Showing posts with label Financial Lifestyle. Show all posts
Showing posts with label Financial Lifestyle. Show all posts
Sunday, December 1, 2013
What's your money personality?
MANILA, Philippines – People have different personalities when dealing with money matters, a financial planning expert said.
Joe Ferreria, the president of Money Doctors Inc., said the personalities range from being challenged to being permanently wealthy.
A financially challenged person, Ferreria explained, is someone who simply doesn’t have enough money to buy what he or she needs.
“You need to work harder or cut down a little bit more because you are challenged financially,” Ferreria told ANC’s “On The Money.”
A person with a “normal” money personality has enough money for every expense that he or she has, but this person does not have any money set aside for emergency situations.
“They’re able to pay for the bills but if you ask them, ‘Do you have 2 years worth of expenses in the bank?, [they don’t]” said Ferreria.
A “wealthy” personality is someone who has saved at least 24 months worth of expense money. Ferreria said a recent Forbes survey showed that if you have P5 million in the bank, you are considered among the ranks of the wealthy.
However, Ferreria stressed that the wealthy differs from the “permanently wealthy,” which have money that is greater than all expenses.
Ferreria said what people should aspire for is the “stable” money personality.
“If somebody gets sick or you need to do something that will require money, you have money in the bank to sustain it. If you lose your job, you have 6 months or a year to look for another job,” he said.
He explained that someone who is stable sets aside an emergency fund and has at least 2 years worth of expenses in the bank.
“You should stabilize yourself, meaning you are spending within your means, you’re saving 30 percent of your income, and the money in the bank allows you to go through financial traumas,” Ferreria said.
“You work to live a life. You don’t work to pay the bills,” he added.
A person’s money personality is formed by parents, life experiences, and influence from media and friends.
Ferreria said understanding oneself is key in determining spending habits which can evolve from being challenged to being permanently wealthy.
source: www.abs-cbnnews.com
Thursday, March 21, 2013
How Credit Card Companies Prey on Your Basic Needs
You may remember learning about Abraham Maslow's psychological theories back in high school. Your teacher probably drew a pyramid on the board with the five levels of human needs: physical requirements for survival, safety, a sense of belonging and love, esteem/respect, and self-actualization.
Maslow's Hierarchy of Needs is a tidy little theory that helps to explain why so few people are able to achieve self-actualization — that is, the ability to completely fulfill their potential. It's pretty difficult to write the great American novel when you're worried about having enough food (physical requirements) or enough money (safety), or if your wife just left you for your best friend (sense of belonging and love), and she announced the split on a billboard in the center of town that called you bad names (esteem).
While Maslow's theory can help us to better understand the plots to many country songs, it can also be used much more insidiously. In particular, one industry relies on Maslow's Hierarchy to conduct its business every day — credit card collections.
It should come as no surprise that the credit card industry is interested in consumer psychology. I've written before about how companies gather data about you based upon your purchases — and use that data to better market to you.
But, of course, credit card companies do not stop there. The industry uses psychology every step of the way, from convincing you to sign up for a card, to getting you to carry a balance, to hounding you for payments when you get in over your head. (See also: Party Like It's 19.99: The Psychology of Pricing)
Here is what the credit card and collection industries don't want you to know about how they are making their agents into amateur psychologists.
Appeals and Needs
When a debt collector calls for payment on a delinquent bill, there are only so many ways they can go about appealing to the customer for payment. After all, they are bound by both the Fair Debt Collection Practices Act and the fact that it is impossible to force someone to do something (particularly over the phone, since it's much harder use the rack on a victim from a remote location).
In fact, according to a workbook for professional telephone collectors put out by the Association of Credit and Collection Professionals (which for some unknown reason goes by the initials ACA), there are only three main appeals for collection: honesty, pride, and consequences.
Basically, collection agents can appeal to a consumer's honesty by asking them to preserve their integrity by fulfilling this financial obligation. The appeal to pride focuses on how other people will think of someone who reneges on a debt. And the consequences appeal asks customers to think about the very serious repercussions they face by not paying their bill.
