Let say our calculation resulted $500 monthly saving, but from our current monthly income, seems that we will only be able to save $100 for our retirement. Don’t let this $100 cancel our intention to the retirement, but just easily start with $100. It will be better instead of surrender then we don’t even do any saving and all will be disappear.

Since saving purpose for retirement age is long-term habit we have to do, the handling of this money a little bit differs from other purpose. I try to give some clues how to handle this kind of saving :

1. Just start with choose well reputable bank with long experiences as a place to save our money, even though they offer lower interest rate. During uncertain long-term economic situation, a lot of small to medium bank will face difficulties once upon a time, and I think we don’t expect to get into hurry, queued at bank’s teller with other thousand of people, just to get our money back. Long established big reputable banks usually have passed several similar time, and time has proved their ability to overcome hard situation.
2. If we have found the bank, open one saving account under our name. This will become a special and particular saving account for retirement purpose, separated from others. Don’t to apply for any ATM card which can make us to withdraw the money easily, but just keep the saving book. Save our $100 every month, then forget our money as if we don’t have any saving at all !
3. Do similar thing every month at the beginning of the month (remember, don’t do it at the end of the month or we will oftenly find that we have nothing to save). If in the future the amount of money we can save is increased (let say become $150), then increase our saving amount, and also forget it for long period.
4. Slow but sure, we will have significant amount of forgotten money, and bank pays some interest to us. After several years, let check our saving balance and judge whether the amount already sufficient to be converted to time deposit or not. If the amount is sufficient, then convert them to time deposit with monthly roll over (please use monthly roll over instead of semester of yearly roll over, even though under lower interest rate).
5. We will have one time deposit certificate and one saving book then. Nicely forget our certificate, by place it in our safety box. Start again to save in our saving account from zero balance amount.
6. Please do it as a habit instead of an obligation for us. Do it for years with discipline, increase monthly saving amount step by step. After more than 10 years, we will have several certificates and one saving book.
7. If the amount already quite huge, and I expect our age already 45 or 50 years, try to find one good mutual fund, fix income mutual fund is better, and invest our money amount. Let the fund manager manage our money, and just forget it for 10 years. Meanwhile, keep continue our habit to save any amount in our saving account, still; convert them into time deposit when the amount already sufficient.
8. At the beginning of our pension age, we will have one saving account, several certificates of time deposit, and also mutual fund certificate. It’s a time to use them for our remained whole life. Post them all back to our saving account, and I believe we already had significant money amount for enjoyable retirement age.

This kind of scheme shall be implemented in flexible ways, and for sure we will need financial calculator to review time by time how many amount we have to set aside for securing our pension age.

So, forget our money, and enjoy our retirement age then !

Tags: retirement, saving

But, on the other hand, all financial advisor always ask us to think and make some personal finances planning for our retirement age. Why this topic is crucial as one of our financial mission ?

For us who still enjoy your 20th years period of our life, we may think that retirement planning is something that can wait. So many thing to do and to think such as social life, romance, entertainment, and other ways of enjoy the life. Then, there’s a time when we get old and start to think about our retirement. At that time, may be the planning is too late and we have to work very hard to achieve our goal.

So, how important is retirement planning for all of us actually?

Let’s find the broad and simple answer. Assume that we started our career at our 25 years of age, then how many years time we have before retired? Up to 55 years old, there will be 30 years. Yes, we have 30 years to prepare. After that, if we can live up to 75 years old, how much time we have to spend without any significant income but just continuous monthly expenditure ? 20 years.

It means, we have 30 years to secure our next 20 years life (2/3 of productive life period). To be emphasized here, 20 years is not a short time, and at that time we will need something to spend for our daily life.

So, begin our retirement planning on 40 years of age is little bit too late unless at that time we have quite huge income to allocate. But, who can grant that our 40 years age will become our financial golden age ?

If we now 25 years old, and have 30 years to prepare our another 20 years life, I think such 20 years is quite important and fair to be included in our life planning. Otherwise, we will burden our children or family when we get retired without sufficient amount of money to spend.

