Of Birkin scams and vacation loans

MANILA, Philippines - This week two articles posted by my friend on her FB wall caught my attention. The first one is that of the Birkin scam girl who was hidden under the name Sheila in an online article but whose name you can easily google if you write “Birkin scam.” She was a flight attendant turned gallery managing director because of her outstanding sales skills. So outstanding that she was able to dupe a lot of people into investing in her buy and sell of luxury bags (that’s why she’s now known as the Birkin “scambag”), paintings, watches and jewelry.

Investors were lured into the high and quick profits and probably didn’t really bother to check the transactions as long as they were being paid on time. They didn’t notice that their investments were funding her own Birkins, lavish parties and even the luxurious closet of her husband who refuses to wear Hugo Boss becausethis brand is beneath him. (???!!!) (If you want to see the shoe collections of this couple, you may still see some of their photos which have not been deleted.)

The second post that caught my attention was the article announcing that Pag-Ibig Fund is now extending vacation loans to its members. I saw the morning interview of the Fund’s head calling it the Anti-Depression Loan. She actually sounded good and maybe she’s just trying to diversify the portfolio of the fund to include loans other than housing (the main mandate of the fund). Well, you may recall that Pag-Ibig was also a victim of a large scale scam care of Delfin Lee of Globe Asiatique Realty, who got P7 billion loans from the fund using fictitious borrowers. His warrant of arrest has been issued but as of writing, he is still at large.

Now here’s my take on the Anti-Depression Loan. Although this news got some interest from the show host and the people behind the camera during the live telecast, I think it is not wise to take up a loan to fund your vacation. A vacation is something that you should plan and save up for. If you really need the break from work but can’t afford to go out of town, then maybe you’re better off taking the vacation at home. To me, piling up unnecessary loans is a sure way to stress that may eventually lead to depression. So where is the anti-depression in that?

Here’s another thing that the prospective borrower should be aware of. The maximum amount a Pag-Ibig member can borrow for this purpose is 80% of his total contributions to the fund. His contributions earn him around 4% p.a. while the interest rate to be charged on the vacation loan is 10.75%. So the rational individual will only use the Pag-Ibig loan for his housing needs because their interest rates are subsidized and lower than those offered by commercial banks. In the event of an emergency, and the member needs additional cash, then he may also consider taking a calamity loan from the fund.But for a vacation? Think again.

The Common Denominator:

The common denominator of these two posts – the Birkin “scambag” and the appeal of the vacation loan is the human propensity to covet the things he cannot afford.

The story of the Birkin girl could have had a happy ending. She was a good salesperson. Had she just saved all the commissions earned from her buy & sell transactions instead of embezzling her investors’ money to buy luxuries she can’t afford, she could have grown her business. Eventually, she could have purchased her own Birkin the honest way.

There is a right time for enjoying luxury items. There was a Lifestyle Channelshow which featured the top of the line items and services worldwide and the guest said, “It is so much sweeter when you reach a point in your life when you can finally afford the luxury that you’ve dreamed of.”

If we were all rational beings, maybe we can all wait for that point. Unfortunately, most of the time, we’re irrational. The Birkin girl was surrounded by all these luxury items and having them probably made her accepted in the society she wanted to be a part of. It’s a lifestyle creep, a fancy term I chanced upon which means “keeping up with the Joneses;” in other words, social climbing.

Lifestyle creep is the enemy of wealth accumulation - even if you’re using your hard earned money and not some embezzled funds. You cannot save and invest for the future when you start re-labeling your luxuries to necessities.

Guidelines:

If your dream is to accumulate enough wealth so that you are not only secure but can afford the luxuries you’ve always desired, here are some guidelines on your purchase of luxury:

1. Never borrow money for a luxury item. If you can’t afford it, you don’t deserve it yet. And borrowing money includes using your credit card and not paying it in full knowing too well that the interest rate is 3% per month (that’s 36% per annum!)

2. Your savings rate should increase as you earn more. I don’t just mean the absolute amount that yousave but the rate of savings. Example: Last year your monthly salary was P50,000 and your savings rate was 20% so you saved P10,000.This year you moved to a new job and your salary suddenly jumped to P75,000. You may say that you can just save 20% again and this will increase your savings to P15,000 and that’s a whopping 50% increase! Although that’s true, wouldn’t it be better if you up your savings rate? Strictly speaking if you maintain your lifestyle you can increase your savings rate from 20% to 47%! But you don’t have to do that. It’s also good for you to enjoy the fruits of your labor as an incentive to work even harder. But just make it a habit to increase your savings rate as you increase your income.

3. There’s a rule of thumb that goes, “Buy a luxury item only if you can afford to buy 10 pieces of it.” This just means that you don’t buy a luxury item even if you have the cash for it, if this purchase will break your bank accounts or compromise the more important expenditures such as your children’s tuition fee, etc.

4. A deeper guideline to be aware of was expressed well by Will Smith when he said, “Too many people spend money they haven’t earned to buy things they don’t want, to impress people they don’t like.” Examine yourself when you’re buying a luxury item by asking these questions - “Am I buying this just because everyone else has it except me?” “Am I buying this to cover up for something I don’t like in myself?” “Does buying this item agree with my core values?”

I’m not a bag person so I have not experienced lusting for a Birkin.But there's nothing wrong with owning one if you can afford it (at least 10 of it). I fondly call expensive bags asGK bags because one bag can buy you a GawadKalingahome. Well, in the case of the Birkin, that’s one community. I also don’t know the girl in the news so I don’t know what really motivated her to dupe her own friends, one is even a cancer patient. But I think she never intended for all these to happen. She was a good salesperson and was “rewarded” by society in the form of trust they gave her and the acceptance she got as she was even featured in style blogs.

Maybe it just took one person to question how she was able to afford the lavish lifestyle and yet still borrow cash to purchase the items she was going to sell. This reminds me of The Emperor’s New Clothes. But no one around her was as “innocent” and gutsy as the boy in the fairy tale so no one spoke for as long as the interest was coming in on time. It was only when she disappeared with their money to the tune of P500 million that they started to verbalize their negative intuition about her deals.

Maybe no one dared to question because she looked “credible” in her signature outfits. And maybe that’s why she had to wrap herself in luxury so she can keep her “credible look.” It’s a vicious cycle. And as long as society obsesses unreasonably on these things, there will always be scammers and “scammees” in our midst.

For your comments and questions please write to maryrose_fausto@yahoo.com or log on to www.RaisingPinoyBoys.com.