Wednesday, September 22, 2010

Building your barn

It's important to have savings in life. Especially when you are expecting big expenses in the near future, eg. house renovations, money for higher learning, etc.

The rule of thumb is that you should be saving at least 10% of your monthly income, but for some of us out there, you might not be saving fast enough to meet your target, eg. your house renovation is expected to start in 2012, but you only have 2 years to save.

Therefore, you might try to increase your savings to 15% or 20% depending on your lifestyle and discipline. I guess a lot of factors affect the aggressiveness in which we save.

Depending on your character, you might be a spendthrift, spender, madman when it comes to money. I'm currently logging every single expenditure I've made for the month of September. It gives a clear picture of where the bulk of your money goes, and if possible, ways to cut down on spending.

Some of us have cars, some have education loans to repay, some have one credit card, some have many credit cards, some like to shop everyday, some like to pay expensive stuff, all these affect your savings.

This word keeps popping up recently in my mind, someone once told me that discipline determines destiny. (details also but thats another story). I can say that I think very carefully before spending money. Especially purchases above $50. Even during shopping in the supermarket, I try to buy value for money stuff. Recenly I thought of getting a key pouch to keep my keys cause the number of my keys grew and the keys keep poking me. I had in mind a buffel keypouch but when I saw the price $50 i decided against it. Cause to me, my keyring does the job. Who cares about a few pokes?

Some of us have a heavy lifestyle, like hospital loans and family bills to pay, but they are discplined, they don't go on holidays, they don't buy big purchase items randomly. They will have savings.

Some of us have a light lifestyle, no bills to pay, nothing, but they are ill-disciplined. They buy presents for the whole world, they take cab wherever they go, they just buy buy buy. They will not have savings.

The people who save best are people who have a light lifestyle and are very disciplined.

I'm all for enjoying and pampering yourself once in a while, but my personal conviction is, i know i have something i need to pay for in the next 1-2 years, rather than borrowing money or taking a loan, I'd rather save up and pay for it cash.