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How Facebook's Libra might get you to clean up your wallet

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Once Facebook's Libra makes it into the cryptocurrency, there may be a new threat to consumers: their own bad spending habits.

Libra is a proposed cryptocurrency developed by Facebook and operated by a consortium of partners, including payment providers, credit card companies and consumer companies. It should start in the first half of the year 2020.

In a Facebook whitepaper, the company claims that Libra for targeted advertising is not connected to a user's data. Nevertheless, the social media giant plans to integrate Libra payments into its own products, which are used by billions of people, which according to experts leads to other concerns.

"For a number of users, easy access to a tool that can be used for retail purchases and activities could be dangerous, especially for those who are already struggling to keep their budget under control," Bruce said McClary, Vice President of Communications for the National Foundation for Credit Counseling.

Officials on Facebook did not respond to requests for comments.

More than a third of Americans reported that their spending was impacted by social media experiences, said Charles Schwab 201

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The February survey analyzed how 1,000 Americans manage their money.

Social media was ranked by respondents as the "worst" influence in terms of money management.

Overspending [19659011] Facebook announced its cryptocurrency Libra.

Chesnot | Getty Images News | Getty Images

According to Tyrone Ross Jr., a crypto-currency-focused investment advisor in Woodbridge, New Jersey, the Libra could easily exceed spending as it will be easily accessible.

"Knowing how people are, if it's easy to do something, they'll have it," he said.

Compared to cryptocurrencies like Bitcoin, Libra may be easier to use for everyday exchanges like paying or buying bills, Ross said.

Libra was developed as a currency for exchange and is less likely to be used as an investment such as Bitcoin, Ross said. It should be a "stable digital cryptocurrency" and "fully backed by a reserve of real assets, including bank deposits and short-term government securities," the company's white paper said. That is, there should be no wild price fluctuations as with other cryptocurrencies.

Bitcoin is not attractive for conversion because there is little clarity on how it can be used and it requires technical know-how, said Ross.

"Efforts to gamble or digitize money will lead to an" increase in spending on pointless purchases, "said Priya Malani, founding partner of Stash Wealth in New York.

She said makes the convenience and efficiency of the pay It is much easier to part with your money.


David Marcus, vice president of messaging products at Facebook Inc., speaks during an interview with Bloomberg Television on the sidelines of the Wall Street Journal global technology conference, D.Live, in Laguna Beach, California, USA, on Wednesday , October 18, 2017.

Patrick T. Fallon | Bloomberg | Getty Images

David Marcus, head of the Calibra Facebook division, which will develop products for the new cryptocurrency, said the company may offer other financial services in the future, including loans.

Loans could become problematic if consumers lend to maintain an unsustainable lifestyle, Malani said.

"If you're not careful," just this one purchase "can quickly become a year-long repayment of the money you've borrowed at damaging, high interest rates," she said.

This year, consumer debt in the US reached a high, according to the Federal Reserve, a time high of $ 4 trillion.

How it's handled

A customer hands over twenty US dollar bills as she pays for her purchases in Frankfurt, Kentucky.

Luke Sharrett | Bloomberg | Getty Images

Perform the following steps if you are not debting and you do not want to spend too much with paper money or its digital relative:

Make the process less automatic. "The pain of paying is so far from the present," said April Benson, a psychologist specializing in compulsive shopping. "Everything that makes it less automatic is preferred." Logging out of your favorite shopping websites on your computer makes spamming more difficult.

Change your shopping philosophy. Benson encourages its customers to think about shopping for long-term rewards. "Think about shopping with a wide-angle lens," she said. "Not just for shopping, but for shopping for adventure and pleasure."

Stick to your budget. "It does not matter what the currency is, whether you have $ 100 million or $ 100, a budget is so important," said Ross. He said it would be helpful to follow a budget template to keep track of where and how much you spent your money, even if you use the scale in the future.

Learn as much as you can. "The wave is there, if you trade with other financial services, it comes in. It's here," said Ross. He recommends reading about Libra, asking experts questions, and understanding what spending on Libra will look like.

"I have no confidence that larger companies will need time to educate people on how Libra will change their lives," said Ross.

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