In March, I slightly went over my budget for normal expenses and the total sum, I spent quite a bit cos of driving.
Following previous budget of $20-25 per day for 30 days, budget for normal expenses is $600 to $750.
For normal expenses, the final figure I arrived at is $888.80. Exceeded by $138.80. Reasons were cos of extra spent
1) Sand spa $100 for facial and body sand
2) Watch $23.90
3) Cardigan $40
4) Sunglasses $20
5) Hair cut $28.80
6) 3 mths supply of glucasamine
7) new photo for resume $15
8) extra cab rides $27
So its a case of quite a fair bit of expenditure outside normal spending on food, transport, phone bills. But quite a bit are work-related and full-time work is starting, so I will monitor these work-related expenditure.
Add in guitar $120 and driving $1090 cos I topped up and booked enough driving slots to last from end April to End July plus 1 driving test. So its all in at a shot.
Total amount spent is $2088.80 Very pain. Big dip into reserves but consolation is that work is starting and a fixed and more reliable income is coming in from April onwards.
Showing posts with label budgeting. Show all posts
Showing posts with label budgeting. Show all posts
Monday, April 19, 2010
Thursday, March 04, 2010
Keeping your yearly savings INTACT every year is the KEY
Hmm it seems that nowadays I have ALOT of thoughts in my mind. I guess partly is cos of the transition from no-work to working soon. So there are some anxieties, some thoughts. Then also thinking about investments, so more thoughts. It would mean alot of 'deposits' of thoughts here.
On the thought of savings again. One point that came up is the fact that most of us try to save some money. Its not that we intend or even purposely spend until $0 every month. We do put aside some money, whatever it is in a saving account.
There are just 2 issues.
First, whether the amount saved at the end of 1 year is kept intact.
Second, whether the amount saved is enough.
To illustrate. Say a person puts aside $400 a month into savings. After 12 months, its a sum of $4800.
For the first point of keeping the amount intact, is this. Is it being drawn out at the end of the year to pay for something? Assuming all drawn out to finance an expensive holiday abroad? To pay for insurance premiums? To buy a few expensive designer items?
IF that is the case. Then after 1 year of saving, the NETT effect is $0. I emphasize looking at the NETT Figure always in planning of savings, cos that is really the picture that matters.
Some might argue that cos of the insurance, all or a huge chunk is taken out of their savings. Hence save very little. I think unless one is earning MINIMUM income, about <$1800 gross a month, that is AN EXCUSE. It can be done but of course it meant spending lesser per month to 'save extra' on top of the insurance premiums.
So say insurance is $3000 a year. Save $400 a month previously. To avoid the nett picture of $4800-$3000 =$1200, a mere sum, one really has to raise the amount per month. So working backwards. $3000 / 12 = $250 extra. So it meant IF can now try to save $400+$250=$650 a month, it would mean at the end of the year, the Nett picture is $650x12 - $3000 = $4800. Hence you have managed to keep your savings intact.
The same principle can be applied to financing for a year-end holiday. You estimate how much it would cost you to have a good and comfortable holiday eg $5000. Work backwards. $5000 / 12 = $417 extra. So a target to try to hit is $417+$400 = $817. After a year of saving up. You can go for your well-earned holiday with a budget of $5000, and yet still have $4800 in your bank account intact. Also if you didnt fully spend that $5000, the extra is extra savings.
Some might say that what IF the sum I calculated is TOO high and it is very stressful and impossible to achieve it. As a flexible, thinking person, firstly the target is there to help you have a sense of where you are going with the money. If there are months, a bit tight, cannot hit, so long as most months manage to hit it. The nett effect at the end of the year, is still a larger amount intact in the bank compared to $0 if nothing is done. Secondly, IF after trying to spend less, still not able to hit the target amount, then it is a Strong indication that either you have TOO many stuff to finance at the year end or you are not making much inroad to rein in spending. Then I would advise a re-think on your part to better manage your money. Cos at the end of the day, its your money and your life. I am not one to dictate how much you should spend or save. So you make your decisions and live with it.
The second point about whether the amount is enough?
This is related to the first part about keeping the savings intact. If it can be kept intact. The next question is to ask IF you are happy with the intact amount per year. If yes, continue, cos at least every year, you can add on more intact money to your pot of gold. It WILL grow provided every year, it is kept intact.
But if it is a bit low for your liking. Tweak it by thinking of a slightly higher amount you like eg $6000. That would translate to $6000 / 12 = $500 a month. If there are insurance $3000, that would mean $250 extra. If there is a holiday, maybe lower $4000, that would mean $334 extra. So the total target is $500+$250+$334 = $1084, which seems to be a rather large figure. Now can try it out but montior monthly. If after a while, really is too unrealistic. Then look through the components. This $1084 is arrrived from 3 parts, the $500 intact savings, the $250 insurance premiums, the $334 for holiday. So maybe have to adjust some. Lower the holiday to $2000, $167 per month. The newly adjusted is $$917, lower and maybe more doable. Try out again for a few months, see if can hit, if not readjust the components again.
Some might ask WHY should I limit myself and live on a tight budget? That is so not enjoying life. I rather live with small savings than do this.
As mentioned, this is a method to 'force' out extra savings that can be used to finance those end-of-year huge expense and by doing so, allow your savings to be kept intact. Only the nett picture matters. So unless one is happy with the lowered nett amount cos didnt account for these large end-of-year expenses, otherwise its either earn much more or save much more.
This is an actual method that I use to manage my savings. I would say this is the HIGHEST level of analysis and planning I make to ensure I am saving
The basic being first monitor daily expenses to get monthly expenditure totals, next monitor and ensure monthly surplus mostly, also analyze expenditure patterns and adjust.
Then more advance is to get an annual figure saved eg 1st Jan to 31st Dec. The amount that is kept intact after ALL the annual expenses are accounted for.
Then the highest level is to set targets by looking at the overall picture, work backwards to arrive at a target amount per month.
Next is back to basics, checking nett figure per month to see if hitting the target, monitoring expenditure pattern (not every expenditure amount), total amount per expense item. Then annual figure, less year-end expense. After all of that check if the Intact savings is hitting target. Then repeat.
Too much trouble? Well its your money, its your life.
I did it this way, it doesnt take that much of my time at all. It allowed me to save up alot in my working days, enough for me to get started investing in shares, enough to build up a separate living expense reserve that is used to finace this period of unemployment and change in job.
It doesnt matter how much one saves every month IF at the end of say a year or 2 or even more, ALL or the bulk of it is used to finance something (non-income generating) Only with INTACT savings building up every year. Over a short few years, you can be surprised at the amount you build up, just by being more dilligent, conscious of where your money is going to, what are you saving up extra for, what are the things you have planned in your monthly, annual budget. Just like that.
Easier said than done. But getting started in small steps first. A journey of a thousand steps begins with one. Even if one does not manage to do everything listed above in a yearly cyle, the simple fact that you are putting more effort to manage your money is way better than what you started with (a simplistic idea of putting leftover of your salary into your bank account and hope it will grow somewhat)
On the thought of savings again. One point that came up is the fact that most of us try to save some money. Its not that we intend or even purposely spend until $0 every month. We do put aside some money, whatever it is in a saving account.
There are just 2 issues.
First, whether the amount saved at the end of 1 year is kept intact.
Second, whether the amount saved is enough.
To illustrate. Say a person puts aside $400 a month into savings. After 12 months, its a sum of $4800.
For the first point of keeping the amount intact, is this. Is it being drawn out at the end of the year to pay for something? Assuming all drawn out to finance an expensive holiday abroad? To pay for insurance premiums? To buy a few expensive designer items?
IF that is the case. Then after 1 year of saving, the NETT effect is $0. I emphasize looking at the NETT Figure always in planning of savings, cos that is really the picture that matters.
Some might argue that cos of the insurance, all or a huge chunk is taken out of their savings. Hence save very little. I think unless one is earning MINIMUM income, about <$1800 gross a month, that is AN EXCUSE. It can be done but of course it meant spending lesser per month to 'save extra' on top of the insurance premiums.
So say insurance is $3000 a year. Save $400 a month previously. To avoid the nett picture of $4800-$3000 =$1200, a mere sum, one really has to raise the amount per month. So working backwards. $3000 / 12 = $250 extra. So it meant IF can now try to save $400+$250=$650 a month, it would mean at the end of the year, the Nett picture is $650x12 - $3000 = $4800. Hence you have managed to keep your savings intact.
The same principle can be applied to financing for a year-end holiday. You estimate how much it would cost you to have a good and comfortable holiday eg $5000. Work backwards. $5000 / 12 = $417 extra. So a target to try to hit is $417+$400 = $817. After a year of saving up. You can go for your well-earned holiday with a budget of $5000, and yet still have $4800 in your bank account intact. Also if you didnt fully spend that $5000, the extra is extra savings.
Some might say that what IF the sum I calculated is TOO high and it is very stressful and impossible to achieve it. As a flexible, thinking person, firstly the target is there to help you have a sense of where you are going with the money. If there are months, a bit tight, cannot hit, so long as most months manage to hit it. The nett effect at the end of the year, is still a larger amount intact in the bank compared to $0 if nothing is done. Secondly, IF after trying to spend less, still not able to hit the target amount, then it is a Strong indication that either you have TOO many stuff to finance at the year end or you are not making much inroad to rein in spending. Then I would advise a re-think on your part to better manage your money. Cos at the end of the day, its your money and your life. I am not one to dictate how much you should spend or save. So you make your decisions and live with it.
The second point about whether the amount is enough?
This is related to the first part about keeping the savings intact. If it can be kept intact. The next question is to ask IF you are happy with the intact amount per year. If yes, continue, cos at least every year, you can add on more intact money to your pot of gold. It WILL grow provided every year, it is kept intact.
But if it is a bit low for your liking. Tweak it by thinking of a slightly higher amount you like eg $6000. That would translate to $6000 / 12 = $500 a month. If there are insurance $3000, that would mean $250 extra. If there is a holiday, maybe lower $4000, that would mean $334 extra. So the total target is $500+$250+$334 = $1084, which seems to be a rather large figure. Now can try it out but montior monthly. If after a while, really is too unrealistic. Then look through the components. This $1084 is arrrived from 3 parts, the $500 intact savings, the $250 insurance premiums, the $334 for holiday. So maybe have to adjust some. Lower the holiday to $2000, $167 per month. The newly adjusted is $$917, lower and maybe more doable. Try out again for a few months, see if can hit, if not readjust the components again.
Some might ask WHY should I limit myself and live on a tight budget? That is so not enjoying life. I rather live with small savings than do this.
As mentioned, this is a method to 'force' out extra savings that can be used to finance those end-of-year huge expense and by doing so, allow your savings to be kept intact. Only the nett picture matters. So unless one is happy with the lowered nett amount cos didnt account for these large end-of-year expenses, otherwise its either earn much more or save much more.
This is an actual method that I use to manage my savings. I would say this is the HIGHEST level of analysis and planning I make to ensure I am saving
The basic being first monitor daily expenses to get monthly expenditure totals, next monitor and ensure monthly surplus mostly, also analyze expenditure patterns and adjust.
Then more advance is to get an annual figure saved eg 1st Jan to 31st Dec. The amount that is kept intact after ALL the annual expenses are accounted for.
