Philippine Stock Market has been taking a beating for many days now and it is a concern to many. From a high of 9000 and dipping to 7500 in just 4 months, there’s so many things that goes on the mind of investors.

Let me share you a very insightful discussion I have with my good friend and stock investing advocate Marvin Germo about the PSEi bloodbath.

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Question: I have been reading your articles and other posts about finance. While I find most of them very informative, I find them difficult to apply. How do I find the discipline to follow the rules that you, finance advocates, always talk about?-Joshua via Facebook

Answer: Let me start by saying this, “money is behavioral and not mechanical.” It is too challenging for us to follow the money “rules” because we think we can just flip a switch and be on our way like a computer program. The famous author Dave Ramsey said, “Money is 80 percent behavior and only 20 percent skill.” The struggle will always be about our behavior and how consistent we are with such behavior. The money “rules” may be very simple such as “do not spend more than what you earn,” “live below your means,” “invest early” and so on. However, simple is not the same as easy and therein lays our struggles.

Finance advocates can give ideas that seem very sound but can sometimes be impractical. For instance, you will hear us say, “do not drink expensive coffee, do not upgrade your smart phones etc.” They are logical ideas, but hey, where’s the fun in that? I am a father of four kids and I know how important rules are, without them our household will be in constant chaos but my wife and I also learned how to set rules, relax the rules and be flexible—in other words, we are trying to strike a balance. With regard to money matters, it is the same—balance is key.

Having a budget is very important, you will need to track and allocate what you should be spending on. One of the many reasons why people are in a financial mess is that they are unaware they are over-spending. By the time they realize they are, it may be too late. A budget tells you where money should go, not just where it went. Allocating your money is critical to you being able to achieve your financial goals.

However, your budget should not be too stringent that it does not allow ‘fun’ items. Some finance advocates will give you very strict recommended budgets that even many of them can’t follow themselves.

For instance, you might have heard or read experts telling you that you should not spend your 13th month pay on buying gifts and festivities and just save and invest all of them. While it is a good suggestion, it’s actually easier said than done. We are people and we need to have fun, removing it will make us feel money is a hard taskmaster and we will find ourselves rebelling.

How do you strike a balance then? Unfortunately, there are no hard and fast rules on this. You will have to experience trial and errors until you find a balance that works for you. If your budget is too stringent that you feel like you are missing out on many things, adjust your budget. When you look at your bank account and you get stressed because your funds are so small, adjust your budget.

Know your priorities, we should all be responsible about our future. You should not sacrifice long-term gains by enjoying short-term benefits. After several trials and errors, I am sure you will find a balance that will allow you to enjoy the fruits of your labor, without sacrificing a comfortable future. After finding that balance, you will still need to recalibrate it from time to time—that’s what life is all about.

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QUESTION: I already have my financial goals but I am having a hard time achieving them, or even starting on them. What should I do?—name withheld upon request

Answer: There are many reasons why you are having difficulty. But I think the biggest reason is not having the right behavior. Personal finance guru Dave Ramsey says finance is 80 percent behavior and only 20 percent skill, and I agree with that 100 percent.

Your quest to achieve your financial goal is a big step in the right direction, and that should be backed up with consistent behavior.

The most important behavior that you need to watch out for is that in money management, and this is where a lot of people fail because it is a daily task. People do not get into a financial mess overnight, they do so with wrong behavior done on a daily basis. Spending and saving money are behavior concerns and not skills. Let’s break it down for better illustration: To achieve your financial goals, you need to invest properly. To invest properly, you need to save properly. To save properly, you need to spend properly. To spend properly, you need to earn properly. While investing is a skill, earning, spending and saving are all about behavior.

Here are some simple and practical tips:

1) Create a practical budget and stick to it. Have a spending plan. As your receive your income, you should already know where it will go. When preparing a budget, it is best for you to identify those that are needs and those that are wants so that when there is a need to make adjustments, adjust from your wants, not the needs.

2) Make savings automatic. The phrase ‘pay yourself first’ is one of the most helpful personal finance tips ever. Your budget will let you know how much you can set aside on a regular basis and when you know the amount, set it aside regularly. A 20- to 30-percent savings rate is an ideal target. You can also enroll your bank account into an auto-debit arrangement.

3) Invest small amounts regularly. Most people make the mistake of waiting for their savings to grow substantially before investing it. However, many will never get into investing because they keep on waiting for their savings to grow, but it never does because there is always the temptation to use the money every time we see it grow into something sizeable.

A number of people are not aware that they can invest small amounts. When done regularly and consistently, these amounts can grow into hefty sums someday. Some banks and mutual funds accept investments as low as P1,000 a month that can be invested in long-term instruments. Just make sure that you have emergency funds set aside before you invest. Once you invest, forget about it so that you will not be tempted to pull it out before you hit your objectives.

4) Study. It is always a good idea to learn about finance and investments. So go buy a personal finance book, attend a finance seminar, read blogs and posts. Learning helps you get motivated and to be on track with your goals. It’s not rocket science but you will need to do some studying. It can be a big help in the future. By studying, you will also surround yourself with financially-able individuals who can hold you accountable to your goals.

Don’t worry, there is still time for you to achieve your goals. But make sure that you begin with the change in behavior.

“Good planning and hard work lead to prosperity, but hasty shortcuts lead to poverty.”— Proverbs 21:5, NLT

Happy New Year to all!