So, just keep invest our money when we are young. If we are still under 20 – 30 years period of our life, we can learn all investment instrument and don’t be scared to take some investment risk. When we are under 40 – 50 years period, please calm down and save conservatively. Just bear in mind, that we will have long 20 years road to walk when our body is too weak to work, our brain is too tired to think, and the most appropriate thing to do just to enjoy our life.

Personal finances is sacrifice something in our current life for our better future life. Just make it as a natural process, enjoy our today’s life but also make a plan for our future life, so we will be able to enjoy our whole lifetime. That’s a dream of every human being, isn’t it ?

So, once again, retirement planning is important just because we all want our whole life become enjoyable and valuable for us.

Tags: Investment, Personal Finance Management, retirement, savings

Then, at the end of the month, some people will become headache because of incoming credit card bills, even bring them to personal bankruptcy. For those who still able to pay minimum payment amount, they can postpone life difficulties because of huge debts, but it’s just another time will come with bigger debt pressure, unless they can well manage utilization of credit card.

For sure, just thrown away our credit cards and not use them anymore is not a proper solution under current less-cash world. What we have to do is a good personal finance management of our credit cards.

Here are some tips that we can do for better utilization of our credit cards, to avoid getting mad because of their bills :

1. Bear in mind that credit card is not a debt facility

A lot of people forgot to use credit card as their main purpose for flexible payment method, but just swipe card for another debt which cannot be fully paid at the end of the month. One underlined mindset in using credit card is, please treat them as a tool of payment only, which has to be paid with your current routine income or future expected income. So, when we see any interesting things to buy or to pay using credit card, think over and over again whether our income can cover that purchasing or not. Implementing this rule effectively, then we will become credit card debt free.

2. Use several cards for different purposes

Lets say we have three credit cards on hand. Just allocate utilization of each credit card for different purposes. For example, credit card A is utilized for monthly household budget which is covered by monthly income. For this credit card, our payment shall be 100% of billing amount, so we don’t have any future obligation or interest paid. We may use credit card B for entertainment and traveling. For this credit card, we can choose whether to pay 100% of monthly billing by our allocated saving or pay a part of billing amount now and settle all obligation when we receive our future expected income (such as yearly bonus, project disbursement income, etc). Credit card C is utilized for purchasing household apparels or electronics, and we can order our bank to switch payment method to 6 months or 1 year installment type. Then, allocate some monthly budget to pay them. Please be careful to make sure our monthly income can cover all installment.

3. Pay more than minimum amount every month

For credit card B, please pay more than minimum amount every month. Since we don’t do traveling or unordinary entertainment every month, in the next month our bill amount will be reduced. If we continuously pay as much as we can more than minimum amount, at the end billing amount will be less significant compared to our budget. In accordance with personal finance management, the best way to do is make some saving for our planned traveling or entertainment, so we can pay 100% of billing amount with your saving.

4. Control our lifestyle

The last but not least, as general rule of thumb in personal finances, please just life with suitable lifestyle which can be fulfilled by our income. Sometimes we forget it and do a mad entertainment, mad shopping, or other mad things. When we have interest to buy clothes, just buy clothes which are match to our income. A lot of entertainment type out there, simply choose one or two type which suitable with our income. So many house apparels and electronic tools with wide range of price, just buy one which is suitable for us. If we want higher lifestyle, then just try to enlarge our income. But, if we cannot enlarge our income yet, then be satisfied with our current lifestyle.

By implementing utilization of our credit cards as mentioned above, we can well manage our expenditure and still on our track of personal finance management.

Tags: Household budget, Personal Finance Management, savings

A lot of game is able to do, but the most easy and simple way is to inure them with management of their pocket money. Usually, we give them some money to spend every day. Why don’t we start to let them manage their money for some longer period of time ?

I am doing such thing with my child.

