America is spending its way to disaster. You can see the signs everywhere: Americans burning a hole in their pockets through their credit cards, big houses, big cars, small savings. I can’t help asking whether Filipinos, always enamored with what Uncle Sam is doing, are going in the same direction.

In Metro Manila, at least, I would say this is true. As one of MoneySmarts’ readers commented (I think it was tee), we are in a wanna, wanna, wanna mode. Let’s break the mold by curbing our spending habits. This week, MoneySmarts is all about tips on how to do this in our Money Myth Buster feature.

Tip number one: Learn how to multiply by 12.

What’s the monthly payment on the new X-trail? Or the plasma tv? The monthly payment on a G3 phone is only so-and-so… That’s not so bad…

Thinking of spending in terms of monthly payments is a sure way of falling right into the marketing trap. Some marketing guys are so smooth, they even divide the cost into days (It will only cost you P150 per day! Surely that’s not expensive?).

Bust out of that mentality by learning how to multiply by 12 – all the time. That simply means to annualize the cost of an item. And then ask yourself what that kind of money will mean to you.

I tried this tip with a couple I met over the weekend at a friend’s son’s pre-birthday swimming party. With three children in school, they are starting to worry about tuition fees. “It’s an annual headache,” they told me. The main breadwinner, the husband, has a stable income and commissions on top of that, sometimes amounting to P50,000 in one check. But they had credit card debts and they are always worried about money, they say.

The couple said their main problem was they love to dine out as a family. New Italian restaurant across the street has to be tried. Little burger joint should be tested. They spend more or less P2,000 per payday minimum. They didn’t say how much was the biggest bill they every paid on food.

I looked at them in admiration. Both husband and wife are loving parents. They are totally family-oriented. They are good people who are trying to do their best but are floundering. Two grand every two weeks didn’t seem like much in the face of a P50,000 single check for commissions.

I let them do the math. P2,000 per payday meant P4,000 per month meant P48,000 per year. Their eyes grow large. “That can be a huge chunk of their tuition fee!” wife says.

Marketing staff pepper malls these days selling all sorts of imaginable stuff on installment – from Black and Decker power tools to Magic Sing Karaoke to condominium units. They make it look affordable by using the monthly payment trick. Flip the technique back at them by always multiplying by 12.

Fair-goers check out Samsung’s 102 inch plasma TV. Photo: AFP