Budget Sense

Salary increases are indeed a blessing that I never take for granted, especially in today’s uncertain economic times where job security is a luxury. Receiving a salary increase feels like a bonus, and even though there’s no assurance of it, I’ve already planned how to utilize any potential increase.

Firstly, I won’t be frivolously spending this money; instead, I’ll be judiciously saving or allocating it to existing categories in my budget. As I’ve mentioned before, treating a salary increase as money I never had is crucial, and it’s best to channel it toward more important uses rather than mere spending. The majority of any increase will be directed towards the payroll stock purchase program, matched by my company up to a certain amount. Additionally, I’ll contribute to a company-matched pension program. If anything remains after allocating 50% and 30% to these two savings programs respectively, I’ll allocate some funds to cover bills and grocery shopping, considering the impact of higher bills and increased grocery costs due to ongoing inflationary pressures.

Will I enjoy any of the extra money? Perhaps 5%—not more! Every cent will be dedicated to savings and increasing the allocation to existing programs benefiting the family and household. This approach ensures a substantial accumulation of savings for the future and sufficient funds allocated to our needs, minimizing the necessity to take on debt for bills and groceries. While different people have different needs and may spend their increase differently, it’s essential to review all budget items before declaring that you’re saving enough and can afford to spend the extra money instead.

Opting for delayed gratification lays the foundation for a prosperous and financially secure future. Conversely, succumbing to immediate desires may lead to uncertainty and a future burdened by debt

We’ve all encountered the idea of sleeping on a decision before making a purchase or committing to a significant financial investment. Many of us have found ourselves caught in the ‘buyer’s remorse’ conundrum, regretting a decision shortly after making a purchase. But how about going out of your way to find a reason not to buy something? Just as some individuals will discover any justification to acquire something they desire, there exists a tiny minority at the opposite end of the spectrum. This rare breed, upon finding something they genuinely want or need, invests the next few hours or days attempting to convince themselves otherwise, diligently searching for any reason to resist making the purchase. Their hesitation is so profound that unless they can identify a compelling reason not to proceed with the acquisition, they refrain from making the purchase. These are the ‘meticulosumers’ , or someone who meticulously analyzes and considers every aspect before making a purchase, even to the point of finding reasons not to proceed.

Are you a Meticulosumer?

I have been guilty of this and are mostly proud of it. In fact it is a habit, and borderline an obsession. For example, I am due for a new laptop, as my current one is a used one from 2014 and even when I bought it back then, it was refurbished and had already been used for another 2 years. But I have come up with so many reasons why I should continue with this, how it is still runs so good for the most part, that my money is better spent on paying off debt or saving it instead. But as with all consumable items, this laptop is due to be replaced eventually, so I have agreed to push this purchase to September 2024, that is when this laptop will have been used for exactly 10 years. That also means that I start to save for it from now, instead of trying to make one big purchase and come up with the money at once.

While being addicted to non-spending and finding ways not to go ahead with big purchases, this doesn’t extend to smaller, routine purchases, or even purchases that may impact my health or safety. For example, if my car tires or breaks are due for replacement, I won’t hesitate to go ahead and make that purchase. While a Meticulosumer may take things to the extreme, they should know where and when to draw the line and health and safety should always be on an exemption list.

Meticulosumer can’t regret their decision

At the end of the day, you can not regret not buying something because you can always go out and buy it but the opposite can’t be the case with something you wasted money on but hardly ever use.

Imagine having a good car already, that runs fine, is already paid off, but decide to go for the latest model because you saw a commercial for it, or want to keep up with the joneses. So you sign the agreement to buy a car that costs you $45,000 as an example. Based on the downayment you made and current interest rates, you figure that you will be paying $750 a month on this car, for the next 6 years. At first, you say to yourself: “I make enough money to afford this and I can easily afford this. Not to mention that I deserve a new car. ” But things always look better on paper than in the real world. So while you are comfortable making the payment in the first few months, by the 6th payment (with another 66 payments to go or so) , you start feeling payment fatigue, as the car is now taken for granted and you don’t feel like you want to keep paying this big amount – in addition to paying for gas and insurance – and want a way out. Unfortunately, it is not easy to get out of this situation without losing a lot of money.

