One Sunday afternoon in October 2008, I met a geek at the Switch Store (an Apple products retailer) in a shopping mall.
I was browsing the apps installed on the demo iPod Touch. A short chubby guy in plain white T-shirt came in and walked straight to the tall male sales assistant.
“Do you sell iPhone casings?” asked the chubby guy, taking out his brand new iPhone from the right pocket. Obviously, the iPhone was brought in from oversea because it is not yet available in Malaysia at that time. I knew it because I had one too, bought in Hong Kong.
Being eager to interact with someone who possesses a rare gadget, I approached him and introduced myself as an iPhone fan. Shortly after that, we were chatting enthusiastically on the couch at the nearest Starbucks.
That is how I met Steven, a 22-year-old Apple geek.
Steven is a hardcore fan of Apple. Beside the iPhone 3G, He owns an iPod Touch, a Macbook Pro, and also an iMac.
“It must be fun to own all these wonderful invention.” This is the statement that sparks the conversation to reveal Steven’s financial worries.
Knowing that I am a personal finance author, he told me more about his financial situation to seek for advice.
After 30 minutes of hearing his stories on how he got into credit card debts, he said, “I am thinking of getting a personal loan to pay off these credit card debts. What do you think?”
Before I tell you my response to his suggestion, let me summarize his situation as below:
- He has two credit cards, maxed out the total credit limit of RM12,000
- Besides all the Apple gadgets, he also bought a 40” Sony LCD TV and also the Sony Playstation3, all on 24 months easy payment scheme. It is because of all these gadgets that he can’t afford that put him into credit card trap.
- His monthly cash flow is very tight. The monthly salary he receives is barely enough to pay for all his expenses including the credit card minimum payments.
I am curious that since Steven has no savings, how he got the cash to buy the iPhone 3G from oversea. It turned up that he maxed out his second credit card by withdrawing cash advance to pay his friend who helped to buy the phone at Singapore.
He used to enjoy all these gadgets but when it comes to the due date to pay credit card bills, it was a nightmare!
Imagine that you are in Steven’s situation, what would you do?
Most people will do some of the following actions:
- Cut expenses drastically (stop eating out, surrender insurance policies, say “no” to all entertainment and social activities etc).
- Take up a part time job.
- Cut the credit cards with a pair of scissors.
- Choose to ignore the problems as long as there is no legal action yet.
I told Steven that there are many solutions to his financial trouble. There are many actions he can take. Some are effective and some are not. Most of the actions are not enjoyable. But the most important action is to set up a system.
He did set up a system.
The system he follows is very simple, but extremely effective and efficient.
It is elaborated in the FREE report I just created. You can download the report at Money Automation System.