Have you entered or are you in the maelstrom?

The maelstrom is an extremely dangerous marine vortex that occurs in the cold waters of the Atlantic Ocean. With a spiraling, corkscrew-like movement, it pulls heavy ships to the bottom. The extremely strong centripetal forces and the unique direction of the force vectors cause ships to be unable to escape. The only driving technique that works is to advance at maximum speed in the direction of the current, followed by an attempt to angular escape, but the situations in which a ship has managed to escape the curse of the maelstrom are few.

The maelstrom and personal finances

We find the maelstrom effect in our personal lives, in many cases, targeting the financial and social spheres. People who fall victim to this maelstrom effect are those people who, out of a desire to “make themselves popular”, to enter the community or “among the people”, purchase, like the others, expensive clothes, expensive cars and, also, increasingly, bigger houses. The maelstrom effect refers to the consistency in competition or “keeping up” with others by making purchases that are not necessary for the person in question.

People who, out of a desire to be with other people, go on extravagant vacations that they cannot afford, enter a maelstrom effect. This effect occurs when they take out a personal loan. They have fun on the week-long vacation, feel good in the company of others, then return home and work for between one and five years, for those moments of pleasure.

The collectivity or social group is a determining factor in entering the maelstrom. If in the company where you work, in order to have a good image, it is necessary to wear “quality” suits (often, for most people, quality means expensive, not being made of good material) and, especially if you are a woman (because the aesthetic aspect is much more predominant in women than in men), you buy a 600 lei suit this month. The next month, seeing that a colleague bought a better suit worth 800 lei, you will buy one for 1,000 lei. And so on. Does this situation seem familiar to you? Do you or anyone else behave like this?

The same thing happens to men with cars. Men, among themselves, talk about what cars they drive, how many horsepower they have, what engine and cylinder, and, of course, they brag about the cost. Since a car, once bought, does not remain the only car, for the rest of their lives, men compete in buying a car that is much better than the previous one and, obviously, than the other colleague, friend, relative, acquaintance. Also, a better car also means a more expensive one (preferably the latest model).

In the case of families, we find the desire to compete with their neighbors by buying a bigger, better house, which, unfortunately, for their budget is even more expensive. The cost is felt in the high, suffocating rate paid on a real estate loan.

We also encounter this effect in children, mainly in adolescence. They brag at school about the latest phone model. If mom and dad compete with their classmates in suits and cars, and at home, with their neighbors, in terms of the house, why not, at school or in the group of friends, extend the maelstrom effect within the family?! Why shouldn’t adults also pay credits for their child’s latest smartphone model?!

Why did I mention higher rates and, implicitly, credit, regarding the maelstrom effect?

Because, just as the natural phenomenon: the maelstrom presents extremely strong centripetal forces that lead to the sinking of ships, so too do the forces of the desire for social integration and the consistency in purchasing the newest model of handbag, bike, phone lead to personal bankruptcy. “Helped” by the media and advertising, in the act of purchasing, a cost much higher than the personal budget is reached. Further, driven, subconsciously, by all these signals, the purchase of things is carried out on credit, based on borrowed money and interest.

These things are not necessarily necessary. They just respond to the desire to keep up with the trends, with the trend that others have created. If the (limited) budget does not help and stands in the way of meeting expenses, especially when, at every turn, there are advertisements offering a sum of money without guarantees or salary certificate, only with the ID card, the loan is the “savior” solution. Entering such a gear, also due to the simplification of the loan process and the constantly changing trends, accessible credit becomes a “friend” and, over time, all these “friends” gather and make a big gang, from which, at a certain point, the person can no longer escape. Although he no longer wants them as his companions, because they make his life difficult, man cannot easily get rid of them. All of this often leads to the depths of the whirlpool – financial problems.

Can I still escape the financial whirlpool?

I asked you, in the title, if you have just entered this effect. If you have just entered, now is the time to realize and get out as quickly as possible, while there is still time to turn back (a sudden turn, as ships once entered this whirlpool phenomenon did). Stop unnecessary expenses, review your budget so that you save for those goods that you want, but that you currently cannot afford, and take the path to financial health: to have a financial reserve for situations of decrease or lack of income. You never know what can happen.

If you have been in this whirlpool for some time, it would be time to reduce these expenses and, slowly – slowly, get back “to the helm”, so that you and your budget, in the future, do not suffer anymore. If you do not take the reins now, “your ship” will start to sink. The maneuvers, later, will be very difficult to do and, perhaps, in vain. You may have heard of people who lost their homes for various reasons. You may have heard and know friends or relatives who have their wages garnished for loans taken out “for nothing,” they say now, when they have become unable to pay them back.

If you are not in such a whirlwind, then: “With all sails up, move forward!” Maintain healthy financial habits: track your spending with your needs and wants, save for future needs and wants to stay afloat, and invest to quickly move forward on your path to achieving your financial goals.

Good luck with your money awareness!