Then the highest level is to set targets by looking at the overall picture, work backwards to arrive at a target amount per month.
Next is back to basics, checking nett figure per month to see if hitting the target, monitoring expenditure pattern (not every expenditure amount), total amount per expense item. Then annual figure, less year-end expense. After all of that check if the Intact savings is hitting target. Then repeat.
Too much trouble? Well its your money, its your life.
I did it this way, it doesnt take that much of my time at all. It allowed me to save up alot in my working days, enough for me to get started investing in shares, enough to build up a separate living expense reserve that is used to finace this period of unemployment and change in job.
It doesnt matter how much one saves every month IF at the end of say a year or 2 or even more, ALL or the bulk of it is used to finance something (non-income generating) Only with INTACT savings building up every year. Over a short few years, you can be surprised at the amount you build up, just by being more dilligent, conscious of where your money is going to, what are you saving up extra for, what are the things you have planned in your monthly, annual budget. Just like that.
Easier said than done. But getting started in small steps first. A journey of a thousand steps begins with one. Even if one does not manage to do everything listed above in a yearly cyle, the simple fact that you are putting more effort to manage your money is way better than what you started with (a simplistic idea of putting leftover of your salary into your bank account and hope it will grow somewhat)
Another deposit of thoughts
Where I left off, I did manage to buy lunch for dad, then head to Gym near to Driving school, where I did stepper and weights for about 40mins then bathed and change to go straight for driving. After that, I took a bus to Bukit Batok Central to take bus 106 which will pass by Holland, for me to drop off my watch for repairs. Then I hopped onto 106 to head down to National library area to collect my cert. After which, I took a train down to Tanjong Pagar to meet Tab for dinner at Soup Spoon. Quite hectic indeed. I was more or less quite alert until I reached home and then feel the effects of so many stuff. BUT I did cook another pack of magee mee with egg white only to eat cos I felt hungry and cold after my long bus ride back from Orchard.
Hmm there are many things in my mind, if those thoughts are worth money, guess I'll be rich.
Just finished a quick tally up of my expenses for Feb and catch up for the few days into March.
All expenses (except Jap, guitar, driving) = $701.90 (plus minus a few dollars)
Driving $300, Jap $200
Total $1201.90.
A bit on the high side due to the courses. But cos those are more or less transient or at least until I finish those courses, my MAIN concern are all the other expenses.
My budget is $20-$25 a day or $600-$750. So judging from the figures, I have kept within the budget.
Income is $600 from flexi-work (received thus far) So more or less can cover the cost, except for the courses which will eat into part of my reserve.
Higher expense came from a Denim blazer, more eating out cos of birthdays, weekends. Will have to monitor and make sure not to overspend.
So far so good after 2 months of CONSCIOUS budgeting. I can see that expenses are reined in more or less. Its more of the courses that are the more expensive items in my budget. Will continue monitoring into the month of March.
The good thing about getting the flexible work (income) and also monitoring and reining in spending (expense) is that I see that my reserve is reducing much slower than before.
No further sales of shares yet, been buying an order for LONG-TERM portfolio. Then I looked at the excel files and chose those that I decide to put more long term. Turns out, I only have 1 counter for trading. The rest are all Mid-to-Long Term.
____________________________________________
Have another 3.5 weeks more to adjust sleeping hours, nurse my health and get into better shape, finish up flexible work, start setting up routine/timetable to ensure ALL my courses & stuff are slotted nicely so that there is little strain on time and energy. Then its ready for work to start.
On a certain note, cant wait to start.
On another note, would have to say good bye to my 'break'.
It is overall a good and well-deserved one for me.
Monitoring of monthly expenses and savings to continue. Annual comparison of savings to continue. Annual review of Savings and Investment to continue. An overall review in 3-5 years time.
Hmm there are many things in my mind, if those thoughts are worth money, guess I'll be rich.
Just finished a quick tally up of my expenses for Feb and catch up for the few days into March.
All expenses (except Jap, guitar, driving) = $701.90 (plus minus a few dollars)
Driving $300, Jap $200
Total $1201.90.
A bit on the high side due to the courses. But cos those are more or less transient or at least until I finish those courses, my MAIN concern are all the other expenses.
My budget is $20-$25 a day or $600-$750. So judging from the figures, I have kept within the budget.
Income is $600 from flexi-work (received thus far) So more or less can cover the cost, except for the courses which will eat into part of my reserve.
Higher expense came from a Denim blazer, more eating out cos of birthdays, weekends. Will have to monitor and make sure not to overspend.
So far so good after 2 months of CONSCIOUS budgeting. I can see that expenses are reined in more or less. Its more of the courses that are the more expensive items in my budget. Will continue monitoring into the month of March.
The good thing about getting the flexible work (income) and also monitoring and reining in spending (expense) is that I see that my reserve is reducing much slower than before.
No further sales of shares yet, been buying an order for LONG-TERM portfolio. Then I looked at the excel files and chose those that I decide to put more long term. Turns out, I only have 1 counter for trading. The rest are all Mid-to-Long Term.
____________________________________________
Have another 3.5 weeks more to adjust sleeping hours, nurse my health and get into better shape, finish up flexible work, start setting up routine/timetable to ensure ALL my courses & stuff are slotted nicely so that there is little strain on time and energy. Then its ready for work to start.
On a certain note, cant wait to start.
On another note, would have to say good bye to my 'break'.
It is overall a good and well-deserved one for me.
Monitoring of monthly expenses and savings to continue. Annual comparison of savings to continue. Annual review of Savings and Investment to continue. An overall review in 3-5 years time.
Saturday, February 27, 2010
Making a large deposit of thoughts here so that I can sleep... omfg
Yes, I am feeling tired. Quite stoned than usual. All thanks to that sleeping at 4-5am reading storybooks for a few nights in a row last week. Then I tried to adjust back the timing to very mixed and not much success. Sleeping at 2am++ and the hot weather at night also made it difficult to sleep. SO feeling more stoned than usual. This week, heading out for a swim in the morning was so difficult. I woke up for it on tuesday but decided to postpone to wednesday, which I did wake up tired but dragged my sorry butt out of the home and into the pool. Then going out also tiring. The only day I felt better was actually Tuesday, the swim woke me up sufficiently and the driving lesson was good. Then Wed, Thur deteriorated. Need to sleep earlier...
That's what I tell myself when I hopped into bed at 10.30pm, hoping to sleep. Guess what I am stoned but my mind is active. Too active. Hence I am here at my blog to make a deposit of thoughts so that I can finally sleep, hopefully by 1am so that I can wake up less zombified and go for guitar tomorrow.
There are various thoughts swirling in my mind, guess that is what I get when I go to FH office and did work without listening to music for half the time there. There are various threads going on.
1) Housing in Japan. The research that I was doing, concluded and showed FH the sites and information found, plus some of my thoughts regarding investing in a housing over there. But that meant I dont have that much mind-consuming tasks left to do... Later I was looking at the actual prices and doing currency conversion and also calculating the cost per square metre and per square foot, to compare to Sg prices.
2) Housing in Sg. Was reading up articles after articles about sg housing. Then checked up some developments that I passed by on my journeys on the buses. Curious about the price ranges and checked. Unfortunately I DO not have that amount of money and I dont think houses priced at certain ranges have a lot of upside left, even if one is thinking of capital appreciation. Then was reading about the seller stamp duty news, PRs housing articles etc.
3) Was also monitoring the stock market in-between tasks. I had already keyed in the orders at home and just checked on the prices periodically. I hadnt had the time and energy to sit down and focus on coming up with an exact strategy yet. I do have thoughts here and there about how to reach the goal of $30k this year but a thought struck me on my bus journey home. I need to also look for LONG-TERM and buy and keep for long term. Currently among my portfolio, there is only 1 share counter that is cheap enough for me to do a long term thing. Hmm... Monday I shall key in an order for that. Also need to write down and record and remind myself NOT to sell off this batch of shares unless it gains in capital, more than 300% of current price. Think that can help somewhat address some long term thingy. That also meant my 1/3 funds left, might not be enough to buy more shares, cos have to buy LT, put aside some for reserve in case of funny stuff like rights... but most counters already had right issue. Still has to be done.
4) The last and most thought given to was with regards to what I was talking with FH about. Basically it boils down to money. Nope, we werent arguing about my wages. I quite enjoy talking with FH cos he does understand and share certain concepts about money and investment. Basically to cut the chase, we were talking about the property investment and how though there are gains to be made, a normal person can only afford 1 house. Whether that is the correct or wrong decision, really meant a person can end up repaying 30 years or losing in the region of $200k mistake...
He was saying that many cannot afford such a mistake. It would take perhaps a peson 10 years to save that sum. I agreed. Even if a person saves $10k a year, it still takes that many years. Then he told me that not many can save $10k/12mths = $830 a month. Also instead of saving, he reckon probably I could do agency work and earn more. That 'extra' earned is the 'savings'. I told him its the same financial equation "Earn more, Spend less". For most of us, with single income from work, the earning more part is from promotion, bonus. But mainly is the spending less. I want to remind that spending less is NOT saying that you dont buy things you want, need, nor eat out nor spend on lesiure. It just means managing them so that you can do most of them pretty regularly and yet be able to accumulate savings in the bank, which can then be used for investment.
Then he was remarking that I seem to be quite well-off financially, at least from what he could observe. Ya being one of the other amongst us who is 'fun-employed', guess its obvious enough, plus I work for him doing flexible so he had more interaction with me. I agreed that I dont have much financial obligations comparatively, try to manage my money well, dont buy that much wants.
I did tell him that I hope he doesnt misunderstand this as being a Scrooge. He clarified that its not being scrooge. He was saying how he was surprised at the amount of money I spend when I go holidaying (I presume to be Bangkok, Macau, HK and even KL, JB) *Yes I surprise even myself when I total up the amount I can spend in one trip... luckily never hit beyond maximum of $1.7k, all in* He was saying that judging from the way I buy things, pay for things, he can gauge that I am not stingeing. Its more of paying for things that are worth the value, eg the memories of a good holiday than on something branded/material.
I agree with that. It is true that I can afford eg a $1k bag, even now being unemployed. But what is stopping me is my perception of value for it. I dont derive that much value from owning it, using it. Its too overpriced for me. This is also connected to my problem of spending $1k on things I want. I was telling him that really the things I want, that $1k cannot buy. It really requires alot of money to 'buy' what I really want; time and energy and money enough to pursue whatever it is that I want to learn, not have to rush to work.
Things he also envied when I told him I got to go for guitar class tomorrow. I told him that at this point, he is still setting up the firm. Give another 3-5 years, he should definitely get somewhere (way higher than me) and then surely can take a good break.
At this point of time, I wont rule out agency work or whatever but it has to be in my own time. I have many things going on all at the same time. I want to focus on a few, when more stablize then explore others. Learning and developing skills that can translate into monetary benefits are always welcome, provided I can manage. I believe that is the key.
___________________________________________
After he dropped me at Cityhall after work, I sat on the bus and gave further thoughts about the several topics that came up today. I was thinking about just being a Saver, is that basis enough to be able to invest?
I still remember exactly HOW it was like when I first graduated. I had been a Saver then but my savings (from pocketmoney) wasnt enough to do much at all. Buying shares was out of the option then. I Had To Work. Then I actually sat down and thought about saving up enough money so that I could start buying some shares, as part of investing, while I continue to earn an income (at this point, I havent thought of passive income) It was a thought similar to what my dad did; working and then buying shares.
