June 16 came and went last week without me realizing that it would have been my 5th anniversary in my former company had I not departed from it. Not that I had a reason to remember, though.
However, once I had realized it, I couldn’t help but ask myself the question:
If you would go back five years in the past, what advice would you give your past self?
For me, the answer is simple: I won’t tell him anything about his future.
Looking back, I don’t regret anything that I’ve done in the past 5 years. Sure, I’ve made a lot of grave mistakes and I got burned out twice, but I’ve learned a lot from those experiences. If I had avoided all of those mistakes and had not endured the hardships that came with them, I probably won’t be as skilled and open-minded as I am today.
I will, however, give him financial advice.
What?!? Didn’t you just say that you don’t have any regrets?
Well, yes, I don’t regret anything even in the financial side of my life. I actually made a lot of good financial choices in the past half-decade and they’re the reason why I’m enjoying my unemployment.
But they’re not enough. Or at least, I could have done much better.
If I was able to talk to my past self, I would tell him to stick with the following:
Money is not everything; don’t let it control your life.
You don’t like debt (which is a really nice trait to have).
Set a periodic (monthly or quarterly) savings budget. This way you can splurge on stuff you enjoy without feeling guilty as long as you meet the savings quota.
Store your savings in your high-interest checking account to prevent you from withdrawing them on a whim.
Stick with relatively inexpensive hobbies like Magic and computers.
Think real hard whether you want to buy a house or condo unit. The monthly payment might mess up your life.
You don’t need a car yet.
[edit: how could I forget about this one]
You’re a non-conformist. You don’t care about stuff that people spend tens of thousands of pesos on like cell phones and HDTVs.
In addition, I’ll give him some new advice:
Admit it, you’re leaking money. Be stricter with your savings budget.
By “leaking money”, I mean I tend to spend on random stuff without noticing. And by “without noticing”, I mean my savings are relatively much larger than my random expenses that I don’t notice that when the random expenses are put together, they could have been added to my savings.
At first glance this advice seems to run in conflict with my guilt-free spending approach. But looking back, it turns out that my savings quota was too low and I was allocating too much on random expenses.
A better approach would be for me to gradually increase my savings quota until I feel that I’m too restricted with my budget. The per-diem/envelope trick might be applicable for this.
Learn the basics of investing and invest in bonds/stocks as early as possible.
The reason is simple: my “high-interest” account is technically negative-interest because of RP’s ~6% inflation rate.
Thus, the only practical way my savings could “beat” the inflation is through stocks and bonds.
But it doesn’t mean I have to be a stereotypical investor who takes note of stock prices everyday, “buys-low-sells-high”, and all that crap. It’s all about sticking to the basics: do your research, invest in some stocks, check them once in a while, and sell stocks only if the company you invested in is really screwed. Doing anything beyond that is just wasted effort.
Had I started to invest some of my income 5 years ago, I probably would be 50-100% richer than I am now.
Get your own credit card once you get that BIR-form-copy-whatever which states your yearly salary and withholding tax. Find ways to use it often without hurting your budget.
The key points here are credit limit and credit score.
My approach with my credit card was actually quite good. I got my own credit card two years ago, used it almost every month on online purchases, and paid the entire amount (not just the minimum) before the monthly deadline. Because my credit card usage was so good, my bank increased my credit limit multiple times even without me asking for it. Right now my credit limit is so high that my cash advance limit alone would be enough to feed me for half a year.
That was just two years of having a credit card. Imagine if that was 4 years of responsible credit card usage.
As a disclaimer, I’d like to point out that these advice may or may not work for you. Don’t sue me if you lose all your money or something… :P