PERSONAL MONEY MANAGEMENT
By Yong Tiong
Please allow me to start with few scenarios.
During the end of the month or early of next month, people are rushing to banks. They are busy with home loan payment, car loan installment, credit card repayment, etc. At the end of their busy monthly schedule of paying day, one most popular question pop up in their head: How much do I have left for the rest of the month? Does it sound familiar to you? Are you one of them who go in and out of several banks after you receive your salary, just to pay off your bills? If you do all that for a reason and you are happy with it, it is fine. But the problem is, that is NOT fine for most of us.
You walk into a shop. You see something eyes catching, something you have been wanted to own for so long. A sales person approaches you and started his/her sales take, not to forget those "If you purchase now and make a full payment now, you will get these free gifts plus ....." nice offers. You wanted to pull out your credit card and have it on credit. But wait! If you bought it, you might have to sacrifice your lunch, no more month end get away trip, no more golfing during your weekend, etc.
The scenarios can go on and on but it is not the purpose of this material to upset people. So, let us move on.
The Gap The poor are getting poorer while the rich are getting richer. What is the reason behind this scenario? The answer is simple. Rich people treat money differently from poor people. Rich people manage their money quite differently from how poor people manage it. Before we get into the detail of how to manage your money like rich people, we need to do a little self examination.
What is Your Financial Status? In businesses, we look at the financial status of a company by looking at their balance sheet. Balance sheet is a piece of paper that records incomes and expenses of a company during a particular period time of operation. The status of a company is displayed by a number at the end of the sheet. It is what a company have in balance by taking all incomes minus off all expenses.
Do you know that you have a balance sheet of your own? That is right, your bank statement. It records all transactions of money that go in and out of your account. Let us do a very simple exercise now. Take a look at your balance in your account. Does the number show at the end of your little booklet make you proud (Ok, you can check it online as well.)? Do you think that number is sufficient? How many days can you survive if your boss suddenly decides to lay you off? Your boss will give you decent reasons for that. But the truth is because you are expensive to them now. Your salary is a big number in their balance sheet, categorize under "Expenses".
Here is the Basic Idea Most people never manage their money well because it seems difficult to manage or it just doesn't seem necessary to manage. The good news is, everyone can manage their money equally well as those who are good at it. You are not good at it at the moment simply because you do not know how. You might have your way of manage your money, but does it effective? You might have gone to a good university. You might have got yourself a good degree. The truth is, you never learn how to manage your money well in university or college. At most, the professors teach business student how to calculate the balance sheet and manage it for other people, for the rich people.
I'm not implying that you don't need to study. I strongly believe that knowledge is the source of power. With great power, you can do mighty things. Just that, maybe it is time for you to start manage your money like those who manage it well and get their way out of the undesired situations that I mentioned above? I believe for most of us, the money we have is always insufficient. If you feel that you already have enough money to live with, you may want to take it to a next level. If you are constantly short of money during the end of the month, or you think you have enough money and still need a little extra, this is the correct book for you.
Self Awareness - Knowing Who You Are and Why You Are Who You Are Remember that I ask about your financial status previously? That is because you need to know where you are before we begin. If you don't know whether the money you have is sufficient or not, then you will be like a boat lost in the ocean without a compass to point you a direction.
We are who we are and where we are for a reason. So you do not have enough money to live with. Blame it to your education level. Blame it to your boss who never gives you a good increment or promotion. Blame it to the economic condition. Blame it to fate. Please forgive me for a little detour here. I believe most of us went through exam during our school time. What was the most common reason for those who did not manage to get good grade on their score sheet? It usually went something like these:
If I had enough time, I could have solved more questions..... If I had enough time to study, I could have studied those few chapters that I did not manage to cover..... The weather was so hot last night that I could not concentrate..... It was the season finale for that drama.....
