Hello everyone, I’m back. FIRST of all, holy. I cannot believe that so many of you read the first article that I had up last week. Given that I hadn’t written in here forever, I wasn’t actually expecting anyone to read – also because most blogs are dead now? I for one, still enjoy blogs and this particular domain of mine, so I will stick to it, but a lot of people don’t read anymore, or SO I THOUGHT. As you can see, I’m very overwhelmed by all the kindness, comments, WhatsApp messages (what even) and overall feedback. Even if that was a one-hit-wonder, I’ll take it. So thank you to all those who took the time to read the article, share it and also give feedback on it, I truly do appreciate it. What I’m sharing are things I have learnt on personal finance over the years that I think might be helpful for others.
Right, now that we have gotten that out of the way and getting back to where we left off last week, if you managed to read through that, I have four main suggestions that I list out in the earlier post. And to some extent, they are in an ‘order’ of sorts:
- If you don’t already, make a budget, preferably, before you get paid
- Consider savings as an expense
- Have a separate account for your savings
- Track finances
So we are picking up from there and also please remember, I am not a finance expert. Also, this article turned out way longer than I had hoped for.
Stocktake, budget and reallocate
If you’ve been relatively consistent with tracking your finances on any apps (I’ve heard good things about “Mint” – I haven’t tried it myself though) or an Excel sheet, chances are that you are starting to see some trends.
The above image is the format I have been using for a few years now and while this format has more or less remained consistent over the years, certain fields in the dropdown menus have changed. I try to update this at the end of every week so I don’t fall behind on my tracking. The format itself I try to update it whenever I feel like it has to, but that doesn’t happen always.
Understand where you are putting your money
One of the best things that come out of taking stock of the finances you are tracking is that it helps you prioritise and better understand where your money is going. I personally try to do a quick analysis or stocktake before every monthly budget and something more in-depth every quarter. And this analysis as fancy as it sounds does not have to be complicated. I’m going to try and explain this with an example and if you are not very good with math, like myself, I would suggest having your tracker open as well as a calculator at hand.
Eg: Looking at the past month (or the duration you are taking into consideration), what is the total amount of LKR you have put aside as savings? Now that you have that number, try to do some math and figure out what this amount of savings is equivalent to when compared to your monthly salary. If you have multiple streams of income, try to either combine them or if you are only using one particular income for expenses and to put aside for savings, then use only that.
Monthly salary: LKR 75,000
Monthly savings: LKR 15,000
To find out your % of the savings: (15000/75000) x 100 = 20%
Also side note, I never thought I would do an equation with NUMBERS on my blog. Wowerz.
This means you are saving 20% of your monthly income! From all the readings I have done over the past two years or so, this is pretty great % and well done! Now, that you’ve found out how much you are saving, try to do the same for the rest of your spending allocations or in my instance “purposes” just to find out how much of your salary is being spent on various items.
Remember, there is nothing to beat yourself up about here, it’s okay if you spend LKR 15,000 on a moisturiser once in a way, I do that too. It’s also okay if you bought yourself one too many bottles of alcohol to help you get through the pandemic – I might have also done this. It’s not ideal but it’s okay. We are not going to dwell with what was. If we are going to better ourselves with our money habits, we have to be kind to ourselves. Let ourselves fail, make mistakes, learn from it and try to find a fit that feels right. However, if these continue then my friend, we would need an intervention.
While planning for this blog post yesterday, I did a stocktake of the quarter that has passed and looked at some of my numbers. I realised, thanks to the pandemic many of my expenses (including travel) has now reduced, although internet and phone bills have gone up. But this means, if I continue making certain adjustments, I can increase my savings. I also noticed a few random AF spending habits (some Sims 4 games and skincare purchases seem to make it to the top of this list). However, after punching out some numbers on the calculator and writing notes down on a sheet of paper, I realised that I am able to go from a monthly average of 33% savings to 46% savings starting June 2021. This is all very exciting to me especially to know that I am able to put aside 46% and (be disciplined enough to) not use it.*
Understand what the bank is doing to your money
I left this as a second point of discussion. Not because it’s not important but more so because it’s important for us to first understand what we are doing with our money.
I don’t know about you but knowing what happens to my money, where it goes, how much is taken by the bank is really empowering for me. As we all know, I like to control things and having this knowledge makes me feel as though I am aware of what happens in my bank account. At least, most of the time.
A stocktake is also great to know details like how much interest the bank is paying you for holding your money. More often than not, even if you have SMS notification turned on, not all banks sends you a SMS on your monthly interest and you have to check a bank statement for it. Unless you check, you wouldn’t even know if the interest rate has changed (unless you are aware of news in general) – like it has now.
This is also a great opportunity for you to go through your statement and see what additional fees you’ve been charged. If you have signed up for some sort of additional subscription, membership etc that you forgot to unsubscribe from (Zoom, I’m looking at you).
