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Living within one's means

October 8, 2008 9:27am
The $700 billion bailout package to save the economy of the world's only superpower is too staggering to comprehend for the ordinary Filipino whose main concern is coping with the rising prices of basic necessities including the shrinking pan de sal.

But whether it's in the billions of dollars or meager Philippine pesos and centavos, the US financial crisis has again reminded us of the folly of a materialistic society and the virtue of living within one's means.

In an article in the Inquirer, former Economic Planning Secretary Cielito Habito tried to make understandable to non- financial wizards the problem facing the Americans, which has sent shivers all over the world. He said, "Put simply, the plan would permit US Treasury Secretary Henry Paulson to buy from troubled US financial institutions, using taxpayers' money, up to $700 billion worth of the so-called 'toxic mortgages' or failed subprime loans.

"These are the loans that had been lent by banks and mortgage companies to American home buyers that the latter could no longer pay for."

There are a number of articles in newspapers and blogs that explain the financial mess that the U.S. is in today. There's one by "Reyna Elena" a US-based Filipina. Here's portion of her engaging entry in an otherwise dismal topic:

"To non-financial people, para maintindihan what 'subprime' means is to understand what 'prime'is, sa lending business. Yon ang pinakamadali. Kaya sya tinawag na 'prime' because not only does one have the money to pay, the ability and the capacity to pay, but also the right attitude and the discipline to pay regularly backed up by a history of good payments. Why? It does not necessarily follow na porque mayaman ka, nag-babayad ka nang utang regularly. In the US, almost everything here is about credit. One must have a good credit history to have a good credit rating. "

More from Reyna Elena:

" How does the credit ratings work and what does it mean? It simply means, the higher your credit rating means, the lower interest rate you pay on credit cards, loans and mortgages. The lending business sa US rewards good borrowers and penalizes yong mga hindi nag-babayad or pumapaltos nang pagbayad nang utang. "

"That's why we have a lot of credit rating agencies. There's Experian, Trans-union and Equifax. Ano ang counterpart nito sa Pilipinas? Honestly, I don't know. I have not heard anything other than merong mga Credit Investigators na kakatukin ang kapitbahay ninyo. Korek?"

For the whole article, check out Understanding Subprime and the US Housing Market

If we are to base it on the available statistics on the number of credit card holders in the Philippines, we are far-off from the level of living-on- credit lifestyle in the United States.One article says there were 5.5 Million estimated number of credit card holders in the Philippines in 2006. The figures are not much considering that there are 86 million Filipinos. But it's an actively growing business because in 1997, there were only 2.5 million credit card holders.

I can imagine that the number of credit cardholders in the Philippines would be increasing with the aggressive marketing that credit card companies are employing. It has become annoying to be accosted by credit card sales people in malls.

There are also the phone calls congratulating you for having been selected for another credit card. I tell them, "No, thank you. I have two credit cards and I'm already having difficulty paying my bills."

There's a temptation to overspend with credit cards but once you have learned to discipline your spending habits, it's a great convenience.

It used to be that whenever I find something nice I want to buy, a blouse or a good book, I would have to save money for it. But many times, by the time I returned for it, the item would already be gone. Now with the credit card, I can buy the item I like on the spot.

But that's all I would go with credit cards. I'm wary about those no-interest for one year purchases of electronic gadgets or appliances that they are promoting.


There are also text messages offering loans. I always reply, "Give me an offer better than what Manny Gaite gave to Jun Lozada. P500,000, no collateral, no interest, no commitment to pay." So far, none has replied.