Lifestyle of the Broke and Fabulous

WHEN I WAS YOUNG AND silly, I watched with awe the episodes of " Lifestyle of the Rich and Famous", a primetime American television show. If you've watched them, too, you'll be amazed at how the rich spend so lavishly.

Today's youth

Today's youngsters are both in a sweet spot and in deep trouble. Many of them are broke and fabulous.

First, the sweet spot. Compared with other countries, we have a greater percentage of the youth in our population. The youth can contribute to the GDP through value creation, not just consumption. Today's youth are brighter and more talented that those of my generation. They are technology savvy -- have cellular phones, Facebook or Twitter accounts, and emails. Many have competencies required to work, be productive and contribute to nation building.

Now, the troubles. Youth unemployment is almost double the country's overall unemployment rate, and worse in Metro Manila. Of 100 who enter elementary schools, less than 20 go to college. If you think college education facilitates employment, think again. There are as many, if not more, unemployed college graduates than high school graduates. More and more jobs don't require college education nowadays. Many college graduates are overqualified or hesitant to do menial jobs. A significant majority of today's youngsters are broke.

Who's broke?

You're broke if you worry where to get money to pay this month's rental for the condo or apartment. You're broke if -

• you get a cash advance from your credit card to pay your utilities

• your retirement pay is not enough to pay off your housing and car loans

• you've locked your credit card in your office table and

promised yourself never to use it

• you regularly ask your parents for a regular monthly allowance

• you've depleted your savings

• you constantly look for friends with whom you can "pawn" your ATMcard one week before payday

Many of today's youth brag of their so-called "assets" -- car, iPad, Android phones, etc. By Robert Kiyosaki's standards, those are not assets. Assets bring money into your pocket. Your house, car and gadgets don't bring money into your pocket - unless you use them in business to generate more money for you. In fact, they usually bring money out of your pocket.

But, if you have all these -house, cars, and expensive gadgets that you buy with your money, aren't you rich? If you have all these and can comfortably be sure that money will continue to come to your pocket in the future because you own assets, then you're rich. If you spend all your income to buy expensive cars and gadgets and have no assets that will bring money into your pocket, you're simply a fabulous, big spender. Sooner or later, you'll also be broke.

Among the broke, the NINJA is usually the most hopeless - No Income, No Job or Assets.

Fabulous wants

Many people get broke while running after their wants. Of course, it's not bad to want. A little greed often spurs people to work harder, produce more, and eventually become rich. But when all you have are wants and greed, and you're not rich and you're spending beyond your needs, life can be scary and suspenseful. SuzeOrman admonishes us to spend below our means - not even within our means.

Today's youth seems to want a lot of things -- several C's. Typically, they want a great career, cash, credit card, connectivity, cars, and condo. They also want a few T's - travel, tours, trips, etc.

Time was when the youngsters wanted simpler things from their employers -free uniforms, free sack of rice, and free training. The yearend bonus was much appreciated then. Today, some employees get quarterly bonuses and are never satisfied.

In the past, when employees receive bonuses from the cashier, they go to the bank and deposit their money in their savings account. Today, most employees simply go to the mall - to withdraw their bonus from the ATM machine, go shopping and paint the town red. Today, that's fabulous for you!

The problem

Working people have problems. They see their problems differently. A common view is that salaries are low -but often this is not the case.

In the call centers, a new entrant usually gets a P15,000 basic monthly pay, plus incentive from clients, quarterly performance bonus from the company, free HMO coverage for the employee and three dependents, rice allowance, and transportation allowance. On the average, the new employee makes roughly P300,000 per year. That's the credit side of the T account - now let's look at the debit side. The typical employee usually has the newest iPhone or Galaxy, and has gone to Palawan or Caramoan. He or she goes to Singapore to buy his or her favorite sneakers. He or she splurges during company bazaars (tiangge). To his or her credit, she invests in a pre-selling condo unit near her place of work.

I used to have a client (a manufacturing company) where 20 percent of shop floor employees have zero balance in their payroll. The employees, usually averaging more than P15,000 basic monthly pay, have availed of all possible debts through payroll deduction, including that from the employees' cooperative. You offer anything through payroll deduction and they grab it like piranhas devour a piece of meat. When the HR manager knew of the situation, he immediately placed a cap on employees' take home pay. Obviously, it's bad when employees' take home pay can no longer take them home.

More often than not, the problem is not how low the pay -- it's how high the expenses because of the employees' lifestyle.

Employee pressures

In many companies, employees have several things in common. They are subjected to several pressures to spend whatever they earn. Their problem is not that the income is low. The problem arises when they spend beyond or within their means -- for things they want, but don't need. Here are a few reasons for this unsavory situation:

• No financial literacy. Many employees have no training in or basic understanding of what is money and how it works. They look at it as simply something to spend. The other aspects of money are not in their consciousness -- earning, saving, and investing. (I teach this in my clients' in-house training programs.)

• Self-gratification. There is a strong urge to spend whatever they earn because they believe they owe it to themselves. They shed blood, sweat and tears to earn money, and therefore, it is just proper to spend that money to gratify themselves.

• Money for love. Some believe that to show their love for their family, relatives and friends, they have to spend their money. Love is always equated with material things that money can buy. Material or financial gifts are a must for every conceivable occasion -- even to say "I love you."

• Can't say no. Many employees simply can't say no to borrowers, lenders, sellers, or needy friends and relatives. Employees need to be trained to say "No." It's a good word, especially if you want to retain the money you worked so hard for

Pressured to spend. If you traverse EDSA often, you will realize that anywhere from point A to point B, you'll be subjected to terrible pressure to spend. There are big and loud outdoor signs all telling you one thing, "BUY." You watch movies and you are subjected to subliminal messages saying the same thing, "BUY." You read the tabloids and broadsheets and you see the same message, "BUY." There's no escaping -you just have to stand your ground.

• Don't know how to use credit cards. Many employees believe that credit cards are plastic money. They are debts. The moment you swipe that card, you owe something that you ought to pay in the very near future. If you don't know where to get the money to pay for that swipe, don't use your credit card at all. If you're deep in it, cut your credit card now -- into pieces -- and negotiate with the credit card company for your payment. If not, you'll be in deeper trouble with other aspects of your financial life.

Unbeknownst to many, the rich and famous are not just big spenders. First and foremost, they are big earners, big savers, and big investors. On the other hand, the broke and the fabulous are mostly big spenders -- they don't earn big, save big and invest big.

(Ernie is the current Executive Director, and the 1999 President, of the People Management Association of the Philippines, Chair of the AMCHAM Human Capital Committee, and Co-Chair of the TWG on Labor Policy and Issues of ECOP. He was recognized by PMAP as Diplomate in People Management (DPM) in 2011. He was also voted "Best Newspaper Columnist" by PMAP in 2011 and 2012. He is the President and CEO of EC Business Solutions and Career Center, a HR consulting firm. His books, "Life's Big Lessons" and "Life's Big Lies" are available at PMAP, tel. +632 726 1532 or at ernie_cecilia@yahoo.com)