Also, please ask questions. It’s okay if this means that you have to be on a really long customer care hotline for so many minutes, ask questions of what money has come into your bank, what has left it and about certain expenses that seem unfamiliar to you. If you are tracking your finances already, cross-check against your own. My Mother usually gets a printout of her credit card statement, marks certain discrepancies and calls up the bank to check on these. For those who have credit cards, it’s also good to know what additional fees you are being charged (and also remain mindful about the interest rates).
Also quick unrelated side note on online banking. Pre-pandemic, like way pre-pandemic, I used to be the type who liked to stand in line and pay my bills or deposit money at the bank or later at CDMs. But then I was almost lured into online banking (because I thought physical banking taught me patience, which it did haha, but now I also have more time to do additional personal admin work) and now looking back, I am grateful! Online banking is also useful when it comes to identifying these expenses as well as diversifying our savings, as we will talk in our next point.
Diversify your savings
Before I dive headfirst into this, I want to talk a bit about financial goal setting. It’s something I started doing mid last year and I’ve found it very fascinating and useful and wanted to share it with you too. Once you’ve managed to track your finances for a while, hopefully, you will want to set some financial goals for yourself. It could be something as small as ‘save consistently for six months by December 2021’. It’s also important to have an indicative time period next to your goal because it lets you put in place the work to meet this goal. There is some weird psychological flex towards it that someone with more than 02 years of psychology can let you in on but I thought of letting you all know about this as this has been very helpful for me.
From tracking your finances to saving consistently for a few months (hopefully in a separate account where your savings are left untouched) you might by now, have a fairly decent stash of cash sitting in your savings (only) account.
Now, continuing from what our parents taught us, money just sitting idly in a bank account is not going to do anything for us. In today’s economy, there might also be a chance of the bank and the money even ghosting us. Yes, it will accrue interest over time but in this economy, I highly doubt it would make a sizeable difference. So this brings us to something I have personally grown to become very fond of: diversifying savings streams. I’ve done a bit of reading into this one and also have been practicing some of it myself, probably not as much as I should have but hope some of the following insight would be helpful.
Also, no amount of savings is too little so as long as it has been acquired in a consistent manner. However, having said that, if we are moving to the next part of this discussion, banks would require a minimum of LKR 25,000. Sigh.
Fixed deposits (FDs)
Us Sri Lankans loves our FDs. At least I do, to some extent! The first time I opened one of my FDs (online not the physical ones), I felt like a true adult. And mind you, it happened only in my late 20s. But jokes aside, besides the fact that FDs give you marginally higher interest rates it does a fantastic job of keeping you from accessing your own money. Sure you can access it but this will come at a cost. I personally think this is a great way of ‘hoarding’ your money. Especially for those who genuinely find it difficult to keep themselves from spending money, an FD is a good start to keep your savings put and maybe even earn some interest on it.
FDs have also been one of my main methods (still is) that has helped me grow my savings, sustainably. I have online banking with Commercial Bank and Sampath Bank and they start their FDs at LKR 25,000 and they let you calculate your interest rate based on the months that you select in real-time.
So I’ll tell you what I did.
I began with putting down smaller FDs of about LKR 25,000 and LKR 30,000. I try to save up over a course of a month or two (depending on how much I am putting aside) and then put them in a say LKR 30,000 FD for 03 months. I repeat this step for the next two months as well and put in another FD for one month. I try to bring the date of maturity of these FDs as close as possible because we all know what happens when there is extra money lying around in our bank accounts. So once both these FDs mature, hopefully around the same time, I combine them both and put it in a 03-06 month FD – of course, this would be heavily dependent on the interest rate. Also, I use the native Reminders app on my iPhone/Mac with the dates and amounts of the maturing FDs and schedule it to about a day or two in advance so I am informed (and prepared). I find having reminders really helpful because once I thought an FD maturity was pending payment and by the time I had realised, it was too late, lol.
I’ve found that going back to my finance or savings goals when setting up these FDs gives me some sense of priority and direction. I don’t know about you, but I really find it difficult to save aimlessly. I am well aware that I have no EPF or gratuity and need to be mindful and save for the future but then the ‘future’ that already seems so bleak. But this is how I managed to save up enough for my big 09-day trek in Nepal, two years ago. I managed to come back to the country, not broke and in fact travel to Singapore immediately after. Also, air planes.
Fuck, this is a big word. I still have to check myself again when I talk about this. Also, please remember, I am not a finance expert.
So investments are great if you really want to grow your money. In fact, most personal finance advisors ask you to invest more and save less. Our Sri Lankan brown asses might find this daunting and don’t worry, this millennial is with you. Currently, even though my savings is about 33% a month, my investments amount to about 15% and that too has only been since of recent. With investments what I’ve learnt is that while it offers you higher returns this often also comes with a higher risk.
