For this valedictory article, allow me to give you some last thoughts on personal finance, particularly on debt management.
Time and again, people would come to us distraught, panicky and on the brink of giving up on life. Data from the Bangko Sentral ng Pilipinas shows that as of June 7, 2018, the banking industry has Php983 billion in outstanding consumer loans. And of this amount, 3.6% are non-performing.
The other telling statistics are that: 1) non-performing consumer loans comprise 33.85% of the total non-performing loans of the banking industry; 2) of consumer loans, the highest ratio of non-performing consumer loans to total consumer loans come from motorcycle plus non-collateralized credit card, salary-based general purpose consumption and other consumer loans; and 3) the largest Peso amount of non-performing loans come from credit card receivables.
What is not reflected in the statistics is the volume of past due loans that have been written off because of Bangko Sentral ng Pilipinas regulations but are still being collected through external collection agencies.
So many have been sending us text and email messages asking for help on how to get out of debt and how to get the external collection agencies off their backs.
Debt is not bad in and of itself. It is the misuse, whether intentional or not, that can lead to what we call financial slavery. But all is not lost if you find yourself mired in debt.
Personal finance is all about cash, debt, risk & wealth (CD-RW) management executed in that particular order. And many financial planners now are realizing that they cannot get people to progress along CD-RW management if such people are bogged down with cash and debt management. That is why many financial planners are offering help by way of advice on how to get out of debt.
But it has to start from the delinquent borrower. And the first action he or she should take is to smile to produce the endorphins needed to relax his mind and body. Only in this proper disposition will the delinquent borrower be able to power through debt concerns. But it has to be a true smile. And what is the cost of a true smile?
A true smile is called the Duchenne smile where the muscles around the mouth (zygomatic major) plus around the cheeks and eyes (orbicularis oculi) contract. This is not the Mona Lisa smile because as the emotion recognizing software of the University of Amsterdam found out, Mona Lisa was only 83% happy, 9% disgusted, 6% fearful and 2% angry. Mona Lisa was just smiling with her mouth, and timidly at that.
It only takes 42 muscles to smile. And, as a challenge to those who may have the calling, it takes only one sincere financial planner to make countless debt-burdened people happy and eventually financially free!
To all of the readers of this column, thank you for following it. I hope we can cross paths soon.
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