03 July 2010

Money

My Mom, whose middle name if I did not know any better should have been “Conservatism,” was the ultimate master in making do with whatever Dad made. I am not complaining. My Dad’s Air Force salary and subsequent pension enabled us to live comfortably – but ours was a family for which luxury was not affordable.

Among the things Mom always took pride in was the fact that she never had to run to anybody for anything – and apart from the GSIS mortgage for the homestead, there was nothing in the way of utang.

Dad, I seem to recall, did not always agree with Mom’s conservatism. I remember he would tell us about this one time he wanted to apply for a loan so we could acquire additional real estate; but Mom would have none of it. As was the case in many households in those days, husbands handed over their paychecks to their wives and let them pretty much handle the family finances.

How many housewives, in those days however, had business backgrounds or MBA's? Business – among other things – was very much a male enclave. Housewives, thus, ran their family finances the way they were probably taught by their own mothers. In Batangueño subculture, that meant aremuhunan: recycling anything from a garapon to a paper bag; spending sparingly and prudently; and making sure whatever was left over was carefully stashed away somewhere.

For the more progressive housewives, the money went into the banks either in the form savings accounts or time deposits. The more traditional – i.e., those who wanted their cash within easy reach – hid money inside thickly padlocked cabinets or in a box buried in the silong. The latter sounds exazh but was not unheard of.

It is easy to understand the Psychology behind the hoarding. Money was hard to get one’s hands on, and housewives were happy when they had some and could raise their families without having to borrow.

Those who have attended Economics classes, of course, know that money is of no use to the economy stashed away in a baol. Looking at things from a macro perspective, money spent becomes income to manufacturers; that income would help manufacturers grow, hire more employees and, hopefully pay them better; the manufacturers pay government by way of taxes; and – at least theoretically – government would funnel the money spent back to the housewives in the form of social benefits.

Do you still wonder why – now – PGMA used to love those long holidays? It was an open invitation to go out and part with one’s cash in the malls or a resort somewhere.

As it happens, consumer spending is one of the indices experts constantly monitor to gauge the state of a nation’s economy. Citizens of First World countries, naturally, spend more than their counterparts in the Third World. This is because, on the average, household incomes allow citizens to spend beyond the essentials and still have enough left over to deposit in banks. That is not necessarily the case in Philippine households; hence the tendency, even today, to hold on to cash.

Now, keeping hard-earned cash in banks, that was – for housewives in the old days – not just a minor achievement and was even a source of pride and bragging rights when among one’s kumares. It made sense, in a way; money was more safely stashed away compared to burying it under the silong; and there was the icing of a little interest to boot.

What few housewives knew was, despite paying them token interest, the banks invariably made so much more in their use of other people’s money. The banks invested the housewives’ deposits or loaned these out to others to earn heftier interests. As an Accounting professor once said in class, the essence of business is to earn profit from the use of other people’s money; and Accounting ensures accurate records of the monies that come in and those that go out. Everything is perfectly legal. In Tagalog, we say paikot ng pera...

The reason the housewives could draw on their deposits anytime without harming the banks’ operations was because of the proper management of the cash that the banks collectively had. It’s the same elsewhere in the business world. They keep cash budgets to see, monitor and predict the inflow and outflow of money.

It goes without saying that the secret to profitability is ensuring that what comes in is always more than what goes out. There are some businesses for which a captured market more or less ensures a constant and predictable income. For others, though, everything is always a gamble.

Either way, rational use of money either to attract or keep customers is always the key because it is they – the customers – who, after all, bring it in. Holding onto money may not necessarily be a good thing, particularly if employees become disgruntled and unproductive or if customers begin to feel they are getting less value than what they paid for.

Then, the business begins to falter. It all goes back to how money that came in is used. The secret is to filter out abuse; otherwise money is not unlike water. It should be allowed to flow where it wants to flow. Sabi ngâ ng isang Sister Madre I used to work with – gesturing as she did with her fingers as though she was playing with wads of cash – ang gusto ng pera ay pinapalabas… The implicit statement was, “Kasi bumabalik…” Meron ‘yung kadugtong… “Nang mas madami…”

This is, of course, an oversimplification; and it is just as easy to lose money as to make it. Business – and the use of money – is too complicated a process to describe in one short blog entry. An MBA, for instance, takes more than two years to acquire. At the end of the day, though, one comes to the conclusion that money cries to be invested rather than hoarded.

Parting with one’s money – well, that’s where it becomes, sometimes, problematical. I think my own Mom was a perfect example of one who didn’t. I do not blame her, though. Ideally, what should be invested is money that can be spared. I don’t think we had that much, to begin with.

Also, there is an attitude and a value system attached to it. My Mom, old-school that she was, preferred to sleep soundly at night compared to what she could have expected if she had to worry where money would come from to pay any loans she might have made. Investing money is, after all, a form of gambling. And, as everyone knows, in gambling one can lose…

Yet, those bold enough and who are smart and lucky enough to have won handsomely, they can enjoy the luxury of living off the interests from their bank accounts without even having to lift a finger to do any sort of work. If you only have a few millions, forget it… At today’s low bank returns, a few millions yield only a few thousands per month.

But if one has millions upon millions… Whew!!! Makatayâ na nga kayâ sa Lotto…





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