Sunday, August 2, 2009

Am I Living Frugally or Stingy?

After I went through some bad experiences and the begin of doing simple monthly personal budget, I hope I'm doing better on my personal financial management compare to the previous years. Even though I'm still single for now, I believe a person should have learn the basic of personal financial management when he/she has the ability to obtain income, to prepare the path to our goal, such as budget to retire early, get marry and children education etc.

From my opinion, we should have a goal and then allocate a sum of budget from our monthly income in order to achieve this. I hope I'm not doing this too late for now.
Today, I'm going to share with you on my total spending over the past 7 months, as well as how I categorized them. I'm not earning much per month, I don't even have side income or great return from investment for the time being. However, I believe it's just too important to track where my money spent, and how can I control it from there. And from the outcome, you can determine whether I'm living frugally or stingy for now.

Have you educate yourself enough on personal finance?

Basically I categorized my savings and spending into the groups below:

Group 1 - Savings
Income, savings & secure return investment with maximum liquidity

Group 2 - Home Expenses
House maintenance, bills, furniture, assessments, others related to the house

Group 3 - Transportation
Fuel, vehicle road tax, insurance, repair, parking fees, others related to the vehicle

Group 4 - Daily Living
Groceries, clothing, meals, any expenses related to daily living.

Group 5 - Entertainment
Movies, books & magazines, exercises, outdoor recreation, traveling, etc.

Group 6 - Investments
Stocks, unit trusts, Forex, foreign funds, REITs.

Group 7 - Obligations
Family needs and contribution.

Group 8 - Protections
Peronsal life insurance, vitamins, health inspection, etc.

Group 9 - Miscellaneous
Others which are not categorized under groups above.

By putting in my monthly income & return into the groups above, the pie chart below is what I see for over the past 7 months:

Average monthly personal budget - Jan to Jul 2009

The biggest spending goes to Home Expenses group, 30%. I always want to contribute a better lifestyle to my parents. The cost of maintaining a house and family is not cheap too! With luck, 25% of my income retain as savings. After I make sure I've enough savings to ensure my family and I can survive for 6 months time, I'll try to transfer 10-15% of the net savings to other investments with greater potential return, and also to increase my sum insured of my existing insurance, which is too small for now.

Are you using a software to manage your monthly budget?

The 3rd largest portion goes to investment, which is 19%. Thank God that I managed to cover up all my previous investments loss during the recent bull trend. I'm looking into real estate investment (for my family living) once I know better about it. So far I know I unable to keep my promise of getting back the loss under my previous Forex investment.

Do you understand the importance of keeping track your spending?

For entertainment and daily living, they took aboubt 8% and 7% respectively. I spent 20% for entertainment such as clubbing and social previously, which was a waste for me. Nowadays, my entertainments are pretty simple, spend time to have casual drinks and movies with friends, purchase some magazines and books monthly. I seldom go for traveling, which it will be changed once my goal is reached.

For personal daily living, I couldn't press anymore from it, as I consider it's already the minimum. I rarely go for expensive restaurants which I think it's not worth, and I only buy clothes once or twice a year.
I personally think it's not a totally bad news anyway, I can have it when I get rich, if.

Why most Malaysians are queuing day & night just to buy limited government funds?

On the other hand, I also contribute 6% of my income to my parents and their insurances. It's not much actually. I always hope I can do it better, and I'll try. Besides, I also spent 3% on my life insurance, which is too small for now and the sum insured need to be increase soon. For transportation, I'm using company car at this moment, so it's consider lucky for me.

Now, let's have a look on what's in my previous 1st half year spending by estimation:

25% goes to obligations, 24% goes to entertainment, 22% goes to home expenses. There is totally no savings & investment, and the spending should be more than income. See, it makes a difference now.

That's all about the sharing of my personal budget for the 1st 7 months of 2009. Even though I'm not a guru in personal finance or personal budget, I hope my sharing can help you out. If you want to be a millionaire or multi-millionaire, this should be the starting point. Good luck!


Anyone Can Make Money Online said...

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Anonymous said...

Lucky you. You totally don't have to pay any installment like house and car. When you start it, your savings/investment % will be lesser and lesser. Good luck.

Vincent Lee said...

Anyone Can Make Money Online, I like your blog too! Keep it up. :)
Anon, yes, so far so lucky. May be I'll buy a house by end of this year.

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