Back in the day during my first job at Far East Bank & Trust Company as an analyst, there would be vendors who would visit us at the office to peddle different kinds of goodies. They ranged from snacks (remember those chocolate coated mallows and biscuits packed by the dozens, not in branded boxes with foil but in generic plastic bags?
The first time I experienced that was when a female officemate asked me, “Rose, do you want to see some items being sold at lower prices? Go to the ladies’ room, some of the girls are there right now.” And mind you, going out should be in batches so the boss would not notice. So I went and the ladies’ room was turned into a tiangge. I think I ended up buying those chocolate-coated mallows and biscuits.
Later on, I learned that some of my officemates were also buying pieces of jewelry from the lady vendor. They were being sold on installment basis, collected every payday. They called the payment scheme “gives” or “hulugans” or sometimes called “teardrops.” One time, a nice gold watch caught my fancy. But trained not to just buy valuable pieces on a whim, I just examined the watch and tried to ignore the prodding of the lady vendor, “Ay hija kunin mo na ‘yan, mura lang, huhulugan mo lang ng PXXX kada kinsenas. Baka may makakuha pang iba.” (“Young lady, you better get it, it’s very cheap, you will just pay PXXX bi-monthly. Someone else might get it.”)
That day my Ilocana mom fetched me from work. I told her about my intention to buy this gold watch but I was still thinking about it. She readily asked me, “How much is she selling it for?” So I explained to her the “gives” payment scheme. She immediately said, “Okay, let’s pass by a watch store now so we can check how much that watch really is.”
We went to a watch store and I saw that exact same watch at less than half of the total of all the “gives” I would have paid had I transacted in “hulugan.” My mom saw how shocked I was, “What, really? This is how much mark up they put?” Then she explained to me, “You should realize that those vendors are taking a big risk on their buyers. They will give you the jewelry after they receive your first installment. They do not require you to give any collateral. If you decide to leave the office or even just always be absent when they come and collect, they would be losing already. And that big risk of loss is what they have to provide for.”
This really made an indelible mark in my early twenties FQ!
My mom further went on, “That is why it is not wise to buy on installment items that you can afford to buy in full anyaway. Or if you still don’t have that much money to spare, save up for it because you don’t really need it. You have a watch that’s working. It makes sense to incur a loan for big ticket items that you need, for example a house. If you’re buying a house, it might take a very long time if you wait to save the entire amount, so it’s okay to borrow, as long as you can afford the amortization.”
This experience of my mom bringing me to a watch store to see for myself the folly of buying a watch more than double its retail price taught me a great lesson on installment purchases, delaying gratification, and what makes a good debt (To read the difference between a good debt and a bad debt, click last week’s article link.)
From then on, I would always scrutinize any installment scheme being offered to me, because I knew very well that the seemingly easy-on-the-pocket “gives” are actually “teardrops” if you compute the effective cost of paying that way.
So are you still purchasing with “gives”? Don’t you think it’s time to stop the “teardrops”?
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Rose Fres Fausto is a speaker and author of bestselling books “Raising Pinoy Boys” and “The Retelling of The Richest Man in Babylon” (English and Filipino versions). Click this link to read samples – Books of FQ Mom. She is a behavioral economist, a certified Gallup strengths coach and the grand prize winner of the first Sinag Financial Literacy Digital Journalism Awards. Follow her on Facebook & YouTube as FQ Mom, and Twitter & Instagram as theFQMom. Her latest book is “FQ: The nth Intelligence.”