"Want is the path to the Dark Side. Want leads to spending. Spending leads to debt. Debt leads to suffering."
"It's not want that's the problem, but the habit of constantly satisfying one's wants."
-- Get Rich Slowly's cousin's rebuttal
"Want is the path to the Dark Side. Want leads to spending. Spending leads to debt. Debt leads to suffering."
"It's not want that's the problem, but the habit of constantly satisfying one's wants."
-- Get Rich Slowly's cousin's rebuttal
***
…some analysts actually believe the bear market is over, stock prices have bottomed out, but that this does not mean the bull is ready to charge. So, as my editor-in-chief JV Rufino asked when I told him about the news, what do you call a market that is neither a bull nor a bear?***
…if you have investments in the stock market, you belong to less than half of one percent of the total population of the Philippines that are into equities! Citiseconline.com only had 6,000 customers in 2007 and only 15% of them traded at least eight times in a month.***
…I am starting to believe I am jinxed! Well, the good news is that a few minutes (yes, minutes) after I blogged about BPI’s online banking service, someone from the bank called me up at home (should I be scared or impressed? honestly, I'm more impressed than worried) and tried to help me with my problems. A few days after, he called me again as promised and told me the account linked to my online banking facility was inactive, hence the error messages. (the phone banker sounded as puzzled as I was by the explanation of their IT guys). I took note of the instructions he gave and resolved to follow them religiously. Finally, yesterday, I was ready to look at my account. Lo and behold, I forgot my password and got locked out! (that was totally my fault). So, I called up the 89-100 hotline today and what message did I get? “Ma’am, we are having a problem with our system so can you please call us again in an hour?” Strangely, I am not really upset. But I think I am so totally jinxed. *** …when you call an OFW abroad through their phone with roaming capabilities, he pays through the nose just to receive your call and you pay IDD rates on your phone. Ouch! If you have Globe’s family sim pack, the best way to maximize the entire package is for the OFW to buy another sim with Globe’s telco partner in that country. You can send him a text message for P1, he can reply using text. The two sims used by relatives here can benefit from “unli text plans” but to call home, he should use his co-branded sim. OneAyala privilege card, by the way, was relaunched today with more benefits! It's a discount card that's also an ATM through which Filipino expats abroad (I like the sound of that more than OFW) can use to remit money to the Philippines. Check out some of the noteworthy discounts below (others I did not include were blah):
When the stock market is raging like a bull, any monkey can make money trading stocks. It is when the market is tanking when, as they say, you can separate the men from the boys.
I was listening to Citiseconline.com president Conrado Bate’s presentation at the CFA Society Prestige Night last week, and found it interesting that the company considers these six stocks their GEMSS.
I didn’t get the meaning of the acronym, but based on my notes, the company considers these companies as leaders in their industry, can report stable earnings in good and bad times and grow when the economy is growing, have management that are transparent, churn out superior products and services and have strong balance sheets.
These companies are:
ALI – Ayala Land Inc. (Last trade at P5.90 per share, only a touch higher than its 52-week low of P5.10)
BPI – Bank of the Philippine Islands (Last sale at P41 per share)
JFC – Jollibee Foods Corp. (Last traded at P38)
MWC – Manila Water Corp. (Last traded at P13.75)
TEL – Philippine Long Distance Telephone Corp. (Last traded at P2,275)
SMPH – SM Prime (Last traded at P6.60)
I personally like five out of the six stocks (wink). They are in good industries and sell products that we all need to buy come hell or high water, and they practice corporate governance. One of these companies I hate with a passion because their service sucks. Can you guess what it is?
How about you, what are you favorite stocks?
