Sunday, April 04, 2010

Spend too much on savings

My gf coined that title, when I told her I saved this and that every month. It was a very interesting way to put it, as the contrast between spending and spending cannot be more stark when they are forced into one single statement like that. How can someone spend on savings?

The story goes like this.. Sometimes when I see something that I that interest me, my gf would tell me to just get it. But I told her that for this month, I do not have the budget for it.

"How can it be? You saved so much every month!"

"Aiya, the savings is used for other purpose, not to buy this mah."

"You must have spent too much on your savings lah"


Come to think of it, it's quite true isn't it? 1.5 years ago, I'm an incidental saver. It means that even though I save a portion of my monthly income, I do not have a goal and neither did I track my savings. I just spent what I had for the month (which is not much) and saved what is left. However, since I started tracking things a little more seriously, I realised this is not sufficient.

I began to treat 'savings' as an expense, something like how you would treat money spent on food and gadget and movies. Everything I have some income, I would squirrel a portion of it into another account so that I do not touch it nor see it. I would continue to do so for the rest of the month until I have met my savings target for the month. If I keep on track of my monthly savings target, I would hit my yearly savings target - a grand total of 50k (again).

This is essentially the same as 'paying yourself first'. I think it works tremendously. I particularly like the philosophy:

If you save 20% of your income, for every 5 years you worked, you can don't work for 1 year.

If you save 50% of your income, for every 2 years you worked, you can don't work for 1 year.

Well, not really. I didn't mean to say that you REALLY don't have to work for x years if you hit a certain percentage savings. I'm saying that if you don't pay yourself, you're really just working for others.

So far, I've stashed away 10k, so I'm quite on track. Another 40k more...


Musicwhiz said...

Hmm LP,

I've seen this topic on saving x% of your income on more than one website or blog. It seems to be pretty commonly articulated in personal finance. Yet, only a very precious few seem to do it, or even do it successfully.

Wonder why this is so?


PanzerGrenadier said...


It's common for people not to track their savings and spending. I only started doing seriously and conscientiously after reading "Your Money or Your Life".

After tracking my income and expenditure to 98% accuracy, I would say it gives me a very good idea on my cash flow for different months in that if I consistently live within my means, the savings will tend to accumulate over time.

In addition, I live my life knowing I can afford small luxuries (which I do indulge) on occasion.

April is my birthday month and I'll be spending the realised profits from my punt in 1 lot of UOB on an iPhone (fully paid from gains) ;-)

Be well and prosper.

Createwealth8888 said...

Save and invest wisely and don't let the Bear takes away your honey. That way to go

Musicwhiz said...

Hi Panzer!

Another "iPhonatic"! hehe just kidding! :P

Anonymous said...

Hi LP,

Investment return sure make huge difference. :)


financialfreedom said...

I started out saving $300 over dollars a month since university days. It was in an investment linked policy so I could not touch the money.

My bank acct later dried up towards the end of year 3 and year 4.

It is important to start good habits when it comes to saving. People should minimally start saving 10% of their income and try to increase it over the years as their pay increases. A little bit a day goes a really long way.

la papillion said...

Hi mw,

I think so too. I've been saying this until I'm quite like a broken record...keep whining whining whining. But I keep seeing pple not doing it.

Discipline issue? Perhaps they think their salary is too low and savings too insignificant. Very wrong...

Hi PG,

Thanks for recommending the book too as it reinforces and made my tracking better. Congrats on your iphone (how about an ipad?) haha! Wishing you a very happy birthday month for you :)

Hi bro8888,

I think so too. Must be the bees that can sting back the bears, haha :)

Hi HH,

Oh..I played around with that calculator :) ROI very impt in compounding :)

Hi FF,

I agree. At least 10% on any amount that you earn. A little goes a long way indeed :)

TheOracle said...

Instead of saving x% per month, I'll rather work out my necessary expenses are, plus a little buffer for a little entertainment / R&R.

Take this sum of money and place into an entire separate account. Every month, only use this account till it's empty (max). Next month, cycle repeats itself. That way, you do not overspend.

What's left over from this budgeting is your savings. Don't care how much % is it. As much as possible. Of course don't kid yourself by putting every thing as 'necessary'. Be clear of needs and wants.

I did this from my NS days more than a decade back. It worked, and really well. I've enjoy the benefits of it since.

And one tip, don't forget your loved ones despite financial commitments. Spending time with them is important, including some entertainments. :)

Otherwise, in the long run, things can get 'sian' in a relationship. That's why there's a saying that marriage is the death of love.

la papillion said...

Hi Oracle,

Thanks for sharing so freely with me :)

I don't save as a % too. I have a yearly savings goal, and just roughly break it up into monthly targets, planned accordingly to how my income varies. Once I reached my monthly goal, I get to spend all of it. But I'm such a miserly person, I seldom spend it all.

I need to encourage myself to spend more actually, haha!

Really...there are all sorts of pple in the world :)