money management Archives | Page 9 of 17

Are You Spending Your Money Properly?

No matter how abundant or scarce your money is, spending it wisely shall be your top priority. It not only enables you to get the most out of your dollar but it also allows you to make life-changing decisions.

Determining the reasons behind your spending is the first step to knowing whether your money is allocated properly or not. Are you spending your money on the latest gadget by Samsung because you need it or because you want it?

There is usually a conflict in differentiating between needs and wants. Perhaps, the confusion is due to our subjective definitions of the two terms. Let us take Cheng Ling as an example.

Cheng Ling values the perceptions of others toward her and her daughter. Since her daughter is starting a new school year, she bought her two new pairs of shoes.

She argues that she does not want her daughter to feel embarrassed by wearing the same shoe she wore last school year. Although the last year’s pair is still in mint condition, she bought another pair of shoes to prevent repetitions.

Do you think Cheng Ling’s purchases are necessary in this scenario? Or, was it a matter of personal desire?

Examine your purchases in this manner along with these helpful queries:

“Will this purchase make my life easier and more efficient?”
“Will this purchase provide a lasting pleasure?”
“Will this purchase be meaningful to my life?”
“Is this something I will use regularly?”
“Is this something I can afford?”
“Is the potential gains from this item realistic?”

Carefully assess all these questions and the interplaying factors that can influence your decisions. If your response to all these questions is “YES” then, by all means, make the purchase!

Aside from distinguishing between your needs and wants, you must sort out your “essentials” first. When I say essentials, I pertain to the fixed expenses that you encounter every month. This includes your groceries, utility bills, and school fees. Plan your spending before you receive your paycheck.

Some people spend their hard-earned money like most lottery winners. They get a huge pile of cash now and spend it all in a snap! Remember that wealth is accumulated over time and not something that you can earn overnight.

Image Credits: pixabay.com

At the end the day, it all boils down to the decisions you make!

Efficient Financial Tips For Fresh Graduates

Congratulations! After the backbreaking years of higher education, you have graduated. The next chapter ahead will not be easier but I hope you find prosperity and joy in the process.

Much like attaining your degree, financial responsibility takes hard work and discipline. Start by reading these following tips to help you stay on top of your money:

GRAB A BOOK OR TWO

Read and understand materials about self-empowerment, investment, and money management. Here are four books to get you started with:

“The War of Art” by Steven Pressfield
“Turning Pro” by Steven Pressfield
“A Money Saving Mindset: 40 Ways to Help You Save” by Derek Polen
“Why Stocks Go Up and Down” by William Pike
“The Intelligent Investor” by Benjamin Graham

AVOID UNHEALTHY COMPARISONS

It is important to limit lifestyle comparisons even before you start making decent amount of money. Comparing your own “backyard” to that of others is basically human nature. However, turning this auto-response into a habit can become unhealthy not just for you but for your wallet. Imagine keeping up with your friends or coworkers who spend their money on designer bags, five-star restaurants, and trendy gadgets. Following their footsteps can easily put you to debt.

SAVE AT LEAST 15% OF YOUR INCOME

Mr. Tan Kin Lian, an experienced professional and former CEO of NTUC Income, highlights the essence of saving at least 15% of your income in addition to your CPF account. Your savings will help you pay for emergencies without having to be tied up with a creditor’s interest rates. Growing your savings shall start with your first paycheck.

PROTECT YOURSELF FROM UNEMPLOYMENT

Having a future mindset can help you cope with unforeseen events such as unemployment. To protect yourself from the immediate effects of unemployment, Mr. Tan Kin Lian also suggested these:

a. Save at least 6 months’ worth of your income.
b. Shy away from relatively large loans that require fixed repayments within several years.
c. Avoid saving in a life insurance policy.

REALIZE THE VALUE OF MONEY

I began to saw the true weight that money holds when I had my first full-time job. It was difficult for me to spend the money that I worked hard for. This is because I know the exact amount of time and how much sweat I poured just to earn my salary. I hope you realize soon especially because we live in the most expensive city in the world.

LIMIT SPLURGING FOR “EXPERIENCES”

Many young adults have turned their spending patterns to experiences rather than material goods. If you solely spend your hard-earned income to pay for your travel without the consideration of your savings, things can go down hill. Saving money is important not only because emergencies may arise but also because retirement is inevitable.

Image Credits: pixabay.com

Different Ways To Define Financial Independence

Whether you call it Financial Independence or Financial Freedom, the first step to achieving autonomy is by defining it.

If you Google this term, you will find that there is an abundance of definitions available. However, let us focus on these four:

1. BY CASH FLOW

The most common definition of Financial Independence relates to cash flow. Many experts accept the idea that it is the “state of having sufficient personal wealth to live, without having to work actively for basic necessities.” Simply put, you passive income is able to cover your living expenses. Passive income sources include rental property, royalties from intellectual properties (e.g., books), trust funds, online business, investments, and pension plan.

Quantify your progress by calculating the percentage of living expenses that your passive income covers. When you reach 100% then, you attained Financial Independence by this definition. Having a full-time job is certainly optional with this circumstance!

2. BY WORRYING LESS

For many people, Financial Independence is achieved once they can use their money to banish their stress. These people focus more on what they can accomplish – in the terms of minimizing the “gap”. The gap that I am referring to is the division that exists between your income and your spending.

By this definition, you can increase the gap and reach Financial Independence quicker by spending less and earning more.

3. BY HAVING NO DEBTS

Financial Independence is characterized by being off the debt latch. While some debts are necessary and can be easily paid off, others are unplanned and difficult to pay off. Eliminating the latter is a crucial step to gaining financial freedom.