From the day that I started working, from temp to intern to Untrained to NIE days, I monitored my monthly overall savings (Using the budget way which I wrote in earlier entries) I refined, modified and rethink along the way and then checked out the overall nett savings at the end of every month (using the monthly bank balance update way and cut-off) Along the way, I did brush up my Excel skills and did up an Excel file to monitor which I still use now. It has been 5.5years since.
If you want to compare salary, I started at $1.2k temp, $1k intern, $2k gross at Untrained, all the way until my last drawn salary. Compared to my friends, there are those amongst who earn way higher than I did, compared to JC friends, all of them earned higher salaries than I. After this 6 months of almost $0 income, I would say, whatever headstart I had is gone.
Then what is the difference? Its Not that Savings alone can let a person become wealthy. The truth is that "Savings is the basis for investment to happen." Unless you are one whose job pays exceedingly well >$10-20k a month, most of us live with decently high salaries and have to accumulate.
For me I did save dilligently. I reminded myself of the earlier temp days, where I had to hold 2 jobs, which the total amount didnt hit the starting pay of a grad at all. I remind myself that I want to manage my money/resources well so that I dont have to worry about income (as I have a buffer) I actually decided that I wanted to save extra $5k to try a first initial investment foray into stocks.
I did save that. Yet due to work taking up a huge chunk of my energy and time, I wasnt sure then if I was ready to enter. Really had no idea. YET I didnt want to end up being Most of those people who enter blindly and actually LOST their savings (they should have just kept it in the bank until they figure things out a bit more) I had to save dilligently and carefully so I wasnt about to become them. Hence I did my Investment Homework. I tried a 'paper trade', monitored certain counters. Over time, I recorded the prices in Excel and refined my criteria of counters. Added and removed certain counters and continued monitoring. When prices were within my range, I took a leap-of-faith and plunged in. I ended up using most of my funds, except my Reserve for expenses. The rest of the story is documented on this blog. Which I myself also re-read to remember certain points which I might have forgotten at times.
My point is this.
Being a Saver Does Not gurantee investment success. It does not mean that you dont have to work.
It is the basis for Investment to be possible (in whichever instrument you are comfortable; property, bonds, unit trust, equity, derivatives) Without savings, investment is not viable because of holding power. Investment funded by credit cards and even bank loans might not be as viable, if interest is high.
It is the means also to have a buffer in case of unemployment, not have daily stress about money problems and to be able to afford certain things you deem important.
At least these are my thoughts about Savings and Investing. I am glad that FH does agree on most of it. It is easier when I speak to him regarding these, and at times I come out with new thoughts, perspectives. Interesting indeed.
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K I think I have exhausted all thoughts in this deposit. Finally can sleep well.
That's what I tell myself when I hopped into bed at 10.30pm, hoping to sleep. Guess what I am stoned but my mind is active. Too active. Hence I am here at my blog to make a deposit of thoughts so that I can finally sleep, hopefully by 1am so that I can wake up less zombified and go for guitar tomorrow.
There are various thoughts swirling in my mind, guess that is what I get when I go to FH office and did work without listening to music for half the time there. There are various threads going on.
1) Housing in Japan. The research that I was doing, concluded and showed FH the sites and information found, plus some of my thoughts regarding investing in a housing over there. But that meant I dont have that much mind-consuming tasks left to do... Later I was looking at the actual prices and doing currency conversion and also calculating the cost per square metre and per square foot, to compare to Sg prices.
2) Housing in Sg. Was reading up articles after articles about sg housing. Then checked up some developments that I passed by on my journeys on the buses. Curious about the price ranges and checked. Unfortunately I DO not have that amount of money and I dont think houses priced at certain ranges have a lot of upside left, even if one is thinking of capital appreciation. Then was reading about the seller stamp duty news, PRs housing articles etc.
3) Was also monitoring the stock market in-between tasks. I had already keyed in the orders at home and just checked on the prices periodically. I hadnt had the time and energy to sit down and focus on coming up with an exact strategy yet. I do have thoughts here and there about how to reach the goal of $30k this year but a thought struck me on my bus journey home. I need to also look for LONG-TERM and buy and keep for long term. Currently among my portfolio, there is only 1 share counter that is cheap enough for me to do a long term thing. Hmm... Monday I shall key in an order for that. Also need to write down and record and remind myself NOT to sell off this batch of shares unless it gains in capital, more than 300% of current price. Think that can help somewhat address some long term thingy. That also meant my 1/3 funds left, might not be enough to buy more shares, cos have to buy LT, put aside some for reserve in case of funny stuff like rights... but most counters already had right issue. Still has to be done.
4) The last and most thought given to was with regards to what I was talking with FH about. Basically it boils down to money. Nope, we werent arguing about my wages. I quite enjoy talking with FH cos he does understand and share certain concepts about money and investment. Basically to cut the chase, we were talking about the property investment and how though there are gains to be made, a normal person can only afford 1 house. Whether that is the correct or wrong decision, really meant a person can end up repaying 30 years or losing in the region of $200k mistake...
He was saying that many cannot afford such a mistake. It would take perhaps a peson 10 years to save that sum. I agreed. Even if a person saves $10k a year, it still takes that many years. Then he told me that not many can save $10k/12mths = $830 a month. Also instead of saving, he reckon probably I could do agency work and earn more. That 'extra' earned is the 'savings'. I told him its the same financial equation "Earn more, Spend less". For most of us, with single income from work, the earning more part is from promotion, bonus. But mainly is the spending less. I want to remind that spending less is NOT saying that you dont buy things you want, need, nor eat out nor spend on lesiure. It just means managing them so that you can do most of them pretty regularly and yet be able to accumulate savings in the bank, which can then be used for investment.
Then he was remarking that I seem to be quite well-off financially, at least from what he could observe. Ya being one of the other amongst us who is 'fun-employed', guess its obvious enough, plus I work for him doing flexible so he had more interaction with me. I agreed that I dont have much financial obligations comparatively, try to manage my money well, dont buy that much wants.
I did tell him that I hope he doesnt misunderstand this as being a Scrooge. He clarified that its not being scrooge. He was saying how he was surprised at the amount of money I spend when I go holidaying (I presume to be Bangkok, Macau, HK and even KL, JB) *Yes I surprise even myself when I total up the amount I can spend in one trip... luckily never hit beyond maximum of $1.7k, all in* He was saying that judging from the way I buy things, pay for things, he can gauge that I am not stingeing. Its more of paying for things that are worth the value, eg the memories of a good holiday than on something branded/material.
I agree with that. It is true that I can afford eg a $1k bag, even now being unemployed. But what is stopping me is my perception of value for it. I dont derive that much value from owning it, using it. Its too overpriced for me. This is also connected to my problem of spending $1k on things I want. I was telling him that really the things I want, that $1k cannot buy. It really requires alot of money to 'buy' what I really want; time and energy and money enough to pursue whatever it is that I want to learn, not have to rush to work.
Things he also envied when I told him I got to go for guitar class tomorrow. I told him that at this point, he is still setting up the firm. Give another 3-5 years, he should definitely get somewhere (way higher than me) and then surely can take a good break.
At this point of time, I wont rule out agency work or whatever but it has to be in my own time. I have many things going on all at the same time. I want to focus on a few, when more stablize then explore others. Learning and developing skills that can translate into monetary benefits are always welcome, provided I can manage. I believe that is the key.
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After he dropped me at Cityhall after work, I sat on the bus and gave further thoughts about the several topics that came up today. I was thinking about just being a Saver, is that basis enough to be able to invest?
I still remember exactly HOW it was like when I first graduated. I had been a Saver then but my savings (from pocketmoney) wasnt enough to do much at all. Buying shares was out of the option then. I Had To Work. Then I actually sat down and thought about saving up enough money so that I could start buying some shares, as part of investing, while I continue to earn an income (at this point, I havent thought of passive income) It was a thought similar to what my dad did; working and then buying shares.
From the day that I started working, from temp to intern to Untrained to NIE days, I monitored my monthly overall savings (Using the budget way which I wrote in earlier entries) I refined, modified and rethink along the way and then checked out the overall nett savings at the end of every month (using the monthly bank balance update way and cut-off) Along the way, I did brush up my Excel skills and did up an Excel file to monitor which I still use now. It has been 5.5years since.
If you want to compare salary, I started at $1.2k temp, $1k intern, $2k gross at Untrained, all the way until my last drawn salary. Compared to my friends, there are those amongst who earn way higher than I did, compared to JC friends, all of them earned higher salaries than I. After this 6 months of almost $0 income, I would say, whatever headstart I had is gone.
Then what is the difference? Its Not that Savings alone can let a person become wealthy. The truth is that "Savings is the basis for investment to happen." Unless you are one whose job pays exceedingly well >$10-20k a month, most of us live with decently high salaries and have to accumulate.
For me I did save dilligently. I reminded myself of the earlier temp days, where I had to hold 2 jobs, which the total amount didnt hit the starting pay of a grad at all. I remind myself that I want to manage my money/resources well so that I dont have to worry about income (as I have a buffer) I actually decided that I wanted to save extra $5k to try a first initial investment foray into stocks.
I did save that. Yet due to work taking up a huge chunk of my energy and time, I wasnt sure then if I was ready to enter. Really had no idea. YET I didnt want to end up being Most of those people who enter blindly and actually LOST their savings (they should have just kept it in the bank until they figure things out a bit more) I had to save dilligently and carefully so I wasnt about to become them. Hence I did my Investment Homework. I tried a 'paper trade', monitored certain counters. Over time, I recorded the prices in Excel and refined my criteria of counters. Added and removed certain counters and continued monitoring. When prices were within my range, I took a leap-of-faith and plunged in. I ended up using most of my funds, except my Reserve for expenses. The rest of the story is documented on this blog. Which I myself also re-read to remember certain points which I might have forgotten at times.
My point is this.
Being a Saver Does Not gurantee investment success. It does not mean that you dont have to work.
It is the basis for Investment to be possible (in whichever instrument you are comfortable; property, bonds, unit trust, equity, derivatives) Without savings, investment is not viable because of holding power. Investment funded by credit cards and even bank loans might not be as viable, if interest is high.
It is the means also to have a buffer in case of unemployment, not have daily stress about money problems and to be able to afford certain things you deem important.
At least these are my thoughts about Savings and Investing. I am glad that FH does agree on most of it. It is easier when I speak to him regarding these, and at times I come out with new thoughts, perspectives. Interesting indeed.
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K I think I have exhausted all thoughts in this deposit. Finally can sleep well.
Monday, February 01, 2010
Jan 2010 expenses and income
I did mention that I was actively monitoring my expenses and spending using the $20-$25 daily limit. Also excluding 2 expense items separately, namely Driving and Guitar.
After 31 days of recording, usually 5mins at the end of the day, I have gotten the amount. At this point, I havent done analysis to it, except total the figures.
Total about => $592.52
Driving => $300
Guitar 2mths => $240
Total about $1132.52
Given my original budget figures was $750 expenses, $120 guitar and $200 driving for a grand total of $1070.
