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More on Spending Practices that will put you in Debt

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Can you afford to live the lifestyle of your Parents?

 

In other countries, children who reach the age of 18 usually move out of their parents’ house and earn their own living.  In our country, children usually don’t leave their parents’ house until they are married.  In many cases, they even live with their parents even after they have gotten married and even when they have children of their own.

There are two points of view in these situations…those of the parents and those of the children.

The parents who keep their children with them even when they are already earning a living and/or have a family may be happy if they can bear the burden of the additional expense.  In some cases, the working children help in the family expenses in which case everybody is happy with the arrangement.  However, this may not be ideal when looking at the long term, if the parents are not able to save enough for the time when they can no longer work.  They will then be dependent on their children’s support and their children may be delayed in preparing for their own retirement.  This may sound ridiculous but remember the principle of saving related to compounding.  “The earlier you start saving and compounding your earnings, the faster you will get to your wealth goal.”

The children on the other hand, whether they continue to live with their parents or live on their own have to undergo three major hurdles.  First is to adjust to a lifestyle they can afford.  If they happened to have parents who could afford to provide them luxury, they have gotten used to that style of living.  Can they afford the same style?  For those who are blessed to have a big income immediately, what luck!  But for the others, they must remember that their parents had a whole life term ahead of them to earn their money.  They are just starting their own life term and have to earn their own future.

Second is not to get into any bad debt.  A bad debt does not bring in any income versus a good debt that either brings income or reduces expenses.  The tendency is to use credit cards to maintain the lifestyle.  Credit card debt, especially if incurred for consumption, is never a good debt.

Third is to remember to save for their own retirement even if they have to help support their parents.

More on Spending Practices that will put you in Debt

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Acting like a Spoiled Brat is a third practice that could lead to unnecessary debt.

I am not a psychologist but I just look at practical situations.  Look at the action of children as they grow up.  Initially, they have to get what they want when they want it.  A hungry infant will not stop crying until fed.  As the baby grows older, he will insist on getting what he wants always to the point of selfishness.   It is up to the parents to train their child that he cannot get everything he wants all the time, especially if what he wants is not good for him or for those around him.  A child who is not disciplined is labeled a “spoiled brat.”  Unfortunately, many children grow up to be adults without learning the important lessons of patience and discipline.  Some adults have to get what they want and continue to be “spoiled brats.”

These adult “spoiled brats” tend to translate their bad trait into bad spending habits.  Some become shopaholics.  A shopaholic feels like he has to treat himself to be happy.  It would be good if he were terribly rich and could afford all the shopping.  But for most, the excessive shopping leads to eventual lack of money and worse, credit card debt.  Just like an alcoholic, a shopaholic will have moments when he realizes the hole he is digging for himself but it will be difficult to stop digging the hole.  He has to really change himself. He has to realize that shopping can no longer make him happy because it has led to problems that lead to his unhappiness.  Anyone who lacks money or is in credit card debt will always be unhappy.  There will be so many people running after him to pay his debts.  Can anyone be happy when he knows so many people are running after him to get his money?

A shopaholic has to find another way to make himself happy.  Even if it means consulting with a psychiatrist, he must do it immediately before he creates bigger problems for himself and for his family.  If he doesn’t, he will be forced to learn his lesson the hard way.  Usually, the shopaholic with a limited budget will end up feeling so miserable because he is being hunted by credit card companies.  He will be forced to pay for the purchases that are probably not useful anymore and worse, he no longer has the money nor the credit to go shopping.

Spending Practices that will put you in Debt

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Some people have ways of thinking in relation to spending that could lead them into debt.  I will be discussing with you some of the spending practices of some people that lead them into always being short of cash and living on credit card or in deep credit card debt.  In analyzing these practices, I want to emphasize the principles I have been discussing through the years.  Read on and see how you can be more aware so that you avoid the pitfalls.

Bonus – Let’s say that you received a bonus of P10,000. What would you do with it?  Most people would not only spend all of it.  Apparently, many will even use it as a down-payment for an item, and unfortunately, the installment payments for the item bought is usually more than their budget. Normally, a budget is just enough for your regular expenses.  You should not add to your regular expenses without a permanent addition to your regular income.  A bonus is not regular income and after receiving it, there will be no more to come in the near future.

