Interview: Author Randell Tiongson on gaining financial freedom

1. Improve your cash flow. “It’s all about money management,” he says. “It’s your ability to earn more, and at the same time, spend less. It’s not enough that you earn more, because if you earn more then spend more, that becomes a problem.”
    
2. Get out of debt. Once you’ve got a handle on your cash flow and you have some extra money, use it to get out of debt. “Debt will always be a burden, especially the wrong kind of debt – consumer debts, personal debts, credit card debts… You wanna be able to get out of that,” he explains.
    
3. Set up an emergency fund. Emergencies happen, “especially if you’re married, or have kids, or have people who depend on you.” Make sure your fund is healthy and can cushion the blow of financial disasters that might strike.
    
4. Get protection against life’s risks. Getting the right kind of insurance will protect you from the unpredictability of life. Of course, the right kind of insurance differs from person to person, so do some research on what would be the best for your situation. Tiongson offers some help on this topic in his book No Nonsense Personal Finance.
    
5. Invest in your future. As Tiongson says, “Spend less than what you earn, and invest the difference.” Read up on investment and find the financial instruments that will give you the growth you need.

 

Figure out your purpose. It’s important to know your purpose or objective in life so you can work your way towards it. “Take a look at what you want to accomplish, and then get the money part fixed so you can concentrate on what you really want to do,” Tiongson says. When you don’t worry about money you can focus more on your purpose.

Take baby steps. It takes an enormous amount of effort to change your behavior and attitude when it comes to money, and it’s not going to happen overnight. Start with what you can afford to save, say P500 or P1,000, and increase the amount as get better at handling your finances. Remember: it’s about progress, not perfection. As long as you’ve started the process, and you’re making progress, you’re on the right track. Just keep at it.

The earlier you start, the better… “The sooner you do it, it’s less stressful, and you pick up the correct behavior early on,” Tiongson says. Studies show that it’s easier to develop lifelong habits the younger you learn… So if you train yourself in good money habits [at] a young age, it will be easier for you to carry those habits as you [grow] older.

… It’s never too late. Even if you’re no longer young, you can still achieve financial freedom – it’s just that it will take a little more work. You have to make the decision to go for the kind of life you want. “Social security is not going to be enough. You see people living that kind of life. Gusto mo ba ‘yung ganyang buhay, you’re dependent on your children? Is it fair for you to depend on them? When you start having those questions, it’s time to do something about it,” Tiongson says. “It might be more difficult, but you may be earning more money at this point so that might balance out a bit.”

Surround yourself with the right kind of people. It’s much easier to stick to your financial resolutions when you’re surrounded by supportive people who are good influences on your spending. “But if your barkada likes to spend or party, you might want to look for a barkada that’s not like that. If it’s a family member it might be harder… but you have to learn how to keep your priorities straight and say ‘No’.”

Pick the right financial instruments. There’s no one-size-fits-all financial instrument – you have to find one that suits you. “I like the stock market but I can’t recommend it to you if your risk tolerance isn’t high,” says Tiongson. “But generally there are generic good investments like UITFs or mutual funds. It depends on your objectives, time frame, and risk tolerance.”