Financial Blog

Not all horror stories are about ghosts or psycho-killers. The scariest ones are those that actually happen in real life—and there’s none more spine-chilling than messing up big with money. Remember, debt can stalk you even after death.

Read more: How Can I Avoid Debt This Holiday Season

Not convinced? Imagine losing your house because of unpaid debt, not having money for college, or not having the cash to shoulder a loved one’s hospital expense especially now that we’re in a pandemic. And that’s just barely scratching the surface. Here are some horror stories that can teach you a thing or two about money.

“I’m Maggie and I’m reeling from losing my job of 8 years. I thought I was financially stable because I had a decent paying job at a popular call center and I lead a not-so-lavish lifestyle. I would like to think of myself as a frugal person: I take the bus to work and I rarely book an Uber or Grab except for when I’m in a mad rush. I don’t even go on expensive trips like my friends.

I do shop occasionally but I use my credit to pay in installments so I don’t feel the brunt of the expense outright. But I did take on a loan to afford a condominium near my office. Now I can barely even afford to pay the monthly fees. I don’t even need this condo anymore. My situation looks hopeless! With the condo market as it is, I don’t think I can even sell this unit discounted.

Throughout my unemployment, I’ve been mostly living on my credit card all the while taking part-time jobs to pay off my debt bit by bit. It’s been a while since I’ve eaten at my favorite restaurant. Maybe next year I’ll get luckier with my finances.”

Lesson: What happened to Maggie is all too familiar. When we have a stable inflow of cash, we don’t pay attention to small, but recurring, expenses. These could be your monthly fix of shopping, streaming subscriptions, phone bills, or your accumulated lunch out bills.

When you remove that stable inflow of money, you suddenly find yourself bleeding out of cash. And that is where the cycle of debt begins. Maggie, who uses her credit card to get by everyday, will find it very difficult to get her finances back on track because she’s essentially taking on new debts in her efforts to pay her old ones.

Avoiding this situation is a matter of habit. For example, your living allowance should not be more than 50 percent of your income. It’s also a good idea to have a rainy-day-fund: enough cash to last you 3 months. Remember, living frugally is not enough; you should be prepared for the unexpected.

“When I decided to take on two jobs, I didn’t imagine that I’ll be crawling from paycheck to paycheck. I’m earning quite well for my age actually. But I feel like the stress of working two jobs and the constant battle of meeting my monthly budget is taking a toll on me.

My monthly expenses are too spread out on rent, food, an auto loan, car insurance, cell phone subscription, medical checkups, and a couple of personal loans. After expenditures, I’m not even left with enough money to take my girlfriend out to dinner.

Lesson: Tracking your budget and expenses is vital, but that’s only the first step. You should arrange items on your budget list according to the category: living expenses such as mortgage, utilities, food supplies, and the like, as the highest priority.

By having a separate category for less important expenses such as cable TV, you can easily see which should go first to help you stretch your budget and give you more room to start a savings fund.

The next step is to clean up your budget. Eliminate unnecessary expenses by categorizing them into needs and wants. Decide which “want” you can let go of to free you up space on your budget for more savings or investments.

“As a doctor, I didn’t have the time to research for good investments so when my buddy proposed to me this investment opportunity in real estate, I didn’t hesitate in signing. I’ve always trusted him when it comes to these things and I wasn’t about to stop then.

Little did I know that I was investing in a long-term investment so I couldn’t get returns right away. My money was basically held up in a dormant portfolio. The worst part is that I needed the cash to fund my upcoming family trip to Europe. I guess it was my fault for not doing the research.”

Lesson: Before investing, make sure you at least research about the fund you’re putting hard-earned money in. You can do background checks on the institution offering the fund on your own or-better yet– ask someone to refer you to a professional broker.

Of course the safest option is to invest in reputable, tried and tested, institutions, like banks for example. Some bank offer UITFs that, not only is diversified by default, but will also give you access to the bank’s host of financial experts.

When it comes to being financially savvy, there are seminars that you can sign up for to help you understand the ins and outs of investing. Once you get the right advice and a sufficient level of investing knowledge, don’t rush making an investment. Scrutinize every step of the application process and ask questions if you’re not sure of anything.