How to avoid broke in end of Month/Year

DO’S and DON’TS

-Pay yourself first. Include savings in your budget. Investing in National Bonds is a good start (it prevents you from buying things you don’t need, like more expensive cars or living in very expensive apartment).

-Think of it as rescuing the old man/woman (you in future) from the follies of the young man/woman, (you today).

-Saving between 10-20 per cent of your pay is a good guide.

-Have emergency funds – between two to three month’s salary — in a deposit account

-Diversify. Do not to put your ‘eggs in one basket’. Hierarchy of diversification:
a) Cash in the bank is secure and accessible;
b) owning a property, which generally increases in value;
c) combine other assets classes such as stocks and managed fund, as these offer good long-term growth  potential

-Take financial advice. This is important to get a wider view of the options available for you (insurance, mutual funds, stocks, or a mix of these)

-Live for today, but also plan for tomorrow. Life is about balance. Enjoy your time in workplace, but work on personal financial plan

-Balance your own interests against your family’s demands/needs. Due to cultural traditions among Asians, many send home a fair percentage of their salaries, which can sometimes be a drain and pressure on those people living here

-Don’t buy a new car on mortgage, especially if your existing one still works fine

WHY IS INSURANCE IMPORTANT?

• There many types of insurance, but basic protection should cover income (or loss of it), health, life and investments. Buy insurance that works for you

• Some insurance packages also offer investment-like features, allowing you to gain from market growth while protecting yourself and loved ones

WHAT IS CURRENCY HEDGING?

• Hedging is a way to guard against foreign exchange fluctuations. If you invest in a fund and the growth is good over a 12-month period but the currency moves against your base currency, then this growth could be wiped out.

• In Indonesia, where the majority of people are paid in rupiah(fixed against the US dollar), a practical approach is to use dollar as the currency to start your savings. Then you could switch to your base currency in the future when the currency exchange rate is to their advantage.

HOW TO INCREASE YOUR SAVINGS

• Consider saving as a mandatory expense

• Open a savings account that’s harder to get to than your checking account

• Systematically (monthly) save to that isolated account on a regular basis

• Pair your raises with increase in savings

• Set milestones with rewards

• Write down expenses in three to six-month goals

• See where your money is going (A daily coffee may cost you only IDR 15K-40K, but if you add that up over a one-year period, this could set you off  IDR 2,000K)

Before buying electronics, jewellery or fashion items on impulse, wait 30 days (you might realize you don’t need those things at all. This could save you thousands by the end of the year)

WHAT IS SAVER’S REMORSE?

Saver’s remorse is non-existent. No one complains of having money in the bank. But if you buy a new phone/item during a promotion, you may regret it soon afterwards