Tag Archives: spending

More on Spending Practices that will put you in Debt

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

 

USING CREDIT CARD INSTEAD OF CASH

 

There are some who have the cash to pay for their purchases but use their credit cards because it is cool.  Besides, there are points to be earned on the credit card.  Very good! Just make sure you set aside the cash to pay for the credit card statement on due date and not later.  Trouble will arise when you forget that you used your credit card and you see the cash available in your wallet.  You use the cash and are scrounging around payment on due date.  Worse, you keep using the credit card and not adding up your individual purchases.  Before you know it, you have overspent.

 

There are also more and more people using their credit cards for automatic payment of their utility bills and other monthly expenses.  What happens is that you don’t pay for your bills with cash as you normally do and the remaining cash is what you have available for your other expenses.  You are now increasing your risk of not controlling your expenses.  When your credit card bill comes probably several weeks later, you will be in for a big shock.  If you don’t pay your credit card on time, you will be in credit card debt and the interest and penalties will be horrendous.  It is always better to just use cash if there is serious risk of overlooking payment in due date, or worse, if you end up not being able to control your use of credit cards.

 

DO YOU REALLY NEED A VACATION?

 

Vacations are wonderful and good to recharge your body spirits.  It is however funny sometimes that so much is programmed during a vacation that you end up needing another vacation just to recover.

 

It is good to program your vacation especially from the financial point of view.  Unfortunately, some vacations are taken as an emotional outlet just to get away from reality because of a big problem.  Because of the emotional issue, the financial burden of the vacation is forgotten and credit cards are used.  That is a big mistake.

 

Never ever use your credit card to pay for a vacation unless you really have the cash actually set aside to pay your statement on due date.  During the vacation, try to leave your credit card behind and just bring your budgeted cash so you are not tempted.  When you are with family, make sure each one understands the budget and strictly follows it!

More on Spending Practices that will put you in Debt

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.

Pera Mo Palaguin Seminar on Aug. 15, 2015

Pera Mo Palaguin Mo Seminar on August 15, 2015 ay gaganapin sa aurumOne hotel, Makati. Ito Ang iyong gabay sa legal at tamang pamamaraan ng pagpapalago ng pera.

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