The list can go on and on but I think those few "reasons" are enough to show you the main reason why you failed your exam or did not get a good mark. You are right, those are all EXECUSES! If you did not have enough time to finish that last few questions, it is because you did not manage your time well. Why you did not study those few chapters that you think might be important the night before the exam? Couldn't you start study a few more days earlier? Why do you have to watch the finale just the day before exam? As a conclusion, it all comes down to how you manage the situation. So what do your education, your boss, economic condition and fate got to do with you for not having enough money? Before blame it on other reasons, take a look at your own good self and spend some time to do a little brainstorming why you behave like what you are behaving.
I was talking about managing a situation. We all manage a situation in a certain pattern, base on some assumptions that imprinted in our memory. Then we make a decision, thinking that is the best way to resolve the conflict, to get ourselves out of the trouble, to achieve a desired outcome. The reason that we make those assumptions, decisions, etc is because base on our knowledge, past experiences, that seems to be the only way. We experienced it before and we feel comfortable with it. Then, things happen exactly the way we want it to be.....subconsciously. Yes! Subconsciously.
Psychologically, we all governed by our subconscious mind. We act and behave the way we feel comfortable with. The technical term that describes this is comfort zone. It is our subconscious that makes us stay in our comfort zone. How many times, when you want to earn that extra money while doing some other investment, joint venture or even start up a business and you really earn that extra money that you wanted? How many times that you hear about someone else lost their life time saving in stocks or businesses? Do you ever wonder why? Is it because of fate? Is it about you go into a market at a wrong time? Basically, it is because they have not prepared themselves. Subconsciously they know they will fail somehow and in the end, their "wish" come true. It is because our brain is filled with all kind of failure experiences and we all want to stay in a comfortable state. As a conclusion, the result turn out to be bad because subconsciously, we want it to turn out bad, so we can stay comfortably and not to worry when the business will success and get into trouble one day.
Business Owner Beware! Owning a business producing physical products will soon only be the playground of major players in their field. The strong get stronger. The weak is diminishing one by one. Just take a look at automotive industries, microchip industries, telecommunication industries, etc. Strong players remain strong. There is hardly a room left for small or new players. Good products and services will not guarantee your market position with the changing of consumer behavior, everyday! If the trend continues, there will soon be only few choices for cars, computers, cell phones, etc to choose from. Does your business stand a chance to survive and get strong in the next few decades?
Employee Beware! Hard working at work do not necessary guarantees you job security today. The world is changing faster than you could imagine. What you have learned at university will soon be obsolete. You may be the lucky one if your company gives you training for continuous improvement. Even so, aren't you tired of trading your time with a fixed salary? You will soon face the pressure of being lay off as your salary increases. Companies are finding ways to reduce their expenses in any form to keep their products and services competitive, considering the rising cost of materials, energies, etc.
The Path to Wealth has Changed! New age has arrived. Today is the age of information. It is no longer about products and services. It is no longer about being hard work and pension fund. Today, good ideas sell. People trade with information today. If you have great ideas, you could be on the fortune list within a year or shorter. Conventional business takes years. It is almost impossible for people who work for others.
New Age Money Management Put your savings in a bank is not really a smart way of manage your money during information age. The inflation rate can easily bypass bank's interest rate. Working is for those who want to stay where they are forever. How many employees get an increment in percentage that is greater than inflation rate? Even if it is greater than inflation rate, by how much?
Therefore, it is no longer about saving money, study hard and get a job. If you want to know how to live a wealthy life, at least at your generation, you need to equip yourself with a proper money management technique. New age money management is not about cutting expenses, manage your debt or get a financial planner. It is more than that. It is not about letting others to manage your money. It is about you being the financial planner yourself. It is about how to minimize your expenses and maximize your incomes.
There is only so much you can save if your income is fixed. With the increasing inflation rate every year, saving is simply not good enough. You need to learn how to allocate some money for investment. No, I am not referring to buying unit trust, bonds, futures, etc. I am talking about something that can potentially earn you more than your monthly salary. Of course, you need to know how and do it right. The answer is definitely not to work harder. Just think, serious think about the following questions for a moment. How many people really get rich by working hard for others? What do the world famous rich people do? It is not that complicated so get rich. You just need to do what rich people do and learn how they do it well!