Taking Control Of My Money

Ask anyone about how they manage their money and there will be coy if not awkward silence for an answer.

Most average people have a poor relationship with money that we are either shy to admit to having enough to live comfortably or ashamed to admit to not having a handle on it. Yet we devote many hours a day working hard to make money -- the very thing we don’t feel comfortable talking about. So lets talk about money.

Money lubricates our lives. We need it to buy food, pay school fees, medical expenses, rentals and mortgages, and utilities to cater for the basics of modern life. It is neutral, neither good nor bad. Develop a healthy relationship about money, especially its function. This is a good starting point to managing it well.

It’s important to start by understanding your money:

  • First, establish what is your disposable income. This is your salary net of taxes and pension. For example, the average Indonesian middle-class office worker earns xxxx Rp, subject to a tax rate of xxx, giving her a disposable or take-home income of xxxx.
  • Next, draw up two columns: incoming and outgoing.  Some are fixed and others are variable. It’s easier to average – e.g. divide your commissions by 12 months to get a better handle on variable income. For utilities, look at this year’s bills from January to December to average. Add as many rows of data as you need but keep it simple and limited to key items. For example:
Incoming A Outgoing B
Salary Mortgage/rent
Commissions Utilities
Rental income Education fees
Dividends Medical expenses
Other income Food, household
Pension payments

You would be surprised to find where you stand financially after this simple exercise. The difference between columns A and B will give you a better idea of how much you have left to save or invest with.

It’s useful for this exercise to collect your receipts in the past month and establish what is your routine spending. Just put the relevant receipts in different envelopes and tally at the end of the month for an idea. It’s not good to guess, as it’s often inaccurate.

  • Another easy way is to put all the expenses on a card (either a debit or credit card, doesn’t matter) and look at the categories at the end of the month when you receive the bill.

Do this for several months to get a good feel of your money and how it is earned and spent. Don’t be daunted by this simple exercise. As mentioned earlier, you spend 9-10 hours a day working to earn your money. Do set aside some time every weekend to keep track of it – filing your receipts and making sure you pay your bills on time to avoid penalties. Then check only at the end of the month and fill up the above table.

Develop a good understanding of your money, incoming and outgoing. Good habits start here.

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