Our parents who often encouraged savings taught us to go the ‘safer’ way. There is nothing wrong with only having savings, but if you want to either grow your money faster or want to dabble around in some investments with a bit of money you are willing to put aside, it’s a great way to test the waters. I’ve even recently decided to try doing this with the stock market but it’s way too early to talk further on this. I am documenting my experiences so hopefully, in a few months 🙂
Also, one of the most helpful pieces of advice I heard from a personal finance YouTuber I follow, Graham Stephan on investing (to paraphrase) is that you shouldn’t regret investment opportunities that you missed out on and there will always be a similar opportunity or a next big thing that comes up in future.
A very Sri Lankan (even South Asian) form of investment I believe and gold, as we know, has been at the forefront of this discussion. I mean there are different points of view on this and some of the perspectives of the West might not be in agreement (I even picked up the word ‘metals’ from one of the Reddit threads!) but it can be useful. My Mum managed to even pay for a few semesters of university by pawning gold. So, if gold is something you are looking at here are a few things to perhaps keep in mind:
- Most importantly, find a safe place to keep your gold. I’m not sure if your house is a good idea or maybe it is, I don’t know. A safe in a house is good but a safe can also be carried away. Banks have safes but they often come with an FD requirement as a guarantee of sorts.
- Gold as an investment would only mean 22 or 24k gold. 18k gold wouldn’t hold a lot of value.
- If you are bringing down gold from the Middle East (their gold is better than ours in terms of colour and sometimes even weight) be mindful of what you can and can’t bring down (please check for accuracy).
- When you think of gold as an investment, do not think of aesthetics first but think of weight. Also, gold with embellishments, stones etc will not be considered useful.
- Side note, diamonds are really great and beautiful but have no real resale value 😉
Also a pretty common form of investment here in Lanka, especially with the ever depreciating rupee. With foreign currency, again, please be mindful of how much you can keep with you legally (please check for accuracy). There are also foreign currency accounts you can open – but I don’t really know much about them.
What else is out there?
I’m also looking into the prospect of buying land and cryptocurrency. But to be honest, I don’t know enough about either of them. Land does sound promising to me because I do have a pet project in mind I want to bring to life, but I can’t see myself giving the required time just yet. On crypto, there are tonnes of resources available online, sometimes, people on the Internet can be kind enough to share knowledge so please do help yourself.
A fellow Tweep also brought up the example of Unit Trusts, which I hadn’t heard of until he mentioned it.
Keep on reading and learning
This is not entirely a suggestion but more so on how I have managed to learn what I have over time. I’ve never been good at school or studies but I’ve realised that when I am reading about and putting into place something I am genuinely interested in, like personal finance, the results start to show. Just like that 😀
Please remember that knowledge is subjective. It’s okay to not know. Be it history, finance, pop culture – we all come from different levels of education and even our secondary school (local) education as we know can be problematic. I myself am a slow learner and have learnt to forgive myself and often tell people, ‘No I don’t know what you are talking about.’ Yes, this would often elicit a weird look and I will be excluded from the conversation but perhaps if it interests me, I will read up about it later. We don’t need to know everything and it’s okay if there are things that we don’t know so as long as we are ready to accept and acknowledge ourselves for not knowing.
Having said that, one of the first things I think we should all do more is to ask questions. From our parents, from banks and even from places that pay us and we pay to. We need to know why certain amounts were deducted, why we had to pay a tax we didn’t pay before or if we are eligible to pay taxes at a particular income level. On a different note, using Excel for finances has also taught me how to use formulas, something I never thought I would dabble in (just like how I never thought I would put an equation in a blog post).
We need to start these conversations with our peers, older adults, employers, colleagues, children and honestly, it’s not going to be easy and not all people want to talk about it because ‘finance’ is still taboo. We don’t want to tell people how much we earn but we are okay with flaunting a new object we purchased. I for one would like to know both sides of the story – like did you save up for that or did you take a loan out for it or the most important question of it all, do you have a sugar daddy, if so how do I get one?
The Internet is also a great way to learn these things and we should take advantage of it. It is how I have learnt so many things and been able to write extremely long articles on personal bloody finance. The internet also tells you shit like, “The easiest way to save more is to earn more and to bring down your expenses” but in reality, this isn’t always possible.
For example, a few years ago I learnt about the FIRE (Financial Independence Retire Early) movement and was completely taken up by it. While I am no longer taken up by the same, to some extent my frugality, try-hard minimalism and spending habits might be attributed to this. However, as I have grown older, I realised that I don’t particularly want to ‘retire’ but I do hope for financial independence and that is what I am currently working towards.
And in conclusion,
that brings this two-part blog posts on savings to an end.
I am not sure what my next post would be because I feel like I’ve spilt all the beans I’ve had. I could perhaps talk about an evolution of my budget – I’ve had an iPhone since 2014 and all the notes are still sitting on my iCloud.
But should you have any feedback, comments or even suggestions for me to write something else, please let me know (the stock market posts will take some time).
Thanks so much for reading it really does mean a lot. I hope this has been helpful to you in some way or form and sorry if this has been an extremely long read.
*In as much as I would like to disclose how much I get paid, I don’t think I am able to contractually. I apologise for this, and in not being able to be as transparent as I would hope for, but someday, soon.