Welcome to Bitesize BKK’s latest entry for our new “Bitesize Finance” section. We’re still easing into the fundamentals today, as it’s the most important thing to get right when it comes to anything money related. Last week, we covered the basics of how to invest, and today, it’s all about creating a sustainable financial plan that fits into your lifestyle. Let’s break it down.
The fundamentals: Get real, Get Tracking & Start Visualizing
- Get real about where the money is trickling in and where its leaking out
Most people know how much money they’re bringing in each month, but aren’t as clear about how much they’re spending on a regular basis. The best thing to do is take notice and write down how much you spend monthly on average (granted, some months like December typically sees more spending than average).
There’s usually a gap between how much people think they spend, and what the actual number looks like.
- Leverage the tech: Track your spending
Easy tip? Go cash only for a week or two to see where your money is going, this should be easy in Thailand! A consumer psychology study analyzed the food buying behavior of a thousand households found that the shopping baskets of those who paid with credit cards had a larger proportion of impulsive and unhealthy food items like snacks and chips.
What else? Track your spending the 21st century way via free apps on the Apple App Store, where platforms like Mint and Wally will allow you to track all your spending, from Sunday’s brunch at Toby’s to a work related expense. By having your financial activities laid out in colorful charts on your screen, it’s easier to digest and really get a sense of what your “money personality” is like.
Even mobile banking apps like Siam Commercial Bank’s SCB Easy now provide a high level financial snapshot of your monthly spending, what you’re spending on and even issuing a pop-up warning if you’re spending more than usual during a particular period.
Not a fan of apps? A google sheet or excel works fine too, but it requires more discipline.
- Visualize your future & Balance those goals:
Make a plan you want to achieve in the next one, five to 10 years down the road.
Don’t restrict yourself based on what you think you can afford. Don’t restrict yourself based on what time restrictions you might have and use this as a guiding point.
Whilst its important to think about the day-to-day spending, this requires you to visualize a more long term plan. It’s also a good litmus test to see what you really want to achieve in life.
Balance goals for the short term and the long term
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- In the short-term, focusing on experiences feels great, but they tend to be expensive. So, thinking a little bit more long term, going out to years and beyond months, is important.
- “Everything in moderation”. Don’t just work and save without factoring in experiences, it makes the journey all worthwhile.
Establish your own money identity
- Don’t be too rigid
We’re not saying for you to adapt the “latte economics” and not go for that speciality dripped coffee. Just like dieting, when you’re too strict with yourself, it’ll likely all come crashing down at one point. It’s important to not be too rigid with your spending, because no month is the same. A good budgeting plan should allow for some cutbacks, but also support your activities, an easy example; cutting back on dinners for a month to save up for a vacation.
- If possible, be charitable
Millennials across the world are speaking up about their passion for different causes; be it the environment, racial equality or recently, Covid-19 relief funds. Most times though, we don’t always factor in continuous donations as part of our “spending plan.” A simply tip? create on-going records of commitment to specific causes. A little can go a long way.
- There’s no “one size fits all”
Just like a good fitting pair of jeans, there’s no “one size fits all” approach to investing, saving or growing wealth. Your goals, ambitions and plans are yours and yours only. Your personal net worth, career, lifestyle choices differentiates you from even your closest friends.
This is why it’s important to always circle back to #1: Visualize your future. A recent graduate’s priority is to maybe start an emergency fund, whilst a millennial in their early thirties may be saving up for a wedding. It’s the same as choosing an investment fund; for someone who wants to start out completely risk free, they may pick to invest in bonds over a NASDAQ index fund.
It sounds simple, but often easy to forget; never compare your financial picture with anyone else. Work towards your immediate, mid term and long term goals.
- Treat yourself
It’s good to treat yourself, to help alleviate the sense that it’s a punishment, it’s not an all vegetable diet plan. In fact, by giving yourself some “Rewards” along the way, like booking a spa day whilst you maintain your financial planning is always a good idea.
The most important thing? Don’t get sidetracked from the big picture. It all adds up.
Pillow Talk: The Money Edition
- Honest talk about debt and spending
Couples should have honest conversations about things like credit card debt and spending habits. Okay, maybe not during the three-six months period, but you’ll probably already pick up on a money habit or two after some time together. A broad example; you may notice how your partner always pays their credit card bills late. It may seem insignificant at the time, but perhaps it shows their attitude towards money management.
If you’re from the US, you’ll most likely be dealing with student loans as a couple and potentially paying it off after you get married. President Obama and former First Lady Michelle Obama didn’t pay off their student loans until they were both in their 40s.
In Thailand, whilst there are no mountains of student loan debt, each couple will have some kind of “financial baggage” they need to pay off, save up for or reconfigure. This could be paying off mortgage, paying for an MBA abroad or saving up to launch their own company. It’s always good to hash out the big topics if you plan on getting serious just to see how aligned your priorities are.
- Getting serious? Have “the talk”
Do you envision the same lifestyle? What about kids? Will you have any? Will they go to an international school? All these things may not be fun pillow talk, but it’s essential to cover the bases before you jump in.
Long term couples are encouraged to dive deep into the nitty gritty of “couplenomics”, or how to spend and save together. After a series of discussions, they can then move on to deciding rules of money engagement across the board.
For example, they can decide whether to do a joint emergency fund, to use combined or separated bill paying and bank accounts.
That a wrap for this week. Our key takeaway? Committing to a financial plan or establishing goals seems simple, but actually discipline and commitment from your end. Once you have a clear snapshot of your financial health, it makes allocating for investments slightly easier and you at least know what needs to be altered.
