How you can avoid these ‘Money Vampires’
MANILA, Philippines – Do you feel like money is slipping through your hands like water? Maybe you’ve fallen prey to “vampires” sucking the money out of you.
In a recent episode of ANC’s On The Money, registered financial planner Efren Cruz said “money vampires” are certain habits or activities that you may be unaware is costing you money.
For instance, you may be doing regular inter-bank ATM transactions, without realizing the fees are adding up.
“(An ATM bank) inquiry costs you P2 and the withdrawals cost you P15… One IT expert told me banks earn millions of pesos just with the bank inquiry and what more with the inter-bank ATM transactions, at our expense. These things (because) we’re too lazy to go to our own bank will cost us eventually,” Cruz said.
Another “money vampire” is leaving electric appliances on even when no one is using it.
“It’s a habit of people that if they were to leave a room, they leave the electric fan on, so that when they come back it feels cool. But it doesn’t work that way. We’re cooled through spot cooling… That habit would cost you thousands of pesos a year,” Cruz said.
Putting your money in low interest-bearing deposits is another “money vampire.”
“Inflation is much higher than the rates these insurance companies give you… You’re losing money just by putting your money in low interest-bearing deposits. Even though there’s a guarantee, no risk to principal but there is inflation risk and that is the money vampire there especially if you’re planning to use it for your child’s education,” he said.
Cruz also cited Filipinos’ penchant for availing of so-called “5/6” loans as a way to easily lose money.
“The 5/6 is commonly looked at at 20 percent interest, because you borrow P5, you pay P6, so there’s a P1 interest… But actually you don’t pay at the end of the term, and you typically pay every day. Every day you pay, you give the lender an opportunity to re-lend the money and compound his earnings at your expense. So if you compute, you will see a 5/6 loan for one year is about 332 percent interest, the effective rate for a year,” he said.
Tips to eliminate these money-sucking habits
Cruz said many of these “money vampires” are rooted in one’s personal finance habits.
To avoid paying inter-bank ATM fees, you should plan your trips to your bank’s ATM in advance.
“The thing with withdrawing from other banks, it’s really just laziness… If you need to withdraw, plan ahead,” he said.
Another tip is to change your mindset when it comes to saving.
“A study I read found that if you tell a person to save 10 percent of his income, he won’t but if you tell him to live off 90 percent of his income, he will do that… It’s in the way you phrase it,” Cruz said.
He also suggested asking help from your family and friends to help you kick your bad money habits.