The fact that I had pre-paid for the guitar (cos they collect for next month) and topped up driving (still have balance of $150 in system for booking) meant that I have successfully kept to my budget.
The amount I spend is not a lot cos I am not working daily and if I can, eat meals at home. So for those without the option but cos u are working, can afford a higher budget.
What is inside my $592.58 amount?
Ezy link top-up $70
Hp $31
Cable tv and internet (after sharing out) $45.50
Cab ride $50
Interview shoes $74
Toto $10
Grocery of 2 x lychee, 2 x miller beer, 1 x Margarita mixer etc
With meals eaten out quite often but at cheaper alternatives, still there is Soupspoon, ramen, ice cream, green tea latte, Old town coffee.
So its not so much of NOT eating out but changing to cheaper alternatives, example coffee shop, food court or just other alternatives. Of course the option of being able to eat at home makes up for the reduced meals eaten outside. Even if that is not possible, eating out at coffee shop, food courts and hawker is cheaper.
My income for flexible work so far is $1k. It more or less off-sets this month's expenditure.
As for my shares, for 2010 so far, I have sold off most of my Singapore shares for cash and made slightly more than 2 months of my previous nett pay. I dont intend to use that to top up my living expense account. I will re-channel them to look for more opportunities to buy. It would mean monitoring the market more consistently and alot of decision making again.
So although my NETT picture for income and expenses is positive for 2 months, I still have to think about looking for work, getting income flows. Also there are many more years to live out... so yes I have more important things on my mind minding my own affairs than to be too overly concern about other's affairs.
Think I will go swimming on Wed instead. Today is too hungry.
After 31 days of recording, usually 5mins at the end of the day, I have gotten the amount. At this point, I havent done analysis to it, except total the figures.
Total about => $592.52
Driving => $300
Guitar 2mths => $240
Total about $1132.52
Given my original budget figures was $750 expenses, $120 guitar and $200 driving for a grand total of $1070.
The fact that I had pre-paid for the guitar (cos they collect for next month) and topped up driving (still have balance of $150 in system for booking) meant that I have successfully kept to my budget.
The amount I spend is not a lot cos I am not working daily and if I can, eat meals at home. So for those without the option but cos u are working, can afford a higher budget.
What is inside my $592.58 amount?
Ezy link top-up $70
Hp $31
Cable tv and internet (after sharing out) $45.50
Cab ride $50
Interview shoes $74
Toto $10
Grocery of 2 x lychee, 2 x miller beer, 1 x Margarita mixer etc
With meals eaten out quite often but at cheaper alternatives, still there is Soupspoon, ramen, ice cream, green tea latte, Old town coffee.
So its not so much of NOT eating out but changing to cheaper alternatives, example coffee shop, food court or just other alternatives. Of course the option of being able to eat at home makes up for the reduced meals eaten outside. Even if that is not possible, eating out at coffee shop, food courts and hawker is cheaper.
My income for flexible work so far is $1k. It more or less off-sets this month's expenditure.
As for my shares, for 2010 so far, I have sold off most of my Singapore shares for cash and made slightly more than 2 months of my previous nett pay. I dont intend to use that to top up my living expense account. I will re-channel them to look for more opportunities to buy. It would mean monitoring the market more consistently and alot of decision making again.
So although my NETT picture for income and expenses is positive for 2 months, I still have to think about looking for work, getting income flows. Also there are many more years to live out... so yes I have more important things on my mind minding my own affairs than to be too overly concern about other's affairs.
Think I will go swimming on Wed instead. Today is too hungry.
Friday, January 08, 2010
Continued about budgeting...
Man I was knocked out after posting up. Feeling under the weather too. Thinking back, its been more than 5 months and I havent had to see the doc so far for any medicine. So I am actually healthier this period and not to mention, can concuss and sleep things off like today.
Really knocked out from 5pm until when I woke up, its already close to 9pm. No intention to practice guitar. Signz this week been rather busy, feeling the tiredness creeping back on me. I better clock in 1 more gym to make it twice. Past two weeks, I managed once a week only... but weighed myself just wednesday. Surprised that almost back to my original fat self firstly. K small consolation that the Christmas and New Year binge didnt leave a lasting impression. Good, now to up my exercise...
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I wanna comment about the 2 different budget method I mentioned in my earlier post, the one about Phantom money.
I feel there are 2 ways of budgeting, which I use at times.
First one is fixed amount a day for 30 days calculation.
I decide to spend between $20-25 per day for 30 days. This amount excludes driving and guitar course. Cos these are higher cost and they are really for a rather transient period of my expense. Also if these are included, it is near impossible to keep to $20-$25 a day target unless I really go into Scrooge and Bear mode (stinge and hibernate at home) I rather take this 2 items out and not consider them my monthly expenditure. But any other things like hp, internet, shoes, clothes, transport all goes into this. But of course I recognise that I spend money on guitar and driving. They are outflows too.
Hence I target a monthly expenditure of $600-$750 for normal expenditure, adding in $120 guitar and maybe $200 driving. That would bring to a sum of $920-$1070. Not an astronomical figure but remember for now, my income is near nil. Hence would have to see if can further minimize, if not, at least keep it within this range, NOT way beyond this figure.
Now at the end of a day, I would recall all the expenses for one day and get a TOTAL figure. Say by today, its already 8 days into the month of January. I recorded immediately the expenditure for today and yesterday which are very fresh in my mind. Receipts helped also. Then I work backwards a bit to trace, starting from New Year party and then the weekend, and then this week where I worked 2 days, went 2 interviews. Of course if you already started a bit late eg >10 days and really cannot get a pic, well simple. Start from today and end your 'accounting' exactly on the date 1 month later. Just to get an better idea of the cash outflows. I am not too concerned if I missed a few dollars, cents but I have to record most of the expenses accurately and also capture all large expenses.
So I am going to show my actual figures. No harm to me. Dont mind ya knowing my expenses pattern. I managed to get a figure accumulated for 8 days $321.10, I paid guitar $120 already. So I am going to subtract it out, $201.10. This seems like a high figure but remember I had a target of $20-$25.
Lets see how I fared, $201.10 / 8 = $25.14. Okay very close. But still at a higher end after averaging. Hence it meant for the weekends and even next week, I will consciously reduce spending, head out lesser etc. I will come back to check this average figure. Definitely would be better if I can lower to closer to $20 but I still have 23 days of the week to fiddle around with. Not to mention other bills like hp, cable tv coming in. Yup its going to be a challenge.
The 2nd method is discussed in the previous post. To put aside a TOTAL amount for each expense item that usually appear in your monthly expense. Eg $200 transport, $100 hp, $200 clothes, $100 shoes, $50 hp, $50 cable, $100 misc, $800 food, $300 outings, $120 guitar, $50 CD, $50 comics => $2120
Now for a nett pay of say $2900 (my old pay), it meant $2900-$2120 = $780. So IF I finished spending most of those amounts allocated in the expenses and didnt exceed much, I should have a nett figure of $780 in my bank account by the end of the month.
Whether how u check it, either using checking nett difference at end of the month method or actually drawing out $780 physically and putting into another savings account.
But of course, sometimes expenses are rather high, maybe cos I take public transport. Maybe I take cab more now, shop more cos need change of wardrobe that even $200 a month is too low. So the planned figures changed.
Cab $250, transport $100, $100 hp, $500 clothes, $200 shoes, $50 hp, $50 cable, gifts $200, misc $100, food $800, outings $500, $120 guitar, $50 CD, $50 comics => $3070
Now you see that this is above the nett salary of $2900. It is NOT FEASIBLE unless I have more income inflows. This is just the bitter truth of Reality. You are spending way too much for your income. There is no other way about it but to either GET more inflows per month immediately or cut next months expenses immediately.
Why do I say immediately? Because this is a situation of negative budget. You are running a negative. Now since money doesnt drop out of the sky, it means, this negative of $170 is being financed out of your savings. It will drain your savings down(like what I am doing now) But at least its your own money. BUT if you dont have savings, its being financed by debt. Either overdrafts or credit cards, cos these are the consumer loans out there, that is easy to draw up on and without having to put in asset as collateral/mortgage. The downside is the higher Interest Rates.
And had earlier explored the whole interest on interest on rolling over debt. It is really difficult to pay off, if every month is tight. So I rather err on the downside and ensure that every month is a surplus instead of a deficit. Some months cos of travelling, so really overshoot. I still have to see how much deficit, so that I can ensure the following months, there are enough surpluses such that the Nett figure at the end of the year is still positive.
I must admit, it wasnt easy, and required more discipline and also monitoring and conscious decision making, deferring Wants alot of times, even evaluating whether this purchase can wait, or even if its a real need. I must admit my guitar course is not a need. But I have my vices too. I dont want to earn an income and yet spend $0 on things I like. BUT I recognize that I shouldnt indulge in everything or most of it at too regular a basis. Its a give and take situation.
K think, I have finished my thoughts about personal finances for now. Subsequent posts will go back to normal unless something hits me in the head to share.
Really knocked out from 5pm until when I woke up, its already close to 9pm. No intention to practice guitar. Signz this week been rather busy, feeling the tiredness creeping back on me. I better clock in 1 more gym to make it twice. Past two weeks, I managed once a week only... but weighed myself just wednesday. Surprised that almost back to my original fat self firstly. K small consolation that the Christmas and New Year binge didnt leave a lasting impression. Good, now to up my exercise...
____________________________________________
I wanna comment about the 2 different budget method I mentioned in my earlier post, the one about Phantom money.
I feel there are 2 ways of budgeting, which I use at times.
First one is fixed amount a day for 30 days calculation.
I decide to spend between $20-25 per day for 30 days. This amount excludes driving and guitar course. Cos these are higher cost and they are really for a rather transient period of my expense. Also if these are included, it is near impossible to keep to $20-$25 a day target unless I really go into Scrooge and Bear mode (stinge and hibernate at home) I rather take this 2 items out and not consider them my monthly expenditure. But any other things like hp, internet, shoes, clothes, transport all goes into this. But of course I recognise that I spend money on guitar and driving. They are outflows too.
Hence I target a monthly expenditure of $600-$750 for normal expenditure, adding in $120 guitar and maybe $200 driving. That would bring to a sum of $920-$1070. Not an astronomical figure but remember for now, my income is near nil. Hence would have to see if can further minimize, if not, at least keep it within this range, NOT way beyond this figure.
Now at the end of a day, I would recall all the expenses for one day and get a TOTAL figure. Say by today, its already 8 days into the month of January. I recorded immediately the expenditure for today and yesterday which are very fresh in my mind. Receipts helped also. Then I work backwards a bit to trace, starting from New Year party and then the weekend, and then this week where I worked 2 days, went 2 interviews. Of course if you already started a bit late eg >10 days and really cannot get a pic, well simple. Start from today and end your 'accounting' exactly on the date 1 month later. Just to get an better idea of the cash outflows. I am not too concerned if I missed a few dollars, cents but I have to record most of the expenses accurately and also capture all large expenses.
So I am going to show my actual figures. No harm to me. Dont mind ya knowing my expenses pattern. I managed to get a figure accumulated for 8 days $321.10, I paid guitar $120 already. So I am going to subtract it out, $201.10. This seems like a high figure but remember I had a target of $20-$25.
