Quite tired now... this week a bit too hectic.
Just came back from meeting up with ex-collegue. It was rather fruitful. Its nice to chat with her and she gave me 2 contacts to use for my current search. A pleasant lady, we had helped each other out, buddy buddy when we both transferred to the same place. Now both of us are out, but since in the area, glad can meet up.
Later after that, I went to buy 2 pairs of working shoes. Basically court shoes cos my only pair of interview shoes broke yesterday after the interview. So 2 pairs cost me $74. If I am trying to max spend $25 a day. It would mean, for the rest of the month, I must make sure spend 0 or dont go out for 3 days extra. Just so until I get a stable income.
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I wanna highlight a phenomenon that is common to us all. The concept of "phantom money or phantom savings" that is encouraged in fact by all the advertisements and sales. I would use the term "phantom savings" first and then see how it transforms into "phantom money" .It seems to me to be 2 concepts but similiar.
Firstly sometimes we see a SALE sign. Say for my example, a new pair of sports shoes. At first $150, now after discount $100. The discount is 33% (50/150).
Now one would easily think that by buying now, I actually save $50 (33%). I might need it for future, so I buy now and save. Familiar?
Now is there really a saving? That is a very important matter to ascertain. There are questions to ask yourself to determine if that item is a NEED or a WANT. A need, you really might have savings, but a want, you are actually NOT saving at all.
To illustrate. For me, I already have a pair of sport shoes, perfectly fine, still rather new, another pair which is thin sole for driving. Do I really need that $100 shoe? Actually with both pairs, I could rotate and hence dont really need it.
So IF I went ahead and buy it, telling myself this is for the near future, eg use for going to gym, new shoes for new year, backup for current pairs. It may sound justifiable to you. BUT there is actually NO savings at all.
WHY?
Well firstly you didnt intend to buy a pair of sports shoes this month. You already had enough at least to last until one broke. It meant in your expenses, you didnt make conscious allowance for it, hence when you actually buy the shoes, it cost you extra $100 on top of the rest of your expenses. Is there any real savings? It appears NO to me.
Now what if it is a NEED? Eg my only pair of interview shoes broke. I need a replacement asap. I bought 2 different pairs at one go, one as back-up. You might say, I should have bought 1 pair only. BUT since I already took the time and effort to travel down (cost), if the first one broke again, I would have to make another trip down which would incur some extra cost. So 2 pairs to me is a decent number. Well for different people, maybe they need more pairs for backup. But not exceedingly. Now do I really save? Well since I really need to buy it, and I did. I am making conscious decision to cut other expenses out a bit to balance out my spending. I would be more conscious that I had spent $74 extra and will try to reduce heading out consciously. Can even compute to spending 0 for 3 days or so. Something like that, I am not asking myself to hibernate everyday and be a scrooge. It is just part of the maxim, "Earn more or spend less". Since I already spent a certain amount, if I can spend lesser on others, say eating out in restaurants/cafes for a few times, it can balance out at the end of the month. At least that is what I intend to do and adhere to.
Okay coming back to the earlier WANT. So if I went ahead to buy the $100 sport shoes. In my mind, I conveniently convince myself that I "save $50". . This is the phantom saving of $50. Then is there any harm in this? Well already it is actually an extra $100 spent this month. Next how can this go wrong then? Well as in my mind, I keep telling myself I "saved $50", so I might go and spend extra money cos I 'feel' richer by $50. (by now, one might realize, that the mind can just thrive happily on the 'feel richer' effect and spend more) So dont go too euphoric on "phantom savings". They might not actually exist but your mind thinks it is there.
Now how does "phantom savings" turn into "phantom money"? Again it has something to do with how your mind perceives the "phantom savings" as actual physical money.
Remember you spent $100. You think you saved $50. But this $50 is Not real money that you bank into a bank. Now how can this harm us again? Well in cases where money is a bit tight, you might be going through your expenses and trying to cut or reduce or justify. What manifest is this scenario...