1. Stock market reversal – the stock market, Lee says, is a discounting mechanism. When the stock market recovers, normally the economy will follow in six to nine months, so watch out for that. 2. US Industrial Production – the graph he showed that historically, this tracks almost the same path as US gross domestic product growth rates and is therefore a very good indication of when the recession is coming to an end. 3. Baltic Dry Index – Wiki explains that this measures the demand for shipping capacity versus the supply of dry bulk carriers. Recently, Lee says the index has been showing a “most disconcerting” trend indicating that world trade is coming to a halt as banks get cold feet in issuing letters of credit, with China, Japan and Korea suffering the most. 4. Bloomberg’s Financial Condition Index – if you have access to a Bloomberg terminal, you might want to track this propriety chart, which has been proven in recent quarters to indicate financial easing or freezing among global banks.I caught a whiff of another interesting thing Lee pointed out and that is the significance of these Asian currency swaps happening in the region lately, as a response to the US and global financial crisis. These swaps initially sound like a good, proactive response, but Lee says they could have the unintended effect of drying up the supply of domestic currency for borrowers in Asian countries. That doesn’t sound good for any economy. The depth and length of this crisis will definitely put a toll on many (some we have already seen in this blog in a previous post), especially in developing nations. This New York Times article points out a very interesting possibility:
This recession will probably have its own social profile. In particular, it’s likely to produce a new social group: the formerly middle class. These are people who achieved middle-class status at the tail end of the long boom, and then lost it. To them, the gap between where they are and where they used to be will seem wide and daunting. The phenomenon is noticeable in developing nations. Over the past decade, millions of people in these societies have climbed out of poverty. But the global recession is pushing them back down. Many seem furious with democracy and capitalism, which they believe led to their shattered dreams. It’s possible that the downturn will produce a profusion of Hugo Chávezes. It’s possible that the Obama administration will spend much of its time battling a global protest movement that doesn’t even exist yet. In this country, there are also millions of people facing the psychological and social pressures of downward mobility. In the months ahead, the members of the formerly middle class will suffer career reversals. Paco Underhill, the retailing expert, tells me that 20 percent of the mall storefronts could soon be empty. That fact alone means that thousands of service-economy workers will experience the self-doubt that goes with unemployment. They will suffer lifestyle reversals. Over the past decade, millions of Americans have had unprecedented access to affordable luxuries, thanks to brands like Coach, Whole Foods, Tiffany and Starbucks. These indulgences were signs of upward mobility. But these affordable luxuries will no longer be so affordable. Suddenly, the door to the land of the upscale will slam shut for millions of Americans.Having said that, I still say watch out for the signs, and in the meantime, enjoy the ride, even if it’s a bit bumpy. Life is too short for something like a Great Depression-like event to make us all grumpy! PS. Congratulations to the new CFA Level 3 charterholders! They have mastered three rigorous, six-hour exams covering topics that included ethics, financial statement analysis, valuation, derivatives, economics, and alternative investments and have gained at least four years hands-on experience. Kudos to Rose Christine Badillo, Anna Marie Bernardo, Kelanie Cabiltes, Luz Pilar Glinoga, Francis Goseco, Biao Huang, Jocelyn Labas, Ana Christina Pastelero, and Carl Stanly Sy. I forgot which one of them gave birth between reviewing and taking the exam, but to you girl, a major salute!
These people better be smiling when they say things like that. They must be joking. As if we don't have enough clowns in government. Our relatives in the Philippines are losing their jobs, so we have to send money to help them. Can't they offer solutions instead of false reassurances? Will they please stop treating us like idiots?He was reacting to the Philippine Daily Inquirer article “Slowdown, not recession” where cabinet officials explained that the Philippines is likely to show a slowdown in economic growth next year, and not a recession as most top businessmen who took the Makati Business Club survey believe. Are we, or aren’t we going to have a recession? Is the government merely trying to manage expectations? Or is there reason to believe that we won’t be hit as hard as we all think we would be? What do you think? Perception plays a big part in business and the economy, but sometimes economic-speak can be confusing. Should we spend more to avoid a recession (and therefore spur business activity), or should we save more to prepare for tough times? Forecasts as provided by economists, government crunchers and banks are taken from their economic models and gut feel. To a certain extent, their predictions also fuel perception, right? I have collated here all