Lets see how I fared, $201.10 / 8 = $25.14. Okay very close. But still at a higher end after averaging. Hence it meant for the weekends and even next week, I will consciously reduce spending, head out lesser etc. I will come back to check this average figure. Definitely would be better if I can lower to closer to $20 but I still have 23 days of the week to fiddle around with. Not to mention other bills like hp, cable tv coming in. Yup its going to be a challenge.
The 2nd method is discussed in the previous post. To put aside a TOTAL amount for each expense item that usually appear in your monthly expense. Eg $200 transport, $100 hp, $200 clothes, $100 shoes, $50 hp, $50 cable, $100 misc, $800 food, $300 outings, $120 guitar, $50 CD, $50 comics => $2120
Now for a nett pay of say $2900 (my old pay), it meant $2900-$2120 = $780. So IF I finished spending most of those amounts allocated in the expenses and didnt exceed much, I should have a nett figure of $780 in my bank account by the end of the month.
Whether how u check it, either using checking nett difference at end of the month method or actually drawing out $780 physically and putting into another savings account.
But of course, sometimes expenses are rather high, maybe cos I take public transport. Maybe I take cab more now, shop more cos need change of wardrobe that even $200 a month is too low. So the planned figures changed.
Cab $250, transport $100, $100 hp, $500 clothes, $200 shoes, $50 hp, $50 cable, gifts $200, misc $100, food $800, outings $500, $120 guitar, $50 CD, $50 comics => $3070
Now you see that this is above the nett salary of $2900. It is NOT FEASIBLE unless I have more income inflows. This is just the bitter truth of Reality. You are spending way too much for your income. There is no other way about it but to either GET more inflows per month immediately or cut next months expenses immediately.
Why do I say immediately? Because this is a situation of negative budget. You are running a negative. Now since money doesnt drop out of the sky, it means, this negative of $170 is being financed out of your savings. It will drain your savings down(like what I am doing now) But at least its your own money. BUT if you dont have savings, its being financed by debt. Either overdrafts or credit cards, cos these are the consumer loans out there, that is easy to draw up on and without having to put in asset as collateral/mortgage. The downside is the higher Interest Rates.
And had earlier explored the whole interest on interest on rolling over debt. It is really difficult to pay off, if every month is tight. So I rather err on the downside and ensure that every month is a surplus instead of a deficit. Some months cos of travelling, so really overshoot. I still have to see how much deficit, so that I can ensure the following months, there are enough surpluses such that the Nett figure at the end of the year is still positive.
I must admit, it wasnt easy, and required more discipline and also monitoring and conscious decision making, deferring Wants alot of times, even evaluating whether this purchase can wait, or even if its a real need. I must admit my guitar course is not a need. But I have my vices too. I dont want to earn an income and yet spend $0 on things I like. BUT I recognize that I shouldnt indulge in everything or most of it at too regular a basis. Its a give and take situation.
K think, I have finished my thoughts about personal finances for now. Subsequent posts will go back to normal unless something hits me in the head to share.
personal finances iii - phantom savings & phantom money
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.
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.
____________________________________________
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.
Thursday, January 07, 2010
Personal finances ii?
This will be a short post. I am kinda feeling the 'toll' of this week. 2 days working flexi job, 2 days of interview, with yesterday being reallly bad with me puking out phelgme cake 3 times, cramping in gym and driving and stayed out until 10pm++, same for today - interview, then hang around out until near 10pm. Feeling very stoned and tired.
Tomorrow no interviews but arranged to meet up with an ex-collegue partly cos I got her help to put down as referee, partly she is on no-pay so not in former workplace and also to catch up with her, since she is quite nearby. So tonight I try to sleep earlier, tom wake up a bit later. Then just take it easy...
RUNAWAY BALLOONING TIME BOMBS
Coming back from the previous entry, where $1.2k, 12mths instalment plan, would balloon up to $1366, with $166 interest ONLY IF it is paid off in full in Dec with a once-off lump sum of $766.
What else can happen? Well now going to look at pro-longing the payment for another 1 year, just to see how the numbers play out.
Remember there is assumed to be NO extra purchases/instalment plans. Hence every month, there is no more additional $100-$50 in terms of nett increase in debt due to increase in principal sum.
Outstanding debt %766, still paying minimum of $50. NO extra purchses.
Yr 2,
1st mth=> $766(debt) + $15.32(interest) -$50(min) = $731.32
2nd mth=> $731.32(debt) +$14.63(int) -$50(min) = $695.95
3rd mth=> $695.95(debt) +$13.92(int) -$50(min) = $659.87
4th mth=> $659.87(debt) +$13.20(int) -$50(min) = $623.07
5th mth=> $623.07(debt) +$12.46(int) -$50(min) = $585.53
6th mth=> $585.53(debt) +$11.71(int) -$50(min) = $547.24
7th mth=> $547.24(debt) +$10.95(int) -$50(min) = $508.18
8th mth=> $508.18(debt) +$10.16(int) -$50(min) = $468.34
9th mth=> $468.34(debt) +$9.37(int) -$50(min) = $427.71
10th mth=> $427.71(debt) +$8.55(int) -$50(min) = $386.26
11th mth=> $386.26(debt) +$7.73(int) -$50(min) = $343.99
12th mth=> $343.99(debt) +$6.88(int) -$50(min) = $300.87
There are a few observations of what happens when minimum payment continues.
After 2nd year. You actually owed $766. You paid up $600 in total again. BUT in Dec when you see the statement, instead of owing just (766-600= $166 more, you actually now still owe $300.87 (300.87-166= 134.87 extra)
Maybe u realised it by now, the extra amount came from the compounded interest. So after 2 years of paying minimum. You owed 1.2k initially, you paid $1.2k already, but you still owe $300.87 extra. That is the accumulated interest in 2 years, compounded at 2% per month.
Another observation is that as the outstanding sum is small, less than $800, the $50 minimum payment actually helped to reduce the interest cos a part of it went towards repaying the principal sum. BUT it is slow-acting effect cos the interest is high.
Now another important note is that THIS interest-reducing aspect DOES NOT come with every and any loan amount outstanding in a credit card. Lets blow up the numbers a bit bigger to $3k. Assuming no extra purchase on this $3k rolling. Maybe a scenario of an outstanding amount on a card not closely monitored. Monitored in the sense, didnt notice how it grows like a balloon. But of course every month, pay minimum.
Yr 1, debt $3000, 0 extra purchase, monthly minimum $50.
Mth 1 $3000(debt) +$60(int) -$50(min) = $3010
Mth 2 $3010(debt) +$60.20(int) -$50(min) = $3020.02
Mth 3 $3020.02(debt) +$60.40(int) -$50(min) = $3030.42
Mth 4 $3030.42(debt) +$60.61(int) -$50(min) = $3041.03
Mth 5 $3041.03(debt) +$60.82(int) -$50(min) = $3051.85
Mth 6 $3051.85(debt) +$61.04(int) -$50(min) = $3062.89
Mth 7 $3062.89(debt) +$61.26(int) -$50(min) = $3074.15
Mth 8 $3074.15(debt) +$61.48(int) -$50(min) = $3085.63
Mth 9 $3085.63(debt) +$61.71(int) -$50(min) = $3097.34
Mth 10 $3097.34(debt) +$61.95(int) -$50(min) = $3109.29
Mth 11 $3109.29(debt) +$62.19(int) -$50(min) = $3121.48
Mth 12 $3121.48(debt) +$62.43(int) -$50(min) = $3133.91
Now its clear enough to see that in ANY loan, so long as amount repaid cannot exceed interest amount, then 0 principal repayment occurs. Which meant that interest compounded on interest is happening and that explains why the interest is increasing still despite payments.
End result is this. You owe $3000. You paid $600. And you now owe $3133.91. No dent in the debt amount. It in fact increased due to interest on interest.
This has implications.
Firstly it is left long enough with just minimum payments, it can ballon up really fast.
Next to reduce this effect, it means the payments should be higher than the interest, keep it higher by a more than just $10 cos the amount you pay over and above interest helps to reduce principal amount. Hence instead of paying $50 minimum as reflected in the statement, pay $100 if can. Next month, pay $90 if cash is tight. Try to go above the minimum sum and dont miss any or even revert back to minimum later on. Just have to bite the bullet lower down the amount until it is like the earlier example, where the overall amount is reduced.
Of course, the price in both examples, the credit card company wins. You lose more in 2nd example than 1st example cos you just might manage to repay and clear off the debt eventually say 1 more year. But in example 2, you can never seek to clear that at all, unless a big enough amount is repaid either once-off or monthly.
These scenarios can happen in any loans so long as there is interest. But the credit card has one of the highest interest out there, hence is much more severe.
So anybody who signs on credit cards have to keep these at the back of the mind, whether financial savvy or not, whether high income or lower. Its a matter of being aware, vigilant and also NOT overspending.
Credit card instalment plans help those without the entire lump sum to purchase something over a period of time, gradually repaying. Definitely the monthly repayment was part of your budget and definitely affordable to you then while you were making the decision to sign on. BUT dont let your guard down over this repayment period. You have to be dilligent and remind yourself that every month, you actually ALREADY spent that instalment amount, cos you have to pay for it at the end of that month. Hence guard against overspending. Cos you have to pay for all your this month purchases and also add in this instalment together. Instalment plans have its good but if you are complacent, it might grow into semething else altogether. Make good on your monthly instalment, make sure you have set aside part of your salary every month for that amount, before spending on others.
Next entry, phantom money and others.
Tomorrow no interviews but arranged to meet up with an ex-collegue partly cos I got her help to put down as referee, partly she is on no-pay so not in former workplace and also to catch up with her, since she is quite nearby. So tonight I try to sleep earlier, tom wake up a bit later. Then just take it easy...
RUNAWAY BALLOONING TIME BOMBS
Coming back from the previous entry, where $1.2k, 12mths instalment plan, would balloon up to $1366, with $166 interest ONLY IF it is paid off in full in Dec with a once-off lump sum of $766.
What else can happen? Well now going to look at pro-longing the payment for another 1 year, just to see how the numbers play out.
Remember there is assumed to be NO extra purchases/instalment plans. Hence every month, there is no more additional $100-$50 in terms of nett increase in debt due to increase in principal sum.
Outstanding debt %766, still paying minimum of $50. NO extra purchses.
Yr 2,
1st mth=> $766(debt) + $15.32(interest) -$50(min) = $731.32
2nd mth=> $731.32(debt) +$14.63(int) -$50(min) = $695.95
3rd mth=> $695.95(debt) +$13.92(int) -$50(min) = $659.87
4th mth=> $659.87(debt) +$13.20(int) -$50(min) = $623.07
5th mth=> $623.07(debt) +$12.46(int) -$50(min) = $585.53
6th mth=> $585.53(debt) +$11.71(int) -$50(min) = $547.24
7th mth=> $547.24(debt) +$10.95(int) -$50(min) = $508.18
8th mth=> $508.18(debt) +$10.16(int) -$50(min) = $468.34
9th mth=> $468.34(debt) +$9.37(int) -$50(min) = $427.71
10th mth=> $427.71(debt) +$8.55(int) -$50(min) = $386.26
11th mth=> $386.26(debt) +$7.73(int) -$50(min) = $343.99
12th mth=> $343.99(debt) +$6.88(int) -$50(min) = $300.87
There are a few observations of what happens when minimum payment continues.
