Frugal Honey

Psychology of Money

Of Dubious Radio Commercials

There’s this radio ad I hear on the AM channel and it never fails to annoy me. It goes something like this:
Matatapos na ang 2012, hard work pa rin ba ang solusyon mo para yumaman? Sumali na sa xxxx raffle bonanza at manalo ng limpak-limpak na salapi!!
(The year is about to end and are you still relying on hard work to get rich? Join xxx raffle to win millions of pesos!)
I think it’s sad that that radio ad seems to be poking fun at working hard to earn your keep and plays on the typical Pinoy mentality of betting on odds to win an easy fortune. But really, that ad just mirrors how Pinoys think about finances.

Hard work is part of the strategy towards wealth, there’s no question about that, however, it doesn’t end there. There’s also living within your means and making your money work for you, because if the radio ad sadly got anything right, it’s that hard work is not enough. You have to work hard AND be smart with your lifestyle and asset planning at the same time.
But will anyone tell that to the dreamers who will join the contest? Nope.
For most of us Pinoys, retirement refers to our SSS or GSIS pensions and relying on our children to support us when we get old and sick. That’s what seems to happens with the “study hard- get a good job- pray to God” upbringing that most of us were reared in.
I went to a good school but I was never taught about budgeting, how to balance a checkbook, open a savings account or use compound interest to my advantage. Honestly, I think learning skills like those would have served me better than the agonizing hours of trigonometry and physics.
So what’s going to happen to us and the next generation? I actually am hopeful that things will turn out better, what with the prevalence of entrepreneurship and the accessibility of money market placements these days. For my part, I try to encourage my friends and family  members to at least invest in mutual funds, specially when I see their bonuses going towards building up their wardrobe or replacing their phones. While I know Lyn-Lyn also regularly conducts mini lectures on wealth building among her fellow OFWs in the UK. Come to think of it, maybe I should come up with my own presentation as well, seeing that my friends are becoming more and more interested in financial planning as well. Hmmmm….
As for that contest, it involves consuming x number of liquor to get the bottle caps in order to come up with a qualified entry. At least somebody’s going to get rich with this contest, and that’s the liquor company.

Spend Less: Calculate Your Salary per Hour

This steak is worth 10 working hours of my salary?!

How often were you plagued with the urge to do impulse shopping?

Or with the sudden call to order for impulse delivery?

How about impulse flight-booking? Have you done this?

Impulse spending is nothing more but a trick done by marketers to trigger your subconscious need for instant gratification. These marketers place signs like “Buy NOW and get one free!”, “Limited offer ONLY!” and the ever-famous “Sale for today ONLY!”

Do you see what these signs have in common? They urge you to buy NOW. Pay TODAY. Pull out your hard-earned cash and give it to them WITHOUT THINKING.


Frugal Honey on ANC On the Money

When Salve Duplito tweeted a question about lending money to friends or family, I responded by saying that it was usually a big mistake and look, I even wrote about it here and sent her a link to this post (epal much?). A few hours later, ANC On the Money asked if they could quote portions of my post in their show. I asked for the terms of the exposure and my talent fee, oh what the heck, I said yes in a heartbeat!

We don’t get ANC on our cable and so I had no clue if the episode actually aired until a reader sent me a link to the episode.

That day’s guest said that the odds of only 1 out of 3 paying a debt is fairly normal and my mistake was in failing to conduct due diligence before lending money to my friends. I actually  didn’t know what to make of that because how exactly do you conduct a due diligence study on your friends?
With the one who lost her job, I really had no inkling that she would renege on her debt. She would always pay her share of the tab during our night outs and never tried to mooch money off me, so I honestly had no clue that that would happen. But looking back now, maybe I should have made them sign an undertaking, even a one pager, just to make the deal more official.
As for the other one, he really was just forgetful and in fairness, he did pay me when I demanded the whole amount.
Anyway, lessons have been learned and I am still not convinced that being a guarantor is a good idea.

Investing in Luxury

An investment is simply defined as putting in money or capital in order to gain profitable returns, as interest, income, or appreciation in value. That’s why I always wondered about women who buy expensive bags and shoes and declare them as “investments”. Do these really appreciate in value? 


Lending Money to Friends and Relatives: More Harm than Good

This article from Learnvest brought back a barrage memories of the first and last time I acted as guarantor for my friends.

In my old law firm, one of our clients had an ex-deal with Gold’s Gym and was paid with 1 year membership GCs redeemable at any Gold’s Gym branch. Our client then sold these GCs for Php12,000 each, payable in 12 monthly installments. Of course I pounced on the deal and informed my friends about this fantastic offer from Gold’s Gym. Several friends bought GCs and we agreed that they would pay me Php1,000 monthly for each GC, I would then remit the cash to the client every month.
Sad to say, of the 3 friends who got GCs through me, only 1 religiously paid every month. One always forgot it was that time of the month and the other lost her job and gave back her GC to me, promising to pay me back later.
The forgetful friend eventually did pay me, but only after I demanded the whole amount after he forgot for 2 straight months to remit his payment. The other friend still owes me money and from the looks of it, she has already wiped off that debt from her consciousness, even if she got a new job about 3 years ago.
I’m still friends with these two, but I will never, ever lend them money again or act as a guarantor for them, or for any other person, for that matter. The stress and disappointment are just not worth it. 
For me lending and borrowing money involves so much more than the actual value of the transaction, as it really boils down to respect. Do you as the borrower, respect the lender enough to make good on your word? Or will you just disregard the loan, reasoning that the lender has more than enough to not notice that she’s out a few thousands of pesos?
I know money problems can’t be avoided, but what you can control is how you will honor your word to someone you are indebted to.

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