Chapter 1

INTRODUCTION

Background of the Study

The concept of money management is not new. It is not limited to currency, economic

conditions, or societal values. The importance of money management stems, quite simply, from

common sense. Money is a limited yet critically necessary resource. As such, the ability to

control the movement of one’s finances is a significant factor in quality of life. Despite this,

people all over the globe struggle with handling their finances and covering their cost of living.

Financial management is an effective way to manage private property. Everyone has

personal property, which will involve financial problems. High school students will enter the

society soon. Their financial management abilities will directly impact on their future living

ways and life attitude. So, it is imperative to perfect financial education (Su and Deng, 2012).

One of the causes of financial problems is the lack of financial knowledge or the lack of

understanding of how to manage, save, and invest money. Low level of financial literacy has

been linked with abuse of credit and living beyond one’s financial means.

In the Philippines, it was reported that only 25 percent of Filipino adults are financially

literate. According to the same source, only one in three adults or 31 percent shows an

understanding of basic financial concepts (Parcia and Estimo, 2013).

It is important that an individual must be financially literate. This literacy will enhance

his ability to handle day to day financial matters and will reduce the negative consequences of

poor financial decisions that otherwise might take years to overcome. Many people lack the

financial literacy needed to make important financial decisions for their best interests. Poor
financial behaviors and personal and family money management practices have consequential,

detrimental and negative impacts on one’s life at home and work.

The recent Gallup-Healthways State of Global Well-Being Index 2014 reported that

Filipinos' perception of financial security is notably below the Asian and global averages of 25

per cent. The global study found that 52 per cent of Filipinos report to be struggling in terms of

financial well-being, while 30 per cent are suffering. It also indicated that suffering is more

prevalent among Filipino rural residents (35 per cent) than those who live in urban areas (24 per

cent).

With the financial crisis in the country, Filipinos are thriving to meet daily needs despite

of financial difficulties. Hence, this study will determine the factors affecting the financial

mismanagement of Ilonggos.

Statement of the Problem

This study will determine the factors affecting the financial mismanagement of Ilonggos.

Specifically, it sought to answer:

1. What is the profile of the respondents?

2. What is the most influential factor affecting financial mismanagement of Ilonggos

when respondents are taken as a whole in terms of financial literacy, economic

condition, financial problems, borrowings diversification and personal values and

when they are grouped according to age, sex, educational attainment, position/status

and financial status.

 3. Is there a significant difference in the pofile of respondents and the factors of

financial mismanagement of Ilonggos?

Hypothesis

There is no significant difference in the profile of respondents and the factors of financial

mismanagement of Ilonggos.

Conceptual and Theoretical Framework

Some existing theories were found useful in establishing the grounds for this study. The

assumptions held by these theories and their applications in this study are discussed below.

Maslow’s (1943) Hierarchy of Needs proposed that motivation is the result of a person's

attempt at fulfilling his five basic needs. These needs, according to him, can create

internal pressures that can influence a person’s behavior. His Hierarchy of Needs includes

physiological needs, safety needs, social needs, self-esteem, and self-actualization. Maslow

believed that these needs exist in a hierarchical order. This progression principle suggests that

lower-level needs must be met before higher-level needs. The deficit principle claims that once a

need is satisfied, it is no longer a motivator because an individual will take action only to satisfy

unmet needs. In this study, the need to be satisfied with their physiological and safety needs are

essential for Ilonggos. Being able to provide for their personal and family needs, which could

depend highly not only on the money/salary that they receive but also on how they manage this,

could affect their attainment of the rest of their needs in the hierarchy.

The Life-cycle theory makes its first appearance in two papers that Modigliani wrote in

the early 1950s with a graduate student, Richard Brumberg (Modigliani and Brumberg 1954 and

1980). According to this theory, an individual’s or household’s level of consumption depends not
just on current income but also, and more importantly, on long-term expected earnings. People

are assumed to plan apattern of consumer expenditure based on expected earnings over their

lifetime. In the life cycle hypothesis, consumption and saving behavior are dependent on the

individual's position in the life cycle. Young workers entering the labor force have relatively

low incomes and low (possibly negative) saving rates. As income rises in middle-age years so

does the saving rate. Retirement brings a fall in income and might be expected to begin a period

of dissaving (negative saving rates). This pattern of consumption and income results in periods

of dissaving during the early working years and the late stage of the life cycle, and positive-

saving over the high-incomemiddle-period of the life cycle. The challenge then is how an

individual can be able to manage the decline of his income in his retirement years amidst the

steadily increasing cost of expenditures. This implies the need to carefully plan and manage his

financial resources while it is at its peak.

