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Tuesday, February 25, 2014

Are You A Consumptive Saver?

I got to bed quite early, so when I woke up, I checked my social media accounts and found my news feed flooded with articles about the debut of the new Samsung S5.

The Enemy, in my line of work.
(Courtesy of

The two people that I think would probably be most orgasmic about this are tech geeks who would be going gaga over the features like fingerprint scanning, and the latest bunch - the people who are obsessed with having the latest edition of their preferred smartphone, laptop, tablet, etc.

It brought to mind a term that I encountered at a recent financial management seminar I attended: consumptive saving.

Simply put, consumptive saving is the process of setting aside money for a specific goal that is neither life-saving nor irreplaceable. The goals mostly take on the form of objects and activities that would likely fall under the Lifestyle or Trend sections of a publication: gadgets, travel, fancy dining places.

Let's use that checklist to determine if having an S5 would fall into this category.

Is it life saving? No. (You can argue that "seamless work transition" is a matter of life and death, but the S5 will not be there to administer CPR or take you to the hospital if your heart stops functioning.)

Is it irreplaceable? No. (In fact, manufacturers make it a point to replace it on an almost annual basis. It certainly makes the stockholders happy.)

A significant part of what I do daily is educating people on how they must conserve their finances, properly apportioning them into goals that are either on the short, medium or long term horizon.

Short term goals consist of having enough money for medical emergencies, baon of the kids, and a ready fund in case you suddenly get laid off from your current job. (Credit card bills fall in this category, since they arrive on the dot every month, like clockwork. Credit cards deserve their own post, though.)

Medium term goals would be concerned about starting a college fund for your 5 year old, or setting aside funds to finally get into your own business and get away from that wretched being called your "boss". Marriage plans also fall into this category - have you checked how much it costs these days to have a "decent" wedding?

Long term goals usually take the shape of retirement planning, or a fund that will take care of medical expenses that inevitably comes with age, a number that is slowly lowering. (We've all known someone who died from a heart attack in their 40's, these are diseases that aren't only "for the seniors" anymore.)

These are goals that should be acted on now, with what you earn now. Too often, especially with medium and long term goals, people have a tendency to procrastinate, and say, tsaka nalang. Long term horizon doesn't mean thinking about it later; it means making a plan right now because you need a head start in order to accomplish those goals.

In my line of work, the Samsung S5's are the enemy.

It distracts people from achieving their savings goals. And without any form of savings, it would be irresponsible of me to recommend any kind of investing, a way to beat inflation. Their savings will never grow if, on a yearly tradition, consumers stand in line for the latest gadget, but can't be bothered with making additions to achieve even their short term goals.

Then there's the "it's going somewhere" defense: some people justify consumptive saving by saying things like "well, at least napakinabangan ko siya, it's not like I wasted it on drugs or anything like that!" not realizing that consumerism can be even more lethal than any mind-altering substance, because when a breadwinner dies, the spouse and children can't live on an S5. (Like cars, gadgets begin depreciating the moment you buy them.)

I'm often surprised when some people are surprised that they don't have enough funds to pay a doctor for an unscheduled emergency visit - but are carrying a designer bag, or an iPhone 5s. If the priorities are wrong, it takes away your right to complain about how doctor's fees are off the charts - how can you complain that your last hospital visit cost you a thousand, when you're willing to plunk down more than 40 thousand pesos for a phone? Or more than a hundred thousand pesos for a bag?

So, are you a consumptive saver?

If you are, recognize the signs and do something about it. I have a goal to change consumptive savers to consummate savers, but like most things in life, that is something you have to decide for - and act on - yourself.

Besides, as far as I know, you can't die from not having the latest gadget.

1 comment:

  1. i dont think travel should be included though?

    unlike gadgets that depreciate, the experiences and memories made during travel and the mere joy of anticipating a destination is priceless.

    experiences add value to life