Friday, December 9, 2011

NU 6 - Spending Habits by HJA LPC Regis

The Ateneo MBA Advantage


          With all the ups and downs of economy, one thing is almost certain, people around the world are now keen on reviewing their spending habits and cutting unnecessary expenses whenever possible. Majority of us, if not all, now realize that we get into serious financial problems because of bad spending habits; it’s a problem and it can lead to serious debt issues.

          Last year, one global market research firm, Synovate, conducted a study about the spending habits of Filipinos and the study results revealed that the lives of Filipinos today revolve around many forms of media and entertainment. The report also showed that going shopping and eating out appear to be an established lifestyle for Filipinos. Six out of ten have visited convenience stores, department stores and malls, supermarkets and fast food outlets in the past month, and there are obvious favorites for shoppers in terms of household products. Close to eight in ten now own a DVD player, whilst two-thirds have a refrigerator and washing machine according to Synovate.

          Having said that, I personally believe that there are only two major types of consumers and they are best characterized by those people we see at the mall day in and day out. One, there are those who strategize and plan everything they buy and are always concerned about not getting oneself in financial straits by trying not to over indulge in unnecessary spending. On the other hand, we have those who just don’t prepare and plan for the rainy days; they don’t care much about having contingency plan when something goes wrong.

         Let’s look at the spending patterns of each group. For this purpose, I’d like to call the first group “Ants” and the second group “Grasshoppers” for some obvious reasons. Well to start with, the Ants don’t normally buy stuff that they can’t afford, they are just too sensitive to those “invincible” RED flags that serve as warning signs that they could be heading to some serious troubles if they spend on unnecessary items. They consistently use a list of priorities which are not only used to help them control or trim impulse spending down but also to remind them what they can live without.

          This doesn’t mean that the Ants don’t spend much. They actually do, but they simply create budget that will tell them how much they can afford to spend and ensure that they get the maximum value for their money while sticking to those numbers. They don’t maintain more than one credit card to do all their purchases even if there are a lot of promotions and marketing gimmicks like free towels, free trips to entice them to get additional credit cards because they understand that there is no such thing as a “free lunch”.

          It’s also interesting to note that more and more people are becoming like the ants these days. Last year, the book of Bo Sanchez entitled, My Maid Invests In The Stock Market And Why You Should Too, came as a surprise to me. (Today, that book is #3 in the Top Ten Bestselling Books List of National Bookstore.) All of a sudden, people realized that anyone can achieve financial freedom through Stocks and security bonds. That is really something new considering that less than 2 percent of our population actually invests in the Stock Market.

         Products and services which promise better health and wellness are also on the rise. Gyms are usually jam-packed with these individuals trying out all kinds of exercises such as yoga, pilates, boxing, belly and pole dancing. After work out, these so called health buffs would buy food and similar items which are labeled organic, less sugar and less cholesterol. Everyone is just going gaga over keeping oneself fit and healthy.

          The Grasshoppers, on the other hand, are among the millions of people who are living with debts that they can hardly control. They basically lack financial discipline and demonstrate unwise consumerism or irresponsible spending in most transactions that they make hoping that they can pay for their purchases.

        Based on my observation, this type of spenders are not limited to those wage earners who have worked for many years; surprisingly, they include younger people who are also battling with debts problem which is becoming a serious social concern. I think there’s this common mentality among these Grasshoppers that working for at least 40 hours a week entitles them to spend, spend and spend as if there’s no more tomorrow. These type of spenders who usually have more than 2 credit cards and wouldn’t mind to use one card to pay the other and they remind me well of those people (probably hundreds of thousands of people in the US and in other parts of the world) who couldn’t wait for the release of the latest model of IPhone. Reports indicate that sales has reached 4 million units in just 3 days !!!

         With more than 80% of Filipinos saying money is difficult these days, I really believe that today is the best time to study our spending habits and to start reducing and rationalizing our expenses. One way or the other, we just have to learn to better manage our finances before money problems overwhelm all of us. 3
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