Spending – Page 2 – CFP, representing Financial Alliance

Don’t pay for tomorrow’s lifestyle with today’s income

there are good debts, and then there are bad debts. It is easy to spiral out of control if we get used to spending on today’s lifestyle with tomorrow’s income – something which is apparently becoming more and more common (Credit Bureau Singapore data showed that while credit card borrowing showed no significant variation, people in their 20s have been taking on increasing amounts of other debt since the second quarter of last year).

but the silent killer? Interest rates. Yes, again.

When you save, you earn a little interest (think 2%)
With debt, you buy what you want now, but end up paying a lot of interest (think > 24% for credit cards).
To put it simply, if you have loan of $10k that you are charged 24% for, you will have to repay ~$16k at the end of 2 years just to clear the debt. Or if you repay monthly, $528/month for 2 years – a total of $12,672.

So really, for your lifestyle expenses, save before you buy.

Teaching your kids to save!

More than once, I have had clients telling me that I should conduct seminars for young kids to teach them the concepts of saving and investing. Some parents are concerned because their children seem not to have any concept of money or understand that money can be a limited resource too. And because we live in a very different era (we are MUCH luckier than the older generation who went through the tough times), many of us also no longer preach that thriftiness is a virtue. That is the reason why we often hear kids ask “Why can’t I have it?” “But she has it too” “I want to eat at restaurant” or “I want to go to disneyland”

Most adults know why they say no – because we don’t want to spoil our kids (though we often do), because we know it would be a waste of money to buy our kid the 53rd Mickey Mouse plushie and because we know that the money could be better spent elsewhere. But while we know all these, we rarely explain to our kids why, nor do we explain to our kids the virtue of thriftiness.

And I believe that is the core reason why kids do not have a good grasp on the concept of money. Simply, because we do not tell them why and because we do not allow them the environment to practise. So here are three practices to look into implementing for your kid 😉

#1 Make it relative, and let them choose (educating them on the value of things)

The next time your kid wants to buy a new plushie, relate the cost of the plushie to their favourite snack instead.
For example: “If you do not buy that plushie, you can use the same amount of money to buy 15 sundaes over the next 3 months. Do you want the plushie, or the 15 sundaes?”. Make it clear that if they were to buy the plushie, they would have to live without ice cream for the next 3 months – of course, it would be a torturous 3 months of crying and screaming but live through that and it will gradually get better. This works because they place more value on the ice cream sundae than the money in your pocket. Sundaes matter to them. And if they were to choose the ice cream, remind them every single time that they are enjoying the sundae because they chose not to buy that plushie.

Point to note 1: Kids are smart these days, they know that you can afford to give them both the plushie and sundaes – so it is useless (and likely a lie) to tell them that you do not have money. Hence, simply let them know that you are only going to spend $X on them and that they have to choose how they want to spend it. If they already have the habit of getting their way all the time, then this method would be tough but all the better over time.

Point to note 2: It is ok to oblige to your child’s wishes from time to time. This will teach them to accept both the ‘Yes’ and ‘No’ of life. Sometimes they have to choose, sometimes they can have it all.

Continue reading Teaching your kids to save!

Live Life to your Fullest, Now and Always.

Just recently, there was a piece on Straits Times on how Singaporeans are splashing on out travel and expensive meals – on just how much more Singaporeans are spending than 10 years ago. Reading the article, I felt somewhat conflicted. It makes me wonder if this is a good, bad or neutral trend. It makes me wonder if there is a social complication to it, if it is a ‘problem’ that needs to be addressed. In the end, I decided that maybe it is not all that important.

Like some of the interviewees, I will not pull back my dollars spent on vacation because it is something that I enjoy. And life is simply too short for us to not enjoy. The above statement may seem odd coming from a financial consultant but what I really do mean is this: Live life to your heart’s desires, now and always. This means that our action today must not jeopardise our (or others’) life tomorrow. If you can spend & travel to your heart’s content and still be responsible for your own future, then by all means, go ahead.

All in all, the more important question we need to ask is: Is our action today jeopardising (or still supporting) our life tomorrow?

Continue reading Live Life to your Fullest, Now and Always.

3 Steps to Liberation (breaking bad money habits and starting better ones)

Recently, I spoke to a client (a teenager) on her spending habits. This is her description on how she feels on a monthly basis:

Countless research and poll have shown that it is much easier to overspend with this mode of payment because when we sign off the plastic, we do not experience (visually) that we are spending- our bank account value does not decrease, the cash in our wallet remains as it is. Sometimes, we are even lured into a false sense of security of having more money, for example in the case where friends return you their share of the expenses charged to your card – but which becomes money which you eventually spend (on yourself). Sometimes, we convince ourselves that we are enjoying the rebates/discounts of the credit card company – which is all true until when the bill date draws nearer and we realise that we have spent more than what we should have.

Then, the dread comes. The fear of paying the bills is not uncommon. A poll conducted by gobankingrates.com (US site on interest rates of financial services) shows that of the various financial tasks, people dread paying the bills the most.

This vicious cycle is more than just an emotional roller-coaster. The cycle itself does not promote good habits because we spend before we save. What we really need, is to cultivate a healthier habit. And here are 3 steps that will lead you to that.

Continue reading 3 Steps to Liberation (breaking bad money habits and starting better ones)

What you treat with devotion, grows.

Recently, I have been becoming more curious about people’s attitudes towards money & life in general. And I think I came across a phrase that sums it all up – What you treat with devotion, grows.

In fact, whatever you treat with devotion grows. And while devotion is technically a noun, I think it also represents as a verb. It is what you put into action until eventually, one side of the spectrum wins.

Most people understand this concept for relationships. We know that when we treat relationships with devotion (time & effort), it flourishes. But the thing, this really applies for most other aspects in life too- business, career, education and money (financial well being) too.

Take for example, if you have a low devotion towards money and do not treat it with care, you are likely to spend more or be more careless on spending it. At the end of the day, you may find that there has not been much growth in your wealth.

If you have a high devotion towards earning money, you are likely to navigate yourself on course for that. You grow, your ability grows, your earning potential grows.

If you have a low devotion towards investing your money, then of course your portfolio is unlikely to grow. In fact, it would be more likely that you lose your capital.

If you have a high devotion towards financing/donating money, then you would always find your position to give. And those whom you give and treat with devotion? They grow.