Small Steps To Grow Your Finances
Money doesn’t grow on trees, but there are ways to expand your account, even if you start small. The first step involves moving away from mindless spending and making a conscious decision to save money for a bigger purpose. This will ensure that your hard-earned money goes a long way. Harvey Chua, general manager of AdPhoto Inc., one of the country’s top advertising and commercial photography studios, and a self-made entrepreneur, mother of three and grandmother to two lovely girls, shares clever saver tips that she has learned through the years.
Stop, Look, List
Take stock of your financial realities. List all your regular sources of income. How much money will you make each month? Then list down all your monthly expenses. Make a separate budget for the money that will not be spent on utilities and bills. Put money away for savings, your emergency fund and some as disposable income.
“Create and maintain accounting records of your incomes and expenses. Any spreadsheet app will do. Do weekly or monthly summaries, and write notes to explain extraordinary items,” Harvey says.
Review your expenses. Look at each one and see where you can cut costs to find sources of savings. For example, you can reduce consumption of frequently bought items and be conscious of price points in supermarkets. Choose a supermarket that offers better value and consider changing to more cost-effective brands. Take an extra effort to save—carpool, walk more, cook at home, and most of all, say no to impulse buying.
It’s a Family Business
Treat personal and family finances like a business. Have a bookkeeping system to help you keep track of the cash movement in your home. “Create a family petty cash to help you monitor small cash expenses,” Harvey advises. “Assign the responsibility of maintaining it to someone, and set guidelines as to what she can spend on. You may also want to limit your spending by giving yourself a daily cash allowance. It would also be wise to open a checking account for family expenditures. Lastly, print your own family vouchers as this will help you maintain records of your expenditures, as well as classify your expenses.”
“Remember to pay yourself first. Savings should not be what is left after expenses; it should be your ‘first expense,’” says Harvey. Consider it as your "payment" to yourself, before you pay for electricity, food and other daily expenses. Some personal finance counselors advise that we should have at least a year’s worth of buffer funds—money we have reserved for contingencies like losing (or giving up) a job.
Fully understand how your credit card works and understand its billing system. You can use your credit card as a substitute to carrying cash around but not as an extra cash line. This simply means that you should be able to pay your card bill IN FULL, every month, on or before the card due date. Partial payments and delays will incur you high penalty fees and interest charges. Harvey adds, “Try to use only one credit card, or if you do have your own business, a maximum of two credit cards: one for personal expenses and the other for business expenses. Do not withdraw cash that is charged to your credit card (cash advance) as interest rates on these transactions are very high. ‘Zero interest’ on installment purchases may seem attractive, but they can mislead you into thinking that you still have money when actually funds that you are still going to earn have to be reserved for such installment payments. Always check your credit card bill to make sure you are only charged for purchases you actually made.”
Never Stop Learning
Read or listen to personal finance counselors like Suze Orman and Efren Ll Cruz. There are many free seminars on personal finance management being offered by financial institutions and organizations. Blogs, books and webinars are also widely available.
Gaining full control of your finances is a skill that must be learned and honed. Saving and investing are conscious efforts that require a change in mindset and lifestyle. It takes a bit of getting used to but the financial freedom you gain is priceless!
This article was originally published as "Grow Your Money" by Ros Juan in Working Mom magazine.