If you are making a budget for your regular income and expenses, all the more you must treat a bonus with some analysis and planning.  Remember the First Principle is “Pay Yourself First?”   I ask you to follow the formula “Income minus Savings equals Expenses.”  A bonus is income as well.  You must still follow the formula.  Set aside 10-20% of the bonus as your savings.

You could also give yourself and your family a little treat but make sure it is something modest and commensurate to your regular income.

Discuss the bonus with your spouse and/or your family.  What are your priorities to help get the best value for the windfall.  Since the amount is limited, don’t immediately think that you can use it for a new type of expense that could balloon to something more than you bargained for.  Rather, maybe it is better to use it to help you in a regular expense or even better, put it all in savings.

The bonus is the only additional income you have. Unless you get a salary increase, you do not have additional money to pay for additional regular installment payments.  Never buy an item that will require you to make regular installments that you cannot afford.

“Nang Magising si Juan” Episode 13 Sneak Peek

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While there are some improvements in Ariel’s financial education on Nang Magising Si Juan, there is still a lot to ask for.  In last week’s episode, Ariel ended up staying in a hotel because his electricity, water and telephone were cut off because he was unable to pay his bills.  Ariel is not as poor as not to find money for his electricity but he is not careful.  He forgot to pay the bills because he was too busy.  I had to remind Ariel that he can pay for his bills even by cellphone.Now he has to use his credit card to pay for his hotel bill and that adds up to his expenses.  Ariel didn’t even realize he was staying in aurumOne Makati Hotel that I own together with OFWs and members of KsKCoop.

At least, he remembered that he had to arrange for an interview with Ms. Yasly Corazon Jaen, Chief Admin Officer of Governance Commission for GOCC of LandBank Mobile Availer.  He learned that it is easy to get a salary loan. When you avail of a loan, you should have a mobile phone because you apply by text and you get the approval also by text within three days and the money is deposited to your account with Land Bank.

Tomorrow Aug. 10, watch the Ariel and the members of KsKCoop as they meet up in Hong Kong to discuss the projects of KsK.  We have sponsors for the show like Bulgar, Bounty Fresh Chicken Chooks-to-Go, Mang Inasal and LandBank of the Philippines.  With them, we are able to give all Filipinos information while watching an enjoyable comedy show.  Please pass the word to your family and friends.

“Nang Magising si Juan” Episode 12 Sneak Peek

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Ariel, in Nang Magising si Juan last July 27, continues to believe that his real talent is in show business.  He looks for ways and means to support his feeling and he joins the Chooks-to-go caravan.  This is actually a good move on his part to understand his real passion.  This is what we should all do to really discover if what we believe to be our capability is really true.

In joining the caravan, Ariel got himself into the groove of all the fun that Chooks-to-go caravan had to offer.  He went to the extent of being personally involved in the activities, which was again very good to enlighten him. He was convinced that it was really his calling to be in the limelight and he made up his mind that he would be a good endorser of Chooks to go.

He thought he should resign from his job with Feeling Close with FJCshow and maybe even his job with PLDT.  He went to me first to resign and tell me about his plans. I was surprised and kept asking him if he already had a signed contract.  He was evasive and didn’t really confirm, but he was so sure he wanted to resign, so I accepted.

When Ariel went back to Chooks-to-go, he was shocked to learn that they already had a poster of their endorser.  He didn’t even know!

Tomorrow, Aug 3 at 8am on GMA News TV, join Ariel again when he is seriously unable to pay his bills.  On Nang Magising Si Juan, learn more about possible solutions especially regarding the mobile salary option of Land Bank.

 

Catch Nang Magising si Juan this Sunday, 8:00 am, at GMA News TV!

Nang Magising si Juan would like to thank its sponsors Bulgar, Bounty Fresh Chicken Chooks-to-Go, Mang Inasal and LandBank of the Philippines. With them, we are able to give all Filipinos information while watching an enjoyable comedy show.