Wednesday, 21 August 2013

"Spend Less Then What You Earn" - Still Can Pakai?

There is an age old phrase used by many which goes something like this "Spend Less Then What You Earn". Our parents probably told us the very same phrase when we were kids, then our teachers when we were teenagers, then during adulthood by our spouse and probably by financial advisers (if you've engaged one). 

Despite these countless reminders, some of us (not all) allow ourselves to spend, spend and spend, not realizing that those tiny little debts which we accumulate each month is fast turning into a mountain. Are we to be blamed for giving in to luxuries ranging from smart phones, gadgets, branded clothes, etc? 

As humans, we naturally seek for fulfillment (no matter how short term it might be). It is that very "weakness" which made companies such as Samsung, Apple, Prada, Sony and many more into billion dollar companies. What are millions spent on marketing and advertising when ultimately the company get billions in returns? I am sure we have seen how as human, in search of such fulfillment tend to overspend not only in monetary terms but in emotional and physical terms as well. Setting up camp outside a store a night before an official launching of a new smart phone is a classic example. Not forgetting the most recent McDonald's minion craze of course.

My point here is that humans are susceptible to such attractions thanks to those awesome mind blowing ads. From a financial planning point of view, some of us tend to overspend on such attractions. What's worst is that credit card is facilitating the ownership of such luxuries so easily! Just one swipe! Only a single swipe, no cash changes hand and you have your 15 minutes of fame and satisfaction! Easy-peasy except now you just got yourself 24 months worth of debt installment to pay.

Let's move a little higher to the middle income earners whom can afford to pay cash in return for these so called "fulfillment". I agree that each and every one us whom has worked hard and would like to reward ourselves in return. What I can't understand about rewarding is when one changes phone every time a newer version is out. Or getting a new branded clutch or handbag every month. Perhaps it is something that I am unable to comprehend or feel. Perhaps it is an interest or a passion to some. 

Whatever the reason might be, if you intend to take control of your financial planning, all you need is to complete three simple key objectives every month before spending on those so called "fulfillment":

First :Stay out of debt (specifically credit card debts) 
Second : Save by paying yourself first. 
Third : Use that money earned from paying yourself to invest. Make your money work even harder!

Whatever extra you have after completing above, then by all means go get yourself an awesome Iphone or a Coach pursue. You deserve it.

Cheers and Happy Investing!

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