I have one 8 years old son, and I am dealing for long term financial game with him. Usually, his mother gives him Rp 3.000,- daily pocket money (similar with around $0.3, sufficient amount for our 8 years old kid pocket money in our country). Starting from his 3th grade of his elementary school, we give him pocket money in weekly basis instead of daily basis. The Rp 15.000,- money (5 school days times Rp 3.000,- daily pocket money) is given at the beginning of each week. We give him a freedom to manage and spend his money by himself, and just give him important point that he may not spend more than Rp 15.000,- a week.

We suggest him not to spend all of his weekly money, but set aside some money for weekly saving, which will be saved in his own moneybox. Every weekend, when he sets aside some money, he has to note his saving on one particular book, so he will exactly know the amount of his money in the moneybox. This recording shall be done by time for any saving and withdrawing from his moneybox.

The game is, for the money saved every weekend, my wife will give him additional 10% extra money of his saving amount. So, bigger saving will lead to bigger weekly bonus.

How if during specific week his pocket money doesn’t sufficient (let say, the amount already zero on thursday) ? Of course, he can take another money from his moneybox, but as a consequence, his money amount will be reduced and he will not get any extra money at the weekend.

We are doing it continuously week by week until the end of school year period (end of May). At the end of may, we will count together the amount of his money, and I will give him yearly bonus which is 10 times of his money amount.

I also give him extreme example, in case he doesn’t spend even any penny of his pocket money, his money (including yearly bonus from me) can reach around Rp 9 millions (US$ 900). He will be able to spend all money for his school vacation, buy some toys, clothes, or anything he likes.

This kind of game seems quite interesting for my son, and he always be able to save some money every weekend. The most important thing for us, he enjoys this game !

From this game, I expect several things :

1. He will be familiar to manage his own weekly money instead of hope some daily money which will be spend out all during the day. Naturally, it will build his insight about money management, important part of his future live when he has some income and shall make periodic household budgeting along his mature period.
2. This game will make him familiar with financial goals. In this game, he has short term (weekly) goal and long term (yearly) goal. All of the goal is measurable to him. Implementing this game will make him familiar with financial planning activity.
3. Recording of saving and withdrawing will make him familiar with accountable budgeting. He will be use to note all of his spending and income, and as the future result, he can manage his own money in an organized way.
4. He can learn about “money make money” rule of thumb. In this game, larger money he can save can generate larger bonus. Similar rule also happened in our real life, when time value of money is happening, our bigger money will cause bigger passive income from some investment.

Of course, in this game I never and will never push him to save as much as possible from his pocket money, but I prefer to let it done by natural way. As long as this game still enjoyable for him, it will be good learning of personal finances, since we are trying to build his way of thinking about money, instead of the amount of money itself.

I believe, implementing some financial games to our children, and do it in natural way, will give a lot of good impact and benefit for their future lives instead of giving them a lot of money, since the art of money management is not built by amount of the money, but more by their pattern of thinking about money.

Tags: Financial Education, household budgeting, Personal Finance Management

Borrowing the term introduced by well known person Stephen F. Covey, I call it “8^th habit on implementing Personal Finances in Daily Life”.

Good personal finances shall consist of following actions :

1. MUST set up definite personal finances goals, but DON’T be unrealistic

Freely defined, personal finances is the way to create well organized financial actions, and to implement such actions, we need some blue print or map. The first thing to do is determining financial goals as a grand platform of all action. Budgeting deals with regular income and expenses, meanwhile wealth management deals with creating assets to financially secure ourselves. We must set our own realistic goals anyway, otherwise the platform will be useless just because too far to be reached out.

2. MUST establish certain timelines, but DON’T be too rigid

Once some future goals already set, for example: having standard house, plan some amount of cash / savings, do some investment, retirement planning, and so on, next step is determine certain timeline of each goal. The sentences may become: having $ 30,000 standard house within 5 years, save for extra fund every month with certain target amount $ 5,000 within 3 years, will make some initial investment in bond / stock amounted $ 4,000 starting from next 8 years, calculate expected fund on hand at pension age (55 years old). With this timelines, we will exactly know what action to do. But, as the future is uncertain including our financial situation, we cannot too rigid stick on that timelines. Periodic review is necessary to re-setting those goals related to future real financial situation.

