Why does it seems that every Filipino is in debt?
It’s said that if you throw a pebble on passers-by in Seoul you’re likely to hit someone either named Kim or Lee. If you do the same thing in Metro Manila, you’re likely to earn the ire of someone who’s in debt. The culture of incurring debts is so ingrained in the Filipino society that it has become as common as the Kims and Lees in Korea.
According to a survey, four in 10 Filipinos carry non-mortgage liabilities, which consists primarily of personal debts. “A third of respondents cited daily living expenses as the main factor contributing to their debt, which could indicate that investors’ ability to save regularly may rely on the use of credit to pay for day-to-day living expenses,” the Manulife Investor Sentiment Index (MISI) reported. The Philippines has the second-highest level of personal debts in the region after Malaysia.
Why does it seem that every Pinoy is in debt? Here’s an overview of common money mistakes and why Filipinos commit them.
The salary rates are just too low
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Let’s face it. The prevailing minimum wage in the country is barely enough support a small family of three. Currently, minimum wagers in the capital region (non-agricultural workers) receive Php454.00 to Php491.00 or roughly Php9,000 to Php9,820.00 per month. The rent for a one-bedroom apartment will already eat up a third of that amount. How will the family provide for other necessities such as food, clothing, utilities and transpo? In cash loans.
The sadder part of this story is that majority of the working class is not paid the statutory minimum wage. Businesses survive on the back of these underpaid workers. It’s a vicious cycle. How can the large working class group support domestic consumption that fuel businesses if they’re barely surviving on their pay?
Still, many Pinoys live beyond their means
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An entry-level post for a fresh graduate in Metro Manila’s business districts offers only a little more than the minimum wage. You can say that these first-time workers take home about a couple of thousands more each month. Still, that’s not enough to live a debt-free life. Why? Because instead of finding ways to create additional income, young Pinoys splurge on a lifestyle they can’t afford. They want the latest gadgets, the newest model of shoes, and regular dine-outs with friends. Three days before payday and they’re already calling their parents for “emergency” funds. In many cases, these impractical spenders take out loans from friends and loan sharks in the office or neighborhood.
“Bahala na si Batman”
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The Philippines is regarded as among the happiest places in the world mainly because of the Filipinos’ positive disposition. Pinoys are inherently happy. They always see the good side in every situation, and no matter how dire surviving is in a poor country, Filipinos still face the day with a smile. However, this trait can have its downside.
“Bahala na si Batman” is a colloquial expression that means leaving things in the hands of a fictional character. A common Pinoy will not let the risk of falling ill or meeting an accident rain on his parade. He’ll put his faith on someone else: his God, saints or a favorite superhero. It’s a way of dodging potential disasters instead of preparing for them. Imagine a minimum wage earner, who can barely make ends meet, figuring in an accident or losing his job. Without an accident insurance or sufficient savings, his recourse is to borrow money from family, friends or loan sharks.
A false sense of security
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Why does it seem that every Filipino is in debt? You can blame the deeply rooted tradition of interdependence. Pinoy families are closely-knit and everyone develops a sense of security that can do more harm than good.
Take for example Carmela, a 25-year-old sales executive, who earns a monthly salary enough to fund a bi-annual vacation abroad. Carmela, despite her good income, depends on the group life insurance provided by her company and a couple of thousands in her bank account in the event of emergencies. Prepping for the rainy days never bothered her because she knew that her parents will always come to her rescue…until they didn’t. One fateful night, Carmela lost both her parents in a car accident. She was alone for the first time in her life.
Family can give you a false sense of security. It’s a blessing that you have a support group, but this doesn’t mean that you should consider them as your only safety net.
Poor financial literacy
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The indebtedness epidemic in the Filipino society can partly be blamed on the lack of money management skills. Do you have an accurate info on your earnings and expenditures? Do you even make a weekly or monthly budgeting? Financial literacy among Filipinos has been improving in recent years, but the country has a long way to go. The latest Manulife survey where 40 percent of Filipinos holds a non-mortgage debt is a glaring proof.
Few Filipinos are also aware of the importance of getting insured, building an emergency fund and investing for retirement. A young professional would rather splurge on high-end gadgets or fancy flip flops and rack up credit card debts than securing an insurance plan.
End the indebtedness cycle
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The alarmingly high rate of personal debts in the country is a roadblock to economic development. People holding loans, especially those who owe loan sharks, are stressed out and less motivated than their debt-free colleagues. For them, their daily lives seem to revolve around a cycle of incurring and paying off debts. Worse, they depend on luck when managing risks.
Save yourself from the quicksand of bankruptcy by changing your mindset on money. If you’re living on a paycheck-to-paycheck basis, it’s time to assess your sources of income and spending habits. Seek other earning opportunities such as a part-time job or freelance work. Spend within your means and control your credit card use. Get an insurance, build an emergency pot and start investing for your retirement.
Article Courtesy of Ms. Patricia Evans