These appeals are already pretty psychologically loaded. Collection agents are basing their appeals on how a customer feels about himself and his life and circumstances.
Where it gets even more pernicious is when these basic appeals are used in conjunction with the agent's understanding of Maslow's Hierarchy. According to the ACA workbook, "when these [three basic appeals] are used in conjunction with Maslow's Hierarchy of Needs, they become the single best way to inspire consumers to pay their bills." (Emphasis theirs.)
In short, customers are being psychoanalyzed by their collection agents to determine what kind of appeal will most likely "inspire" payment. That feels a little creepy, no?
The Collection Agent Is Your New Best Friend
While the intimidation tactics we are most familiar with in collection agents are certainly still being used with regularity, credit card companies and others in the industry are now developing different strategies for extracting payment. In particular, they are following the age-old wisdom about catching more flies with honey than vinegar.
Charles Duhigg reported in New York Times magazine that even the job title of "collection agent" is getting a makeover in many companies:
It was the first day of training for Bank of America's newest credit-card customer-assistance employees, and some of the 12 new hires sitting around the classroom were a little confused. At another company, these employees…might be called "collection agents" or "at-risk account reps." But at Bank of America, "our whole program is built around assisting the customer," explained Ric Struthers, president of the credit-card division. "We call it assistance, because we're here to find a solution."
From day one, brand new collection agents are trained to treat their customers in a friendly way and to build a sense of trust. Then, when the appeal to pay comes along, you're much more likely to listen.
This is a familiar tactic to anyone who went to college in the bad old days when credit cards were still allowed to solicit college students. I remember one persistent telephone solicitor who claimed that I shared a birthday with his little sister. I found myself signing up for a card I didn't want because I was reluctant to disappoint my new "friend" who sounded so fond of his sister who was a fellow Aquarius.
Applying Maslow's Hierarchy
Duhigg goes on in his article to tell a fairly chilling anecdote about a collection agent using Maslow's psychology against his customer. This particular customer called to offer $10,000 to settle his $29,000 debt. It's important to note that by the time debts reach the collection stage, debtors can often settle for much less than they owe because the creditor would prefer some money to none. Nearly every debt expert and reputable credit counseling service will advise their clients to take this route if it's possible, as it can end the debt mess.
However, this particular debtor's offer was refused, even though his collection agent had been advised to allow settlement for no less than $10,000. Instead the agent — who had spent several weeks getting to know the debtor over the phone — "diagnosed" the unfortunate man as being in the esteem phase of Maslow's hierarchy. The agent appealed to the man's pride, asking him if he wanted to be the type of person who broke his promises. It worked. The debtor called back with an offer of $12,000.
This also meant that the agent enjoyed a higher commission — which was information he did not share with his good buddy the debtor.
Inverting Maslow's Hierarchy
The problem with credit card companies using psychology to extract payment goes deeper than the issue of having amateur psychologists pushing your buttons. The real problem is that these tactics can end up confusing consumers as to what their financial priorities should be.
In particular, those who get in over their heads with credit card debt are often also experiencing financial woes elsewhere in their lives. When having to make the choice between paying the mortgage or paying your credit card bill, it should be obvious that keeping a roof over your head is more important. After all, that's a basic physical need and the very foundation of Maslow's Hierarchy. Without that, there can be no safety, belonging, esteem, or self-actualization.
But collection agents don't care about your mortgage, no matter how much they may pretend friendliness. Their goal is to get you to pay your delinquent credit card bill — and earn their commission. If you are concerned about money (safety) and worried about what people will think of you for falling behind (esteem), you could easily fall victim to an agent's appeal, even though you really do need to prioritize your mortgage.
Since consumers haven't received background training in psychology, they're at a definite disadvantage.
Know Thyself
While all consumers need to be better informed about the practices used by the credit card industry, the best defense against these sorts of tactics is to be well aware of your priorities. Whether you've never missed a payment in your life or you are chewing your fingernails because you're not sure how to get out of debt, you need to know what is most important to you.
That starts with recognizing that some bills might need to take precedence over others in the case of financial hardship. But in the modern world, knowing your priorities can also mean remembering the difference between wants and needs. No one wants to be the one pleading poverty to a collection agent while talking on an iPhone and drinking a Starbucks coffee.
