Lessons and thoughts in trying to increase my savings

Besides building my financial knowledge about investing and stock analysis, I know that having strong cash balances is key to my financial freedom. Unfortunately, I have not been doing well in this area.

After 3 years as a practicing lawyer, I should have been able to build a decent cash pool, and yet my current bank balances do not show this. Suddenly having my own income led to me spending that income without setting up proper controls to make sure I am spending reasonably, and to make sure I gain same benefits using less money, or preventing leaks in my spending. (In some ways this reminds me of when I was playing alot of poker, and having to look at plugging leaks in my game).

Taking stock of my finances now, besides my stock portfolio, I have little cash savings which are not growing as much as I hoped.

I do not regret the spending though, most of the spending was on good meals and holidays with my wife, and also to build up our house. Investing in my family and memories is of course important too.

Now that we are settling down, and working towards building a family, it is time for me to grow up and build more discipline in the way I spend. I hope that with the house almost complete, the "family" based spending will slow down and I can start saving more again.

Creating that nest egg and building that financial discipline is more important now as I spend more time trying to discover my life and what I want to do. I do not want to feel that I have no choice but to continue a job purely because I need the higher pay. It should be something I am doing because I do enjoy the work, or to give me the freedom to take on a lower paying job which I find more meaningful.

Having low cash balances also worries me as I have no war chest for investments if the market has another downturn. I am also losing out on a decent 3% interest rate on my UOB one card.

I have been trying some ways to reduce my daily expenditure and have more leftover cash to put into my reserves. It has not been an easy journey however and I need to try better at it:

1. Expense Tracking

I use an app called Monefy to track all my outgoing cash. Monefy has a simple interface with nice pastel colours, making it my choice of expense tracking app.

I know some apps these days can link to credit card and bank accounts for automated tracking, but I think such things may distort the tracking process (the transactions do not truly reflect spending at times, such as when paying for friends in advance).

After doing this for around 4 months, it has become almost second nature to record the expense each time I spend. Although I still far exceed my ideal spending goal , I feel that getting to see how much I spend makes me more conscious about my purchases.

It is also useful for helping me see where all my money is going. I was not previously aware that I am likely to spend almost $3000 a year on sports alone (wakeboarding and wing chun lessons). Other big sources of spending include insurance (over $2000 a year), petrol/cashcard, my SRC club fees.

These expenses are not much individually, but when considered in aggregate with all my other expenses and my savings aims, they are taking a toll on my savings.

2. Better spending considerations

I have also tried to be more conscious of how I spend, think of whether I can find a cheaper way to buy something, or if I really need it. I had the good fortune of having parents were doing well and who wanted to make sure I was comfortable and thus would spend on me with less worry about the cost. I feel I have abused this by getting used to buying things on a whim, without realising just how much they are sacrificing to always buy me the best and latest things for my enjoyment.

I learnt (which I should have learnt a long time ago), that with a little bit of additional thought and research, I can usually find a cheaper alternative, get more mileage out of what I already have, or check that what I am buying is of a fair quality for the price paid. Sometimes that additional effort also makes me decide not to buy something in the end.

One thing that helps, that while at first may not seem linked to saving cash, is to take that effort to know myself better. We naturally want to be many more things than we have capacity for, and thus end up buying things to meet those wants. Knowing who I am, and thus what things I really need to express my own unique self, also helps to answer whether I really need something or not.

I also try to do one thing at a time, and increase my focus. It always seems tempting to buy more books or games while they are on sale, to save for later. With the limited free time available, it ends up that I take too long to finish each one and do not ever get through the queue.

My wife and I have also tried to cut down on our food and other spending. Most people used to know us to take our food pretty seriously and go for quite expensive meals. We still enjoy our big meals to celebrate special occasions, but we try to be more discerning with where we go, and also see if we can find a more interesting adventure by hunting cheap and good hawker food, rather than expensive and mediocre restaurant food. This adds some excitement to our life too, when we find something cheap and good, but also frustration when we go to a place where the price far exceeds the value we got.

3. Solo Meals and spending

Looking at my priorities, I know I do not want my budget to constrain my ability to maintain my social life, or to make it difficult for those around me. Granted that I am sure they will understand if I told them I am on a budget. I feel that my current earning power is also such that, I should be able to spend a little in order to go for events with friends and build bonds.

In order to do this, I decide to put social spending as a priority and not count the pennies there. Instead, what I want to focus on is to ensure that the amounts I spend on my own is limited. When eating meals alone I now try to find much much cheaper options. Hopefully when I move into my own place I can find some options for cooking my own meals as well.

Challenges

Building these habits have been difficult though.

Watching my expenses so closely makes me feel stressed as I know I am far below an ideal budget. I hope most of my big expenditure has somehow happened these few months and the expenditure will slow down over the rest of the year. It has taken me some time to let the expense tracker be useful in monitoring expenses and change my behavior but not affect my mood.

Also, for someone very used to spending so liberally, I now go through that additional thought process of heavily considering my expenditure for something I previously would have spent on without a second thought. It creates more choices, more thoughts, and leads to a higher drain on willpower. Spending less on myself also reduces the instances of joy that comes from purchasing new things. I thus feel that I have one less source of enjoyment. I hope that as I make this into a better habit, this will become second nature and reduce that willpower drain. I have a much deeper respect for my friends who are always able to think about this and hope I can learn more from them. Perhaps what I need to learn is to feel the sense of accomplishment from having saved money, and also maybe using those savings to buy something I really want and need.

These changes have been small changes to my daily practices to try and reduce expenditure. Sadly, looking at the amount I have spent, it shows me that these small changes are not enough to make a large improvement in my savings. What I need is to make big steps in changing my lifestyle to really get to my savings goals. I lack the willpower to make these big changes, but my aim is to start with these small changes and let them compound into larger changes which will take more time and then manage to save more.

A last problem I have is that I have limited time too, and I do believe that time is money. At times it would make sense to spend more so that I can save time to do other things. Probably not the best mindset for achieving great savings, but I try and tell myself that if i do make this trade, I should make the most of the time that I have "bought". Rather than absolute dollar figures, it is important to think of "value, to stretch each dollar for more than I would have used it for previously.

Final thoughts

This state of having high expenses but wanting to save money has given me an interesting insight. Through self-reflection, I get a better understanding of the consumer mindset. I think more about what things people would buy, and more importantly, what makes people want to spend money, even on things they don't truly need. People usually have a strange habit of spending much on something that seems frivolous, but yet going to great lengths to save smaller amounts of money, and this is something I start to observe in myself to greater lengths. By having a budget, I also observe how people might allocate their resources. Humans are not always perfectly rational, and that is what keeps us interesting and makes commerce interesting. These might be valuable information for the future if I want to sell consumer goods.