Five simple steps to curtail spending
Have you wondered why some people seem to handle their finances so well, while others have no money left at the end of the month or are forced to borrow on a regular basis? Essentially, the difference is a matter of self-discipline. Even in a 'have it now' society, where many of us tend to spend whatever we earn or more, there is no substitute for prudent financial management. And that does not mean using one credit card to pay off another or taking out a bank loan to pay off various accumulated debts.
There are five tell-tale signs which show if your spending is out of control and, therefore, that you need to take concerted action to get things back on track. The first is that you don't know how much money or debt you have, and it's something you prefer not to find out. The second is an acute sense of fiscal indifference - the feeling that you're so much in debt that one more purchase won't make a difference.
Then, there is 'Barbie syndrome', the idea that if you pay with plastic, it is not real money going out. Next is the fear that you might be over-spending, but the greater dread is sitting down to confirm the feeling. And finally, there is the impulse to buy, followed by an immediate sensation of guilt.
To get a grip on things, you will need to take the following five-step plan: Be bold. Pluck up the courage and determine exactly what you have and what you owe. You will either be shocked by how bad it is or pleasantly surprised.
Downsize yourself. If you have various credit and debit cards, store accounts and other debts, then you need to reduce the number you juggle with at any one time. For example, why not cut back to just one credit card and concentrate on eliminating the outstanding balance in a series of steady steps.
Be retro. Adopt the old-fashioned notion of saving for a rainy day by regularly putting aside a few dollars in a separate account.
Don't be greedy. Think twice before buying anything and consider carefully which items you really need and will use repeatedly.
Carry cash. This makes it easy to see where your money is going. If HK$500 just 'disappears' and you find yourself back at the ATM, it reinforces the message that expenditure has to be controlled.
Article contributed by Rainbow Pan, head of sales and operations of ipac financial planning Hong Kong