Paradigm of the Study

Independent Variables Dependent Variables

Profile of Respondents Factors of Financial

Mismanagement
Age
Financial literacy
Sex Financial
Economic condition
Position/Status Mismanagement among
Financial problems
Educational Attainment Ilonggos
Borrowings
Financial Status diversification

Personal values
Significance of the Study

Students. This study will be beneficial to students since this will give them ideas on how

to manage their finances as a student who are relying financially from their parents. This will

open their minds about their financial practices and change for a better manager of financial

resources.

Employees. This study will be beneficial to employees since they work hard and earn a

living to meet their financial needs personally and for their family. This will give them ideas on

how to manage finances to avoid financial problems further and not be drawn to financial debts.

Small entrepreneurs. This will benefit the small time entrepreneurs since they engage in

financial gains on their own so they need to manage their finances diligently. This will give them

ideas on which things they neglect to improve financial decision making.

School. This will help the school realize the importance of financial literacy among

students. The school could add additional subject or embed in their curriculum financial literacy

so that students at an early stage of life would be trained about handling finances that they couls

use later on in their lives.

City government. This will serve as guide for the city government particularly our

officials for them to be aware further of the financial situations of the Ilonggos and could make

policies that would help augment their financial problems.

Scope and Limitation of the Study

This study will determine the factors affecting the financial mismanagement of

Ilonggos. The respondents of this study will be the students, employees and small entrepreneurs

of Molo, Iloilo that will be chosen through stratified random sampling.

 Descriptive survey method will be used in this study. The data gathering instruments

will be researcher-made questionnaires that will be developed by the researcher with reference

and information from the literature reviewed.

The data gathered will be coded and subjected to the following statistical treatments:

frequency counts, percentages, means, standard deviation, t-test, one-way analysis of variance.

Descriptive and inferential statistical computations will be computer-processed through

Statistical Package for Social Science (SPSS) Software version 22, set at 0.05 level of

significance.

Definition of Terms

Age.  Age is the period of time someone has been alive or something has existed

(Cambridge English Dictionary, 2019).

In this study, the same definition is used.

Borrowing diversification. Borrowing diversification is a simple but fundamental

investing concept that spreading your invested money across a variety of assets helps to reduce

exposure to any single investment (https://blog.lendingclub.com/diversification-101-

marketplace-lending/).

In this study, the same definition is used.

Economic condition. Economic conditions refer to the present state of the economy in a

country or region. The conditions change over time along with the economic and business cycles,

as an economy goes through expansion and contraction. Economic conditions are considered to

be sound or positive when an economy is expanding and are seen as adverse or negative when an

economy is contracting (Investopedia, 2019).

In this study, it refers to the economic condition of the family of the respondents.

Educational Attainment. Educational attainment refers to the highest level of education

that a person has successfully completed. Successful completion of a level of education refers to

the achievement of the learning objectives of that level, typically validated through the

assessment of acquired knowledge, skills and competencies (Statistics Canada, 2019).

In this study, it refers to whether the respondents attained primary, secondary, tertiary or

even if they are on-going education.

Financial literacy. Financial literacy is possessing the skills and knowledge on financial

matters to confidently take effective action that best fulfills an individual’s personal, family and

global community goals (National Financial Educators Council, 2019).

In this study, it refers to skills and knowledge on financial matters of students, employees

and small entrepreneurs in Iloilo City.

Financial problems. Financial problems are situations in which you are not able to meet

your bills on time or afford necessary basic needs (IGI Global, 2019).

In this study, the same definition is used.

Financial status. Financial status means the level of income into which applicants are

categorized (Law Insider, 2019).

In this study, it refers to the financial status of the family of the respondents that will be

categorized as Low Income, Moderate Income and High Income.

 Personal values. Personal values are the general expression of what is most important for

you. A value expresses the worth of something, and in this case what you categorical like and

dislike (Thum, 2013).

In this study, it refers to the personal values of Ilonggos regarding their financial

preferences.

Position/Status. A person's place or level of importance in relation to others (Oxford

Dictionaries, 2019).

In this study, it refers to the position/status of the respondents whether they are students,

employees and small entrepreneur.

Sex. Sex refers to the state of being male or female (Merriam-Webster Dictionary, 2019).

In this study, the same definition is used.