There are numerous ways to minimize your debts and build a better relationship with money, learn some of them by checking out our helpful posts, here.

4. BY DOING WHAT YOU WANT

A refreshing definition of Financial Independence is shared by Investopedia. Its contributor believes that Financial Independence “should mean the ability to live more or less as one wants to, within reasonable limits.”

Financial Independence can be seen as being able to do and choose the path that you desire the most. Absolute autonomy mean not always be synonymous early retirement as it can refer to your power to quit a horrible job.

Image Credits: pixabay.com

In my opinion, this is the most achievable definition among the four.

Brilliant Ways To Simplify Your Finances

1. UNTANGLE YOUR STREAMS OF INCOME

If you are juggling through your day job, online business, personal blog, and weekend side-job…take a breather!

Multiple sources of income sounds great in theory but it can be very challenging at times. I can attest to this statement as I am freelancer. When new opportunities are handed to you, analyze if you (and your schedule) can handle another weight. You do not want to waste your precious time on things that are not necessary.

2. ALLOT MONEY USING LAST MONTH’S INCOME

Budgeting your money is efficient for two reasons. It brings you a sufficient cushion as you are a month ahead of your bills. Also, it is very helpful for people with irregular income.

Image Credits: wikihow.com/Do-Envelope-Budgeting

3. CUT DOWN YOUR BANK ACCOUNTS

In a world filled with choices, most people have several number of financial accounts. You may have an account that brings highest interest or another that brings the highest shopping rebates. More than being complicated, the constant shuffling between these accounts can get messy. This is why you must narrow down the number of your accounts.

4. REDUCE YOUR JUNK

Reduce your physical and virtual junk authorizing creditors or vendors to issue bills using one method. If you want to go paperless, keep digital copies of your important documents on the “cloud” or on an external hard drive. If you are old-fashioned, organize all your documents in labeled folders or boxes.

5. SET SMART FINANCIAL GOALS

Develop a habit of financial goal setting to know where you are going and to plan how you can get there. Write down your financial goals with a trusted witness and contemplate the monetary milestone you would like to accomplish in the next 2 to 5 years. Track down your monthly progress.

6. CONSOLIDATE YOUR BILLS

Are you tired of receiving 3 separate bills for your landline, hand phone, and internet services? Consider consolidating all of them in a single bill by signing on bundled services. For example, Singtel’s Fibre Home Bundle (1 Gbps) offers the following:

a. Fibre Broadband,
b. Wireless Dual-band Router
c. 4G Mobile Broadband Plan, and
d. Home Digital Line with free unlimited local calls.

This plan costs S$59.90/month with a contract of 2 years. What is nice about this plan is that it offers an additional “10% off monthly Mobile subscription” (T&C apply).

Image Credits: pixabay.com

By bundling these services together, you just eliminated 2 monthly bills!

Sources: 1, 2, & 3

Brightest Financial Nuggets From Acclaimed Dads

A man who exercises parental care over other people and acts as a protector or a provider – that is the textbook definition of the word FATHER.

But the real nature of a father and his child is more complex than that. My father was the first person to tell me that my dreams are valid. He taught me how to deal with difficult people and to laugh at life’s problems. He worked hard to ensure that I finish my studies on exclusive institutions despite how hefty the costs were. Truly, my father is an amazing human being and I am proud to call him my DAD.

Like my dad, most of the fathers out there are great at giving advice about work, love, and money. Their advice may be clichés at times but the wisdom that they passed on often sticks with their children. So in the cheerful spirit of Father’s Day (June 19), I present you some of the brightest finance advice from experienced dads…

1. KNOW WHAT AN ASSET IS

Robert Kiyosaki, the author of Rich Dad, Poor Dad, believes that it is important to “know what an asset is, acquire them, and become rich.” Its premise is simple. To become financially independent, you must acquire income-generating assets which can pay for all your expenses. The only problem is that some people do not know how to differentiate between an asset and a liability. Instead of purchasing equities or bonds, these people purchase iPhone and MacBook.

Image Credits: pixabay.com

2. MAKE MONEY WORK FOR YOU

David Richmond is the founder of a financial planning firm called Richmond Brothers, while his father worked in the insurance industry throughout his life. David’s dad reminded him that there are two ways to make money: to earn it or to grow it. Merely working for it and witnessing it grow can be hard as you can only work so much. This is why you must incorporate the two ways. Your hard-earned money must be saved and be able to grow with an interest.

3. WORK HARD DOING WHAT YOU LOVE

How does one begin to describe the powerhouse that is Donald Trump? For starters, he is running for United States’ 2016 Presidential election. But he is best known as a businessman and a television personality. His father, Fred Trump, was the original real estate tycoon in the family. He owned the company Trump Management Co. where Donald first worked for. Despite the “scandals” that Fred have been through in 1954, he bounced back and built affordable rental housing system in New York City.

Donald Trump was once quoted saying: “My father didn’t give me much money, but what he did give me was a good education and the simple formula for getting wealthy: Work hard doing what you love.”

4. DO NOT SWING AT EVERY PITCH

The iconic Warren Buffett once gave an advice to his son Peter Buffett about investing: “You don’t have to swing at every pitch.” It is direct yet full of substance. When investing your wealth, it is important to wait for opportunities that fit your criteria (e.g., your needs and personality). And if nothing of that sort comes along, you must wait patiently and practice perseverance.

Image Credits: pixabay.com

Sources: 1, 2, & 3

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