the predictions and forecasts worth studying (and salient excerpts), to help you make sense of what is being said in the news: “Slowdown, not recession” “What you mean by economic slowdown is when your neighbor loses his job. By recession, it’s you who lose your job,” Finance Secretary Margarito Teves said, explaining the difference between a recession and a slowdown. Also… The DBCC now expects the economy to grow at a slower pace of 4.1-4.8 percent this year after a slowdown in exports and farm output in the first nine months. The economy is expected to grow 3.7-4.7 percent next year. It was earlier projected that domestic growth would be within 5.5-6.4 percent this year and 6.1-7.1 percent next year. The new targets, the government’s second revision, were aligned with external developments “that may generate a knock-on impact on our overall economic activity,” Budget Secretary Rolando Andaya said in a statement. Top businessmen see recession in 2009 Eighty-seven percent of the businessmen polled by MBC said they believed the Philippine economy would fall into recession next year, while 60 percent said their company’s workforce “will contract.” The MBC groups the country’s biggest conglomerates and companies, and the survey was conducted among its members’ top management. Seventy-six percent of those surveyed agreed that obtaining bank loans would be more difficult, while 75 percent said “access to trade credits will be more difficult.” The “most alarming concern” is an expected spike in layoffs projected toward the end of the first quarter of the year, according to the survey. Deutsche Bank sees no recession for RP The Philippines is not in danger of falling into a recession. In fact, it is the only country in Southeast Asia that has so far escaped the harsh impact of the global financial turmoil, European banking giant Deutsche Bank said Wednesday. In an equity research note, the German bank said the Association of Southeast Asian Nations as a bloc was far more resilient today than during the Asian crisis of the late 1990s, when the sharp economic slowdown and unprecedented currency devaluation triggered a wave of corporate defaults that in turn soured banks' assets. “While the collapse in commodity prices and the anticipation of weaker exports should hurt economic growth, DB is not expecting a recession in Indonesia, Malaysia, Thailand or the Philippines,” the report said. The article also stated: “Financial prudence, deposit guarantees by central banks and the general lack of exuberance in the mass residential property market has left the Asean bloc in far better shape today than before the Asian crisis,” DB said. HSBC sees Asia staying resilient BRITISH banking giant HSBC sees developing countries in Asia in a much better position to withstand the current global financial turmoil than during the 1997-98 regional currency crisis. While emerging Asia would slow down alongside the global downturn triggered by the US credit crunch, the region--the world's fastest growing in the last few years--would likely remain resilient, HSBC group chief operations officer Michael Geoghegan said in an international teleconference late Monday. He said Asia outside Japan would still sustain a respectable growth of 7 percent this year. "If the world economy slows, Asia will be impacted, but unlike the Asian crisis, the Asian economies are strong. They have strong reserves, current account reserves and each country is capable of stimulating domestic demand," Geoghegan said. RP economy to grow amid recession MANILA, Philippines -- The Philippine economy will slow down due to the worldwide recession but it will still grow, with some sectors even showing surprising strength, an economist forecast Tuesday. Victor Abola, program director of the School of Economics of the University of Asia and the Pacific, projected gross domestic product growth in 2008 at 4.5 percent with 4.0-percent growth next year. This will be a sharp slowdown from the 7.2-percent growth posted last year but will be far better than the minimal or even negative growth projected for developed countries, Abola said. The likely effects of the world financial crisis on the Philippines will be a decline or even withdrawal of foreign investments in the stock market. Philippine financial institutions are not too exposed to the financial turmoil and those that have been affected have already made this public, Abola added. "We won't have a credit crunch as banks have plenty of money," he forecast. Philippine recession seen as unlikely The Philippines may be headed for a slowdown next year, a spillover effect of the ongoing US financial crisis, but the domestic economy is far from plunging into a recession, two experts said. University of the Philippines economist Raul Fabella and former secretary of finance Ernest Leung spoke at a forum organized by the nongovernmental organization Action for Economic Reforms. “The Philippines will definitely feel the impact of the US crisis—lots of jobs may be lost and the country’s capacity to borrow will suffer—but I don’t think we will go into a recession,” Fabella said, noting that recession is technically defined as two consecutive quarters of year-on-year contraction of a country’s gross domestic product. Fabella has projected that growth of the Philippine economy would slow down further to 3.5 percent next year from a projected 4.4-4.9 percent this year as the