Sunday, February 08, 2009
Personal Finances and Losing Weight.
Yesterday I was reading a few blog articles about Personal Finances. So far, the common theme is that everyone needs to manage their finances but there is no one sure way to do it. Some people work well with certain methods and others don't. However, the basic concepts remain the same regardless of what method you subscribe to. The main difference amongst the articles I read yesterday was that most advocated totally not using credit cards and some advised using credit cards.
This morning I was thinking and I realised that managing your personal finances is exactly the same as losing weight.
First let us look at the concepts of weight loss.
There are many ways to lose weight. I guess I need not list them all but the basic concepts remains the same. Eat less or exercise more. Preferably eat less AND exercise more.
Now let us look at managing personal finances. When you manage personal finances, what do you want? Hopefully accumulate some wealth right? So how do you save up money? Spend less, or earn more. Preferably spend less AND earn more.
See? They are EXACTLY the same!
Some weight loss methods tell you to count calories, some tell you to exercise like crazy, some tell you to cut the carbs and some tell you to cut the fat. At the end of the day, they all mean that you should reduce your caloric intake one way or the other.
Some personal finance concepts tell you to pay yourself first, some tell you to make a budget and keep to it strictly, some tell you to cut up your credit cards and use cash only and some tell you to pay for everything with a credit card (but make sure you pay the balance in full every month) in order to help keep a expense record. At the end of the day, they all mean that you should spend less then what you earn.
Personally, I do not have a budget. I know that if I had one, I'd stray off it in a week. I'm just that ill disciplined. What I currently do now is to get into the habit of recording everything I spend money on. I don't even really control what I spend on. Hopefully, little by little I will get tired of seeing disgusting expenditure numbers and gradually my spending habits will change. I'm not sure if they have changed much but I know that I have managed to keep up the expense recording for about a year now. I only have about 6 months worth of records though, since an incident with my pc wiped the previous records.
I don't record how much I have in the bank, because I'm too lazy to tally it all up and one of the reasons I never managed to keep up expense recording with other available expense software is that they require too much information from me. Information like balance in account A, balance in account B etc etc. To me, it is simple. As long as I keep within my monthly pay, then it should not matter how much I have in my bank. If I want to know how much I have in my bank, I will just check my bank account. if I have too much information to tally, I know I will just say heck it and throw it aside.
If I forget to input something and I really can't remember how much it was, I either approximate it or forget it. It's not a good thing to do, but rather then fuss over it and get frustrated (thereby increasing the likelihood of me ditching the whole project), this is probably the better way.
I'm also pleased to say that I am an advocate of using credit card to pay whatever I can use it to pay. This is because I can see what I spent on at the end of the month. I can't do that with cash. Cash just... goes. Suddenly my wallet needs cash top ups (bail outs seems the hot term to use these days) and I just have to go to an ATM again. However, all credit card balances must be cleared every month. NO CARRYING OVER!
Hopefully, I will not only continue to keep up recording my expenses but will improve my personal finance situation.
This entry is part of a series of entries that I shall be entering in my blog to get myself into a 'manage my personal finance mode'
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Yesterday I was reading a few blog articles about Personal Finances. So far, the common theme is that everyone needs to manage their finances but there is no one sure way to do it. Some people work well with certain methods and others don't. However, the basic concepts remain the same regardless of what method you subscribe to. The main difference amongst the articles I read yesterday was that most advocated totally not using credit cards and some advised using credit cards.
This morning I was thinking and I realised that managing your personal finances is exactly the same as losing weight.
First let us look at the concepts of weight loss.
There are many ways to lose weight. I guess I need not list them all but the basic concepts remains the same. Eat less or exercise more. Preferably eat less AND exercise more.
Now let us look at managing personal finances. When you manage personal finances, what do you want? Hopefully accumulate some wealth right? So how do you save up money? Spend less, or earn more. Preferably spend less AND earn more.
See? They are EXACTLY the same!
Some weight loss methods tell you to count calories, some tell you to exercise like crazy, some tell you to cut the carbs and some tell you to cut the fat. At the end of the day, they all mean that you should reduce your caloric intake one way or the other.
Some personal finance concepts tell you to pay yourself first, some tell you to make a budget and keep to it strictly, some tell you to cut up your credit cards and use cash only and some tell you to pay for everything with a credit card (but make sure you pay the balance in full every month) in order to help keep a expense record. At the end of the day, they all mean that you should spend less then what you earn.
Personally, I do not have a budget. I know that if I had one, I'd stray off it in a week. I'm just that ill disciplined. What I currently do now is to get into the habit of recording everything I spend money on. I don't even really control what I spend on. Hopefully, little by little I will get tired of seeing disgusting expenditure numbers and gradually my spending habits will change. I'm not sure if they have changed much but I know that I have managed to keep up the expense recording for about a year now. I only have about 6 months worth of records though, since an incident with my pc wiped the previous records.
I don't record how much I have in the bank, because I'm too lazy to tally it all up and one of the reasons I never managed to keep up expense recording with other available expense software is that they require too much information from me. Information like balance in account A, balance in account B etc etc. To me, it is simple. As long as I keep within my monthly pay, then it should not matter how much I have in my bank. If I want to know how much I have in my bank, I will just check my bank account. if I have too much information to tally, I know I will just say heck it and throw it aside.
If I forget to input something and I really can't remember how much it was, I either approximate it or forget it. It's not a good thing to do, but rather then fuss over it and get frustrated (thereby increasing the likelihood of me ditching the whole project), this is probably the better way.
I'm also pleased to say that I am an advocate of using credit card to pay whatever I can use it to pay. This is because I can see what I spent on at the end of the month. I can't do that with cash. Cash just... goes. Suddenly my wallet needs cash top ups (bail outs seems the hot term to use these days) and I just have to go to an ATM again. However, all credit card balances must be cleared every month. NO CARRYING OVER!
Hopefully, I will not only continue to keep up recording my expenses but will improve my personal finance situation.
This entry is part of a series of entries that I shall be entering in my blog to get myself into a 'manage my personal finance mode'
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