April is Financial Literacy Month – in the US anyway. So in conjunction with their trying to be/being financially literate, thought I’d write a post on $$$.
Now background story from me: My brothers have this tendency to talk about $$$, or more annoyingly what I’m doing with my money. Annoying and stifling as it is, they do give good advice and a lot of times, I just pretend not to listen when in fact I do. I think they think that back in the days, when they were my age – starting uni, then earning my first wage – no one really gave them advice on what to do with the money. Sure, you should save and not spend excessively but that’s just superficial advice isn’t it? You could save $50 a month and have much much more to spend and think you’re doing alright.
My parents on the other hand are quite relaxed with what I do with my money. They get flustered and worried when I give them money (oh that feeling of giving at your first paycheck – my friends and I went through our parents reaction when we went through this stage) and when I was studying, they made sure I have enough to live.
Now that I think about it though, my family are quite active in preserving and adding in more money. You know how they say people can be divided into the ‘save more to have more’ kind and the ‘earn more to have more’ kind. When I say earn – I mean my parents are into selling kuih/catering food or in the old days – Amway (anyone remember this phase of our parents/aunties?) or tudung or kain, whatever they can think of that would rake in the money. My brothers LOVE finance books. Well, one had a degree in finance (or finance management? something like that) and one just has an affinity to reading and learning re. finance.
So one day, I thought – let’s read one of their books cos I sure don’t know much about money except that I should save. I didn’t take economics or accounting in school and in a way, I felt finance-illiterate.
And this is what ALL the books tell you: SAVE.
Imagine my disappointment in this. I wanted a quick sure fire way to have more cash. Not a dodgy scheme, but a sure proof here’s how you can have more money. But no, all of them are telling me to SAVE. And that’s what my brothers are telling me to do too. (Imagine my even more disappointment in thinking they were right)
But there’s more to it than that, of course. Its a whole 300 pages or so book, it must be telling something else right. So there’s different ways you can save and different goals for saving.
The gist of this for you who are no finance-savvy are:
1. First and foremost, make sure you have enough money for emergency. And the money should cover living expenses for at least 3 months. (some say 2-3 months, some say 6 months but let’s make our goals realistic yes?) Just imagine for whatever reason – that you have to stop working and therefore need to live off on your own money for awhile. This is where this emergency funds come in. So for at least 3 months, you can get by.
2. As per above, you need to work out how much your living expenses is before you can actually properly save. This is the potentially depressing bit. Each time I work out my mid-year (or sporadic time of the year) money review, I get depressed thinking how much I’m spending and how much I’m not saving. But you need to bite the bullet and work it out.
Now you may THINK you know how much you’re spending on things (eating out, buying books, watching movies, coffee every saturday are included in this y’know) but really you need to sit down and look at your previous bank statement. What M and I are doing now is collect all our receipts and work out how much we’re spending on the big and little stuff. Some are expected (like bills and fuel) but some were a bit more surprising to know.
3. When you’ve worked it all out, then you can think of other things you want to save on: pension (I know boring, but much needed to think of**), super-long-awaited vacation, wedding, a car, a house or having a baby. All the super adult stuff that you think you can pay when the time comes. But my dear readers, if you think you’re going to get married at SOME point or want a house, then you should save now, rather than have a headache later. (speaking from experience of course)
4. When you’ve worked out your living expenses and how much you want to save, then you can have that mental note in your head on how much to spend on. We all have our must haves and wants, but there’s also those little things you can live without. You think it’s only $3 but when you add it all up, you can rake in (or out) the money.
My brother drilled this into me: Is it a want or need?
5. How can you have more moolah? Essentially what I like to think about (but doesn’t mean I want to work longer hours). Now I’m a fan of getting rid of stuff once in awhile and a lot of times, I just bring it to charity shop. But there’s other options too that I’ve ventured in: Ebay, garage sale, car boot sale. And now a good idea me thinks: Swap Parties. People bring in clothes/bags that they have some attachment to but don’t wear/use anymore and can’t bring themselves to throw away or send to charity shop, look around on other things people brought they might fancy and swap. Apparently it’s satisfying and fun. Hmmmm…. something to think about.
Anyway, that’s it for now.
Check this out: Make A Budget to give you an idea on how to calculate your in and out. It’s free, online and quick!
ps. I was also drilled in NOT to have a credit card by my brother. Apparently it’s the root of all evil – or debt. As a result, I’ve never had a credit card and haven’t felt its implications. My bank calls me every so often to tell me of benefits if I get this credit card. It does sound tempting but as I said, I’ve managed to live without it and I know how slippery slope it can be.
If you need to borrow, is THAT thing really essential?
** we will talk about pensions in a separate post. Mostly cos it’s boring and I know only little. The things I know about saving for it comes from my brother’s presentation to me (with diagrams lagi!!) about it.