Do you remember when life was simple and everything was cheap in our country? If you say no, you might think that it’s just a dream to live in a place where you could buy anything you wanted for next to nothing! Well, there’s no denying that life is getting more and more expensive – the latest in March is the prices of shallot and garlic rise steeply beyond our imagination. Shall we only blame on our government’s incapability in managing the agriculture sector, especially related to food imports? I think that is not the solution to face the rising prices. Remember, we’ve been dealing with so many rising prices and costs form time to time: electricity, gas, food, and so on. Some people are able to survive, some others don’t. And many agree that the best thing to do to cope with the rising cost of everything is just managing your money. Angeline Tan, a Certified Financial Planner with Great Eastern Life says that the successful people who can manage and save money are those who plan and have budgets. If you see yourself now crippled by the rising prices, you might have something wrong with your personal budgeting.
Here are the things to manage your money so as you can survive in times of inflation, taken from Maura Fogarty from Reader’s Digest Asia.
The first thing to do is to determine your monthly income: salary, TKPKN, honorarium, rental income from your owned property, and anything that comes in a monthly basis. Then, figure out how much you spend. Keep all the bills and receipts you have collected and write down everything you have paid for in a month. Track every single expenditure, whether by cash or credit card, because you need to have an accurate data before keeping up a good budget. While doing this, you might be surprised with your “losing money” list: but keep on being honest in tracking so that you can solve your problem.
The next step is to categorize your list of income and expenses into three groups: fixed expenses, committed expenses and discretionary expenses. Fixed expenses are things that don’t change from month to month, such as your housing, insurance, taxes and car payments. If you pay the expense annually, just divide the sum by 12 to get the monthly cost. Committed expenses are things you’re committed to, such as utilities, mobile phone charges, food, transportation, credit card payments, children’s school fees, and allowances for parents. Everything else falls under discretionary expenses: spending on clothing, entertainment, school books, children’s extra-curricular activities, medical bills, gifts, vacations, etc.
If you have written everything down, you’ll have a picture of where your money goes so far. It’s now the time to review your list and starting out to make a budget.
What do you see in your list? Do you spend more than you earn? If the answer is yes, it’s time to reduce your spending. Look at your discretionary expenses and figure out which ones that are easiest to cut back. Perhaps you can visit a mall once in every two weeks to avoid impulse shopping or some undoing there by taking a shopping list with you. Try eat out once in two weeks instead of weekly. Forget about keeping up with new gadget or new high-tech toys. Then look at your committed expenses. You must make a bit life style changing, or else you won’t be able to save money and keep up with the rising prices. Reduce the bill for your phone and the internet, save electricity and water to reduce utility bills, and figure out cooking without much use of expensive food stuff such as garlic, onion, shallot, chili, etc. Try to take a bus or train instead of a taxi or private car. It’s hard in the beginning, but keep remembering that you are doing these to make a good budget.
Now you’re just starting out to make a budget. There is a 50-30-20 plan suggested by Harvard professor Elizabeth Warren. That means: your fixed and committed expenses should make up half of your after-tax income; 30 percent is discretionary spending and the final 20 percent goes to savings. (Some might say that the amount of saving depends on your situation: whether you are single, married, or married with other families living with you. But 20%, according to Elizabeth Warren, is the least you should save which can be taken occasionally for emergency reasons). Can you just do that? You won’t know unless you try. Well, we might not be able to control the rising prices and the cost of living, but the above tips are just what you need to get the most of your money.
“How to Manage Your Money” by Maura Fogarty accessed March 19, 2013 from http://www.rdasia.com/how-to-manage-your-money
“How to Cope with Rising Food Prices” by Jean Chatzky, accesses March 25, 20133 from http://www.dailyfinance.com/2011/03/11/how-to-cope-with-rising-food-costs/