Money Business: How do you really save money?

Managing money is simple. As long as you don’t aim for the heavens, I assure you the phrase is true! It’s simple, useful and it will prove to be fun when the day comes. Follow a small plan with only one requirement: spend a few minutes every month to manage your savings. The game plan is based on these three essential principles. Ready? Go!

1. Reduce your expenses

I feel so much angst just from the first item on this list. First, imagine you have SGD1,000 in your savings. After a year, they will earn you 1%, at SGD10. It’s very little. Now imagine that you manage to reduce your annual expenses by SGD1,000. Twelve months later, you will have SGD1,000. That’s a lot. The best investment by far is to have 100% of the money you save. Do you think it’s difficult? Try listing your expenses and then try to reduce the unnecessary expenses that do not bring you substantial pleasure. You have the right to refuse, of course, but at least I’ve given you notice on what to do!

2. Get to know yourself

Good management of your savings is one that is adapted to you, your constraints and your objectives. Obviously we do not make the same ones at all times. We don’t make the same investment five years after retirement as we do when we have a budding career. It could also depend on whether we own a property or are just seeking to buy one in the near future. We either seek for big returns or strive for security. There are two solutions. Go to a financial advisor or do a self-analysis.

When doing it yourself,  there are the ‘objective’ factors to consider: age, marital status, income, expenses, savings. There are also the subjective elements of appreciation, like your reaction to risk. How would you react if you lost 5 or 10% in an investment? Do you console yourself saying it’s all going to work out or do you throw tantrums and stay in bed crying for eight days? Another one is how predictable your work situation — and hence, your income— is. It is important to do this with sincerity, without clouding yourselves with white lies. Finally, set your goals. What would do your savings good? Should you aim to get additional income? Do you start saving for a capital to invest in real estate, for example? Or do you establish a supplementary pension?

3. List your current investments

This is the simplest part: make a list of all the investments you already have, from all your financial accounts to life insurance. Frankly, all of this is not very complicated. It’s not to be taken lightly, but it’s not at all difficult. Moreover, it is helpful! Because once you have finished with this third phase, you are ready to manage your savings the right way.

Marc Fiorentino is an investment banker, financial market specialist, radio and TV commentator, and the author of Faites sauter la banque!

Marc Fiorentino