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Wednesday, May 28, 2008

Money Advice...From Someone Who's Also Still Learning

Today and yesterday I attended a very interesting course; Finance for Non-Financial Executives. The reason was initially so I could make heads and tails out of all the financial reports and P&L statements I had to go through during the course of my work, but in the end I came out with a lot more knowledge.

During one of our chit chat sessions, our lecturer touched on the subject of personal financial planning. She gave an example of her ex-colleagues who had retired but were forced to dive back into the corporate sector because they had non or insufficient savings to last them during their retirement years. She then gave an example of another ex-colleague who is not only currently enjoying his retirement years playing golf, but also has 3-4 houses for renting, thus generating passive income on the side.

Being seated in the front of the class subjected me to be the "example" during the lessons. The prof asked me whether I had any assets to my name; I mentioned I had a car and an apartment, both of them already fully paid for. To say she was impressed was an understatement. In fact looking back, I probably was the person in the class with the most net worth to my name.

During lunch hour, I was approached by one of class members who asked me about my financial strategies; how on earth was I able to afford a car and apartment and not have any loans to burden me with? Did I win the lottery? Did I get a huge inheritance from anyone?

My answer was simple; I made sure I spent less than what I earned.

Sounds simple, right? Yet you would be surprised to know that a lot of people I know, not only live from one paycheck to another but also accumulate debts on a monthly basis.

She then asked me, I make so and so every month and it's barely enough to get by. How can I ever have enough to start saving?

I told her, make your savings automatic. Fill out the form from HR and allow them to deduct a certain amount from your salary that will be autodeposited into your ASB or Tabung Haji. Just make sure you place this savings into a place that you can't just use an atm card to withdraw money from. Depositing money into another bank where you don't have an atm card is also a good option.

My concept is "out of sight, out of mind". If that portion of money is not made readily available for me to spend, I usually find that I don't even miss it and even find ways to compensate for the decrease in spending money.

Ways I've cut down my monthly expenses.
1. I sometimes bring breakfast to work. Usually I eat it a bit later in the day, at around 930am. That way, at lunch I'm still half full and don't feel the urge to stuff myself. Another idea would be to also bag your lunch to work, something I'm also considering after I get a more reliable maid.

2. I drink lots of plain water. At my office, we have a ready water cooler so basically plain water is free for the staff. When I go out for lunch with my colleagues, I fill up a bottle of water and take it with me. That usually saves me RM1.50 if I were to order hot lemon tea. Times that by 5 days a week and 4 weeks a month and the savings can really add up.

3. I carpool when going out for lunch. We usually take turns driving so everyone gets a chance to save on petrol.

4. I make a grocery list and make sure I stick to it. It's very easy to get "lost" at the grocery stores and by pushing the trolley down every aisle, I would normally find myself spending up to RM200 per trip, mostly on items that were never on my list to begin with. By sticking to my list and minimizing the amount of time I spend at the grocery stores, ensures that I cut down on fraudulent spending and increase my savings.

There are a lot of ways to increase your savings. Another tip that I found extremely useful was to meticulously track my expenditures for at least 3 months, then go over the receipts and figure out where my money was going to and how I could cut down on the spending. I found out that one of my weaknesses was to visit the store at the petrol stations whenever I stopped to fill up on petrol. Those RM2.50 cups of corn can really burn into your budget if you allow them to.

I would recommend everyone who's interested in finding out how to improve their net worth to visit The Simple Dollar. I find the articles to be very informative and really easy to understand, which is important for a non-finance executive like me.

3 comments:

Joe said...

kau memang loaded, beli wira cash upfront sampai dealer tu tak caya haha..

aku ada a few books, nak pinjam?

Along said...

manade loaded, cuma frugal living je...

bleh gak...nanti hang bwkkan ke spa aku...hehehe..bleh kita bincang hal duit sementara shu buat treatment...bile nak mai?

Joe said...

since when kau frugal? haha..

ntah bila nak pi lagi, pun tak tau.. dah taruk tv and astro, or ps2 ke? heheh