17.11.12

2 Simple ways to Save without the Tiresome Budgeting!


2 Simple ways to Save without the Tiresome Budgeting!

How many of you have tried budgeting and in the end, nothing seemed to work? Come on, let's see those hands.

OK, that's just about everybody.

I've kept a budget of one kind or another, first on paper and then with the help of various software programs like Quicken.com, but to not much impact though.. I feel more like wasting of my time.


Despite knowing the importance of Budgeting and "Saving for a rainy day", many people have not done so.. I mean... come on, even though it's just a 5 mins of keying in data for your own good, i believe most of us would rather lie down and watch tv after a long day at work (Yeah, i feel you...)

Therefore, I have developed my own style of saving and decided to share with my readers... I call it: The Percentage (%) Rule: Get Rid of all the Complicated and tedious budget calculations & see as your Savings Soar!

What is The Percentage (%) Rule?

It is a faster and easier way to structure your budget without having to account for every penny.

What you're trying to do with a budget is to prevent overspending, which ultimately leads to lower savings to Retirement.

First of all, tune your mindset: contrary to the usual "wants vs needs" mantra, giving up on your vacations and such, i suggest people to take on another view in life.

When you want to go overseas for example: A trip of 4d3n to Korea will set you with around $1.5k. You compare to a trip of 4d3n to Kuala Lumpur, at most you are going to spend $500?

Or how about a morning coffee? A Starbucks coffee will cost $6 while the usual coffee is only $1.20? The more "high-classed" option is 5x more expensive... or 500%!

When you think of how much you can save (in percentage terms), it all makes sense to opt for a cheaper alternative that serves the SAME purpose.

In the examples above, if you are just going overseas to relax and be away from the working trauma, any country that allow you to relax will do! And if a coffee is merely to keep you alert at work, choosing the lower-priced variation is going to make your money last much longer...

Thus, I call this the percentage(%) rule. I used to have this habit when i am having my meal. A lunch at a restaurant is around 10+ and a lunch at food court is $5... i save 100% just by eating cheaper (this return is so much more achievable and easier as compared to you investing your money for a 100% return!!!)

Here comes The Limit (n) Rule?

After cutting down your spending by visualing how much you can save by % terms (its really a lot!), let's take a look at the Limit Rule.

Looking at my own spending history, I realized that it wasn't the usual expenses here and there that got me in trouble. It was the large, irregular expenses, like vacations and the occasional indulgences (e.g. drinking regularly, branded bags etc) that did all the damage. To avoid overspending, we have to set a limit to all these expenses which can add up to a hefty sum.

An example will be to set a holiday trip only once a year for places outside south east asia (meaning taiwan, korea, Europe...). And buying a branded bag can be done only when the existing bag is spoiled but not just relentless purchasing for style.

Combination of Both Rules

When you master these 2, i can safely say that when your income rises through the years, your expenses will not just increase "subconsciously" to match your income.

As such, you will have additional savings which you can put them to work (Money grow money!) by investing prudently. That's how Dennis Ng, the late founder of masteryourfinance.com, became a millionaire! Just through saving consistently and investing wisely with his stable income from his accountant job!

6 comments:

  1. Good post.

    Reminds us of the things we need to be reminded over and over again once in a while.

    ReplyDelete
  2. Share with you something morbid. There are two ways to die. First is to have a massive chunk of your body ripped off. The other way is to have so many small cuts all over your body that you will bleed to death.

    Why do I tell you this?

    The analogy can be applied to spending money. To prevent a huge chunk of money from being spent off, your method of limiting each purchase size is great. I think that's how a typical guy would spend. Guys generally don't spend on tiny but numerous things but whack one time on something expensive.

    But the other half of the population spends in a different way - they spend numerous small items, each one costing tiny amounts that normally wouldn't dent your budget (if I can't generalise, at least my other half does it this way, hah) but the sum of all these will burst the budget. That's death by a thousand cuts.

    The way to do that is to pay yourself first. Cap a max of what you can spend on your monthly wages by setting aside the money in another separate account. Then apply your method of capping each purchase. Doing both will prevent you from spending excessive amounts in any one particular purchase, and also prevent you from spending above a capped limit in any particular month.

    ReplyDelete
  3. honestly, if you cannot muster the discipline to do budgeting than you have a bigger professional problem when it comes to money management.

    the purpose of that budget is not to keep watch on your spending but how you prioritize your goals. and it acts as a performance monitor whether you are on track.

    it is some what like a project manager who plans and don't keep track of whether the project is on schedule or under budget.

    if you are the sort that are so well off that you don't have to worry about the little amount then congrats, because that is one weak reason why you shouldn't do some form of budgeting.

    nobody likes to do timesheets, but hey if everyone don't do it, you wouldn't know if things are on track.

    ReplyDelete
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  5. Hey everyone,

    Thanks for all the comments.

    It's glad to hear from different people who have different views (esp from la papillion about the association between "death" and "saving" o.O)

    But yeah, i forgot to add in the part about "Pay yourself first".

    I also do set aside another account just for saving and investing on insurance, endowment plans and stocks.

    People may say a budget is important and that I am lazy to skip it, but i still prefer my Simple way of
    1) Paying myself first
    2) Spending what Can Be Spent in my SPENDING account

    I do not keep track of my spending account but i do keep track of my investments and insurance etc.. I accumulate all my left over expenses for a vacation trip as a bonus for spending lower than my pre-determined level :D

    Cheers,
    Kissinvestor

    ReplyDelete
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