Financial experts are warning Bahamian consumers against flagrant borrowing, as financial institutions around town were hyping various lending schemes for vacations and back to school expenses.
President of Fidelity Merchant Bank and Trust Gregory Bethel called it simply a bad idea.
He explained that every year consumers are sucked into the system of borrowing unnecessarily and are left swimming in debt as a result of poor financial planning.
“Bad idea,” he said. “If you are going to borrow money, put it to a useful purpose – buy land, invest in stocks but do not borrow money for something that you will look at six months from now and you won’t see, neither will you appreciate it.”
This is typically the time when banks go into overdrive pitching the idea of borrowing thousands of dollars to foot that dream vacation or cover back to school and college expenses.
But Mr. Bethel advised that consumers should only borrow if they are acquiring an asset that will increase in value or generate additional income.
He pointed out that although borrowing seems like a quick fix to a financial dilemma, it’s actually one of the worst decisions that a consumer can make.
“I advise people not to borrow for vacation. Everyone knows that the summer is vacation time and so you should plan for it in advance by saving and investing a little money every month, a year before your vacation time,” Mr. Bethel said.
Managing Director of Britannia Consulting Group Lester Turnquest also sought to discourage potential borrowers from getting into bad debt, which he categorized as borrowing for automobiles and shopping sprees.
“Borrowing for a vacation is a bad debt that is not a necessity,” he said.
“I understand that people want to get away for vacation but you really ought to seek throughout the course of the year to put away some money every month for vacation. I think the worst possible decision of a consumer is to borrow money for vacation because at the end of the day you may have some pleasant memories but you would have nothing that advances you financially,” Mr. Turnquest said.
He added that if a consumer has to borrow for a vacation then it simply means that the individual cannot afford it.
Deborah Cartwright, a consultant at Consumer Investment Services advised that persons set a budget and stick to it. As a compromise, she suggested that the potential vacation borrower should consider relaxing on one of the Family Islands instead.
“A lot of people may not realize that borrowing has become an addiction in The Bahamas. Many persons especially government employees and hotel workers, where there is the option of salary deduction which aids in them getting credit more easily, they are usually the ones who are more liable to be swept off their feet by loan promotions,” Ms. Cartwright said.
Mr. Bethel said another ploy commonly used by lending institutions to increase consumer spending is credit cards.
But financial experts say this is another contributor to financial misery.
“Credit card borrowing is to be discouraged because it is an unsecured loan at a high rate of interest and with paying just the minimum payment each month, many often never pay off the entire debt,” he said.
Over the years, Mr. Bethel said Bahamian females have adhered to much of the expert advice that has been given, planning for a financially secure future by investing in retirement funds and starting college funds. However, he said, it has not been the same with men, for the most part.
“There are men who are very good investors but generally speaking men don’t pay attention to financial planning until they are in their late 40’s or early 50’s,” Mr. Bethel said.
By: Bianca Symonette, The Bahama Journal
