The Three Most Often Ignored Necessary Expenses
When we talk about being financially smart, the conversation usually revolves around budgeting, saving, and cutting unnecessary spending. Most people easily recognize the basics: food, shelter, clothing, utilities—these are obvious priorities. We budget for rent or mortgage, make sure the fridge is stocked, and pay the monthly bills because they keep our daily lives running.
But beyond these visible needs, there are certain financial commitments that many of us either overlook or push aside, thinking we can always “deal with them later.” Unfortunately, that habit of postponement often becomes a costly mistake.
In fact, there are three necessary expenses that, while not as obvious as food and rent, are equally essential for financial security and long-term stability: an emergency fund, insurance, and a retirement plan. Let’s dive deeper into why these three are so important—and why ignoring them can derail your financial journey.
1. An Emergency Fund: Your First Line of Defense
When you think about “necessities,” the emergency fund might not immediately come to mind. After all, it doesn’t provide food on the table or pay for today’s electricity bill. But if you look closely, its role is just as vital: it provides peace of mind and financial security when life throws curveballs.
Imagine suddenly losing your job, facing an unexpected medical bill, or having to repair your car immediately after a breakdown. Without a financial cushion, most people resort to swiping credit cards, borrowing from friends, or worse—taking out high-interest loans. This creates a debt spiral that takes years to escape.
An emergency fund breaks that cycle. It’s like paying for financial shelter—a safety net you can fall on when something goes wrong.
How much should you save?
Financial experts often recommend setting aside 3 to 6 months’ worth of living expenses. If your monthly expenses amount to ₱30,000, your target should be at least ₱90,000 to ₱180,000. It may sound intimidating, but you don’t have to build it overnight. Start small—₱1,000, ₱2,000, or whatever fits your budget. What matters is consistency.
Where should you keep it?
An emergency fund should be accessible but not too tempting to touch. High-interest savings accounts, digital banks, or short-term time deposits are great places. Avoid risky investments like stocks or crypto for this fund—you need liquidity, not volatility.
Remember, your emergency fund isn’t just about money—it’s about buying peace of mind. You’re paying today to avoid sleepless nights tomorrow.
2. Insurance: Protecting Your Wealth and Loved Ones
If an emergency fund is your first line of defense, insurance is your shield. Both serve to protect, but they do so in different ways. An emergency fund relies on the money you’ve personally saved, while insurance leverages the power of risk-sharing to provide far greater financial protection.
Many people view insurance as an “extra” or even a “burden.” They delay getting it until they’re older, or worse, they completely ignore it. But in reality, insurance is a necessary expense that prevents a financial collapse in times of crisis.
Life Insurance:
If you’re a breadwinner, life insurance is non-negotiable. It ensures that your family won’t sink into financial hardship if something happens to you. Think of it this way: if your income supports your family, then your life is already a financial asset. Protecting it is a responsibility.
Health Insurance:
Medical expenses are one of the most common reasons people drain their savings or fall into debt. Even minor hospitalizations can cost tens of thousands of pesos. Having health insurance ensures that your emergency fund won’t be wiped out by a single illness or accident.
For employees, check your company’s HMO benefits to see what’s covered. If you’re self-employed or a freelancer, investing in a private HMO or health insurance plan is crucial.
The Leverage of Insurance:
Here’s the beauty of insurance: unlike an emergency fund, which is limited to what you can save, insurance provides coverage far greater than your monthly premium. For example, paying ₱2,000 a month might give your family ₱1 million worth of life insurance coverage. That’s financial leverage.
Today, many insurance products also come with investment components, giving you both protection and growth potential. While they may not replace pure investments, they provide a balanced mix of safety and returns.
Think of insurance as the safety net for your safety net. It fills the gap that savings alone can’t cover.
3. Retirement Plan: Preparing for the Future You Deserve
The last of the three often-ignored necessary expenses is retirement planning. Many Filipinos skip this because they assume their children will take care of them in old age. But relying solely on your kids for financial support is not a retirement plan—it’s a gamble, and a risky one at that.
A retirement plan is not just about preparing for when you can no longer work. It’s about securing freedom, dignity, and independence in your later years. It’s ensuring you can enjoy the lifestyle you’ve built without becoming a financial burden.
Why start early?
The earlier you begin saving or investing for retirement, the more powerful your money becomes thanks to compound interest. A 25-year-old who saves ₱5,000 per month can retire with far more wealth than someone who starts saving ₱10,000 per month at age 40. Time is your biggest ally.
Types of retirement plans:
- PERA (Personal Equity and Retirement Account): A voluntary retirement account in the Philippines with tax incentives.
- Company Pension Plans: Check if your employer offers one and maximize it.
- Investment-based Plans: Mutual funds, UITFs, or even insurance-linked products that allow long-term growth.
What matters most is consistency. Whether you’re setting aside ₱1,000 or ₱10,000 a month, what you’re really buying is your future comfort and security.
Why These Three Expenses Are Non-Negotiable
It’s easy to dismiss these three as “optional” because they don’t give instant gratification. You don’t eat them, wear them, or live in them. But their value becomes crystal clear the moment life doesn’t go as planned.
- Your emergency fund saves you from debt when unexpected costs arise.
- Your insurance shields you and your family from financial ruin during crises.
- Your retirement plan guarantees that your future self won’t struggle or depend on others.
Together, they form the invisible foundation of financial stability. They may not feel urgent today, but they’re always essential.
Final Thoughts
Being financially smart is not just about cutting expenses or finding the best investment. It’s also about recognizing which costs are truly necessary, even if they’re not immediately visible.
The next time you sit down to review your budget, don’t just account for food, rent, and bills. Make room for your emergency fund, insurance, and retirement plan. These are not luxuries—they are lifelines.
Think of them as investments in your peace of mind, security, and future freedom. Because at the end of the day, true financial success is not just about how much you earn, but how well you prepare for the things you can’t predict.