local business environment feels the adverse effects of the financial turmoil in the United States. His growth forecast for 2009 is less optimistic than the official projection of between 4.1 and 5.1 percent set by the Arroyo administration’s economic team. Global recession, local crisis Broadly speaking, recession refers to the fall in economic activity. It is a phase often technically measured as two or more consecutive quarters when the growth rate of the gross domestic product (GDP)—the total production of goods and services of an economy—is negative. Recession is the contraction phase or the “downtime” in the business cycle. Thus, it is often reflected not only in declines in industrial production and sales but also in employment and real income (or the income relative to the increase in the prices of basic commodities). Will we import a US recession? No Free Lunch/Cielito Habito Before going any further, what does it mean for the US economy to go into recession? Recession has come to be commonly defined as a contraction—that is, negative growth—in a country’s economic activity for two consecutive quarters or more. “Economic activity” here is measured as gross domestic product (GDP), which also reflects incomes received in the economy. In short, then, recession implies a prolonged drop in aggregate income. This is not to be confused with an economic slowdown, which implies a lower rate of growth, but continuing (positive) growth nonetheless. He also said: Will the Philippine economy go into recession if the US economy does? I could most confidently say no. A slowdown is almost certain—but by saying “almost,” I would still not rule out the possibility of sustained or even accelerated growth, as I will explain later. But a downturn for us is most unlikely, and can happen only if the entire global economy is somehow led into a downturn. A lively debate is ongoing worldwide, both politically and technically motivated, about the expected repercussions of a US recession, but there appears to be no disagreement that the world economy will slow down. It is the magnitude of the impact that is widely debated, with some arguing that the contagion will be severe, while others contend that the world economies have undergone a “decoupling” (translation: cut the link or dependence) from the US economy. I will set aside the question on the global impact, and focus here on the particular impact on the Philippine economy, and the lives of Filipinos. On this, our best basis for analysis is to look at the hard numbers. Export prominence How prominent is the US in our overall economic linkages, especially trade? If we count China and Hong Kong as one country (even though the trade statistics still separate the two), the US has already been dislodged as our largest export market, whose 17-percent share of our exports is now just second to China-Hong Kong’s 23 percent. Contrast this to only 10 years ago, when the US took more than one-third (35 percent), while China-Hong Kong took less than one-twentieth (5 percent). Our vulnerability to a US recession via an export slowdown is therefore far less than what it would have been 10 years ago. But let’s look more deeply into the details, particularly the destinations of our top exports. Electronic products, which account for two-thirds of all our export earnings, are now well distributed among our top four buyers for these products, with the US taking only 14 percent. China-Hong Kong takes 23 percent, Japan takes 15 percent, Western Europe takes 14 percent, and even Singapore and Malaysia take sizable shares of about 8 percent each. On the other hand, the US takes up the bulk (79 percent) of our garments exports, our second (but a far second) largest export. Mineral exports to the US hardly matter, with most going to our neighbors. Woodcraft and furniture, another top export earner, mostly go to Japan, with only 20 percent going to the US. JP Morgan expects RP to weather the crisis THE PHILIPPINES HAS “SIGNIFICANT” exposure to an emerging global recession but has built up internal buffers to cushion against external shocks, American banking giant JP Morgan said. In its latest emerging market research dated Oct. 16, JP Morgan held the view that local monetary and fiscal policymakers were well-positioned to act, if needed, to help perk up domestic output given the uncertainties in the global economy. JP Morgan estimated that every percentage point drop in US growth would shave 0.4-0.5 percentage point from the growth in the Philippines’ gross domestic product (GDP), or the sum of all goods and services produced by the local economy in a given period. Remittances are also directly exposed since more than 30 percent of overseas Filipino workers (OFWs) are based in the United States, the research said. But JP Morgan noted that there had been minimal bond financing by Philippine corporations. It added that real estate and stock market prices have previously moved up but still lagged many of their regional peers, thus dismissing concerns that they were nearing “bubble” type levels. “Bank foreign funding both as a percent of GDP and as a share of total bank liabilities is manageable and derivatives licenses had been given out prudently, so there has been no excessive activity there,” it said. From MoneySmarts: Prepare for the worst but hope for the best. ☺ What about you? Is it going to be a recession or a slowdown in 09?
