‘Cut back’ or ‘Magtiis’?

CTALK - Cito Beltran - The Philippine Star

The writing on the wall is “Cut Back!”

For several months now, I have been reading up or following respected individuals in the field of personal finance, economics and faith, to feed my renewed interest in financial literacy, money management and income growth. If we consider ourselves to be “stewards” or caretakers of God’s resources, then at the very least we should be equipped with the necessary knowledge and up to date information concerning global trends as well as concerns.

Every time the pump prices for diesel and gasoline shoot up, I get flashbacks of the Oil Crisis in the 70’s when they rationed gasoline. What all that did to the Philippine economy was beyond my comprehension, but it certainly left us out of gas, economically speaking. When gas prices or inflation goes up, I instinctively invite economists, bankers or financial analysts to our show AGENDA on Cignal TV in order to get an idea of the potential economic impact these things will have on our daily lives.

To be brutal about it, the last three to four weeks have been nothing short of an economic hurricane and analysts have run out of “nice ways” of putting it. Even the formerly optimistic analysts have become blunt and disturbing in their assessments.

We’ve had at least two price increases for fuels in the last three weeks, The price of rice went up by as much as P10 per kilo and placing a price cap on it is no guarantee against future inflation. No one expected to see tomatoes hit over P200 a kilo, and to add to our long-term misery, we have been benched by three typhoons that directly and indirectly caused even more damage to agriculture and infrastructure  – and all that will have a negative impact towards the end of the year. Even former president Rodrigo Duterte is speculating rice could even hit P90 a kilo.

As the saying goes, “It will be darkest before the light” and the writing on the wall as far as experts are concerned is “Cut Back.” Cut back on your personal expenses, Cut Back on the optional lifestyle spending, Cut Back on speculative investments, some even say “Cut Back” on operations, production or anything that is not backed by actual demand or hard currency. As another saying goes: “Don’t throw good money after bad.”

Whether you are managing a household or a money manager in government, the natural tendency is to solve a shortage or a lack by finding more, earning more or borrowing more. That is why the term “side hustle” has become part of our daily language. Given the credit card debts of most individuals and families, borrowing ahead of earnings has become normal.

This mentality is also why the Philippine government owes something like P14 or P15 trillion. Because bankers are only too willing to loan money, and because those government officials borrowing the money don’t have to pay the bill themselves; they just keep on borrowing until someone shuts them out.

“Cut Back” is considered politically incorrect by presidents and economists because today’s measure of political success is measured first by the number of projects you built during your term, which in turn goes to the second measure of political success: Being re-elected. Saving money, reducing debt, balancing “the budget” are not considered real life political achievements. Besides, how are politicians supposed to earn back the billions of pesos invested in vote buying just to get into office?

If government and politicians refuse to “Cut Back,” what about you? Let’s apply the same conditions and solutions to your household or family. The head of the household is the sole income earner. Inflation has risen considerably but your salary has not and will not increase for a year or two. You have fixed expenditures for utilities, rent, food, taxes, transport cost as well as education, all of which rise every year.

American families have addressed the problem first via the two-income solution, while others went for the one and a half job or two jobs for one person solution. We have done similarly in the Philippines but to the shock of many, it does not result in transformational quality of life improvements.

What most experts are saying is that “adding jobs equals added income” does not work in most cases because you end up simply spending more. But unlike the Philippine government, your cute loving little family does not have the assets to sell, natural resources to bid out or financial guarantees to acquire huge loans.

Your only option is to do what the government and politicians refuse to do: Cut Back on the lifestyle expenses, create and follow a budget (not an unrealistic form of penance and denial), reduce credit card debt, automate savings and become creative in your spending habits.

You have heard and read all of these, time and time again, you’ve wanted to but short of financial disaster, there is little to motivate you to action. The sad part is Filipinos often get enough warnings and advance information, but we persist doing what we have always done since time immemorial. Then one day, we end up telling our children, spouse or ourselves, “Magtiis na lang tayo.”

“Magtiis” in this modern world is such a big lie because it is often the excuse and the statement of surrender we all make for our failure to be proactive, pre-emptive and preventive when we still had the time and the choice. Telling your family, children, spouse, employees to “magtiis” is equal to making them take the punishment for your failure to act.

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E-mail: [email protected]

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