Maslow would certainly hope you could recognize where those luxuries fit in the hierarchy of your life.
source: wisebread.com
Thursday, December 13, 2012
4 Tips For Effective Savings
When you set about devising a personal finance strategy, you may find
yourself considering anything from how to maximize your income to how
to start planning for retirement as early as possible. The fact is,
“personal finance” is a very broad term that covers different things for
different people. However, there is one thing that ought to be at the
top of everybody’s list, as it dictates the way your entire financial
life is run: maximizing savings. Whether you are working your first job
and concentrating on each month’s rent, or leading a successful career
already, finding ways to save money can help you to be more economically
stable, which in turn makes your life far less stressful. With that in
mind, here are four miscellaneous tips for maximizing savings that can
help you no matter what your financial situation.
1. Eliminate Debt
Eliminating debt altogether is a tall order, but even chipping away at it can leave you far more financially flexible. One great concept to consider as you devise ways to tackle your existing debts is the “debt snowball” idea, which many consider the quickest way to eliminate multiple debts. The concept is actually fairly simple: figure out an amount that you can put toward paying off debts each month, and as you begin to eliminate debts, keep that amount the same. This way, once your smallest debt is eliminated, the money that would have gone toward paying it “snowballs” into the funds for your other debts.
2. Conserve Water & Electricity
Let’s face it: most of us waste at least some water and electricity, and cutting back on this waste is one of the simplest and most effective ways of saving money in a home environment. Little things like turning off the sink while you brush your teeth, taking shorter showers, and turning off lights and other electronics when not in use can drastically reduce your water and electricity bills. Not only is this an environmentally responsible practice, but it can result in significant savings each month.
3. Invest For Stability
Instead of investing money in high-risk stocks and bonds, consider making a few financial investments simply for the sake of stability. For example, you might choose to invest in gold at BullionVault.com, so that some of your money can be tied up in gold. This keeps that wealth from being subjected to potential drops in currency value that can occur in difficult economies. You won’t make significant financial gains investing in gold, but you can protect your existing assets.
4. Shop Online
If you haven’t yet begun shopping online, now is the time to do so. You can purchase just about any product you could think of on the Internet, and in most cases you can find better prices than you would in stores. Occasionally shipping costs can even out this price difference, but when you need to go shopping it is always worth checking online – over time, it may result in major savings.
source: lifeandmyfinances.com
1. Eliminate Debt
Eliminating debt altogether is a tall order, but even chipping away at it can leave you far more financially flexible. One great concept to consider as you devise ways to tackle your existing debts is the “debt snowball” idea, which many consider the quickest way to eliminate multiple debts. The concept is actually fairly simple: figure out an amount that you can put toward paying off debts each month, and as you begin to eliminate debts, keep that amount the same. This way, once your smallest debt is eliminated, the money that would have gone toward paying it “snowballs” into the funds for your other debts.
2. Conserve Water & Electricity
Let’s face it: most of us waste at least some water and electricity, and cutting back on this waste is one of the simplest and most effective ways of saving money in a home environment. Little things like turning off the sink while you brush your teeth, taking shorter showers, and turning off lights and other electronics when not in use can drastically reduce your water and electricity bills. Not only is this an environmentally responsible practice, but it can result in significant savings each month.
3. Invest For Stability
Instead of investing money in high-risk stocks and bonds, consider making a few financial investments simply for the sake of stability. For example, you might choose to invest in gold at BullionVault.com, so that some of your money can be tied up in gold. This keeps that wealth from being subjected to potential drops in currency value that can occur in difficult economies. You won’t make significant financial gains investing in gold, but you can protect your existing assets.
4. Shop Online
If you haven’t yet begun shopping online, now is the time to do so. You can purchase just about any product you could think of on the Internet, and in most cases you can find better prices than you would in stores. Occasionally shipping costs can even out this price difference, but when you need to go shopping it is always worth checking online – over time, it may result in major savings.
source: lifeandmyfinances.com
Subscribe to:
Posts (Atom)