My husband and I went crazy at the DIY Handyman shop over the weekend to buy stuff for the house, so we had quite a stack of things to pay for at the cashier. I knew we probably overspent, but the bill still surprised me when it reached P9,000 plus.
I paid for the bill and then asked for the tape receipt. Rugs, check. Two different sizes of hooks, check. Car cleaning stuff, check.
“What’s this item that costs P4,200?” I thought my voice sounded really calm.
The cashier and her bagger checked each item and found that it really cost P99 but the scanner somehow made P4,200 appear on-screen. Great.
They voided the charge to my credit card and counted everything all over again, while my son complained of a missed meal and general tiredness at the things that adults worry about. I paid P5,121.23 instead of P9,291.48.
I was lucky it was a big item, that I spotted it and double-checked the tape receipt before I left the store. But what if these automatic scanners have been taking money from us without us knowing it? What if these are in increments of P50, or P100? Would we notice? What if they are already taking over the world?!! (kidding)
I once scoffed at my brother-in-law who checked each item in the tape receipt every time they went to the grocery. He may have a point after all. I just hate having to feel like I can’t trust something as simple as a scanner or barcode.
“Everything’s going to be OK.” -- Nick VujicicSuch simple words have never been uttered with so much impact as when they came from Nick. Watch the video and see why. Nick graduated with a bachelor’s degree in Financial Planning and Accounting, and is a stock market and real estate investor, and a philanthropist.But his greatest asset is his sense of humor.
“Lehman was after all an AA-rated credit so who would have imagined what would become of such a venerable Wall Street name. This human limitation is the best reason why we should be saving. We should save because it is the only way we can transfer purchasing power from when we have a surplus to when we may suddenly need more of it. In other words, saving during normal times helps us manage the difficult times. When difficult times kick in, our financial plans often shift to prioritizing liquidity over profitability. Unless we have a fool-proof way of either marrying into or inheriting liquidity just at the right time, we simply cannot maximize liquidity when we have no saving to speak of in the first place.”The other point that you should not miss in Ravalo’s latest column is to remember always that financial values are relative.
“A trader, for example, would have a different mindset from an investor. This matters because ultimately the portfolio of a trader should be different from the portfolio of an investor. There is always that natural urge for any investor to get a bit more but without realizing it, some of us cross over and mimic a trading position and get consumed in the day-to-day changes in market values.”So what are you? Investor or a trader? Most of the trends you see in the news of the stock market going up and down on a daily basis is because of traders’ movements, and if we are hoping to be an investor, rather than a trader, why do we often get too affected? A reader also wanted to know whether she should invest in stocks or in mutual funds? , a common question we receive here at INQUIRER.net. The answer depends on your risk aversion and cash flow. One way to boost savings is to consider limiting Christmas spending by putting your 13th month pay into your investment or savings portfolio. Read this article for more ideas. If you need help with how to manage your finances, this article tells you how to Find a reliable financial planner that won’t disappear when bad times roll along. Is the insurance industry in trouble?, asks PDI columnist Honesto General. The long and short of it, he says, is that while they are not in bad shape, insurance companies here must be prepared to put in more capital. Investing: It’s not true that investments in art are immune from the ups and downs of financial markets. Financial crisis puts chill in Asian art says why. The 3-year Treasury bond rate also plunged almost one percentage point to 7.6 percent Macroeconomy: Good news for consumers! Things are looking at least a little bit good for consumers this week, no wonder they are upbeat about the economy despite the crisis, according to the latest Nielsen consumer confidence survey. Good news for retailers. Oil in foreign markets flirted with the $60-level this week, and you have the US recession to thank for that! Remember when it was at $140? How long ago was that? The Department of Energy is seeking a P191 cut in liquefied petroleum gas prices and if the suppliers do that, the already dropping cost of staple food like rice, fish, chicken and sugar should move even lower in the coming months. Meralco has also started its deposit refund. October inflation (the rate by which prices of major consumer goods go up) is already down to 11.2 percent and will likely drop to single-digit levels come 2009. Yey! Will mortgage interest rates follow? I hope so for those that have fixed interest rates