Sunday, August 17, 2008

Spending Now Can Be Fun But........

Sharing a thought...

Spending money now can be fun, but it can hurt your future financial well-being if you don't save enough.

I was at a seminar on financial planning organised by SIDC yesterday. An enlightening and full of insight seminar which has reinforced what we've read, taught and learnt on the importance of budgeting and financial planning. This is oh-so-true especially in our current high inflation!

Higher gas and fuel prices are making it harder for us to do something that most of us are not too keen on anyway—saving for the future. Now that economic times are tough, many of us are looking for ways to cut back spending.

To permanently cut spending and increase our savings requires a shift in attitude. However, by cutting back, you're not really giving up anything. The money you saved will still be available for future needs. Plus, if given enough time to compound, those savings double and triple in value when invested properly—giving you even more to spend later.

At the seminar we were reminded that overspending today makes it impossible to achieve dreams tomorrow—whether the goal is a major purchase, an early retirement, or an adequate income in retirement. Save enough now so you can maintain the same standard of living throughout your life

One of the ways to reduce expenses is to analyze exactly how the money is being spent. Retain and record your purchase receipts. At the end of the month, analyse them. Identify which is your need and want. Am sure you'll note that the items in "want" list is recommended to be reduced or eliminated.

Match your spending to your goals and values in life. Align your spending with what you think is really important to you. The process of cutting spending would really makes you look at what you want to get out of your life and assist you in setting your priorities. Coincidently, I have also sent an email on The Secret of Wealthy Living which I hope is helpful to you.

With this perspective—thinking long-term and focused on what really matters to you—cutting expenses can be easier.

Controlling spending requires extra thought every time you open your wallet—being an educated, responsible consumer. It can take some time to adjust to a tighter budget. Extra measures are usually needed to help people stick to a new spending regime eg hiding or cutting your credit card? You may liken it to a diet. If you don't focus on it, it won't happen. Just as dieters need to step on the scale and tally up their calories and exercise each day, spenders must track expenses carefully.

However, does cutting back means depriving yourself? I've also noted that T Harv Ekar, author of The Secrets of the Millionaire Mind, advocates his readers the essential of setting aside 10% of our net income as our "play fund". According to him, it is important for us to satisfy the child in us otherwise the deprived feeling may cause us to blow our hard earned money thru irrational purchases whenever we have a windfall. Makes sense especially for those who are used to spending! Therefore, set aside a little bit of money each week, perhaps $10 or $20, for small luxuries or just for fun! ;)

And that's the whole point of cutting spending: The goal is to save money now so you can continue enjoying your money—on both essential and frivolous expenses—for decades to come.

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