Saturday, August 15, 2015

5 Things I Should Have Done with my Income

A little background as to why this is my topic of choice: This year, two very important things happened to me which helped me to take better control of how I spend my money. The first is a short prep talk by Jeevan Sahadevan, and the second is a Compass course (which I am still in the process of completing).

Unbeknownst to me, most of my income was spent at Mr. DIY monthly

After working for four years (going into year 5, come September!), I still have not achieved any amount of financial independence and freedom that I thought I would have by the time I were an adult. How embarrassing.

All of this boils down to poor financial education. 

(Despite my stupid financial education, I have two things to take pride in - first, my strict regime in handling credit cards. I didn't get one until last year, and only then used it to pay for petrol and NOTHING ELSE. I always made sure I paid off the dues on the day it is due, or earlier. The second thing is the routine payment of my car loan.)

Today I share with you the 5 additional things I would have told myself about my income when I first started working.

1. Do not touch the money in the EMERGENCY SAVINGS account
Ideally, we should put 10% or more of our monthly income into a savings account. The purpose of this account is to have reserve money on hand, in the event of an emergency. Some people can save up to 30% of their income, but I would recommend you start with 5 or 10% and work your way upwards. 

For me, for the past years of working, I was disciplined in putting aside that money, but had little discipline in what defines an "emergency". Holiday with the girls? Sale at Cotton On? Birthday treat for myself? Anything and everything warranted a use for the extra money. I depleted my savings very, very quickly.

Now I know better. This money is not to be used for debts, expenditure, treats or holidays. It's to be used in the event of a job loss or economical instability, or to be put towards the down payment of my first property purchase, or to be used for my further education. It's very boring, but very necessary! 

2. Create a FUN JAR
I would have put aside about 10% (or however much I could afford to put aside for that month) into a FUN JAR. This Fun Jar would fund my FUN stuff, like the things I mentioned in point 1 - holiday with my friends, buy stuff at the Cotton On sale, or treat myself on my birthday. 

Another plus point is that this amount can snowball. It's not like I go on a holiday every month - so at the end of three months, I could have as much as 30% of my income in my FUN JAR to spend! I highly recommend doing this alongside your emergency savings account. 

3. Manage the 90% as well as you manage the 10%
It has been indoctrinated in me that 10% of my income belongs to God and goes to tithes. As we tithe or pay our zakat, we are actually saying to God, "thank You for the sustenance and provision". So you can say that giving is a form of worship. 

I have been religiously giving 10% of my income to the church every month, without much thought to how I spend the remainder 90%. This year, I have been taught that all 100% belongs to God. I am merely a steward of the money that I have, and I have been a sucky steward of the 90%. MIND BLOWN! This principle (from Compass) changed the way I looked at my finances and how I manage it. 

4. Create a financial goal
It can be modest or outrageous, but have something to focus your energy and effort towards. Here are a few popular ones for those who are new in the workplace:

- Pay off student loans 
- Pay off hire purchase (car loan) ahead of time
- Set aside one month's salary in emergency savings
- Have a retirement plan (PRS)

And this one, I highly recommend to everyone to do - give your parents some money every month. They paid for the cost of your life, man. A small token for them each month would make them happy that you thought about them. It's not the amount, it's the thought.

5. Get a financial adviser/mentor
This person would not be a financial consultant, or a unit trust rep nor my insurance agent, but someone older, wiser and with more experience than me, who can help me plan out my finances with their great counsel. Uncles, aunties, your parents, your parent's friends. 

Mostly, I spoke with my mother regarding my monthly expenditure, but I do wish there were more people I could bounce my thoughts off with. "Plans fail for lack of counsel, but with many advisers they succeed."

Finally, I hope you will be able to be content in whatever state you feel you are in - like Liz Lemon here.

Okay that's all for this series! I hope you learnt something. 

No comments:

Post a Comment