Four Wrong Beliefs About Money


Question: I believe that my parents taught me well when it comes to finances. But I still have uneasy feelings with some of the mantra they left behind, like on buy one, take one deals being true bargains, that one should not scrimp when it comes to food, using credit cards is OK provided you can pay your balance in full and that whatever coverage life insurance companies offer can be earned in my lifetime. What is your take on these lessons? —asked at “Ask a friend, ask Efren” free service available at, Facebook and SMS.

Answer: Let’s tackle the lessons you mentioned one at a time.

1. Buy one, take one is always a great deal

Our brain cannot pass up on what it perceives to be a good offer. The buy one, take one offers are not necessarily bad. In fact, some can lead to a lot of savings. It is when this belief is applied blindly to all situations that things begin to go haywire. Take the case of the time I saw a suitcase in a mall many years ago that was selling for P1,400. Seeing that the suitcase was value for money, I bought it. Weeks later, I found the exact same suitcase selling under a buy one, take one promotion in another mall. I almost threw a fit before I found out that the buy one, take one suitcase was selling for P2,800. And this is not the first time I had seen such offers.

2. If it’s about food, don’t scrimp on it.

Eating to live makes the above rule sensible. Living to eat simply makes you lose money and gain weight.

Even the essential nutrients are good only up to a certain point. Water, when taken in excess amounts, can be fatal to the human body.

One way to avoid eating too much is to eat slowly, thereby allowing your body to digest the food and your stomach time to tell your brain that it has already a full load.

3. If you can afford to pay your balance in full, charging your purchases to your credit card should be of no consequence.

Credit card revolvers are people who do not pay their credit card balances in full and get charged the high-interest rate.

Credit card “transactors” pay their balances in full. Still, because many merchants pass on the fee (i.e. merchant’s discount) they pay to credit card companies for credit card purchases at their store, cash many times is still the cheaper way to transact. So, pay in cash as much as possible. And if you have to borrow just to buy an item, ask yourself first if you truly need to have it now. On the other hand, tell yourself how wealthy you are in that you can afford to pay cash (but within limits).

4. Earning the coverage that insurance policies promise is no big deal.

The moment you pay your first insurance premium, the amount that you want your family to get in case of your untimely death is guaranteed.

If you are still in the accumulation phase as regards your earnings, you will need a number of years before you can save enough to match the death benefit that insurance policies guarantee.

So, don’t fool yourself. Go buy life insurance. The earlier you do, the better.

Rules make it easy to navigate what would otherwise be a complex management of personal finance.

But it is in the overuse of these seemingly simple rules, especially when they are not validated, that we end up losing instead of winning.


Efren Ll. Cruz is a Registered Financial Planner of RFP Philippines. He is best selling book author of Pwede Na! (A Complete Guide to Personal Finance) in 2004, and is the chairman and president of the Personal Finance Advisers Philippines Corporation.


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