K this month I spent $100 on shoes. Next 6 months, I am NOT GOING to buy any. Then I would "save some money". Yes, IF you do this, you are actually cutting out 1 expense item from your budget for the coming 6 months. BUT is there any ACTUAL MONEY saved just by deciding not to spend anymore on shoes? The answer is sadly NO. If your mind thinks that you actually save money from not spending money on shoes, the "phantom savings" becomes now "phantom money" which you think is an inflow into your bank account. But it is not. WHY?
Cos maybe in the 2nd month, I really didnt buy any shoes, but I spent the $100 on food and going out. Is there savings from not buying the shoes? No. The money is spent on another expense item.
In the 3rd month, I bought a new watch $100, no shoes. Is there savings? No I spent money on watch, another expense item.
In the 4th month, I spent $100 on bras, no shoes. Is there savings?
In the 5th month, I spent $100 on hair cut. Is there savings?
By the 6th month, I bought a $100 shirt and pants. Is there savings?
It is clear that by cutting out an Expense item from my budget is NOT going to result in SAVINGS. You might think it can, but it didnt. So assuming the rest of my expenses are somewhat fixed, like hp bills, cable tv, transport etc. I spend the $100 extra every month on something else, even though no new shoes. Nett result is that I still didnt save $100 every month.
Now when is it actual savings and not "phantom money"? There are many instances..
Example I put aside $2 physically and put it in a piggy bank. I consciously do that. After 5 months, I found I had $700 which I put into the bank. It is physical savings, partly cos it is real money and also it helped to lower my expenditure amount (look at previous 2 entries where I shared on my expenditure over this 5 months).
Another would be I actually put aside $100 for taxi ride in my purse. Then I only use this money for taxi rides, any fare or change is put back into this pocket where I keep the $100 cab fare. Maybe in the 1st month, I used up and didnt take any more rides after that. So savings = 0, extra expenditure = 0.
2nd month, I was more conscious and spent only $60 on cab rides. So I have extra $40 left over. This is a saving. Now if I choose to put it into the bank and then next month, I start over with my new $100, I actually save $40. If I decided to roll it over for next month, and start with $140, which I completely spent finish. Nett result is savings 0, extra expenditure for month 0. Cos you already budgeted $100 for taxi, you got extra $40 from last month, so this month even if you spend extra $40, it does NOT cause you to spend extra money from this month, its using last months extra.
Many more examples. Hence a related question would be HOW the hell do I know how much I spend on clothes, shoes, hp etc? And also how do I designate how much to spend per month? Well there is where knowing your own monthly expenditure patterns, habits comes in useful. Once you can get very accurate figures of your expenditure, NOT AGAR AGAR, you can actually sit down and look at your monthly income and your monthly expenditure. Then you cand designate how much to set aside. IF there is not enough to set aside, which ones to lower not cut. I think I mentioned about binge spending which might happen. AND most importantly, you have to arrive at an amount of money, you put aside in your bank. So maybe after all your designation, you only have $400. To really manifest this, draw out $400 and put in your savings bank, every time your salary comes in. If you are more discplined, monitor your bank account nett changes after a month, to see if it increased by $400. Either way, you are actually forcing out a $400 from your salary to stay in your bank account permanently.
So for expenses, even if this month, I set aside $50 for clothes. To help the less disciplined, might really need to draw out that money and put it in a particular pocket and desiginate as clothes, another $50 for taxi, another $50 for shoes. So if you had accounted for all your expenses and finished designating amount of money for them,
IF that month, you spent $80 on shoes. $50 taxi, $50 clothes. So next month, you can only put $30 (50x2 - 80) for shoes, $50 taxi, $50 clothes.
If in 3rd month, you spend $30 shoes, $50 taxi, 0 clothes. You actually have a surplus. So if u didnt bank in that extra $50, you can let it roll over. You have $50 shoes, $50 taxi, $100 clothes.
Similiarly if u spent $200 on clothes. Then next month, you have $0 for clothes. Until you paid it off.
All these might sound kiddish, give it a try, if you have problems reigning in certain expenses.
I am also working to reign in my expenses. OF course I am human too, also overspend at times in a month but my overall is that I have monthly surpluses during the entire period of time I was working. Except now when I have $0 income. So no matter how I lower, overall is negative. But no excuse to let it run away. I have to reign in still. Guess let's all work towards saving up, cutting down.
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