With a Meticulosumer, this situation is avoided altogether because they would have found a way not to go ahead with such a big purchase in the first place, by first convincing themselves that their current car is more than enough for their needs, and their decision to buy one would never be influenced by a commercial they saw, or to keep up with their neighbour and friends. As they say, once a glass is broken, it is impossible to put it back together. Apply the same imagery to spending money on big purchases and how it is usually close to impossible to recover your losses and get back your money in full. You don’t have a Costco-like return policy for every purchase you made. So avoid that feeling and don’t go ahead with a big purchase to begin with, doing your best to overanalyze and find ways not to go ahead with it.

To be a Meticulosumer is the same as developing your patience or endurance muscle: you need to work on it and develop it to the point of putting it on autopilot and let it do the work and thinking for you when faced with a big purchase decision. This will not only help you avoid waste money and save it instead, it will mean a much brighter and independent financial future for you.

Do you have a “why”? You know, the thing that gets you up in the morning and pushes you to your limit, no matter what life throws at you. It is that goal in life that propels you to work hard and have a hope for a better future. Some people may have one default and universal “why”, while others may have a different why depending on their different life domain; one for career, another for their finances and so on.

Personally speaking, the topic of my “why” has been a fascinating and compelling one for me ever since I started getting into the whole personal development journey. While different people may have a different “why”, it is almost universally accepted that freedom or financial freedom is one of those that many strive for. We all aspire to enjoy financial security, while having enough time to spend with family and friends and pursuing different passions and interests. For me, financial freedom is huge. While this may not necessarily mean retiring at an early age, I want to be able to have a sizeable passive income that can sustain me, even if I decided to quit my job or lost my job on day.

This brings us back to the topic of your why and how it fuels us. Although my life is in a very good position at the moment in terms of career, family and finances, I still find myself faced with situations that cause frustration and some hard decisions. But instead of letting them get to me, I use them as fuel to leap forward. As I mentioned in the title, every life frustration is a stepping stone towards my ultimate financial freedom future. For instance, our family car, despite its age, is usually reliable. However, it recently required several costly repairs. This got me thinking that my next car, hoping not anytime soon, will hopefully be as reliable and as financially efficient as possible. Same goes for any unexpected expense, rather than allowing it to affect me negatively, I use such chances to fire me up to work harder and harder towards achieving my ultimate financial why.

Do you have a strong ‘why’ in your life that drives you, even during the toughest moments when you feel like giving up and doing nothing? If so, that’s fantastic. Having a compelling ‘why’ is a powerful motivator, especially when it comes to achieving financial freedom, as is the case with my own ‘why,’ which helps me overcome many of life’s frustrating moments. When life throws you a fast curveball, having a strong “why” will help you

When life throws you a fast curveball, having a strong “why” will help you stay focused and resilient, enabling you to adapt and keep moving forward with determination and purpose.

While I don’t like talking down or preaching to people about finances from a position of ‘know it all’ , I do like to offer any advise I can when I realize the person is totally clueless or their situation is in need of some simple advise.

One of the advice I give out to people is to to simply save money and ensure you are paying yourself first. As simple and as obvious as this financial lesson may sound, it is lost on so many. The good news is, some of these same people are one advice away from turning their life away.

A friend of mine, whom we shall refer to as ‘Nick’ , was the recipient of such friendly but crucial advice. About two years ago or more, the topic of finance and money management came up and after knowing his situation, I gave him the simple advice and the importance of automating his savings. Moreover, I brought up the concept of paying yourself first. In his mid 40s at the time and while he had saved money in the past, it was sporadic and more of an afterthought. In other words, saving money was far from a priority for his pay check. I explained to him how not prioritizing this will ensure not a penny remains after he takes care of both essential and non-essential budget items. And I use the term ‘budget’ here loosely as he didn’t even have a real budget.