for only a year. The peso has also strengthened this week. Elsewhere in the world, top economies are already “in the belly of the recession beast” and the IMF has also lowered its growth projection for the ASEAN 5 economies but NEDA Director General Ralph Recto expects the Philippines to grow faster than expected in 2009. Naturally, Recession fears continued to stalk financial markets. Nothing new there. And the Obama victory added a little bit more excitement in traders’ lives by sparking profit taking on Wednesday. Again, nothing new there. Traders will trade for any reason. Banks and the financial sector: There have been plenty of pessimism about banks and the financial sector, lately, and that’s very understandable. It’s hard nowadays to know which opinions about them are to be trusted or not. I’ve been very selective about whose opinion to publish in MoneySmarts, and whenever I do, I focus on the figures and let the figures tell the story. It was gratifying to see Moodys confirm what these two guys said (though I am not really a fan of credit rating agencies), saying Philippine banks, as well as Asian banks, will not be immune from the crisis but they are likely to maintain these credit ratings. Nevertheless, the first half report showed that rising interest rates, the weakening peso and risk aversion caused banks’ income to drop 26 percent in the first half. However, they continue to be well-capitalized at an average 15.5 percent capital adequacy ratio and bank lending continued to grow 25.1 percent in the first half. Banks also got an early Christmas gift this week from the central bank when it cut reserve requirements by two percentage points, which should hopefully urge banks to continue to lend more. From PF Bloggers: Frugal Pinoy has a great tip on how to get Ivy Leage lectures for free by accessing them via the Internet. I used to just buy Business Harvard Review books from A Different Bookstore so that I can speak like I went to Harvard, nyahaha. Now I can watch them for free! All About Financial Planning talks about the investing wisdom of the world’s wealthiest including Warren Buffett and sums them up in nice little quotes you can repeat again and again when you’re nervous about your mutual fund holdings, heh. The Serious Nuts finished her Excel worksheet for Household Finance Workbook, congratulations! I guess you aren’t happy with Quicken and other free applications already out there . Great job! Have a great weekend!
In an economic climate in which buying a handbag with a four- or five-digit price tag is starting to seem gauche, the free-spending style hounds formerly known as “fashionistas” are rebranding themselves. Consider the $1,235 patent-leather satchel with golden hardware designed by Anya Hindmarch. Mary Hall, a marketing manager at I.B.M. in Redondo Beach, Calif., heard its siren call. Then she went to Target to purchase a similarly shiny purse, made out of polyvinyl chloride, by the same designer. Price: $49.99. “In the current economy, I thought I would reform,” Ms. Hall said.”Now, is this a money-smart move? Or is it falling prey to a marketing spin that makes you feel it is alright to spend because you’re after all spending just a portion of what you normally would? The article goes on to say:
In part, the word reflects the efforts of fashion and beauty publicists to spin the economic downturn as an attractive retail trend. For instance, Bourjois, a moderately priced makeup line from France, sent a recent press release by e-mail to reporters promoting the brand’s cheapest mascara and lip glosses as “the Recessionista Collection,” an antidote to gloom. An e-mail message sent last week on behalf of Salon Eliut Rivera in Manhattan promoted “Recessionista Beauty,” offering discounts on haircuts and eyebrow shaping.”To me, there are no seasons for being money-smart. If you are used to buying what you need, looking for quality items that last long at a good price (hmm, just like Warren Buffett’s criteria for a good company to buy), whether you are in boom times or in a recession, you won’t have to adjust your spending habits. It’s when we are used to luxuries we cannot afford, perennially trying to keep up with someone that’s two notches above our income levels, when we find it hard to adjust to crunch times. Lately, I was going through my eldest sister’s office clothing she left with me when she and her family migrated to the United Kingdom earlier this year. I found suits and clothes she bought more than 10 years ago that still look good and haven’t gone out of style. Classic cut; good quality textile. They were pricey, I bet. Her taste dictated that. But for the items to last 10 years? That’s recession chic :-) If you feel like it’s time to try this new skill, here are some tips I found helpful:
Photo courtesy of Aladdin Cordero
I learned a few more things while preparing for my interview at ANC’s Shoptalk, as well during the show and would like to share them with you:
Is there anything wrong with enjoying the spirit of the season that’s fast approaching? Of course not. We wouldn’t want people to think we are misers who are only concerned with the glint of money.
