Sometimes, there are certain essentials in life that get overlooked. Things like say, saving up money for the long term. Whether it’s due to being thought of as impossible (student loans, low salaries, unstable jobs etc) or the urge (driven by peers, advertisers etc) to live for the moment and enjoy life, being frugal isn’t easy to do or popular. But saving isn’t about being cheap, not having fun and missing out on life.
That was an accusation I got from a relative when I mentioned that a lot of people in society don’t seem to save money — “well you hardly go out and never eat out,” she said, not without some rancour. That is not exactly true though I don’t have an overly active social life and I don’t spend much on meals and drinks – I usually get simple meals if I am eating by myself and I mainly drink only when I meet with friends (I do like beer and wine but I hardly drink alcohol at home). But the fact is that as someone who is completely financially responsible for himself, not to mention being well into my thirties, saving up is absolutely vital. Wherever I am and whatever my financial situation, I adjust my budget accordingly. Saving up also has a lot of benefits.
First, who wouldn’t want to have money on hand for whatever you want to do or buy.
Second, no matter how much people say to live in the present, being prepared for the future is important. You need to be prepared for medical issues, having a family, retirement, losing your job, etc.
Third, savings isn’t just for going on trips or buying nice stuff, but also for essential but not-so-fun stuff. Things like dental treatment, and surgery, and family emergencies. For instance, I have a lot of issues with my teeth and have had surgery to remove crooked wisdom tooth and two root canals (I may need another one soon too!). Though I did most of this in Taiwan, where dental treatment is extremely affordable as most of it is covered by health insurance, getting a root canal and a crown is still at least US$400. Of course, in Hong Kong, the same would cost at least US$2,000!
But the biggest benefit of saving money isn’t being able to afford good things or go on trips to different places. It’s not even the relative freedom of not having to put up with bad work situations for too long and being able to handle being jobless for a short period of time. It’s about being able to enjoy or endure these things and still have something left over.
At the same time, I’m not an expert saver. I don’t keep track of my daily or regular expenses, I don’t make detailed spreadsheets, and I don’t go around counting pennies.
Now, I’m the first to admit I could never be an expert on life, but this is one area where perhaps I can offer some decent advice. Here’s a few tips (some may seem kind of silly but they have worked for me):
—Use a mental trick to ensure you always have enough. When budgeting (as mentioned, I don’t keep regular tallies), always lower your actual budget. Basically, always imagine that your salary or the amount of money you can spend is a little less than what it really is.
—Never spend every single bit of your money. And conversely, save up a little more than what you actually need for something. For example, if you need to buy a pair of shoes, and you budget US$120, feel free to spend less than US$120. If you need to buy something that’s US$500, save up $600 and hold on to that extra $100. Doing this regularly will ensure you’ll always have a little bit extra and it adds up, which is very helpful if unexpected expenses come up or if you want to spend a little bit more in future.
—Pay off your debt (or as much as you can) as soon as you can, whether it be student loans (unless there’s no interest or it’s very miniscule), credit card bills, or even your mortgage. While a little debt might be unavoidable, it’s hard, both financially and mentally, to be dragged down by substantial debt that keeps increasing due to high interest.
—Invest in something stable like pension plans or life insurance investment plans, which are popular in Hong Kong and Taiwan, early such as when you are in your late 20s. In the case of the latter, these plans take a number of years to become mature but they guarantee a significant return later on in your life. I’m no investment guru so do check actual experts and professionals for more insight and advice. That said, I would add never put all your eggs into one basket, and diversify your savings into different things like stocks, insurance, mutual funds etc.