When I was a kid, money has always been an issue. I don’t like to generalize everyone but perhaps some people you know have trouble with money and financial management. Growing up, it’s hard to cultivate that savings habit when you live in a poor person mentality where ‘If I don’t get it now, I may not be able to get it later.‘ This tends to be in a vicious cycle of buying more than what I really need.
I’m officially a year in the workforce and I felt satisfied when my monthly salary was debited into my account at the end of the month. The feeling where you actually work for your own money is more satisfying than say, receiving monthly allowances. I imagined saving half of my salary for ‘Savings’ and the rest are for ‘Expenses’ so that I could cultivate some sort of a financial safety net and not to overspend.
Well, reality strikes and it wasn’t as simple as ‘savings’ or ‘expenses’. There are months where I spend more than I make and had to sacrifice previous months’ savings to compensate it. And then this leads me to less spending for the next month. There are also times when I ‘think’ I am alright and live in denial on my money situation that forces me to write down every single expense (that innocent $1 nasi katok counts too!).
I am by no means a financial planner so I speak from experience. So what have I learned in a year on earning my own money?
If you don’t have savings, you are somewhat screwed.
I am sure by now you had read many articles out there on the importance of savings or anything similar. As cliché as it may sound, you need to have some sort of savings for yourself for any unprecedented events. Case in point: you may end up losing your job and not being able to have an income to survive, or someone ended up in the hospital and needed an upfront payment to cover medical costs.
Let’s face it, a lot of things we do in life require money to begin with (Paying bills, rent, groceries, education, the list goes on!). It does help if you can divide your savings into many different categories such as ‘Retirement Savings’, ‘Accidents Savings’, ‘In Case I Lose My Job Savings’, and so forth. Regardless, if you can’t divide your savings into categories, just having a ‘Savings’ account helps you in the future. Remember not to touch it though or you’ll beat the purpose of savings!
Pay your debt because it will haunt you if you don’t.
Debt is a complicated matter and the sooner you know how to solve it, the better you will be. Sometimes, we have debts from the loans we took from banks or we borrow money from our relatives or friends. For whatever reasons you have debt in the first place, ALWAYS make an effort to settle the debt no matter how long it will take. Think of it this way: If you have a debt of $1000 and you commit to paying $100 a month, you will be debt-free after 10 months and on the 11th month onward, you’ll have an extra $100.
While I am aware that some debts will take years to be cleared (especially on home financing or on educational loans, etc), you have to have the commitment to pay all your due debts. If you find it hard to pay your debt, discuss it with your local bank to see if there are any ways you can clear your debt in line with your salary or talk to the person who lends you money and see if you can agree on the amount you can fork out per month to get the debt settled. Landing yourself in a debt is a financial responsibility that you have to bear. If you cannot afford that dream holiday or travel, that new phone or gadget, and has to be in debt to achieve them, then you know your bank account is screaming to you for help.
All these ‘just in case’ or ‘standby items’ can wait.
How many times have you wandered into a supermarket or a department store, thinking, “I need to get that extra bottle of shampoo in case the ones I have runs out” or “OMG, the thing I wanted is on sale, I must buy it now because it’s cheaper!”. I sometimes find myself unnecessarily buying all these ‘standby items’ or I like to call them, ‘in stock items’ for myself because once I’m already out in the stores, I might as well get everything I needed for the future. Truth to be told, maybe these items can wait for another few months. Realistically, I can use up to 4 months for a bottle of shampoo and only go buy one when I am really running out of it. I guess it is the temptation to buy them in bulk for the few dollars of savings or so my future self doesn’t have to make double trips. However, by doing so, I ended up with more unused items sitting at a corner and that ends up with more clutter and maybe will be cleared in few months.
Save yourself the trouble by firstly evaluating what you really, really need to buy and then make another list of things you don’t necessarily need. The next month, evaluate again and see if any of the things from the other list will make it to your ‘to-buy’ list. If it doesn’t, that item can wait (and you can save money too!). Buying things on sale or in bulk equals to spending money so if you don’t buy anything, yay to your money.
Definitely set aside an amount of money you can for things you love.
This is different from the ‘savings’ strategy I mentioned above. I’d like to think that each one of us has a hobby we like or love doing, or an interest we want to develop further, which may result in us spending a bit more on the hobby or interest. You may like arts and handicrafts and is willing to spend more on crafting materials, or you like to cook and rather spend more on food ingredients. If you want to buy that big ticket item (new phone, laptop, gadgets, etc), start saving up so you can get that item. Personally, I like to travel so I make a point in allocating at least 10% of my salary to this and stick to this. If I have extra cash, I could allocate more.
Why would you want to set aside an x amount of money and not mix it with ‘savings’? The difference here is that this money will be used for your wants, hobbies or interests, while you try not to touch your savings account. In other words, you set a budget and hopefully won’t over-spend yourself.
Making your own food totally beats takeout, big time (money-wise).
Let’s face it, who doesn’t love food? Whether you eat to live or eat to live, we do need food for our energy sustenance throughout the day. We may over-eat or under-eat but my point is, we are bound to buy food. I understand that not many of us have the luxury of making and preparing food at our homes and prefers to buy takeouts as it saves time. If you can allocate x amount of food for your monthly food expenses, then by all means, stick to it. However, if you think you have been eating out too much and needs to cut that spending, scale back and try to make an effort to prepare food at night after work. Maybe cook more for dinner so you can pack the leftovers for lunch, or prepare your go-to breakfast the night before so that in the next morning, you can just grab and go to school or work.
You can definitely save more in the long run if you make the effort to prepare your food. Allow me to demonstrate a simple example with an estimated cost:
Say, you always buy this ‘roti kahwin’ sandwich for breakfast and it costs you only $1. ‘Roti kahwin’ typically consists of 2 pieces of bread with butter on one side, ‘kaya’ spread on the other. Assuming you buy your favorite ‘roti kahwin’ for every 5 or 6 days you work, you will spend $5/$6 a week, which results in $20/$24 a month.
You’d think, “Well, $24 a month isn’t a lot since it’s only $1 a day.”
Compare this to you buying a loaf of bread and the butter and kaya spread, and start making your own ‘roti kahwin’ from scratch for your own breakfast. You may end up spending only $11:
- A loaf of bread (Up to 5 days) = $2
- 4 weeks worth of bread = $8
- Jams/spread (Good for 1 month) = $3
- Total spending for 1 month: $8 + $3 = $11
Assuming you were to continuously buy your favourite sandwich from the stores, you will spend $24 a month as opposed to making your own which only cost you $11. That’s $13 difference. To put that in perspective, if you can save $13 a month by making your own sandwich, multiply that by 12, you would have saved $156 a year instead of spending it.
Of course, this is just a simple example to get you thinking and you can try doing this by comparing the food you always go for takeout versus buying the ingredients yourself and make them. Chances are, you helped yourself to save more money for other important matters.
I hope reading this article will help you think about how you save or spend your money. I am still learning myself and if these tips or knowledge is useful to you, I’m glad that I could share it with you. Until the next article, take care!