The Bad Economics of an Overspending Lifestyle

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DebtWave

Back in high school, I could remember how I often overspent during my teenage years. It wasn't "easy" to have thrifty parents but it was worth it. College came in and I remembered how I had to deal with different types of people at the University of San Carlos-Main Campus (USC-Main). It could be seen that various people of various classes were spotted. There were rich people who valued money, rich people who no longer became rich because of their bad money habits, poor people who manage money well and are no longer poor but not necessarily rich, and poor people who don't value money as much as the overspending rich. Spending is part of economics. However, too much spending is basically too much of a good thing and becomes junk. Junk food contains excessive salt and sugar--both of which are beneficial but end up damaging the body in excess. That's why it's called junk food.

I think about the typical Pinoy spending habits and what went wrong. I confess that there are some Tsinoys who are also overspenders. I was thinking about how college changed my perception of money. My parents gave me a limited allowance, didn't give me everything I want, and I must confess I only got money for necessities. Eventually, I had to learn to manage the money I had from the family business. Then I remembered some things about the attitude towards money. Some of older schoolmates should've been my seniors. Instead, it was amazing how I got my status promotion while others who were older than me--were now beneath me in terms of standing. Some of them even said something like that their parents didn't care even if it took many years to get that degree. What was even more surprising is that they weren't rich at all! Some even go as far as to keep hating the rich only because they're rich. 

Analyzing why Filipinos tend to overspend 

I was thinking about how, as a Filipino-Chinese, that overspending is a very common thing. So far, there are five reasons that you might want to observe. They're evaluated as follows:
  1. The hot pandesal syndrome (aka bandwagon effect)
  2. Possibly, cultural DNA (but again, culture isn't static)
  3. The social status trap
  4. The "Global Citizen" mentality (all the while having a wrong perception of foreign direct investments or FDI)
  5. Spending based on emotions
Somehow, I could agree with these ones. I could talk about how these things happen one way or another. These tend to be linked together one way or another. I think emotional spending is what summarizes the first four points. It could also be very true which can be summarized by this statement of Amy Fontanille, a personal finance expert:
"Emotional spending occurs when you buy something you don’t need and, in some cases, don’t even really want, as a result of feeling stressed out, bored, under-appreciated, incompetent, unhappy, or any number of other emotions."

This would be the problem of spending based on feelings over facts and figures. It would be pretty much apparent in the following situations that I've observed:

  1. It's very often the bandwagon effect is based on feelings than facts. It's like if you don't have this--you must be very poor. That perception of wealth based on possessions rather than the amount of money in the bank is really often shown. For example, you must have the latest video game console or be left out. However, a video game console is a want and not a need. Not having the latest video game console doesn't mean you're poor--it might mean the parents are need-focused. Some rich children don't get everything they want either.
  2. The feeling of "cultural DNA" maybe another. It seems that it's almost impossible to separate being a spendthrift from being a Filipino. It really shouldn't be associated with such. What can be observed is celebrating beyond one's means. It's not wrong to celebrate but celebrating lavishly when one has little to no money is. Just think about how Christmas and New Year in the Philippines (which got canceled by Odette in some areas) tend to be celebrated with lots of debt. January comes and the Five-Six Lenders may be asking for their money back.
  3. The social status trap is, as said, thinking one is wealthy based on what one has rather than how much money you have. It's something to be belittled for driving a Toyota while using a Samsung while the other is driving a BMW and having an iPhone. However, the person driving a Toyota while using a Samsung may have more money. The other person with a BMW and an iPhone might be broke as a joke. The person may be BWM (broke without money) and has no ipon (Tagalog for savings) which the person may be chased by bad creditors. Having status symbols may be another reason why someone became poor. It's not inherently wrong to have them but most of them are just overrated. It's best to stick to what works than status symbols that may end up doing a disservice to the users.
  4. The "global citizen" status is another. It's really something when some overseas Filipino workers (OFW) have their families ask this and that. It's not easy working abroad. However, you may have friends and extended family members asking for this and that such as a brand new iPhone or the latest video game console. This also goes back to the social status trap again. 

The end results of overspending can be rather vicious

Overspending, whether we want to admit it or not, has bad end results I was thinking about the situation based on how COVID-19 hit then Odette. Before that, I still think about how Christmas and New Year can be the worst times in the Philippines. The Christmas season becomes a stressful season to do groceries. I would want to think that people wait for their bonuses because of the tendency to (1) not handle money well for the rest of the year, and (2) the need for lavish celebrations. Not handling money means one may end up having to wait for the Christmas bonus and the 13th-month pay. When the money arrives--there's the tendency to misuse it too. 

The recent COVID-19 crisis (hopefully, it'll end soon) and Typhoon Odette made me think about stuff. I was thinking what if I lived lavishly like a king? What if I decided to buy expensive apparel that I know would just wear itself out like my non-branded apparel? What if I decided to keep getting luxury items when I can settle for affordable quality items? Those were questions I asked myself when Odette hit and there was COVID-19. Having contingency planning was helpful. Expenses were piling up but they could be paid. Materials used to disinfect to prevent severe COVID-19 were there. 

Meanwhile, others choose to blame the rich instead of their lifestyle that doesn't value money. It's like how somebody said that her parents didn't care how long it took her to finish college. Other poor people have been working to make sure they finish college, get a good job, and save up their money. It can also be ironic how some refuse to get insurance while they have no problem going gambling and getting drunk. Where's the Return On Investment (ROI) in drinking and gambling? It will only result in accumulated losses because there's nothing to gain in engaging in such activities. The money runs out resulting in them not having money when they truly need it.

This, in turn, makes people who overspend want easy money. The consequences that I've observed are as follows:
  1. They would want to join game shows rather than get a proper job. I was wondering if somebody's obsession with Kapamilya Deal or No Deal back then was a result of wanting easy money?
  2. It would be easy to fall for investment scams. Scammers just love to fool people who are financially illiterate or desire easy money. Scams like give us your money with "fast returns" is one. I remembered spamming messages on my smartphone that offered to pay me PHP 8,000.00 a day. Is there such a company that can pay me like that in the Philippines? Yet, some end up buying it, and the scammers use them. It's no wonder why some working-class people fell for it even if their bosses warn them against it. As said, if it's too good to be true then reject that investment!
  3. Even worse some can be easily recruited by criminal organizations. 11 years ago, I remembered the incident regarding three drug mules in China. I can't be sure of the motives why they joined but I can just assume that it's all about the desire for easy money. There's really easy money with drugs but like any easy returns--the risk can be much higher. Poverty is a very good breeding ground for criminality, right? Some people join crime organizations out of poverty though that's not an excuse to do so. Both the rich crime lord and the lower-class thugs should face the law.
It's really time to rethink--overspending isn't economics. It ignores economics. It really lives like as if money grows on trees or that it rains gold coins. Those are all scientific impossibilities and can't account for the overspending lifestyle. 

References

"5 Reasons Why Pinoys Overspend" by Faith Dayrit

"China executes three Filipinos for drugs smuggling"

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