Looking at the table below, can you tell the difference between the two scenarios and understand its implication?
This table explains how we spend our income. In Scenario A, we spend our income and save the balance. Therefore, our savings may fluctuate every month depending on our expenses for that month. In the Scenario B, we set aside a sum of money for our savings first, and then we spend the balance. If we have any balance left, our savings will be more for this month. This is a form of discipline savings for ourselves so that we can accumulate more in the future.
So question you have to ask yourself is, “Am I a Saver or a Spender? Do I have a consistent sum of money save for the future or do I always complain that money is not enough for me?”
If your answer is that you are a saver, congratulations to you as you started your foundation for wealth management correctly and you are on the right track to accumulate more wealth in the future.
If your answer is that you are a spender, then you have to change your lifestyle now and reduce your expenses. First and foremost, do you know where did you spend your money? Did you keep track of your bills and receipts? Do you have a notebook to record down your expenses every day and categorize them properly so that you can identify where you spend the most on?
Once you identify the category, think of ways to save money, where you can reduce your expenses in the category. Some of the common money savings tips will be, instead of eating at restaurants every weekend, how about changing it to once a fortnight or once a month? Instead taking cabs and travel every day, how about taking public buses and trains? Instead of buying a luxury item in every boutique sales, how about buying some other brands instead? Instead of changing mobile phone every time there is a new launch, how about changing it only when it is faulty?
Reducing your expenses can be quite hard at first and some of you may find it uncomfortable to change as you are so used to the lifestyle you have now. However, if you see the benefits of having more money in your bank for emergency purposes or for your future big purchases such as a car or a house, then you find that it is worth to pay the price now and enjoy the fruit later. As many industry specialists have advised, we should have at least 6 months of our income as our emergency funds in our bank savings account.
So do you have at least 6 months of your income in the bank now? If not, start savings quickly now and build your foundation strong so that you can enjoy in the future without having any worries that money is not enough.