Smart consumption in the face of El Buen Fin (I)

We have all felt that the money we earn is not enough to buy everything we would like to have. It is something natural and only confirms that money is a scarce resource: that is why it is so important to manage it wisely. That means we have to prioritize: decide what is more important and what we can put off for later.

However, many people decide to buy things anyway, because they can be paid in “interest-free months.” In other words, they are taking on debt – spending money they haven’t earned yet. This means that part of the money they receive, they will no longer be able to use it for future needs: they will have to use it to pay the monthly payments of what they already bought before, leaving them less money for other things (a greater feeling of scarcity).

In some cases this continues: new loans are requested to maintain the “spending power”, credits that are increasingly difficult to pay until they can no longer be paid. This, unfortunately, happens very frequently in our country, especially in the middle class, which has a comparatively much lower income than in economically more developed countries.

In my experience, the vast majority of financial problems for individuals and families have to do with how they spend their money. I see it with people very close to me, people who live very limited but still “need” to buy the newly launched cell phone, obviously with payments.

Before continuing, I want to make one thing very clear: it is not about not spending. Not at all. It’s about doing it smartly, consciously, and in balance. Nothing more.

I think I’ve talked about this before, but I know a woman who loves designer shoes and has a good collection of them. But he buys them because he earns well and he can. She is debt-free, has an emergency fund, and automatically saves for her retirement every month. He spends little on other things and that allows him to buy shoes. That’s wrong? No, because that is important to her and she is not neglecting other even more important things, such as saving for retirement, in addition to keeping her finances in order.

The problem is that there are people who go into debt for this. They have their shoes, but not a peso saved and with debts that drown them, stress them and take away room for maneuver for other things that are really more important. Sometimes you can, sometimes you can’t. Understanding this is paramount.

The social environment certainly doesn’t help. Companies compete with each other and are unable to survive if they fail to position — and sell — their product. That is why marketing and advertising are so developed, based on psychology and manage to touch our most sensitive fibers, our deepest desires. Sometimes they make us think that it is a unique and unrepeatable opportunity, other times it is a matter of status or belonging. The fact is that they make us think that we “have to have” that product and often stop thinking about anything else. They are teachers.

So it is not easy at all. That is why it is so important to learn to plan and prioritize, which necessarily implies being clear about our priorities. Is it really more important to have the latest generation cell phone than to live our golden years without having to depend on someone else?

Smart consumers know how to differentiate what they really need from what they want. They are people who are clear about their priorities and know what they can — or cannot — pay for. They decide what they are going to do with their money from the moment they receive it and modify it along the way, if they require it. We will talk more in the second part.

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