There is nothing wrong with enjoying what we earn. But therein is the key—the words “what we have already earned.” We should be enjoying in moderation past income with some set aside for the future. But Filipinos have to stop enjoying future income, future bonuses, future salary increases. After all, what if these don’t come in? Then we have to live with the reality of bounced checks in January or missed credit card payments when the new year rolls in.
Break the cycle by refusing to mindlessly spend. The psychology of spending is a topic that I have been studying for quite some time. Unless we face the deeper reasons why we get into debt come Christmas season—and even after—we cannot really get rid of these urges to splurge.
The psychology of spending
Drazen Prelec (associate professor of marketing at the Sloan School of Management) says that “people’s complex attitudes towards money defy economic theory.” For example, some buy lotto tickets and insurance at the same time. Buying lotto is risky behavior while insurance shows risk-averse behavior. I also find Prelec’s findings to be “fascinating glimpses into our own complex relationships with money.”
He says we all have personal rules when it comes to money, rules that we think will keep us out of money trouble. For example “I never take a taxi unless in an emergency.” When we don’t live by the rules, we feel guilty. That’s what he calls a moral tax on consumption that interferes with the pleasures that we get from doing what we do.
Marketers take advantage of these findings by offering freebies or bundled pricing, for example. At a cosmetic shop, for example, you get a free item if your purchases reach, say 5,000. So if your total purchase so far is 4,500, and the next item you like is 700, you add to your basket so you can get the free item. Makes you feel good about adding that extra item.
Credit cards, he says, are “insidious” because they remove the pain of that moral tax, or make it appear that the pain is not there. That’s why when you pay with plastic, you tend to spend more than you budgeted for.
Money and happiness
In one study, a psychologist named Miriam Tatzel, PhD, of Empire State College, State University of New York, compared peoples' spending habits with their sense of well-being.
Her study of 329 students examined what types of spenders are the happiest. She observed that there are generally four groups of people with different combinations of the trait frugality and materialistic.
From the mid 80's to the 21st century, consumers have fallen prey to cues created by socioeconomic standards of living by measuring what is deemed 'normal' against those whose incomes are far beyond their socioeconomic statuses. We measure ourselves by what we own, what we wear, where we live, how we spend our vacations, our choice of automobiles, and other material measures of success. And yet, the majority of us are still unsatisfied with what we have. When our income increases, we inevitably spend more money in order to match those whose income brackets are yet again, one, if not two, levels higher than our own. This creates a society consumed with materialism, and sets the stage for dangerous vulnerabilities associated with consumer debt. Constant, mounting debt forces the consumer to work longer hours, sacrificing their freedoms to a sort of enslavement to money. Meanwhile, corporations merge, monopolies are created, and profit margins that drive capitalists determine what is culture, simply by measuring what sells. This is further complicated if you are a parent, because not only does your self esteem rely on where you fit in the social strata, but your children measure their self esteems in similar ways. " If my friend, Johnny, has a cell phone, a computer, and attends private schools, why can't I?" Middle class parents send their children to unaffordable private schools out of fear that their children will not succeed. What results is enormous debt and related stressors due to debt. And it is debt that enslaves society to the mercy of their employers.Understanding how or why we spend also means we have to look into how we react to advertisements and whether we fall prey to the contrived psychological triggers that marketers cook up to remove the rationality in our spending. These triggers don’t even have to be “materialistic” in nature. They may include such noble desires as wanting to please our children, our spouse, our relatives and friends. At the end of the day, there’s always a reason to spend if you want to find that reason. Taking control of your money will not happen by magic; it will require conscious choice, and an understanding of the complex relationships we have with money.
ADVISORY: Catch me live today on ANC’s Shoptalk with Pia Hontiveros-Pagkalinawan at 3 p.m. to 4 p.m. to talk about the psychology of spending (one of my uber-favorite topic) and how to hammer down your Christmas budget.
