In a previous post, I was wondering if the financial/economic crises
would hit me and/or my business in Mexico. Fortunately, until now, there
has been no impact on my business.
However, I should be honest; I'm not convinced this won't change.
So I'm preparing myself, cutting expenses both in business and personal
life.
Business wise, the purchase of the brand new Acura TL will be postponed
:-( and of the 6 phone lines we have (included 3 cells), 1 or 2 will be
canceled. And I'm going to try to renegotiate the rent of the real
estate infrastructure we have... And I'm sure I will be able to
renegotiate also the rent of the Mexico City office. There you have a monthly
saving of at least USD 3,000 !!!
On a personal base, there is not much money to save: I've always been
conservative in my spending, so I will keep my standard of living.
However, there is one thing where I can save a few hundred dollars a
month! Yes, on my credit card debt!
Friends of mine, who know my conservative spending pattern would say:
WHAT??? DO YOU HAVE A CREDIT CARD DEBT? Well I have,
although I don't really take care about it as I bought building materials for
my house with that credit card debt... WHAT??? HAVE YOU BEEN
BUILDING A HOUSE ON A CREDIT CARD DEPT? Yes I did, but this was the only way to
do it (please note my post about real estate in Mexico) but I had a plan"
to maintain the interest rates under control...
I'm not going to enter in detail, but my secret is my income in Dollars
and the inflation in Mexico. The value of the USD increased approx 20%
and inflation in Mexico is over 5%. So, that's 25%. And the
interest rates of my credit cards are 25%, 29% and 49% (I have 3 cards).
So if you discount 25%, I'm paying in real terms 0%, 4% and 24% of
interest. I don't worry about the 0% and 4 %, however, I wanted to cut
24% rate.
So I went to the bank. I have an excellent credit history, so I
thought, let's ask a personal loan to pay off my credit card. And
yes! I got the loan! In the past (to have funds for building the
house) I got loans at a 29% rate, so I was happy.
So I started signing papers, but for some reason, I couldn't find the
interest rate, even not in small letters! So I asked... And when I
received the answer, I understood why they didn't tell me... 50% interest!!! Of
course, I told the bank to keep their money: I was not going to pay that
rate. The bank told me this was a "favorable" rate for a
personal loan, taking into account my excellent credit history… Other clients where paying up to 70%!!!
Asking why they didn't offer me 29% as in the past, the answer was "the
economic recession" Wow! in other countries they lower the
interest rates when economy is down... In Mexico they increase it...
Anyway, I told them I was only prepared to pay 29%... I never
thought they would accept... But they did :-). As a result, I paid off my
credit card debt and if the Dollar doesn't lose value against the Mexican Peso
(which I doubt), I will pay of my loans during the following 30 months at a net
rate of 4% (interest of 29% minus 5% inflation minus 20% devaluation).
That's even less than the interest rate of a mortgage in the :-)
Why I'm sharing this information? Well because I’m lucky guy with
brains and education, being able to "use the system" However, I
feel sad for the millions of Mexicans, who are paying off credit cards at a 60%
to 70% interest rate...
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