Money Saving Tips

Here is one secret of successful saving: Do it! As long as you do not start today, you will never grow the habit of putting money aside for your future needs.

Put away a small amount each month. Better still, set up a standing instruction for automatic deduction so you don't have to think about it. Put the money into a savings account that rewards you with higher returns – you can check the list that I have put here on savings account.

You may consider these steps, develop the saving habit and you will soon see the pay-off. You'll see the benefit of saving as you watch your bank balance grow.

As your savings grow, you'll soon find that you may not need to use your credit card so often. In long term, you may even be able to achieve more substantial goals, such as having a deposit for your dream house.

Have a small amount deducted from your salary and deposit it directly into another saving account. As time past, your savings will grow automatically without you having to do a thing.

Why save?
In the short-term, having savings will free you from the stress of living from one payday to the next. Having some money set aside helps you deal with large bills or unexpected expenses. If you use your savings rather than borrowing money, you do not have to worry about repaying the sum you borrowed and any additional fees. On top of this your savings account may also earn a return for you. Saving for big expenses instead of using a credit card has dual benefits – you see your savings grow and you don't pay anything on the credit card.

As your savings continue to grow, you’ll be able to think beyond day-to-day expenses and would afford you larger things, like a holiday, a new i-pod or a car, without going into debt.

Set yourself a goal by setting up a standing instruction for an automatic deduction from your salary account, sit back and watch your savings grow.


How to get started? It’s as simple as 1, 2, 3 ....

No. 1 :  Set goals and determine your budget
Use your goals to motivate you. You can save for your next holiday, your wedding, a dream house or even for your retirement.

Break them down to short, medium and long-term goals.

In the medium-term, you can save larger amounts for things like a deposit for a house. As for long term, you may achieve your goal and have better options to retire. If you opt to have an option of early retirement, you may consider allocating a portion of your savings in investments that enable your fund to grow.

You can start saving now even if you haven't had time to work out a budget. Just pick a small amount to set aside from your salary each month. Some people choose a set percentage of their salary - say 5% or 10%. Others save a standard amount such as $30 or $50. It doesn't matter if you start small. The aim is to get into the saving habit now.

Request for your salary to be automatically credited into your savings account each month. This takes the work out of saving as you won't have to remember to put the money away.

A budget can help you to plan for your saving and expenses. Aim for specific goals. In the early days, keep your plan simple. For example, you may plan to have sufficient amount to pay for the big bills you get every quarter. Or you could plan for a longer term which will save you enough over a year to pay for a holiday. Use a budget to help you plan ahead.

No. 2 - Keep track of your spending
Keeping a spending record is the best way to establish your budget. Carry a notebook in which you record all your expenditure – every item, no matter how small. You’ll be surprised to find out where the money goes... cut down on the latte or cappuccino factor! Small amounts of money you spend on posh coffee or cigarettes can add up to thousands of ringgit a year. Cut back and put this money into your savings account and watch your money grow.

Check bills and keep receipts. Studies estimate that, on average, every fifth bill from the supermarket contains inaccuracies. So check every bill you get, from your mobile phone service provider to your electricity bill.

Avoid the “sale” mentality. Buying something for $100 which has a 50% tag doesn’t necessarily save you money if you don’t really need it. The point is, buy only what you need, not what you want or not what you think you can afford.

No. 3 - Where to save?
Typical savings products include savings accounts, special purpose accounts and term deposit accounts.

Savings accounts

• Allows withdrawals whenever you need to (may be subject to daily limits)
• Rates may vary
• May offer benefits (eg higher rates, reduced fees) if the balance stays above a minimum amount
• Can be useful for day-to-day transactions and short-term saving (eg for utility bills)

Fixed deposit accounts/general investment accounts

• You can't withdraw the money until the maturity of the term which ranges from 30 days to 5 years
• Higher rates than transaction accounts and the rate in fixed deposit accounts is fixed for the duration of the term. Profit is a potentially higher rate for the stipulated tenure
• Can be useful if you've saved a bit of money that you want to keep for a future goal - a term deposit account will prevent you dipping into the money sooner than you had planned and will pay more returns than a savings account

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Tame My Budget 1 : Start to Jingle

"Tame My Budget" would be my opening. Initially I like to put it as "Tame My Money", but over my years of disciplining my financial, I realized that money is nothing. It is just a piece of paper, right? However, when I write about budget, then that is where the power over money comes from.

For start, who do not have budget? 3 years ago, I would be one of those shy ones who would pick up my hands if anyone ask this question. Slow and resistively I started to do budget last 3 years, and I realized how amazing the budget have shape my life. It is not that hard at all, and the best thing, since it is "my" budget, so I got to do whatever I want with it.