Fast forward to last week, where I had a chance to meet Nick for a mutual friend’s birthday. After telling me about his new job , the topic of finances came up and he proceeded to thank me for advice from years ago. Confused and clueless about this advice he had received from me, I asked him and he reminded me about the ‘pay yourself first’ recommendation I had given him years ago. Ever since, and after automating this through his payroll and bank, he has yet to skip a payment. I felt very proud of him and totally blown away by how one simple advice – coming casually and out of the blue – could make such a large impact. It is like the compound effect that starts small but builds up over time.

Seeing that he was committed and took my advise seriously, I offered him another advice that I myself had started to implement last few years. This is to forego any salary increases and let it continue to go to savings instead. It is money you never had to begin with, so just keep pretending that and let it go to savings instead. This was explained in a previous post but the concept is simple to understand and apply. Say your bi-weekly net payout is $1750 and from that, $250 goes to savings automatically. Let us assume you had a salary increase and your bi-weekly payment is now up to $1850. Take that extra $100 and add it to your existing $250 of automatic savings for total of $350. As long as you do this from the start, you won’t feel it and you just have a better financial future ahead of you.

Your life or someone’s life may just be one advise or lesson away from being completely different. When it comes to financial management and freedom, never shy away from advising others, or accepting advise from someone else, as obvious as the advise may be. While the advise may be the same, depending on the context and circumstances, there may be very valuable insight that can help. In this case, had me and my friend not talked about the strategy or prioritizing savings first, he may have wasted the last two years without any savings. And two years can make a world of difference.

If you have a need or even want to buy a big ticket item, do you simply do some research on the best choice, compare it to other items in the same category, then make your decision? or is price the first thing you look at?

For those wondering or are not sure about the exact meaning or what does it apply to, a “big ticket item” refers to a high-cost or expensive purchase or product, which typically represents a significant portion of an individual’s or household’s budget. These items are usually more expensive than everyday or routine purchases and may require careful financial planning and research.

For example, let us say you are in the market for a new Smart TV, as the one you currently have is from 10 years ago or more, and is not only outdated, it is not working properly and it is time to replace it. You decide on the size you want, the features, and even down to two or three brands. You may even have a budget for it. Now what? Do you simply go out and buy it? or do you look at different retailers and big box stores and do price-comparison, as well as checking who gives you the best value for your buck.

With an item that is going to cost a significant amount, it is a no-brainer: you have to spend some time trying to find the best deal, even if it takes you hours or days of research. It could easily mean the difference of hundreds of dollars saved.

Consider Long-Term Costs: Beyond the initial purchase price, think about the long-term costs associated with the item. For example, consider energy efficiency, maintenance expenses, and potential repair costs over time. This can significantly impact the overall value of your purchase.

Read Reviews and Recommendations: Take advantage of online reviews, user testimonials, and recommendations from friends or family who may have experience with the product you’re considering. This can provide valuable insights into the item’s performance and durability.

Warranty and Customer Support: Check the warranty offered by the manufacturer and the level of customer support provided. A strong warranty can provide peace of mind and save you money on potential repairs.

Negotiate for Discounts: Don’t hesitate to negotiate with the seller, especially if you’re making a significant purchase. Many retailers are open to price negotiations, and you may be able to secure a better deal or additional perks.

And last but not least, if you already have the cash to pay for this big item, then use your credit card to get points or rewards, then pay the purchase balance right away. This is an easy way to get more out of your purchase.

In conclusion, when it comes to making substantial investments in big ticket items, a thoughtful and informed approach can make all the difference. Balancing cost considerations with the long-term value, warranties, and reviews can help you find the perfect fit for your needs and budget. Don’t hesitate to explore various options, negotiate where possible, and even leverage credit card rewards to maximize your benefits. Remember that taking the time for research and due diligence can lead to substantial savings and ensure that your purchase is not only satisfying today but also a wise investment for the future.

If you have been budgeting for years now and the process is second nature to you, then this post is likely not for you. But you can still read on, as you may get a tip or two to make budgeting even easier and more fun for you. For the rest who struggle with budgeting, never did it before, or are interested in getting started, read on, and you will likely get enough to get you started. Budgeting, for those who have mysteriously never bothered to learn about it – or will pretend like you just came out of a cave – is simply the process of creating and managing a plan for your income and expenses. The idea is to spend within your means, while ensuring all items on your budget are met.

