Merry Christmas! While you spend quality time hanging out with family and friends, the holiday season is also a time you spend a lot of money on gifts and meals.
In order to grow your wealth, it is very important to control your expenses. There are many people with high income, but some of them are also big spenders so they can't save up to grow their investment portfolio or buy a house.
I recently read the book "The Millionaire Next Door", which was first published nearly 20 years ago about the common qualities between millionaires, and learned that playing great defense (control spending) is just as important as playing great offense (having a high income). Having a high savings rate is the key to financial success.
From the book, it is mentioned that it is good to exercise the habit of writing down the expenses each day. It is now very easy to write down the expenses with the help of a smart phone. I downloaded an app called iSpending which allows you to track your income and expenses. Every time I pay for something (food, bills, gifts or transit), I open the app and mark it down. This way, it is easy to see how much money I spend and what kind of expenditures I spend on each month. After I begin to write my expenses down, I immediately became a lot more conscious about controlling how much I spend. Personally, I aim to have over 50% savings rate (money for mortgage payment and investments).
A timely post - I had a massive fail on controlling Xmas expenditure this year. Oh well....
ReplyDeleteThe Millionaire Next Door is one of my favourite personal finance books. I can well remember reading it one antipodean summer many years ago and finding it highly motivational.
Hi, thanks for highlighting the iSpending app. I currently just analyse expenses where these are easily observable in bank/card statements and haven't really attempted to analyse smaller purchases, or how i spend cash from the ATM. I might trial this as an easy way to monitor expenses on the go.
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The iSpending app is easy to use but discipline is required - it is best to record the expenses right after spending the money, otherwise it is easy to forget some of the transactions.
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