In my opinion, I will like to post my top 5 personal finance tips:
1. Pay yourself first
I think this is one of the most important. You will commonly find this advice in finance books, newspaper articles and magazines.
For me, at the current moment, I pay myself 40% of my net income (after 20% CPF deduction), leaving the rest for extra savings and the reminder includes a mix of fixed and variable expenses.
And this amount paid (40% of my net income) should be left untouched till my financial objectives are met. I do keep track on the records.
Should it be used for share investment purposes, it will be recorded in my personal financial books as "Accounts Payable", meaning it will be paid off once profits realized or if not other sources of income streams.
2. Monitor your budget for specific key areas and put a ceiling if there is a need to
I do place a budget limit for my credit card and debit card expenses. Unless there is a one-off need to spend (for example medical bills and checkups, travel trips), otherwise it will be adhered strongly in my day-to-day survival.
On the other hand, I do not like the idea of living my life too cheap. My definition here is that I am delighted to spend on things that can enhance our lives. Our lives refer to my spouse and me. Things such as dinner together at some fine restaurants, cuisines etc.. we love to eat! - Spore No. 1 passion. But I will ensure that my budget is monitored and there should not be any reason to overspend.
If you have any weaknesses to spend unnecessarily (which you feel that point of regret later), my suggestion is to have stick on notes in your wallet to remind yourself about the perilous financial journey. The journey to reach the goal.
For variable expenses such as mobile phones, I have indicated a ceiling to duly inform myself that this is the maximum amount that should not be breached further.
3. Create multiple streams of income and assets
At the moment, my income streams range from:
- full time employment
- career coaching
- dividends from companies
- others (which accounts about 1% such as affiliates program etc.)
My portfolio income (liquid assets) consist of company shares and unit trusts.
The question to you is this "how large do you want your income pool to be?" "Can your full time job or one income source be sustainable?"
4. Design your personal financial tracking system and ensure that you follow it consistently and diligently
I had a framework drawn up - with fixed and variable expenses being recorded down on a regular basis. Every month end, I will do a consolidation of my income, balance sheet and cash flow statement. From there, I could review my financial profile.
Prior to this, I have my personal stress test, personal finance plan and checklists to remind me that I am focused and on the right track.
You can use excel spreadsheets, word document or subscribe to external software, as long as you are comfortable with the tools used.
5. Develop a strong sense of financial discipline and positive habits
Both the hardware and software have to be well-integrated. The software refers to your mental abilities, financial beliefs, values and attitudes. Once this is conquered, you can slowly cultivate the discipline to track and monitor your income and expenditure patterns.
The development of good financial habits will come upon you unknowingly after a period of strict discipline. And once it's a habit, it WILL be a habit.
My attitude towards finance has made me understand the essentials, from the time of my polytechnic days where I do not care two hoots about accounting and finance (it's such boring subject - my common excuse) to the time that finance has been part and parcel of my daily radar check. It HAS been a habit to carry out the measures.
The habit has turned me into a person whom is now financially capable to buy assets and create businesses that can help to generate future wealth.