterly and even a monthly occurrence. It is best to anticipate inflation and prepare ahead. This is not the total solution (as there's no foolproof solution to inflation) but being prepared softens the impact of inflation.

Cost-cutting is another plausible solution when in a financial jam. Most people feel that it is best to “tighten belts” to weather financial woes. It is “making do with less” to reduce expenses.  There's a Filipino adage that says it is best to curl up under a short blanket. On the other hand, wouldn't it be better to get a “longer” blanket instead?

Another possible action to get through financial woes is to look for another source of income. If a family has a sole breadwinner, maybe the time is ripe for able and capable members of the family to source for work even on a part-time basis. A multiple source of income is better than one.

There are those who opt to borrow money from friends, relatives and, worse, money lenders. The danger of this practice is that there is no telling when the borrower can return the money he borrowed. It is not a wise practice to pay debts by taking another loan. There are those who opt to mortgage or sell their property as a way of getting through money shortage. More often than not, they end up with no property and still in debt. In the end it is best to manage one's finances, drop unhealthy spending habits and save money in the event of financial difficulties,

Tips on Managing Your Finances 

Taking control of your spending and budget is doable. The task may not be easy, but it is just a matter of applying the basic principles of managing your money. The first and hardest step that you (and your family) should do is to change your spending habits. When in a financial crunch, you must refrain from committing the mistake of retaining your former spending habits. You cannot! - as this would lead to more debts.

Stop depending on your credit card for things that you cannot afford to buy in cash. When there is no cash to spare, then unnecessary purchases is not a prime consideration. Your money should go into food, shelter, kid's education, utilities, health issues and other important basic needs. You do not have to buy that $300 pair of trainers or pay for a really expensive dinner.

Taking the necessary steps to secure your family's budget is very important in guaranteeing your capability to go through financial woes. You might also consider putting some money in long-term investments. There are plenty of options in doing this. You can invest in stocks, mutual funds and time deposits, to name a few. Another option is to study the current market and supply a “need” of consumers. It is never too late to establish a start-up company. 

Are you keen in putting money in a small enterprise? Do you need ideas on how to go about it? Servcorp can help you in this endeavor.