Page 23 - Smart Money

Smart Money

have no idea that’s the way it is because they have never actually sat down
and calculated all their outgoings.

Everybody wants to have everything now; they only think about
today and not tomorrow with their spending habits.

The easy availability of credit – credit cards, personal loans, car loans,
boat loans – is partly to blame, but some people are also financially
irresponsible. They seem to think that if the bank says they can afford
it, then they can afford it. But the bank has a very limited view of what
you are actually spending on a monthly basis. For example, the bank may
not know exactly what you are spending on entertainment. It may be
a general rule that people spend $400 a month on entertainment, but
you might be spending $1,000 a month. So even though the bank might
say you can afford it, you have to stop and think about whether you can
actually afford it.
We always do a breakdown of monthly living expenses, and quite often it
is a lot higher than the figure allocated by the bank or even what the client
tells us. Most people don’t realise how much money they actually spend
on things. It can be things like going out for dinner or ordering takeaway.
It all adds up. Their monthly shop might be higher than most other
people. So instead of actually going and doing the research themselves
and working out whether or not they can afford it, they just assume they
can because the bank says so.
Credit cards can be a real trap. Banks regularly send out letters in the
mail offering an increase on the card limit and, of course, what happens
is, you think you’ll get it but never use it. But then because it is there, you
do use it, and increasing it again is as easy as logging on to your internet
banking. There is a button you can press that actually allows you to apply
for an increase to your credit card limit online.
So the banks make it quite easy for people to get into trouble with credit
cards. You only have to pay 3% of the balance as a repayment, but most

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