Most of Brazilians’ financial problems are not related to lack of money or lack of knowledge about what to do with their money. Debt – and everything that comes with it, such as stress and anxiety – still stems from contestable behavior. It is, therefore, a behavioral issue. And that’s what I would dare to call the Brazilian way of spending.
Obviously, we have to consider variables and not be tempted to generalize by stuffing 209.3 million people into one box. But, come on: I don’t need graphs and a plethora of economic data to say that Brazilians, in general, still spend badly, very badly. I allow myself to make this value judgment on the assumption that rolling over credit card debt, abusing overdraft, living in debt and being unable to save, for example, are bad decisions.
To write this column, I listened to two renowned financial education experts who I interviewed almost weekly around 2010 and 2013. I was not surprised to hear from them that their assessment of the Brazilian consumer profile has changed very little since then.
“I still think it’s not a lack of knowledge. Almost all Brazilians in the so-called middle class already know what to do, the information has come to them, but they don’t put it into practice,” said Álvaro Modernell, founding partner of Mais Ativos, master of finance and with a broad academic curriculum, besides being the author of several books in the area.
It is as simple as that: to have a minimally comfortable financial life is no mystery, but once the money is cashed in the account, the vision becomes blurred and decisions are taken viscerally.
Financial information is not lacking. Financial education is lacking.Álvaro Modernell, founding partner of Mais Ativos.
The debate over Brazilian Social’s Security Reform – the one that, in my opinion, is already approved – bothers many middle and upper-class people in Brazil also for this reason: those who live with their comfortable salary in a stable job will be forced to rethink plans and attitudes.
With the reform approved, it will no longer be a question of whether or not to educate yourself financially. The new reality – despite privileges that some corporations have managed to keep – will also impose a new way for Brazilians to deal with the concept of spending and, therefore, of saving.
A congressman who took part in discussions about the final text of the proposal told me privately that a top-tier member of the Judicial System came to his office distressed by the new retirement rules. Why? Because he had planned a quiet life in Europe after quitting work, but the bills were being made with the guarantee of the money saved under the current rules. Yeah.
Libratta’s financial advisor Rogério Olegário told me he is convinced that, before teaching financial rules, it is necessary to “work on the financial behavior” of Brazilians. And behavior, it is known, does not change overnight. This is why Olegário and his wife, with whom he works, have decided to invest in the next generations, launching books aimed especially at young people and leading financial education projects in schools and in partnership with families.
No wonder one of the most successful songs by the renowned Brazilian musician Paulinho da Viola says that “cash in hand is windstorm in the life of a dreamer”. And more: “How many people make mistakes and fall out of bed with all the illusion they dreamed. And the greatness fall apart, when the loneliness is greater, someone has already said.” The Brazilian is, by essence, a dreamer.
Gathering the money first, to only then buy a good or service is, almost always, too much to ask for a Brazilian consumer. Olegário observed: “The Brazilian wants today and now. He can’t wait.” A good explanation – not justification – for this behavior is the mark left by years of superinflation, before the Real Plan*, in the country. With the money drained by the daily scarcity, it was necessary to consume as soon as possible.
“It has to start with children. Because we adults are not convinced that simple rules change our lives. And I realize that, in many cases, it is pointless convincing one that making loans in Brazil, with bank spreads that high, is a shot in the foot. It’s pointless. This person has always done that and thinks it has to keep doing it,” added Olegário.
It’s something rooted, which went from father to son.Rogério Olegário, Libratta’s financial advisor.
From father to son, the Brazilian way of spending even causes that extra income – instead of becoming a solution or at least reducing problems – gives new headaches: just look at how the Christmas bonus salary, paid to all Brazilians with regular employment, it is usually spent. Let’s hope that Brazilian children grow up thinking that Paulinho da Viola’s song seems strange.
*The Real Plan (Plano Real, in Portuguese) was a set of measures taken to stabilize the Brazilian economy in 1994, during the presidency of Itamar Franco. The Plano Real intended to stabilize the domestic currency in nominal terms after a string of failed plans to control inflation.