Savings, System and Security (Part 1)
Hi all! I mentioned in my earlier post that sound wealth management requires Savings, System and Security. Let's touch on Savings first.
Very often, I'll ask my clients this very important question. You may also mentally ask yourself this question:
There are 2 ways of saving money.
(A) You spend on things such as paying your bills, credit cards, food, shopping, entertainment, etc, FIRST and you save whatever is left untouched.
(B) You set aside your savings FIRST before spending any of your income.
Which category do you belong to?
90% of the time, I'll get 'A' for the answer.
And 90% of the time, people who chose 'A' will never attain financial freedom. In fact, people who chose 'A' usually WORK FOR people who chose 'B'!
People who chose 'B' usually end up financially independent, and may also own businesses and start companies which the 'A's work for.
Why? And if you chose 'A', what can you do?
First, let's look back in time, to that age of our parents, and perhaps even our grandparents.
You see, in the past there were no such things as automatic bank transfer, and cheques were not so commonly used. Employers used to pay their workers in cash. And our parents/grandparents will take whatever they need for their necessities. And whatever is left of this money, they'll either keep it in a biscuit tin (sounds familiar?) or if they're savvy enough, they'll go to the bank and 'save' the money. And they do not touch this savings unless there is an urgent need for it, as they have already taken out enough money to cover their basic expenses.
Fast forward to today, where the world can't live without the internet, bank transfers, ATM cards, NETS, debit and credit cards, and so forth. Our salary is credited straight into our designated bank account. This has unknowingly created a habit for us to withdraw cash as and when we need to spend. Suddenly, the bank 'savings' deposit account no longer work like its name suggests. In fact I think it's more like a 'Cash Withdrawal Account'. This system that we have been so used to has trained us to think nothing about spending our hard earned savings. That's dangerous.
What's even more dangerous is that we don't even need to queue up to withdraw cash nowadays. With the various forms of ATM and debit cards available nowadays, you don't even need to have cash to make a purchase. It is difficult to part with cash when making a purchase. But when it comes to swiping the plastic, we usually don't think twice.
Credit cards are worse, in my opinion. Because you don't usually keep track of how much you've spent until the bill arrives at the end of the month.
So as you can see, with the above factors in place, you can definitely count on your savings going up and down like a roller coaster if you chose saving method 'A'.
The 2 most important factors for a savings plan to be effective are DISCIPLINE and SYSTEM. With the 'B' way of saving, you will see your savings steadily and surely growing month by month. All you have to do is to set aside a predetermined percentage of your income to keep every month.
Is is easier to start a business and/or invest with a substantial amount of savings (which you can use as capital) or with a roller-coaster bank account? Definitely the former! And infinitely easier! That's why the 'B's usually end up financially free and most of the 'A's usually bemoan the lack of money.
Remember, how wealthy you are does not depend on how much you earn, but how much you KEEP!
In my next post, I will be writing about System, and how important it is when it comes to wealth building, effectively and efficiently.
Stay tuned!
Very often, I'll ask my clients this very important question. You may also mentally ask yourself this question:
There are 2 ways of saving money.
(A) You spend on things such as paying your bills, credit cards, food, shopping, entertainment, etc, FIRST and you save whatever is left untouched.
(B) You set aside your savings FIRST before spending any of your income.
Which category do you belong to?
90% of the time, I'll get 'A' for the answer.
And 90% of the time, people who chose 'A' will never attain financial freedom. In fact, people who chose 'A' usually WORK FOR people who chose 'B'!
People who chose 'B' usually end up financially independent, and may also own businesses and start companies which the 'A's work for.
Why? And if you chose 'A', what can you do?
First, let's look back in time, to that age of our parents, and perhaps even our grandparents.
You see, in the past there were no such things as automatic bank transfer, and cheques were not so commonly used. Employers used to pay their workers in cash. And our parents/grandparents will take whatever they need for their necessities. And whatever is left of this money, they'll either keep it in a biscuit tin (sounds familiar?) or if they're savvy enough, they'll go to the bank and 'save' the money. And they do not touch this savings unless there is an urgent need for it, as they have already taken out enough money to cover their basic expenses.
Fast forward to today, where the world can't live without the internet, bank transfers, ATM cards, NETS, debit and credit cards, and so forth. Our salary is credited straight into our designated bank account. This has unknowingly created a habit for us to withdraw cash as and when we need to spend. Suddenly, the bank 'savings' deposit account no longer work like its name suggests. In fact I think it's more like a 'Cash Withdrawal Account'. This system that we have been so used to has trained us to think nothing about spending our hard earned savings. That's dangerous.
What's even more dangerous is that we don't even need to queue up to withdraw cash nowadays. With the various forms of ATM and debit cards available nowadays, you don't even need to have cash to make a purchase. It is difficult to part with cash when making a purchase. But when it comes to swiping the plastic, we usually don't think twice.
Credit cards are worse, in my opinion. Because you don't usually keep track of how much you've spent until the bill arrives at the end of the month.
So as you can see, with the above factors in place, you can definitely count on your savings going up and down like a roller coaster if you chose saving method 'A'.
The 2 most important factors for a savings plan to be effective are DISCIPLINE and SYSTEM. With the 'B' way of saving, you will see your savings steadily and surely growing month by month. All you have to do is to set aside a predetermined percentage of your income to keep every month.
Is is easier to start a business and/or invest with a substantial amount of savings (which you can use as capital) or with a roller-coaster bank account? Definitely the former! And infinitely easier! That's why the 'B's usually end up financially free and most of the 'A's usually bemoan the lack of money.
Remember, how wealthy you are does not depend on how much you earn, but how much you KEEP!
In my next post, I will be writing about System, and how important it is when it comes to wealth building, effectively and efficiently.
Stay tuned!
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