Reality Check

 

Earlier today the Government announced a price hike on petrol of 20 sen. So there was some chaos at the petrol stations where people queued up to get a full tank. Someone asked me to do the same. But I said “what for?”. I mean, it’s not like the price was hiked only for the night. If I filled up the tank tonight, it’ll dry up sooner or later and I still have to fill it in with the new price. Duhhh…

 

 

It was a frenzy on Facebook. Almost everyone was posting comments about it on their Walls and on their friends’ Walls and on their friends’ friends’ Walls. Most of ‘em thought of it negatively and I was playing along. There’s nothing much we can do about it, anyway. And no regrets to the Government of my choice during the General Election either. Oppss..! Did I just wrote that? Heh.

 

But let’s look at it from a different perspective. I’m no expert in economy so I’m not gonna blab about the ringgits and sens. I’m looking at it from what I’ve learned and from how I changed my own lifestyle. You see, all the while, since I started working, I would spend my salary mercilessly on unnecessary things. As my salary increased, so did my spending. I would end up having the same amount of money in my bank account year after year after year after year after year. Even though my salary increased almost very year. How did that happen?

 

When I came across this book – Secrets of The Millionaire Mind by T. Harv Eker, I started to realise that it was all in the ‘Blueprint’. My behavior towards money was the result of my money blueprint that I either inherited from my parents or that I sub-consciously learned from past experience. That’s how I ended up with the same amount of money in my bank account every month.

 

Since then I started to practise the principles given in that book. Finally, I got the chance to attend the seminar in December last year and it was an amazing experience! I started to practise even more. I still had the same amount of money in my bank account. BUT! Yes, there is a ‘BUT’ I also have some money in my savings account. At the same time, I have some money for donations, too. Now, is that good or good?

 

The guiding principle is to divide the net income into 6 parts : 50%, 10%, 10%, 10%, 10% and 10%. Here’s the breakdown:

50% is called the Necessity Account. This is where I got to spend on my necessities – meals, groceries, parkings, toll fees, fuel, school fees, tuition fees, rents, etc.

 

The first 10% is called the Financial Freedom Account (FFA a/c). This is where got to use the money for my retirement years. I will invest the amount in fixed deposits, Unit Trusts, savings accounts & such. The principle here is to treat the amount as the ‘Golden Goose’ that lays the golden eggs. You should never ‘kill’ the Golden Goose. That means you can’t spend the principal investment. It’ll be better if you don’t spend on the bonuses and profits either. Just re-invest so that you’ll have more golden eggs.

 

 

 

The second 10% is called the Long Term Saving to Spend Account (LTSS a/c). This is where I got to spend for something that I want in the near future. For example I am now saving for myself and my family to perform Umroh next year (if God’s willing). So I will keep this 10% in the Hajj savings account. If you wish to buy something expensive, like a house or a car or an iPad then you can use the money from this account. You can also use this account to settle off your debts bit by bit. For example, start with paying for one of your credit card bills. Finish it off then start to pay off the other.

 

The third 10% is called the Education Account. We don’t usually spend for our own self development. Of course sometimes we will buy the motivational books, listen to motivational CDs and all but that’s it. We don’t really invest in our own self-development. We were too busy doing and performing for others. So use the money in this account to go to seminars, trainings, conventions, buy home study courses, etc that would benefit us in the long run. Every month, this account must be emptied. I have, for the past one year, spent a lot on seminars by paying monthly instalment, using this account.

The fourth 10% is called the Play Account. We spent as little for ourselves as we spent for our own self-development. Sometimes we spent for clothings or maybe a spa treatment. But those were off the cuff spending. This account would give us the privilege to pamper ourselves, to reward ourselves for all the hard work and to let off some steam. So I will use the money from this account to buy things that would make me happy. I will spend all the money from this account on a monthly basis.
The fifth 10% is called the Give Account. We have to spend all the money from this account for donations either in cash or kind. This is how we should thank God for all the money that He has given us.

So there…that’s how I spend my money nowadays. So I will keep my expenses just within those percentages. If my necessities become more than 50%, I can adjust it to as much as 60%. But that’s about it. Actually the most you can go is 70% but that’ll make the other ‘Accounts’ suffer with less amount. The most important thing is, I need to be realistic with my spending. I need to be more prudent. If I can’t stretch my necessity account any more, then I will have to do some re-adjustment. Perhaps reduce my spending.

I’ve just started this from the beginning of this year. It takes a lot of discipline and self-reminder. It takes a lot of courage to fight off that urge to spend mercilessly because the old habit of thinking “it’s my money, so I deserve to spend it” is still there. By end of the day, I realised that it’s all about inculcating new habits. I have to keep on reminding myself to put in a ringgit or my lose coins in the FFA jar every day. And slowly but surely, I am now settling some of my debts so that my personal commitments to the banks is reduced by almost 70% in the next three (3) years!

When we have this new habit kicks in, we won’t be in such a knee jerk reaction or a panicky state when some costs go up or some subsidies were withdrawn or some new expenses came along. We won’t get so frustrated and become so violent. We just have to make some reality checks along the way.

-This article was published on Wordpress September 3, 2013