My first tips to those who do not have budget, start by listing down the flow of all your money. The list should have a basic categories of income and expense. A low tech notepad and pen is good enough that you can carry it along with you all the time. I prefer to use the notepad application on my mobile phone to write down my money flow. Furthermore, my mobile phone follows me everywhere, right? Rather than use phone to accept call and sms only, give it an extra duty of keeping budget too.


Keeping track your money is solely for your own good. Be honest with yourself. No one in the world would want to see your tracking. So, there is no reason to lie over what you are tracking. Do maintain track for all your money flow including cash, credit cards and even online transaction. When I first do my tracking, I only track my cash. I close one eye whenever I spend on my credit card or online transaction (god knows why I would do that). At the end of the month, I got cash balance (great!). But then I have to push my cash to pay my credit card because I overlook how much (and how easy) I have swipe my cards and spend my non-tracked money (actually, credit card money is "not" my money, it is bank's money, whatever). So, go on and track all your money flow. No need to worry about budget first. You will not be able to setup any budget unless you understand deeply how your spending habits are.

For the expenses, I believe that it important to maintain you tracking with categories too. Make it a main categories, for example, what I did is to have my spending track to Food, Essential, Gadget, Vehicle, Book and Leisure. This way, at the end of the month, I can easily see which categories that I spent more and if necessary reduce the budget for that category.

Track Your Habit
Let me explain more details on the money flow tracking. First, start with you monthly tracking. The monthly tracking should give you an overview of how you handle your money for those monthly spending. Start simple by tracking your income and spending. For spending, details out your monthly expenses. Categorized it to 2 categories; fixed expenses and variable expenses.

Fixed expenses is much easy to track. This consists of your monthly utilities bills, credit card payment, loan payment (housing loan and hire purchase) and savings (saving considered expenses? I will derive in details later for this subject).

Example : My Monthly Budget

Rules of thumb, the variance must be positive which means your income is more compare to your expenses. If the variance is negative, then your expenses must overloaded your visible income. This means that you must have draw additional cash through other means such as spending from your credit cards, borrowing money or withdraw from you banking account. In order to ensure your monthly tracking having a correct positive variance, other source of income such as said above, must be included in the "Other" income as detail as possible.

If you are just starting your budget, do not feel demotivated or frustrated just because your habit of spending more than your salary (income) now become visible on paper. Consider yourself lucky because there are thousands of people out there who live on unhealthy financial habit do not even aware how bad their situation is. As for you, now you know. And that is a good start.

For your variable expenses, it is good enough to estimate the number for the first time as long as you are being as honest and as accurate as possible. For these variable daily expenses, you have to keep track your daily spending from day to day basis. This might sound tedious, but I would highly recommend you start to do this today. Once you have done this for 2 weeks, the habit will caught on.

There are many methods you can use to easily track your daily spending. Here are some example:

1. Using basic pen and notepad
2. Write of as basic excel through your PDA phone. There are many latest phone that support MsExcel. On top of my head, I know Nokia N97 and Sony Ericsson P1i have it.
3. You can directly track into your notebook or netbook. But it will be a bit impractical to have your notebook with you all the time and keep on turning it on and off whenever you want to write down your tracking.
   
4. Use the Notes application from your phone. This application normally comes together with basic phone. I used this method for my daily tracking (Photo below), using simple code, such as "g" for gas, "f" for food, "b" for book and so on. For example, on 25th, my spending are gas[RM4.00], food[RM3.80], essential[RM5.00], leisure[RM5.00], cigarette[RM5.00] and gas[RM5.00]. Can you read what are my spending on 26th?
   

Regardless what tools you used for the tracking, make sure that it is simple, no extra cost (do not go and buy a new PDA just for the sake of tracking your money) and sustainable. The method must work well for you to maintain the tracking throughout the month.

I would proposed that you transfer all daily tracking from your mobile tracking tool (depends on which one you used) into Excel or other spreadsheet in your computer. This will give you better overview of you spending. Example below is what I used for my own tracking.

Example : My Daily Tracking

This list goes on until the end of the month. I set up a formula in Excel that can help to auto-calculate my total spending and also balance cash that I should have. From my monthly budget, I should already know how much I can safely spend daily. I put that budget in my tracking so that I know how much cash I should still have to survive the month. I also compare the calculated balance cash with how much cash I actually have in my wallet, to see if I lost any records. I also put formula to auto-calculate my budget per day. This will give me an overview of my daily spending limit. If I happen to overspent on one day, automatically my budget per day for the next day will decreased showing that I should slow down on my daily spending in order to stay manageable until end of the month.

If you like to try and use my tracking using Excel, you can have a copy by downloading the file here. Feel free to modify the Excel file to fit your own spending style.