We all know the urge to splurge bites everyone strongest during the Christmas holidays or as the colder months come near. But we also get little scratches and bites all year round! Just look at all the stuff (most of which are useless after a month) that we accumulate through the years! The best thing would be to control the urge, of course. The next best thing would be to shop in the right places.
Lately, I have discovered new frugal shopping secrets in Metro Manila, but to my delight, somebody else has been thinking about the exact same thing. Blogger Paetechie/Tutubi, who owns the blog Budget Travel Philippines (among other blogs), practically read my mind when he emailed me yesterday about his blog post “Manila Shopping Guide and Tips: Divisoria, Malls, Markets and the Art of Haggling”.
Drool, drool, drool! You’ll know where to find me most weekends from November 2008 to November 2009! :-D
So here are some of the frugal shopping “secrets” I have discovered lately (thanks to my friend and shopping maven Kharoll Tobias), in addition to Tutubi’s list:
Native, wooden, ceramic, porcelain gift items for Christmas, and even sushi platters – Dapitan St. in Manila. You won’t be able to find little gift items good enough for whole departments or a whole clan for P20 per piece in the malls and still be proud to give them away! But you’ll find them in this little stretch of street near the Dapitan market. There’s also a new “mall-type” enclave that you should also check out for items with better quality (but just a little bit pricier). Plus, if you like simple and cheap sushi platters to serve your guests, walk over to the Dapitan wet market. The rice used is not yummy Japanese rice, but for P60 per small pack and round P350 for a big platter, you can already impress your guest with your sushi creations.
Quality wood furniture—Silang, Cavite on the way to Tagaytay. I have been asking around where to buy good quality furniture for my new home and found a series of little workshops on Silang, Cavite where you can buy solid Kamagong consoles, Acacia or Mahogany beds (and you can be sure the bottom will not break even if kids jump on the mattress), tables, chairs, quaint garden swings, you name it, for around ¼ of the price in malls. No reconstructed wood here, buddy! Pure furniture heaven.
Beef—Tagaytay’s famous beef can be found at the Tagaytay wet market. At one point, my friend said they bought meat so fresh the flesh was still moving. Grab some pineapples while you are there because you will really find them cheap for P25 per piece, (these sell in Metro Manila for P35 to P40 per piece).
Baby rompers, booties, flannel pieces for wrapping etc.—Tutuban mall. Prices here are surprisingly lower than 168 mall or Ylaya St. in Divisoria. There are more options, too, in terms of design and quality. Good quality rompers for P40 apiece beat Zara infant rompers that sell for P1,000+ per, and will be worn by the baby for only one or two months. (I admit, I was very tempted, but he, money-smarts has to be money-smarts!).
Related blog posts:
If you have more frugal shopping secret destinations, even in other cities, why don’t you let other money-smart readers know! :-)
Photo courtesy of Red Monkey
(To the tune of “My Way” karaoke-style)
And now, the end is near,
And so I face my final buying.
My friend, I’ll say it clear,
The bounce will come, oh who am I fooling.
I’ve lived a life in greed.
And now it’s time to live in fear.
And more, much more than this,
I did it my way.
Regrets, I’ve had a few;
Just like when I did not sell Petron
I sold, all that I owned
And bet it all, all on Omico.
I read technical charts;
And listened to my fund adviser
But more, much more than this,
I did it my way.
Yes, there were times, I’m sure you knew
When I borrowed money from you
But through it all, when I would lose,
I ate lugaw or Lucky Me.
I faced it all, and I stood tall,
And did it my way.
I’ve loved, I’ve laughed, I’ve cried.
I’ve had too big a share of losing.
And now, as tears subside,
I will commit my suicide.
To think, I did all that;
And may I say – not in a bright way,
No, oh no not me,
I did it my way.
For what is a man, what has he got?
If prices dive, then he has naught.
To say the things he truly feel;
And yes, the words of one who kneels.
The record shows I took the blows
And did it my way.
--original verses, written in the spirit of fun, by a financial planner friend who asks not to be identified.
Dyandyararandandan! Score: 100 shares in Omico