Don’t Be One Of These 5 Money Fools

Money fools dwell among us. They walk, talk and act like us, and are often a source of chagrin and amusement with their bizarre money management styles. Here are five most common examples of money fools you encounter in daily life.

1. The extreme cheapskate

It is good to save money, but these folks take cheapskatery to a whole new level. The “extreme cheapskate” saves and scrooges, even on basic necessities like food and water, and lives in constant paranoia that one false move or unexpected blunder will make them poor.

But believe it or not, when you take extreme measures to save a buck, you might actually end up wasting money in the process. For example, skipping regular check-ups at the doctor or dentist in order to save money could yield a much higher medical bill in the long run due to the lack of preventive care.

Extreme cheapskate bosses have been known to skimp on experts and consultant fees, preferring to do all the work themselves even if they have no idea what they are doing. As a consequence, they could end up losing time, resource and potential money-making opportunities.

Other displays of extreme cheapskatery include hoarding all the free coffee and sugar sticks at the office, refusing to invest in additional training or further education now to earn a bigger pay cheque later, and avoiding investments altogether – for fear of losing money.

To improve your social life and financial future, you may want to start taking baby steps towards learning how to loosen up on your wallet. Focus on quality instead of quantity. At times, it also pays to take a few risks in your investments. They usually yield higher returns than parking your money in fixed deposit (which is generally only good to put your contingency fund in).

Investment options include stocks, bonds, unit trusts and REITs, which may help you live more comfortably and allow you to savour the fruits of your labour on a long-term basis.

2. The show-off

Otherwise known as the “kiasu” in this part of the world, the “show-off” spends their money to impress their friends. These folks drive the coolest cars, sport the latest gadgets, compare designer wear and are seen only in all the coolest hangouts.

Unfortunately, extravagance has an ugly side. Uncontrolled spending can lead to debt that can jeopardise your financial future. According to statistics from the Malaysian Department of Insolvency (MDI), an average of 1,812 people are declared bankrupt  every month in 2013, with an average number of monthly bankruptcies from 2012 to 2013.

Poor financial management, which typically manifests into credit card debt, is a leading reason for bankruptcy. When we try to keep up with our friends or with our lavish lifestyles, we won’t come out ahead. In fact, we may even end up falling behind if we continuously splurge on things we do not need.

By spending a lot of money on material things instead of contributing to your retirement or other financial goals, you may be able to impress your friends now, but what will be the consequences, a couple of decades down the road?

You don’t have to be frugal, but it pays to spend within your means, especially in today’s increasingly volatile economic climate. At the end of the day, if you feel like you have to spend money to make someone like you, then they’re probably not worth your time and effort anyway.

3. The hipster

The origins of hipsters are vague, but some say that they are simply a bunch of emo kids attempting to rebel against their rich parents by dressing up like hobos.

Hipsters reject all things mainstream and trendy. Ironically, despite their aversion to cultural norms, followers of this subculture are often defined by consumerism, as they spend quite a fortune to look like well…hipsters.

Hipster boys and girls are easily identifiable by their flannel shirts, skin-tight pants, shaggy hair and uppity attitudes. They are usually found lounging at the latest indie cafes, sipping on RM12 Flat White and talking about “art”.

Like their show-off cousins, the hipster is also commonly seen with all the latest gadgets and gizmos. Hipsters tend to be young, usually in their late teens or early 20s, and are likely living off their parents – due to their expensive lifestyle. Hipsters share a lot in common with the Show-Off but they spend instead to reject as much of society as possible.

Instead of splurging on overpriced coffee, why not start looking at ways to make more money? There are a variety of options out there. Bonds and saving accounts provide secure forms of investing, but at a low potential return. Younger adults can afford to be more aggressive and risky with investing strategies than older adults and may consider investing in stocks. Stocks tend to be volatile and can fluctuate easily, but younger adults will have the luxury of time to ride the stock market’s ups and downs.

 4. The serial borrower

We all know someone who conveniently “forgets” their wallet at home every time you go to dinner, “loses” anything you lend them, and always manages to wheedle their way out of their share of a task.

These shameless buggers regularly breach the boundaries of friendships and tear at your sanity. Despite their inclination to leech off others, the serial borrower may not necessarily be as broke as they’d like their friends to think.

I’m sure we all know that one guy who tells all his friends he is in some hopeless financial situation, but on the other hand, is often going out for parties and drinks by borrowing money or just leeching from others.

No one likes a serial borrower. Over time, they are certain to lose their friends and be ostracised from social circles. The solution to preventing that from happening is obviously by stopping! If you can’t afford to get something, don’t. It is that simple.

Alternatively, consider cutting out expenses of things you do not need and start saving for the things you want. You may also consider shopping online for better discounts or promotional rates from selected merchants.

5. Credit card swipe-happy

Credit cards are a flexible and convenient way to pay for goods and services. Used wisely, they let you make purchases with nearly a month to pay for them before the charges kick in. You can spend up to your credit limit, which  is usually a few thousand ringgit, depending on your income and credit rating.

This sounds good in theory. However, without discipline and proper financial management, many consumers end up carrying a credit card balance from month to month. This is likely the case for the credit card “swipe-happy”.

These folks use their credit card for everything, from buying a MacBook to McDonald’s (if they could). Swipe-happy individuals are often show-offs themselves, and tend to be young executives who think that credit cards are a free pass to buying whatever they want without having to pay for it.

Unfortunately, if you don’t pay your credit card bills on time, your minimum payment will grow and your interest rate will increase. Every month, your minimum payment will get larger as more late payment fees are added to your balance. This will affect your credit rating over time.

If you regularly fail to pay your bills, it is probably time to reassess your priorities and spending habits. One way to keep from overspending is to stick to using your credit cards only for daily amenities such as petrol and groceries (things you need) to earn rebates or reward points without breaking your bank.

Nobody wants to be a money fool. It pays to brush up on your money know-how, so you may take control of your financial destiny and prosper.

Being too frugal or too spendthrift are both not good. Moderation is the key. Here are five situations that contribute to overspending you should avoid!