3. MUST arrange positive monthly household budget, but DON’T be self-imposed

Positive result of monthly household budget is a must condition, means our monthly revenue should exceed our monthly expenses. Its important to list up all current revenues and expenses as a part of personal finances, to have clear financial picture. Once the figure is negative, try to arrange less planned spending. If after arrangement the figure still negative, means we have to create additional revenue, from whatever reasonable way. However, we have to wisely arrange our monthly budget. For instance, too much stressing for unreasonable target of saving amount will lead us to unhappy life to do, and at the worst bring us to stressful life. Be reasonable, life is not only for money.

4. MUST be serious, but DON’T be ambitious

Yes, we have to plan and do it seriously, but use our passion, not our ambition. Make personal finances become some enjoyable process, instead of focusing to ambition. Once again, life is not merely money, don’t be getting trapped.

5. MUST have some investment, but DON’T become a speculator

Investment is important. Please allocate the highest portion in liquid cash/savings which has the lowest risk, after that we can think about investment in house, gold, bonds, mutual funds, stocks, forex. Don’t become a speculator, just put the smallest portion in assets with the highest risk.

6. MUST have a credit card, but DON’T lost control

Credit card is important as a tool of payment, but don’t consider it as loan facility, otherwise we will suffer in debt trap. Make sure we can allocate some significant amount to pay our credit card bill at the end of the month.

7. MUST take some loan facility, but DON’T create bad credit record

If we are worker, quite impossible to buy house by cash, so take loan facility to buy it. Take other loan to buy vehicle. In case we have established certain prospective business, get loan to make it grow faster. But before we take some loan, carefully calculate our capability, since we have to avoid bad credit record. Reputation is important to maintain trust from our society.

8. MUST have life and health insurance, but DON’T forget to keep us fit

Health insurance is important to protect our wealth from elimination caused by unexpected occurrence (hospitalization, medical surgery, etc), and life insurance is quite important for person with dependence (wife, children). We cannot expect our destiny, so we have to secure ourselves and the ones who we love. Anyway, don’t forget to maintain our fitness with regular enjoyable sport.

Life is valuable thing, and personal finances is important pillar to make it enjoy. So, just enjoy our valuable life with good personal finances planning.

Tags: Household budget, Personal Finance Management

As a common basic sense, the most preferable thing for all people is a freedom, including freedom to spend our money for anything we like.

Yes, I really agree with this insight!

Just to summarize my basic idea of personal finances, let me back to several previous posts which already published.

First post Basic Personal Finances – Initial Road to be Rich ! emphasizes that definition of financial freedom or getting rich is different between one to another person, because any individual has unique perception about life and how to achieve our happiness, basic purpose of the life. It will take effect to someone’s perception about money and financial related matter.

Second post Start Your Step to Implement Personal Finances repeat the message once again, and then emphasizes to make financial goals based on needs, not desires. In this step, we try to keep ourselves in well-organized financial track rather than let ourselves out of control. Simply say, this way can make our money and assets becoming positive tool to achieve our  personal basic purpose.

In other two posts Personal Finances – Let’s Determine Priority ! and Financial Advice – Systematic Personal Finance Budgeting, I tried to explain more about implementation of the first and second posts, and we were dealing with basic idea of household budgeting.

Before continuing with other future postings, I would like to well explain my basic idea about personal finances. In my point of view, personal finances including budgeting, saving, and all of the planning we make is supposed to be one of the way to make us happy, not the one which will hurt our life. Simple lesson of life, the final ultimate goal in our life is to enjoy the life itself. So – for example, too strict budgeting will bring us into suffering and eliminate our freedom to enjoy our meaningful life. The right thing to do is just make personal finance as a game to play, not a rigid guidance to follow.

