Managing budgets and saving for the future - Part 1

This, I would imagine, is a topic that is close to most people's hearts.

What I would like to write about is my approach in managing my monthly cash flows, meeting obligations and saving some dough for a rainy day.

Let me tell you upfront that I have never dabbled in the stock market, even at the heights of the market frenzy of the early 1990s when even people with less pay than me would be able to get an overdraft facility to apply for new share issuances. It just did not make any sense to me then that these people delved into any new issues and not realize the risks of such strategies. Sure during that period a lot of people made quick bucks with these new issue applications in the capital gains that they made the minute the shares are traded on the exchange. And my thinking has always been one would invest when you have money, NOT that one borrows to invest, even though in financial markets that is the norm. Personal finance, to me, you must have money then only you invest.

The other investing that I did not agree was the getting a loan to invest in ASN/ASB. It didn't make sense to me that I would have to borrow and assumes that ASB yearly dividend would be self paying the financing of the loan. It is a huge assumption on the dividend as well as the interest expense from the loan. The other part is the scheme would require monthly loan deductions and how could I when I can't even meet my fixed obligations.

Needless to say then during the early days of my work life money was tight and investing of any sort was not a priority to me.

But I was very disciplined with cash flow management. My first principle is there must always be enough cash at the end of the month for emergencies or treating myself (and MrM) to a dinner outing somewhere. Mind you, those days our dinner outing was either at Suzy's Corner, AliSan or Mapler at DU. Not some fancy restaurant or hotel dining. Even if we could afford once in awhile fancy dining, most of the time these were the places that we frequented.

My second principle is the art of forecasting how much I needed to save to get something. Those days my pay was RM1,800.00 monthly. I saved RM1K every month for 8 months and had that RM8K used as a downpayment for our first car, the white Proton Saga, WCM5131. I lived on RM800 less EPF deductions, which meant less than RM800. I would ration my lunch to RM2.50 per day and yes those days you could get lunch with that amount of money.

Things of course changed when we got married. Now we had double income, and we had to decide who paid for what. In the early days of our marriage prior to the arrival of our eldest, we did not really care about who is to pay for what. Today I would pay for this, then the next day MrM would pay for that. My third principle is always have your own bank account, even though I know some couples have a joint account while maintaining separate accounts, somehow for us it worked by just having our own accounts and each one of us responsible for common family commitments.

When Munirah arrived, there were milk, diapers, baby needs, nursery fees, on top of car and housing loans to pay, and other things like groceries, utility bills etc. For major purchases, we used our bonuses since monthly cash flow was tight. I remember my first bonus after getting married, we bought a dining table for 6 made of rubber wood for RM900.00. Then MrM bought with his bonus airconditioning for our bedroom, a frost free refrigerator to replace the green colored fridge that was inherited from my mother or sister I can't remember. Then was it his bonus or mine that was used to buy our first sofa set from Fella Design. Savings were nonexistent then because there just wasn't any to save and we needed to buy things for the house. I guess both MrM and I had the stability of our income flows working in the organizations that we were attached to.

Pay increases those days were meagre in the sense that it wasn't enough to make a change in our monthly cash flows. I was thankful for the increases but worried at the same time as to when my salary would reach even the RM5K mark. MrM did well workwise in the other oil and gas company and his salary catapulted fast. We were able to afford a better car and bought th Peugeot 407 in 1997. I was scared with that purchase and the monthly installments because my priority was to save and we still were not able to.

Fast forward to 1998. Zarif arrived and financial wise we were no better than before. Of course we had more income compared to Munirah's arrival but still we were not any better because we had more fixed obligations monthly. The arrival of a new baby, Munirah in playschool, it seemed that all we paid for was nursery, play school, milk, diapers and kids needs. Nursery charges make up the bulk of the kids payments plus overtime. Truth be told, I was saving RM200.00 sometimes less monthly. But I tried to save. I still stuck to my cash flow management. That after deducting all fixed obligations, then I would see how much I have that I could use for myself, vacation, toys, clothes etc. and how long I needed to save to get to a certain target such as vacation.

We used credit cards, made minimum payments, but never to a point where the balance became unmanageable. I do admit that credit cards are evil and there have been many frivolous expenses using credit cards. I always felt that I was in control of my spending where credit cards are concerned when it actual fact, I wasn't.

There was still the issue of saving money to me. I was not able to save enough. There was always a new washing machine to buy, another refrigerator or something. By early 2000 Aliah made her presence into this world, we moved to Sban, we had a maid, and there was barely enough to set aside money or even money set aside for savings will need to be used at some point.

My mother used to say, don't worry about money, if your rezeki is there, you will have money later. However, my sister advised me to save and said "sikit2 lama2 jadi Gold Rolex!" I was really into what my sister advised, question is my sikit2 is nowhere near the Gold Rolex according to my standards.

To be continued.