After 2nd year. You actually owed $766. You paid up $600 in total again. BUT in Dec when you see the statement, instead of owing just (766-600= $166 more, you actually now still owe $300.87 (300.87-166= 134.87 extra)
Maybe u realised it by now, the extra amount came from the compounded interest. So after 2 years of paying minimum. You owed 1.2k initially, you paid $1.2k already, but you still owe $300.87 extra. That is the accumulated interest in 2 years, compounded at 2% per month.
Another observation is that as the outstanding sum is small, less than $800, the $50 minimum payment actually helped to reduce the interest cos a part of it went towards repaying the principal sum. BUT it is slow-acting effect cos the interest is high.
Now another important note is that THIS interest-reducing aspect DOES NOT come with every and any loan amount outstanding in a credit card. Lets blow up the numbers a bit bigger to $3k. Assuming no extra purchase on this $3k rolling. Maybe a scenario of an outstanding amount on a card not closely monitored. Monitored in the sense, didnt notice how it grows like a balloon. But of course every month, pay minimum.
Yr 1, debt $3000, 0 extra purchase, monthly minimum $50.
Mth 1 $3000(debt) +$60(int) -$50(min) = $3010
Mth 2 $3010(debt) +$60.20(int) -$50(min) = $3020.02
Mth 3 $3020.02(debt) +$60.40(int) -$50(min) = $3030.42
Mth 4 $3030.42(debt) +$60.61(int) -$50(min) = $3041.03
Mth 5 $3041.03(debt) +$60.82(int) -$50(min) = $3051.85
Mth 6 $3051.85(debt) +$61.04(int) -$50(min) = $3062.89
Mth 7 $3062.89(debt) +$61.26(int) -$50(min) = $3074.15
Mth 8 $3074.15(debt) +$61.48(int) -$50(min) = $3085.63
Mth 9 $3085.63(debt) +$61.71(int) -$50(min) = $3097.34
Mth 10 $3097.34(debt) +$61.95(int) -$50(min) = $3109.29
Mth 11 $3109.29(debt) +$62.19(int) -$50(min) = $3121.48
Mth 12 $3121.48(debt) +$62.43(int) -$50(min) = $3133.91
Now its clear enough to see that in ANY loan, so long as amount repaid cannot exceed interest amount, then 0 principal repayment occurs. Which meant that interest compounded on interest is happening and that explains why the interest is increasing still despite payments.
End result is this. You owe $3000. You paid $600. And you now owe $3133.91. No dent in the debt amount. It in fact increased due to interest on interest.
This has implications.
Firstly it is left long enough with just minimum payments, it can ballon up really fast.
Next to reduce this effect, it means the payments should be higher than the interest, keep it higher by a more than just $10 cos the amount you pay over and above interest helps to reduce principal amount. Hence instead of paying $50 minimum as reflected in the statement, pay $100 if can. Next month, pay $90 if cash is tight. Try to go above the minimum sum and dont miss any or even revert back to minimum later on. Just have to bite the bullet lower down the amount until it is like the earlier example, where the overall amount is reduced.
Of course, the price in both examples, the credit card company wins. You lose more in 2nd example than 1st example cos you just might manage to repay and clear off the debt eventually say 1 more year. But in example 2, you can never seek to clear that at all, unless a big enough amount is repaid either once-off or monthly.
These scenarios can happen in any loans so long as there is interest. But the credit card has one of the highest interest out there, hence is much more severe.
So anybody who signs on credit cards have to keep these at the back of the mind, whether financial savvy or not, whether high income or lower. Its a matter of being aware, vigilant and also NOT overspending.
Credit card instalment plans help those without the entire lump sum to purchase something over a period of time, gradually repaying. Definitely the monthly repayment was part of your budget and definitely affordable to you then while you were making the decision to sign on. BUT dont let your guard down over this repayment period. You have to be dilligent and remind yourself that every month, you actually ALREADY spent that instalment amount, cos you have to pay for it at the end of that month. Hence guard against overspending. Cos you have to pay for all your this month purchases and also add in this instalment together. Instalment plans have its good but if you are complacent, it might grow into semething else altogether. Make good on your monthly instalment, make sure you have set aside part of your salary every month for that amount, before spending on others.
Next entry, phantom money and others.
Inspired Post, part about action and proscrastination, part about finances.
Drawing-down and Personal expenses
As I am heading into my 5th month of unemployment, looking at how my 30k reserve living expense account has gone down quite a bit, about $9k so far. I do know that NOT all of the $9k is pure consumption. I know I have courses going on, bought some new clothes, did hair and stuff. But cos I did lag behind in my daily expense tracking which I did for about 2.5months dilligently, hence I can retrace back and get some figures to work out an average.
Lemme show ya how I work backwards,
To get the exact amount I spent, I took my recent current amount. Take $30k minus current amount = $8819.34
Then I worked to get the big expenses that I can remember in this 4 & 3/4 months, so
Driving course => $1160.62
Guitar => $680
Jap course => $357
Clothing (bra, cosplay jacket, 2 x 3/4 pants, contact lens, new basic makeup, epillator) => $501
2 Hair cuts and 1 dye => 152.50
Wedding ang baos => $296
Mom (last pocket money until i get perm job) => $800
HP (monthly x 5 mths, $90 hp upgrade => $255
Internet => $150
Cable tv (sub and installation) => $ 110
Others RO machine repair => $80
K now with these figures,
I can approximate that I spent $4541.62 on all these.
Then $8819.34 - $4541.62 = $4277.72 on transport and mainly food and other misc expenses.
Which works out to $4277.72/5 = $855.55.
So if transport is about $100 per mth, it means on average about $755.55.
Which can work out to be $755.55/30 = $25 on food and misc.
Now cos I have been saving $2 notes in my piggy bank to help squirrel away and ensure I 'save' what I have drawn out for spending. Saved $700. WHICH I banked into the other bank account that is for shares and investment, not in my spending/reserve account.
The actual draw-down is $8819.34 - $700 = $8119.34
I also realized that among the bigger categories, there are some which are really ONCE-OFF, not a constant expenditure, eg driving, jap, clothings, wedding, mom final allowance, and RO repair. SO to get a truer picture of my expenses, I would only subtract these categories. Cos some course might end soon and is rather short-term, not something I would do longer term.
therefore => $8119.35 - $3194.12 = $4925.23 for my usual expenses and outings.
per month => $4925.23 / 5 = $$985.05
per day => $985.05 / 30 = $32.85
This amount is a bit too high for my current $0 income status. Hence I have decided to draw it down further into $20 per day region. If I can do that, my monthly would roughly reach $600, which is more comfortable.
NOW the NEXT step is to actually JUST DO IT and adhere as much as I can, on as many days I can to hit this target. Cos only concrete action in small steps can help me achieve this target. No one is going to give me money. Though my shares might give me some gains BUT when I dont sell, there is STILL 0 income. So I need to really reduce the drawings on my reserve. Previously I thought I could keep expenditure to about $600 a month. But this little exercise showed me very concretly I need to cut my eating out in cafes/restaurants and eat more hawker, food court, reduce outings to a more manageable number, not like 3-5 times a week, everytime eating out with a meal about $17 - $20. Ya so I would like to eat in less expensive areas and also find cheaper ways of hanging out IF I have to.
So dont be surprised IF I suggest food court lunch/dinner, or something below $10 but filling.
(Now I wish to clarify that I reveal ACTUAL expenditure amounts NOT to show I am better at saving, better at money, have low expenditure etc etc, but to help those who are interested, to see HOW exactly to work out monthly expense, daily, etc)
____________________________________________
Proscratination and Action
After JLPT and Melaka trip, I actually proscrastinated quite a bit in my job search. So by the time I finally looked through the Sat and Sun Recruits which I had put ON my table, some jobs (including teaching abroad, teaching at a tuition centre quite near my place) were CLOSED. Shit!!!!!!!!!!!!!!!
Plus prior to Christmas and New Year, there was one week, I sent out resumes on Sunday, by mon/tue, I got interviews. Well though in the end, I screwed up some, some were too low offers and etc... I saw how some extra action on my part yielded something.
So after New Year, I promptly collected the Recruits, looked through, cut out, customise and send resume by Sunday evening. On monday still didnt hear anything, so I headed to work. By monday evening, got one email. On Tue, I went to flexi-work and got 2 calls for interviews. Just checked mail, got one more interview next week. One is supposed to call back for another interview. Hence though I havent scored any offers yet, I have gone for one interview today. Tomorrow there's one. Next wed, there's one. So more chances of interviews, more for me to polish up and hope to score better offer.
Plans broken into steps and Action in SMALL do-able steps do yield results.
Just like making sure I exercise 2-3 times a week also yielded weight loss, at least up until before the christmas and new year eating and drinking binge.
I want to maintain and build up this spirit of actually DOING things in steps gradually than to just think about or wait. It somewhat works for me, whether success or not, but its still better than doing nothing and waiting.
___________________________________________
Tab was asking me about credit card payment for interest-free plans. Hmm.. I really have no idea HOW and WHEN exactly I know so much, but I shared what I know with her.
Its interest-free cos if Kenko package $1.2k over 12 months,
using credit card instalment meant $100 a month. If you pay promptly in full every month, you will end up paying $1.2k in 12 months. U get a loan of $1.2k and u paid $1.2k. HENCE interest-free in essence.
NOW what can go wrong with this picture?
Pls remember that credit card companies, unlike HDB loans, WANTS you NOT to pay fully.
How does it do this?
Simple. Your credit card bill monthly allows u to pay minimum and/or any amount u want. It is easy to just pay minimum. Eg $50 minimum (but $0 is paid to reduce principal amount owed)
Compare this to a statement from HDB loan which states eg $550 for 60 months (which a portion actually pays off the principal sum and part of it is interest) so IF I dilligently pay $550 for 60 months, I can actually reduce my debt to $0.
BUT for the case of the credit card, what happens is the 2 things.
FIRST thing, I paid $50 instead of $100 for 1st month.
It meant the debt start accumulating interest of 2% per month.
It meant on 2nd month, I owe now $100 + $50(debt) + $1(charge) = $151
If I still pay minimum $50 in 2nd month,
It meant on 3rd month, I owe $50 + $151(debt) + $3(charge) = $204.
Now up until now, it seems rather low cos its still in the hundreds. Watch what happens next.
4th month, $50 + $204(debt) + $4.10(charge) = $258
5th month, $50 + $258(debt) + $5.16(charge) = $343.16
6th month, $50 + $343.16(debt) + $6.86(charge) = $400
7th month, $50 + $400(debt) + $8(charge) = $458
8th month, $50 + $458(debt) + $9.16(charge) = $517.16
9th month, $50 + $517.16(debt) + $10.34(charge) = $577.50
10th month, $50 + $577.50(debt) + $11.55(charge) = $639.05
11th month, $50 + $639.05(debt) + $12.78(charge) = $701.83
12th month, $50 + $701.83(debt) + $14.03(charge) = $765.87
Which now got to a rather BIG sum that you are suddenly faced with in Dec when you see your statement.