But, on the other hand we cannot stick our steps on opposite side, spend our money without any planning and controlling. It seems valuable for short term, but in fact we go to another direction of life instead of long term happiness.

Actual fact, we need some personal finance management in our life, as a benchmark to pursue our main goal, but not as a rule which monitor our whole life. So that, personal finances is theoretically rigid, but should be implemented in flexible way to bring best result for our life.

So, how to make personal finances as a game ?

One simple example is about monthly household budgeting. Under some amount of current income, we can generate some amount of saving for short term or long term purposes. The rigid one is, we shall treat very strict saving for our short term, urgent, and important upcoming needs, since neglecting them will make us very suffer. If we cannot do that thing, means hard effort is needed to increase our monthly revenue.

On the other hand, we also have long term goals or purposes. We can be flexible enough with this kind of purpose. For some persons who love to do strict household budgeting, then strict budgeting is the choice. But other persons may be have another opinion regarding the way to enjoy life, so flexibility will make them enjoy.

If strict household budgeting seems hurts our life, we may think to implement flexible budgeting, by putting some month to month budget range. For example, we can averagely save 50 for our long term purpose, so just make a range between 40 to 60 or 35 to 65. May be this month we have some interesting things to do which needs extra budget, and we can allocate 10 or 15 more extra fund for our short term purpose. Next month, when we have less things to do, we can allocate more 60 or 65 budget into saving.

Implementing this way, we will feel personal finances as another interesting game to play, instead of tons of disgusting rule which burden our life.

Finally, just have a nice game !

Tags: Household budget, Personal Finance Management, Saving Money

Let assume we have organized our income to be generated once a month. We have several needs and goals and must allocate our income based on them. Based on their urgency and significance, usually people organize their expenses from very routine ones to un-routine household expenses.

At the first line is regular monthly household expenses, followed by allocation for credit card and other credit payments. Education of children will be on third priority, and after that can be continued by routine entertainment, retirement saving, vacation saving, and so on.

As income and expenses already well estimated before, then we are sure that our monthly income will be able to cover our monthly household expenses including several particular savings. Yes, we have done a good personal finance budgeting !

Now, what we have to do is making some systematic budgeting to implement or personal finances planning. In accordance with that, there is financial advice as described below:

• Arrange allocation at the beginning of the month when we just received our monthly income, and make sure that all is balance for incoming month. For this purpose, we have to check our credit card incoming bill and plan the amount of payment for this month. Also scrutinize whether there is un-routine household expenses or not. For instance, child education will need additional expenditure in specific months such as purchasing of new books, two times monthly school fee before school vacation, etc.

• Don’t wait to pay all credit installment or credit card bills until their payment due date, but pay them at the beginning of the month when we receive our monthly income.

• Make weekly review at the end of every week. Just spend one hour of our valuable time on the week end to check all household expenses. In this part, sometimes we will find too much expenditure of the week compared with planned expenditure. With this review, we assure ourselves that our implementation of budgeting still on their track.

• If possible, please keep any receipt of every expenditure transaction. This will help us to trace all expenditure when we do our weekly review. For several not significant amount of regular expenditure, just provide some petty cash in our pocket at the beginning of the month, and we can check remained amount of our petty cash every week.

• Make monthly review at the end of the month, check realization of our personal finance budgeting of the month, whether it’s in line with the planning or not. If not, we can mark several unexpected expenditure which increase the budget amount, and find that such expenditure is really important expenditure. If excess expenditure is coming from un-necessary things, take it as a learning for up coming month’s budgeting (I understand that control our lifestyle is not an easy job, but just try to do our best for that).

By implementing this financial advice, we will be able to do systematic personal finance budgeting as a part of general personal finances matter, and as the result we can control the track of our monthly expenditure, to make it as close as possible with our planning.