Create one

First step to stick to a budget, is to create one in the first place! Without a budget, you have no idea what is coming in and out, and therefore, are likely spending more than what you have coming in.

Review your budget regularly

Just because you have a budget, doesn’t mean you follow it blindly forever. Yes, you do need to stick to it, but you also need to review it every every 6-12 months. This way, you can eliminate things, reduce or increase certain items etc.

Watch your spending

Go over your spending and see if there are any trends, where you are spending money on certain items more than others. For example, do you have too much of your budget going to subscription services (Netflix, Spotify, Prime etc)? If so, it is probably time to eliminate some of these, even if you are too used to them by now.

Use Cash or Envelope System

Consider using cash or an envelope system for certain budget categories. Withdraw the allocated amount in cash and place it in labelled envelopes for expenses like entertainment, dining out, or personal spending. This approach provides a visual representation of your available funds and helps prevent overspending. I have personally been using this and it is simple but extremely effective, given its visual nature.

Discipline and Reward

As sticking to a budget needs some discipline, be sure to build that muscle and have some patience. With the passage of time, things will get easier and becomes second nature to you. In fact, I have often preached about the liberating nature of budgets, as opposed to the popular belief that they restricts you from having a better and more fun lifestyle. On the other hand, be sure to reward yourself from time to time for sticking to a budget, but this is better done at the start of forming a budget than to make it a lifelong thing. As mentioned above, once you have planted this into your subconscious, sticking to it is a matter of autopilot, where little to no effort is required. And with that being the case, you don’t need to reward yourself for something that happens in the background and requires virtually no effort.

Keep in mind sticking to a budget requires commitment and consistent effort. It may take time to adjust and develop new spending habits, but with perseverance, you can successfully manage your finances and achieve your financial goals. This includes financial Independence, where money is longer a life stressors, as you have enough for it to fulfil all your needs and wants, with enough to spare.

You’re cruising along with your trusty car, and everything seems fine. But let’s face it: in 5 years, you’ll eventually need to replace it. It may seem daunting to start saving for such a big purchase so far in advance, but here’s where you’re mistaken. Now is actually the best time to kickstart your savings plan.

But what about those smaller yet significant expenses looming just a few months away? Take, for example, a dream family vacation to the Caribbean, costing a few thousand dollars. With exactly 5 months to save up $5,000, how can you effectively budget and save for such an adventure?

Break It Down into Manageable Pieces

One effective strategy, commonly used in goal-setting and project management, is to break things down into smaller, more achievable targets. For your upcoming vacation, instead of fixating on the $5,000 price tag, focus on saving $1,000 per month over the next 5 months. By shifting your perspective, you’ll find it easier to grasp and rally around these more digestible milestones.

Create a Dedicated Bank Account

Given the substantial amount you’re saving, it’s crucial to establish a separate bank account exclusively for your vacation fund. This separation sends a clear message that this is a special project requiring your utmost attention. By compartmentalizing your finances, you’ll maintain a laser-like focus on the bigger picture without distractions from day-to-day expenses, debts, or other financial commitments. In other words, no matter what’s happening elsewhere, this account will be your unwavering resource for funding your dream vacation.

Explore Multiple Income Streams

Unless you have a substantial income with zero financial obligations, you’ll likely need to tap into additional revenue streams to achieve your savings goal. Begin by calculating how much money you can contribute each month from your current job, and then brainstorm ways to secure the remaining funds. Can other family members chip in? Are there upcoming bonuses or windfalls that can be allocated entirely or partially to your vacation fund? Consider taking on a side gig or part-time job. You can even explore opportunities for extra hours at your current workplace by discussing the possibility with your manager. Lastly, declutter your home and sell any items you no longer need online. Remember, the more income streams you can generate, the easier it becomes to save for your eagerly anticipated getaway.

Remember, the key to success lies in starting early and planning ahead. By giving yourself ample time and diversifying your income sources, you’ll significantly increase your chances of reaching your savings goal. Let’s embark on this journey together and make your dream vacation a reality!