Remember u had paid $50x12 = $600 already but you still owe $765.87 which meant, instead of paying interest-free(which u had initially wanted/planned when U signed up) u end up paying $600 + $765.87 = $1365.87, an extra $166. Now THIS is assuming you pay off the lump sum of $765.87 in full in Dec. BUT if you didnt, then it continues to roll and as u can see, it can get bigger, exactly because NO PRINCIPAL REPAYMENT and it rolls over due to HIGH INTEREST COMPOUNDING.
SECOND thing that happens, if u start paying minimum. You forget that you had actually PLANNED to put aside $100 a month to pay off. So now cos you only paid $50, you somehow 'forget' that you had spent $100 a month effectively. Then u might go and sign up other stuff... Its like u 'feel' $50 richer cos u paid for something that is worth $100 but u only pay $50. So u might go out and spend extra $50. Effectively, it meant u spent $150, not on the same thing, but it meant u spend more overall.
Last thing, it requires quite clear monitoring of monthly statements (but just have to) to ensure that u pay dilligently and not let it roll. Can be easy to forget given we receive so many statements from bills, bank accs, credit cards, insurance, etc etc etc. Its easy to lose track even for me, given all the bills and stuff. A trick for me is to put all the envelops addressed to me at a part of my table. YES I have a messy table but on it, there is a part where I put my envelopes and open it at a go once or twice a month. I even open, put bills together, then pay at one go when all the bills are in. But at times its easy to overwhelm,
so more so for credit cards. The fewer cards the better, the fewer statements, fewer overdue, fewer compounding on outstanding debt, fewer chance of missing payments. Yes, definitely fewer points. BUT if you ask me about points which maybe redeem something $100 worth or interest charge of $166(above example), I take fewer points ANYTIME.
Dunno about the rest. I get overwhelm even monitoring my bank accs in passbook, insurances, poems statment. And this is me WITHOUT a credit card. Now if I have 1-2, it meant additional statements, but at least not that many more to monitor.
Hope this helps. I still have many thoughts about personal finances that I want to blog about. But today is really a LOOOONNNNGGGG day. Really battery flat. Next post, I will discuss 'phantom' money, overspending or not, and maybe some pointers/ or small action steps that can be done to help out.
As I am heading into my 5th month of unemployment, looking at how my 30k reserve living expense account has gone down quite a bit, about $9k so far. I do know that NOT all of the $9k is pure consumption. I know I have courses going on, bought some new clothes, did hair and stuff. But cos I did lag behind in my daily expense tracking which I did for about 2.5months dilligently, hence I can retrace back and get some figures to work out an average.
Lemme show ya how I work backwards,
To get the exact amount I spent, I took my recent current amount. Take $30k minus current amount = $8819.34
Then I worked to get the big expenses that I can remember in this 4 & 3/4 months, so
Driving course => $1160.62
Guitar => $680
Jap course => $357
Clothing (bra, cosplay jacket, 2 x 3/4 pants, contact lens, new basic makeup, epillator) => $501
2 Hair cuts and 1 dye => 152.50
Wedding ang baos => $296
Mom (last pocket money until i get perm job) => $800
HP (monthly x 5 mths, $90 hp upgrade => $255
Internet => $150
Cable tv (sub and installation) => $ 110
Others RO machine repair => $80
K now with these figures,
I can approximate that I spent $4541.62 on all these.
Then $8819.34 - $4541.62 = $4277.72 on transport and mainly food and other misc expenses.
Which works out to $4277.72/5 = $855.55.
So if transport is about $100 per mth, it means on average about $755.55.
Which can work out to be $755.55/30 = $25 on food and misc.
Now cos I have been saving $2 notes in my piggy bank to help squirrel away and ensure I 'save' what I have drawn out for spending. Saved $700. WHICH I banked into the other bank account that is for shares and investment, not in my spending/reserve account.
The actual draw-down is $8819.34 - $700 = $8119.34
I also realized that among the bigger categories, there are some which are really ONCE-OFF, not a constant expenditure, eg driving, jap, clothings, wedding, mom final allowance, and RO repair. SO to get a truer picture of my expenses, I would only subtract these categories. Cos some course might end soon and is rather short-term, not something I would do longer term.
therefore => $8119.35 - $3194.12 = $4925.23 for my usual expenses and outings.
per month => $4925.23 / 5 = $$985.05
per day => $985.05 / 30 = $32.85
This amount is a bit too high for my current $0 income status. Hence I have decided to draw it down further into $20 per day region. If I can do that, my monthly would roughly reach $600, which is more comfortable.
NOW the NEXT step is to actually JUST DO IT and adhere as much as I can, on as many days I can to hit this target. Cos only concrete action in small steps can help me achieve this target. No one is going to give me money. Though my shares might give me some gains BUT when I dont sell, there is STILL 0 income. So I need to really reduce the drawings on my reserve. Previously I thought I could keep expenditure to about $600 a month. But this little exercise showed me very concretly I need to cut my eating out in cafes/restaurants and eat more hawker, food court, reduce outings to a more manageable number, not like 3-5 times a week, everytime eating out with a meal about $17 - $20. Ya so I would like to eat in less expensive areas and also find cheaper ways of hanging out IF I have to.
So dont be surprised IF I suggest food court lunch/dinner, or something below $10 but filling.
(Now I wish to clarify that I reveal ACTUAL expenditure amounts NOT to show I am better at saving, better at money, have low expenditure etc etc, but to help those who are interested, to see HOW exactly to work out monthly expense, daily, etc)
____________________________________________
Proscratination and Action
After JLPT and Melaka trip, I actually proscrastinated quite a bit in my job search. So by the time I finally looked through the Sat and Sun Recruits which I had put ON my table, some jobs (including teaching abroad, teaching at a tuition centre quite near my place) were CLOSED. Shit!!!!!!!!!!!!!!!
Plus prior to Christmas and New Year, there was one week, I sent out resumes on Sunday, by mon/tue, I got interviews. Well though in the end, I screwed up some, some were too low offers and etc... I saw how some extra action on my part yielded something.
So after New Year, I promptly collected the Recruits, looked through, cut out, customise and send resume by Sunday evening. On monday still didnt hear anything, so I headed to work. By monday evening, got one email. On Tue, I went to flexi-work and got 2 calls for interviews. Just checked mail, got one more interview next week. One is supposed to call back for another interview. Hence though I havent scored any offers yet, I have gone for one interview today. Tomorrow there's one. Next wed, there's one. So more chances of interviews, more for me to polish up and hope to score better offer.
Plans broken into steps and Action in SMALL do-able steps do yield results.
Just like making sure I exercise 2-3 times a week also yielded weight loss, at least up until before the christmas and new year eating and drinking binge.
I want to maintain and build up this spirit of actually DOING things in steps gradually than to just think about or wait. It somewhat works for me, whether success or not, but its still better than doing nothing and waiting.
___________________________________________
Tab was asking me about credit card payment for interest-free plans. Hmm.. I really have no idea HOW and WHEN exactly I know so much, but I shared what I know with her.
Its interest-free cos if Kenko package $1.2k over 12 months,
using credit card instalment meant $100 a month. If you pay promptly in full every month, you will end up paying $1.2k in 12 months. U get a loan of $1.2k and u paid $1.2k. HENCE interest-free in essence.
NOW what can go wrong with this picture?
Pls remember that credit card companies, unlike HDB loans, WANTS you NOT to pay fully.
How does it do this?
Simple. Your credit card bill monthly allows u to pay minimum and/or any amount u want. It is easy to just pay minimum. Eg $50 minimum (but $0 is paid to reduce principal amount owed)
Compare this to a statement from HDB loan which states eg $550 for 60 months (which a portion actually pays off the principal sum and part of it is interest) so IF I dilligently pay $550 for 60 months, I can actually reduce my debt to $0.
BUT for the case of the credit card, what happens is the 2 things.
FIRST thing, I paid $50 instead of $100 for 1st month.
It meant the debt start accumulating interest of 2% per month.
It meant on 2nd month, I owe now $100 + $50(debt) + $1(charge) = $151
If I still pay minimum $50 in 2nd month,
It meant on 3rd month, I owe $50 + $151(debt) + $3(charge) = $204.
Now up until now, it seems rather low cos its still in the hundreds. Watch what happens next.
4th month, $50 + $204(debt) + $4.10(charge) = $258
5th month, $50 + $258(debt) + $5.16(charge) = $343.16
6th month, $50 + $343.16(debt) + $6.86(charge) = $400
7th month, $50 + $400(debt) + $8(charge) = $458
8th month, $50 + $458(debt) + $9.16(charge) = $517.16
9th month, $50 + $517.16(debt) + $10.34(charge) = $577.50
10th month, $50 + $577.50(debt) + $11.55(charge) = $639.05
11th month, $50 + $639.05(debt) + $12.78(charge) = $701.83
12th month, $50 + $701.83(debt) + $14.03(charge) = $765.87
Which now got to a rather BIG sum that you are suddenly faced with in Dec when you see your statement.
Remember u had paid $50x12 = $600 already but you still owe $765.87 which meant, instead of paying interest-free(which u had initially wanted/planned when U signed up) u end up paying $600 + $765.87 = $1365.87, an extra $166. Now THIS is assuming you pay off the lump sum of $765.87 in full in Dec. BUT if you didnt, then it continues to roll and as u can see, it can get bigger, exactly because NO PRINCIPAL REPAYMENT and it rolls over due to HIGH INTEREST COMPOUNDING.
SECOND thing that happens, if u start paying minimum. You forget that you had actually PLANNED to put aside $100 a month to pay off. So now cos you only paid $50, you somehow 'forget' that you had spent $100 a month effectively. Then u might go and sign up other stuff... Its like u 'feel' $50 richer cos u paid for something that is worth $100 but u only pay $50. So u might go out and spend extra $50. Effectively, it meant u spent $150, not on the same thing, but it meant u spend more overall.
Last thing, it requires quite clear monitoring of monthly statements (but just have to) to ensure that u pay dilligently and not let it roll. Can be easy to forget given we receive so many statements from bills, bank accs, credit cards, insurance, etc etc etc. Its easy to lose track even for me, given all the bills and stuff. A trick for me is to put all the envelops addressed to me at a part of my table. YES I have a messy table but on it, there is a part where I put my envelopes and open it at a go once or twice a month. I even open, put bills together, then pay at one go when all the bills are in. But at times its easy to overwhelm,
so more so for credit cards. The fewer cards the better, the fewer statements, fewer overdue, fewer compounding on outstanding debt, fewer chance of missing payments. Yes, definitely fewer points. BUT if you ask me about points which maybe redeem something $100 worth or interest charge of $166(above example), I take fewer points ANYTIME.
Dunno about the rest. I get overwhelm even monitoring my bank accs in passbook, insurances, poems statment. And this is me WITHOUT a credit card. Now if I have 1-2, it meant additional statements, but at least not that many more to monitor.
Hope this helps. I still have many thoughts about personal finances that I want to blog about. But today is really a LOOOONNNNGGGG day. Really battery flat. Next post, I will discuss 'phantom' money, overspending or not, and maybe some pointers/ or small action steps that can be done to help out.
Wednesday, April 15, 2009
Stoned
That's how I feel currently, after finished a long day at work.
Heading out for Jap test, meant more stoned.
During dinner with Tab, was discussing aspects of budgeting and financial planning in regards to her intending to save up for a flat plus wedding etc. The main topic was about creating a detailed budget.