Tags: financial advice, Household budget, household expenses, Personal Finance Budgeting, Personal Finance Management

For example, may be our main purpose is to get happiness by helping each other, having a harmonious family, having many friends, and the other noble purposes. We can do those things in our daily life, either with or without money. But just try to imagine, how you can do it in convenience way if you are still heavily burdened to fulfill daily basic necessity, hardly thinking about how to pay your child’s school, or other urgent needs. On the other side, situation will be different if today you’ve been able to regularly allocate some sufficient amount of money to cover your daily lives, make saving for your future lives, or even if you have passive income which can cover all of your needs. I think your life will be seems easier and comfortable to do other important things, don’t you ?

As different person has different perception about word rich, I try to categorize the people into three types in accordance with their concern to financial freedom ;

First, people who already known what’s their own financial purposes, have enough knowledge to implement personal finance management in their life, and do implement their knowledge in daily life. This kind of people is used to become successful in their financial and social life.

Second, people who don’t care enough about financial freedom. For them, financial freedom is just another slogan, and doesn’t so important as well. They tend to entertain their today’s life with almost of their earnings. This kind of people are usually stuck in their lifestyle and as a consequence they must work hard just to pay their current lifestyle.

Third, people who care with the goals of their financial future, have the desire to achieve the goals, but don’t know how to get started. I present this post for these people.

Well, for those of you who are starting to define your financial goals, below are some tips which might be useful for you:

1. Start your step by making goals that suit to your needs, not your desires

Set goals depend on desire will lead you to unrealistic goals, which have no accurate measurement tools, and make you becoming mad in the process to achieve those goals. One simple example is the goal of your saving amount for your pension stage of life. You can freely set any amount as you want, but if you define it based on estimated monthly expenditure at the time of your pension ages, the goal will be more realistic for you.

2.Set some main priorities quantitatively, starting from the most important and urgent things

Suppose you are a 30 years of age male, with $ 4000 monthly income, have been married, and has one 2 years old child, then you can sort your goals as follows:
- Routine monthly expenditure = $ 2,000
- House and car loan repayments = $ 1,000 monthly
- Next year your child shall enter a pre-school, with an estimated $ 1,000 registration fee
- Set aside an emergency fund, with $ 10,000 savings target in next two years
- Plan your family vacation each year, with $ 1,000 budget
- Estimated monthly expenditure of your pension life time, let say $ 10,000 per month

3. Personal Finance Budgeting: Count the needs of your monthly budget based on those goals, and then compare it with your current monthly income

Refer to the example mentioned above:
- Routine expenditures + loan repayments = $ 3,000
- Using financial calculator or Microsoft Excel, you can calculate the money you need to save starting from this month for having $ 1000 registration fee of your child’s school funding by next year (assuming net return of investment is 7% p.a), which is $ 80.23
- For $ 10,000 savings amount in next two more years, you have to set aside $ 387.13 per month starting from now on
- For family holidays, $ 80.23 per month
- For $ 10,000 estimated monthly expenditure at starting point of your pension age (next 30 years), you must have $ 1,714,286 savings 30 years later. To produce this amount, you must start to save $ 1,397 a month from now on

By adding all monthly expenditure, the amount of your monthly budget will be $ 4,944.59, which is $ 944.59 exceeds $ 4,000 monthly earnings.

4. Based on the results,

since your current monthly income doesn’t sufficient to accommodate such budget, you will have something to do, for example to temporarily eliminate your pension fund’s goal, while looking for solutions to increase your earnings by $ 1,000 (to $ 5,000) in the near future.

You can perform different simulation and make your own goals based on your preferences. Hopefully, by setting financial goals since the beginning, you will be able to well organize your personal finances and give you a motivation to search additional revenue in line with your goals.

I have to emphasize once little more, when you set your goals, please set the goals that you thought realistic enough to achieve based on the needs. By doing that, you will not get any stress in the process of achieving those goals, and personal finances will become an interesting game in your life.

Have a nice try !

Tags: financial freedom, Personal Finance Budgeting, Personal Finance Management