Wednesday, February 20, 2008

Dont Spent The Money You Dont Have, To Buy The Thing You Dont Need, To Please The People You Dont Like

Do you find yourself spending more than you earn? Yet when you look back, you find that you actually spent that money on something that you could have done without. Worse still, you spent that money on someone you did not necessarily have to please.

How can you avoid spending the money that you do not have, thus reducing incidences of overspending? Read on to find out.

10 Examples how you can overspend unnecessarily

A fresh graduate decides to buy an imported Japanese car. As a result, he uses up 50% of his salary for the monthly installments, car maintenance and petrol. He is then left with another 50% for his other commitments and expenses.

1. A fresh graduate decides to buy an imported Japanese car. As a result, he uses up 50% of his salary for the monthly installments, car maintenance and petrol. He is then left with another 50% for his other commitments and expenses.

2. You impulsively swipe your credit card to pay for the latest Apple laptop you always had an eye on. At the end of the month, you find that you are unable to pay the amount due.

3. Your colleague just moved into a semi-detached house. You sold your entire investment portfolio and existing apartment, took up a bigger mortgage to buy the house next to his.

4. An office lady uses her entire month’s salary to buy the Louis Vuitton hand bag, just because her colleague shows off one to her.

5. You want your boy friend to propose only if he presents you with a Tiffany’s ring.

6. A father took up a personal loan of RM10,000 so that he can take his family for a vacation to Australia. Although he did not need to take this holiday given his financial situation, he did so because his neighbour just came back from New Zealand.

7. Have a breast implant to impress the man you are interested in although he is not interested.

8. You bought an expensive set of home theatre system. However, you rarely watch any DVD at home since you are too busy at work. It is just to impress your friends who visit your house.

9. Bought a Rolex watch during your trip to Switzerland just because your boss said that it was a great investment.

10. You spent lots of money on your wedding ceremony and serve the best food, although all your wife wanted was a honeymoon in Europe.

What is the money you don’t have?

  • Credit card - If you can’t afford to pay it in full when the charges is due, it is the “future money”, not “current money” that you already have
  • Mortgage - you use the bank’s money to buy a house and stay in it, as long as you are able to pay it back to the financier.
  • Personal debt - getting a personal loan to spend on something is the stupidest thing to do.
  • Loan shark - those who don’t have credit card, without proper documents to borrow from banks will look for “favours” from loan shark.
  • Easy installment plan to purchase consumer product

What are the things that you don’t necessarily need?

Car, a plush house, gadgets and other things that do not fall within your budget. The rule of thumb is to spend less than one third of your income on these items.

Who are the people you don’t like?

  • Friends, colleagues and relatives who like to show off,
  • those who look down on you,
  • those who slap you on the back.

You can have a thousand reasons to hate and dislike somebody, but you don’t have to hurt your wallet.

Have you ever done something like that?

We sometimes, unknowingly, spend money on instant gratification, only to regret much later. We sometimes also give in to our temptations to buy things that we don’t have much use for or things that are impractical.

The next time, before you decide to blow your cash on something, try to think about how many hours of toiling at work that money equates to. This does not mean you need to stinge on everything that you wish to buy. Only buy something if you really need it.

Although this may sound like easy advice, we always end up faltering. We spend more than that we can earn and in the end, find ourselves struggling to make ends meet.

-Credit to KCL.

Thursday, February 07, 2008

Husband and Wife : Who should be The Financial Controller ?

It's said that 60-80% of failed marriages have money problems at their core. Especially for the newly-weds, some financial problem only surface after marriage. You might not know how deep in debt is your spouse, unless he or she told you before signing the marriage certificate. In this post, we are going to discuss about certain issues regarding combining finances for husband and wife. Topics include:

  • Should married couples combine finances?
  • Pros and cons of combining finances.
  • Who should be the financial controller?

Should Married Couples Combine Finances

Money is the root of most evil (if not all). In the US, it is very common especially for wealthy people to have a Prenuptial Agreement before getting married.

Prenuptial Agreement
A contract between two potential marriage partners specifying how the property owned by each prior to marriage and owned individually or jointly during marriage will be divided should the couple divorce.

It is definitely a hard decision to make whether you should commit a long term financial commitment with your spouse. When we are thinking of combining finances between spouses, it has a lot to do with individual comfort and trust levels. Some separates their bills and saving even after years of marriage. For me, I combine and manage my whole household finances even before we get married. My wife trusts me with all her money. The same thing happened to my parents, but my mother is the one who control the finance.

In order to decide whether or not you should combine your finances with your spouse, take these issues into considerations:

  • How much you trust each other with money?
  • Who spend more money? You or your spouse? I suggest to let the more frugal one to be the “financial controller”
  • What are your financial goals? Do you have the same financial goals? Short-list and prioritize them. You need to compromise to come out with a set of agreeable financial objectives.
  • What is each person’s responsibility? (such as handling bills, credit card, parents’ allowances etc.)
  • Discuss about the monthly cash flow, budget and net worth. Use this list of financial tools and application to help.
  • Make a commitment to discuss about your money at least once a month if not more frequent.

Advantages of Combining Finances

Photo by shutupyourface

Love is about “us”
Try saving to your wife, “This is my money!” Most probably this will cause a major fight and hard to put off the fire for weeks. Combining accounts seems to be a major step to show that how much you care for each other. After getting married, my financial goals become “our” financial goals. My money becomes “our” money. If your spouse earn less or stay home to take care of your family, combining finances create a sense of security.

More efficient
When you are combining accounts, it is easier to manage. Either one can sign documents or withdraw cash during emergency. Besides that, you only need “one” instead of “a pair” of the material things. You only need one TV set, one audio set, one house to stay, one car (maybe). You only need to meet one really good financial planner to plan for both person assets.

Better Investment Opportunity
By combining your total income, your assets, you can better manage them. The more money you have, the more opportunity you are exposed to. Some investment such as buying properties, or investing in hedge fund overseas require larger initial lump sum. You will be able to invest in those larger investments which are not available to you before.

Better Tax Planning
This is even better for those who has business income. You can plan your account and distribute your income more evenly, so that your income won’t be at the highest tax bracket. For both working spouses, you can opt for separate tax

Share the load
You will get to make financial decision together, usually through thorough discussions which will enhance bonding between spouses. You’ll share you opinion, before committing a whole life insurance plan. You’ll educate each other on money matters. assessment and claim for many relief. Ask your tax agent for advice.

No more “I owe you”
When you are short of cash and ask your husband to pay for the meal, do you pay him back later? It’s ridiculous right? If you have combined your finances, you will by default, know that whenever you spend and save, the money is yours together. It was added or deducted from your “joint account”.

Who Should Control the Finances?

Usually, one person of a couple acts as the family accountant or “financial controller”. He/She will be responsible for managing investment, tracking expenses, budgeting, and making other financial decisions. If you are one of those couple who opt to combine finances, it won’t be hard to appoint the person responsible. Use these criteria as a guide:

  • Who is more frugal?
  • Who is better in accounting?
  • Who is better in personal finance knowledge?
  • Who is better in investment skills?
  • Who is more convenient to handle the accounts - attends seminar, meets financial planners, goes to the bank etc.?
  • Who is more dominant?

Do you combine your finances with your spouse?

I do combine our finances. My wife trusts me with all our money and assets. We both know that I am more frugal and smarter in financial planning. I make most of the financial decisions.

However, I still get consent from my wife to make major financial decisions, such as buying another house, or vehicle. My wife still has the freedom to spend, within the budget.