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A penny today, a dollar tomorrow

Car loan only at 11%.  Believe car is a set of 4-wheels to bring me from point A to point B though I often ogle at the beemers that zoom pass...

Next, trying to bring down mortgage loan.  Anybody wants to guess whether interest rates heading north in the next FED meeting in a week's time?

 

Just curious... how many of you are servicing your loans (car loan, housing loan etc..) using more than 50% of your salary every month?

 

I only have car loan using 15% of salary. 

 

I can't agree more...  I have a spreadsheet which tracks my expenses and I have that divided into fixed and variable expenses.  Reason is, if I need to cut, I'll zoom into the variable to see where I can chop.  On top of that, I also ensure that my family and I are adequately insured cos I wouldn't want a BIG surprise to derail my plans.

Try to pay yourself first before you spend the money instead of the other way round.  I know it is a struggle 'cos I am still battling with it!!!

 

Morale of the story is to live well within your means.

 

A penny today, a dollar tomorrow
CHEN HUIFEN has some tips on how to save for that rainy day

Published April 30, 2007

WHETHER you are an undergraduate student or a young adult just entering the workforce, chances are, you're unlikely to have much disposable income to partake in the recent stock market bull run.

 
If you fall into this group, do not despair. Rather than gripe about how unfair life is, or plunge into debt with precarious loans, take action now by drawing up a saving strategy - so that when opportunity knocks on your door next, you will have the money to grasp it.

Here are some ideas to help you chart a saving plan for that rainy day.

Have a goal

What are you saving for? Whether it's for a new business, the Gucci bag or that postgraduate education, make sure you have a goal to work towards. Having a goal will not only help you motivate yourself, the target figure you want to achieve is something to base on when working backwards to derive the amount you want to save regularly. There are many savings calculators and financial tools available on the web that can help you formulate the amount you ought to save, based on the sum you are targeting, the length of time, interest rates and other factors.

Instill discipline

Plan how much you are able to set aside and put that away the minute your pay cheque or allowance comes in. If you have a discipline problem, slot that sum in an account that doesn't come with an ATM or debit card. Or you can also create two accounts - one for expenses, and another for savings. Another option is to find a disciplined and trustworthy partner to jointly save with you. And make sure both your signatures are required for any withdrawal and no ATM or debit cards are issued. Hopefully, the hassle will put you off from any temptation to withdraw the funds.

Track your expenses

Many people don't seem to know where their money has gone to at the end of the month. Drawing up an expense account - preferably a spread sheet that totals up the spending in different categories at the end of the month - will help you find out. Anecdotal evidence suggests that a young adult's biggest expenditure is on food, transport, telecommunications, IT gadgets and entertainment. Looking at your historical expenditure, differentiate which type of spending is for things that you want and which is for those you need. Use that knowledge to prioritise your spending and cut down on those things you defined as 'wants' - especially if you have been overspending.

Grow your income

An owner of a very successful homegrown biotech firm once said: 'If you have $10, don't spend $150'. It was one of the reasons why most of the furniture in her office was second-hand - because she didn't have much capital to start with. Yet she also did not want to start her business on bank borrowings, so she set up her first business venture to generate revenue that may be used to finance her second business. Apparently, the equipment for her second business was bought piece by piece, using earnings from the first business.

In the same spirit, explore ways to grow your income so that you can grow your savings. Without getting into debt, look for part-time or contractual jobs that you can handle. There are also an array of savings plan products offered by banks. These come with higher rates of return (through a bonus on the interest earned, or higher interest rates), or are tied to insurance benefits.

Prepare

In the journey toward your goal, take the time to read and learn about investing, starting a new business, or whatever objective that your savings are intended for. This is so that by the time you have amassed sufficient capital, you would be ready to implement your plans.

Reward

On one savings calculator we tested online, if you were to put aside $500 a month as savings, at the end of two years, you would have accumulated $12,038.95, based on an interest rate of 0.25 per cent on the first $3,000 and 0.275 per cent for next $47,000, plus bonuses. It's an illustration of how a penny saved today could be a dollar gained tomorrow.

That's not to say that you should be a scrooge. Reward yourself from time to time. Just don't lose sight of the big picture.