Lemme revisit budgeting, which was a fundamental and crucial first step I had embarked upon once I started working since Temp days. Given that I have actual experience in this, maybe listen and try it out for yourself.
____________________________________________
101 of Budgeting by Hellbound
The financial maxim of Money and savings. "开源节流" => earn more or spend less.
The steps that I had taken, followed by an explanation of the uses, applications of the steps. Of course carrying out is a must, otherwise what's the use of planning?
1)Record all expenditure in a day, with some details for every amount recorded eg lunch, CD, book, concert, dinner, Friday drinking.
Rationale: To get a realistic idea of where all your money are going, to what categories of expenses, you need concrete data, not just aga aga. Not if you want to be able to reduce your spending and thereby without getting extra income, effectively increase your savings.
2) Looking through 1-3 months of your recorded amounts. Only then at the end of 1 month each, tallied up the amounts into Sub-categories by lumping together the relevent amounts from the details of the entries.
Why I choose to only lump up the amounts at the end of 1 month instead of just broadly indentifying sub-categories eg Food straight away? Its because I want a finer details of my expenditure pattern. I want to identify Food for normal meals which are inevitable and Food for weekend outings, money for public transport, money spent on Taxi rides. Occasional expenditure versus monthly expenditure. Basically money spent on neccessities versus money spent on specific indulgences. I want to separate out them from the start to have more strategies to deal with them.
3) By looking at the sub-categories derived from Step 2. I can now see exactly how much money goes into Normal meals, Outside meals for weekends, Hp,internet bills, hobbies eg books, cds, Drinking sessions, Shopping which can be further sub-divided into shoes, tops, bottoms, working clothes, casual clothes, bags and many more.
Where to get this finer details? They all come from your details in your monthly daily expenditure record. Why do I need to do this Ma Fan thing? Just aga aga I know I spend on clothes $300 can liao. BUT if you want to really identify areas that you can reduce, I would advise having finer details of categories. SO THAT you dont have to say things like I cant shop for this month, or I have to stay home for this entire month. It could just be, I need to cut down on my shoes alone, the rest can maintain and eventually you save more. Its that powerful IF you really get through to this stage.
Another aspect is that NOT only can you derive a figure for your general expenditure, your specific expenditure in each sub categories, you can also see the number of times you carry out a particular purchase. Eg Oh I didnt know I buy 6 tops this month, go to movies 6 times, bought 7 pairs of shoes. You maybe surprised by the number of purchases per month for certain sub-categories.
4) Now is the time for analyzing your expenditure pattern which is now finely divided into sub-categories representing your true expenditure pattern which is specific to you (my expenditure would include external courses fees but friends may have differing sub-categories eg car maintainence, car petrol, car parking)
i) What is your total expenditure in a month, including and excluding once-off items eg Holiday, which can also be budgeted into.
ii) How much do you exactly save in this month, putting in your nett pay, less of all your actual purchases for the month? Are you happy with this figure? If you are, game over, no need to continue. If not, then go onto next question.
iii) Which is your top 3 sub categories? And how much is it relative to your income?
iv) In this 2-3 categories, which ones are necessities, which means usually very very hard to reduce without affecting your standard of living and material comfort. Which ones are more of indulgences? You may have more than 3 indulgences. If that is the case, then identify which 1-2 are seriously over limit. A gauge is the total amount spent for it.
v) Set out to reduce the total amount spent for that 1-2 indulgences by smaller amounts initially eg reduce $350 spent on working clothes to $300. But $50 is not much you say, but remember savings is cumulative. Its not only $50 a month extra saved, its $600 a year. Why such small reduction? BECAUSE it is punishing and difficult psychologically to suddenly stop buying things especially indulgences, just like smoking. What is effective is to slowly reduce a bit, so that you can still buy, still have indulgences, but over some time, effectively reduce that total amount.
vi) With the figures decided, now you can do simple averaging and obtain figures like Target amount for spending eg $50 a day max, Shopping is 4 tims a month instead of 3 times, each time budget about $70 instead of uncontrollable bursts of spending, if I already bought 4 pairs of shoes, immediately no more buying of shoes, Weekend outings maximum is $100 per weekend etc
There are then many many more strategies and figures can be derived for the sub-categories.
The very very important last step is to actually CARRY OUT the planned reduction for the identified sub-categories. It requies you to make a conscious decision during purhase to remember certain limits, amount YOU have set to achieve and try as much as possible to stick to.
Hopefully by the next month, through your continued record of your purchases, you can (1) see if you have effectively reduced that amount in that indulgences, (2) see if you had instead spent more in other areas, (3) see if you have been effective in raising your saving amount. And then continue to review and monitor a bit until you are satisified with your new saving amount. By then, it becomes so ingrained, you will make unconscious decisions to save more and every month have surplus and a high surplus.
These are based upon my own experience at least for the earlier years of working, which was how I set about building up my reserve and investment capital eventually by last year.
___________________________________________
Later on I had moved onto other ways of tracking monthly expenditure and savings which I can share if you are interested.
But even I am now currently doing this monthly long, daily record of expenditure. I have just started for 3 days. Cos I want to have a clear idea of where are my money going and see if I can PUSH up my saving rate to a much higher level. Why? Cos I somewhat wanna quit so I wanna make the next few months savings much higher to build up the reserve faster. I was rather lax in the last year or so.
For friends who do not know how to carry out Step 2. After you have finished writing up a 1 month long daily expenditure list with details, can pass to me, I can help you sub-divide into categories, identify indulgences for you etc provided you write more details of each purchase first.
Hopefully some aspects can be put to use and help you on your path to saving more for your home, investment, build up reserve and eventually investment.
Heading out for Jap test, meant more stoned.
During dinner with Tab, was discussing aspects of budgeting and financial planning in regards to her intending to save up for a flat plus wedding etc. The main topic was about creating a detailed budget.
Lemme revisit budgeting, which was a fundamental and crucial first step I had embarked upon once I started working since Temp days. Given that I have actual experience in this, maybe listen and try it out for yourself.
____________________________________________
101 of Budgeting by Hellbound
The financial maxim of Money and savings. "开源节流" => earn more or spend less.
The steps that I had taken, followed by an explanation of the uses, applications of the steps. Of course carrying out is a must, otherwise what's the use of planning?
1)Record all expenditure in a day, with some details for every amount recorded eg lunch, CD, book, concert, dinner, Friday drinking.
Rationale: To get a realistic idea of where all your money are going, to what categories of expenses, you need concrete data, not just aga aga. Not if you want to be able to reduce your spending and thereby without getting extra income, effectively increase your savings.
2) Looking through 1-3 months of your recorded amounts. Only then at the end of 1 month each, tallied up the amounts into Sub-categories by lumping together the relevent amounts from the details of the entries.
Why I choose to only lump up the amounts at the end of 1 month instead of just broadly indentifying sub-categories eg Food straight away? Its because I want a finer details of my expenditure pattern. I want to identify Food for normal meals which are inevitable and Food for weekend outings, money for public transport, money spent on Taxi rides. Occasional expenditure versus monthly expenditure. Basically money spent on neccessities versus money spent on specific indulgences. I want to separate out them from the start to have more strategies to deal with them.
3) By looking at the sub-categories derived from Step 2. I can now see exactly how much money goes into Normal meals, Outside meals for weekends, Hp,internet bills, hobbies eg books, cds, Drinking sessions, Shopping which can be further sub-divided into shoes, tops, bottoms, working clothes, casual clothes, bags and many more.
Where to get this finer details? They all come from your details in your monthly daily expenditure record. Why do I need to do this Ma Fan thing? Just aga aga I know I spend on clothes $300 can liao. BUT if you want to really identify areas that you can reduce, I would advise having finer details of categories. SO THAT you dont have to say things like I cant shop for this month, or I have to stay home for this entire month. It could just be, I need to cut down on my shoes alone, the rest can maintain and eventually you save more. Its that powerful IF you really get through to this stage.
Another aspect is that NOT only can you derive a figure for your general expenditure, your specific expenditure in each sub categories, you can also see the number of times you carry out a particular purchase. Eg Oh I didnt know I buy 6 tops this month, go to movies 6 times, bought 7 pairs of shoes. You maybe surprised by the number of purchases per month for certain sub-categories.
4) Now is the time for analyzing your expenditure pattern which is now finely divided into sub-categories representing your true expenditure pattern which is specific to you (my expenditure would include external courses fees but friends may have differing sub-categories eg car maintainence, car petrol, car parking)
i) What is your total expenditure in a month, including and excluding once-off items eg Holiday, which can also be budgeted into.
ii) How much do you exactly save in this month, putting in your nett pay, less of all your actual purchases for the month? Are you happy with this figure? If you are, game over, no need to continue. If not, then go onto next question.
iii) Which is your top 3 sub categories? And how much is it relative to your income?
iv) In this 2-3 categories, which ones are necessities, which means usually very very hard to reduce without affecting your standard of living and material comfort. Which ones are more of indulgences? You may have more than 3 indulgences. If that is the case, then identify which 1-2 are seriously over limit. A gauge is the total amount spent for it.
v) Set out to reduce the total amount spent for that 1-2 indulgences by smaller amounts initially eg reduce $350 spent on working clothes to $300. But $50 is not much you say, but remember savings is cumulative. Its not only $50 a month extra saved, its $600 a year. Why such small reduction? BECAUSE it is punishing and difficult psychologically to suddenly stop buying things especially indulgences, just like smoking. What is effective is to slowly reduce a bit, so that you can still buy, still have indulgences, but over some time, effectively reduce that total amount.
vi) With the figures decided, now you can do simple averaging and obtain figures like Target amount for spending eg $50 a day max, Shopping is 4 tims a month instead of 3 times, each time budget about $70 instead of uncontrollable bursts of spending, if I already bought 4 pairs of shoes, immediately no more buying of shoes, Weekend outings maximum is $100 per weekend etc
There are then many many more strategies and figures can be derived for the sub-categories.
The very very important last step is to actually CARRY OUT the planned reduction for the identified sub-categories. It requies you to make a conscious decision during purhase to remember certain limits, amount YOU have set to achieve and try as much as possible to stick to.
Hopefully by the next month, through your continued record of your purchases, you can (1) see if you have effectively reduced that amount in that indulgences, (2) see if you had instead spent more in other areas, (3) see if you have been effective in raising your saving amount. And then continue to review and monitor a bit until you are satisified with your new saving amount. By then, it becomes so ingrained, you will make unconscious decisions to save more and every month have surplus and a high surplus.
These are based upon my own experience at least for the earlier years of working, which was how I set about building up my reserve and investment capital eventually by last year.
___________________________________________
Later on I had moved onto other ways of tracking monthly expenditure and savings which I can share if you are interested.
But even I am now currently doing this monthly long, daily record of expenditure. I have just started for 3 days. Cos I want to have a clear idea of where are my money going and see if I can PUSH up my saving rate to a much higher level. Why? Cos I somewhat wanna quit so I wanna make the next few months savings much higher to build up the reserve faster. I was rather lax in the last year or so.
For friends who do not know how to carry out Step 2. After you have finished writing up a 1 month long daily expenditure list with details, can pass to me, I can help you sub-divide into categories, identify indulgences for you etc provided you write more details of each purchase first.
Hopefully some aspects can be put to use and help you on your path to saving more for your home, investment, build up reserve and eventually investment.
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