Pinoy Consumerism



Let’s face it, the Philippines has become one of the fastest growing economies in Asia. With an annual GDP growth rate of 6.1 percent in 2014 – it is considered the second highest in the Asia-Pacific region after China.

That’s quite an amazing achievement in my opinion. This healthy growth is due to strong economic fundamentals and a faster than expected GDP growth of 6.9 percent in the fourth quarter of 2014. The Philippine economy has really grown massively year after year.

And we all know that with wealth comes the affluence and the rise of the consumer middle and upper class. It has been a new rise in wealth within the various towns and cities all over the country. And this new consumerist society means that with all this new more money there are therefore more stuff to buy.

But instead of a vast consumerist mentality, I think that the opposite should be happening. Instead of the middle class buying more stuff that they don’t really need … an on the process, going on debt by using their credit cards.  They end up buying so much stuff that they can’t afford, even though there is an increase in income.

I believe that the middle class should instead be saving money to buy assets that can appreciate and has real VALUE.   Now that plenty of Filipinos are earning more money, they should be thankful that they are now able to save enough pesos in their bank accounts instead of living paycheck to paycheck.

I have been pondering and thinking about this issue for a while now.   I came into a conclusion that for me personally, it is more of a priority to invest my money instead of just squandering it away and buying STUFF.

One of the best investment a person can have is a real estate but also understand that it is not always a true statement.

Many people believe that the home they live in should be considered automatically an asset. However there is a school of thought who is adamant that your home is a liability. A simple way of looking at it, popularised by Robert Kiyosaki (author of Rich Dad Poor Dad), is to focus on cash flow.

From a cash flow perspective, anything that increases our cash balance would be considered an asset. Anything that decreases our cash balance would be considered a liability. In this alternate way of looking at things, an asset is something that puts money in our pocket and a liability is something that takes money out of our pockets.
So our house, even if it is paid off, is still a liability. Why is that so? We still have to pay rates such as property taxes, levies, insurance and maintenance on our homes. So they are actually costing us money.

Many people may protest and state that the value of their home will increase over time. However, this is not always the case. It would be naïve to believe that the growth achieved over the past decade would be constantly achieved in the future. There are many homeowners who are currently in financial distress as they owe more on their homes than what they’re worth.

The value of your home may be irrelevant. You only receive the value of the home when you sell it. Many people retire in their home and will live there until they pass away, so their heirs will receive the benefit of the increased value of the property.

The cruel truth for most people is that their home is in fact not an asset but rather a liability. The point of this article is not to discourage you from buying a home, but rather to make you aware that you could make a serious financial error if you are purchasing your home with the idea that it is an investment.

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