My Darling, Erney and I celebrated our 6th wedding anniversary on Dec 12. Since she puts up uncomplainingly with my eccentricities that revolve around workaholic and, possibly, excessive thrift, I took her for a short a holiday in Hong Kong. We had a great time staying at the posh 40th floor apartment of our friends Jacky and Simon in Kowloon, for free, and visiting Disneyland, Madame Tussauds, and the world’s only full-sized replica of Noah’s Ark built on Ma Wan Island, unfortunately not for free!
Having visited the larger Disneyland in California twice, way back in 1987 and then in 1989, and the original wax museum Madame Tussaud’s near London’s Baker Street tube station several times in my distant youth when the apostrophe in `Tussaud’s’ was still being used in the official name, I was especially intrigued by the novel sights in Noah’s Ark. I was also delighted that prices of tickets, souvenirs and food within the Ark were reasonable, at least by Hong Kong’s pricey standards.
In contrast, the HK$25 (USD 3) charged throughout Hong Kong Disneyland for a regular bottle of Coke sent shooting pains emanating from my wallet through to my brain each time I got thirsty. Nonetheless, I paid that sum several times throughout our visit that lasted deep into the night.
All told, our brief five-day Hong Kong sojourn was fun.
I was also surprised to discover that despite the price of Disneyland’s Coca-Cola and its perhaps even more shocking HK$18 (USD 2.50) bottles of water, the expensive cab fares, restaurant meals and tourist attraction entrance fees, I still came in well “under budget”. That always cheers me up.
I believe part of the reason I spent less than I had earmarked in total for the jaunt was my general preference for carrying more than enough cash whenever I go on holiday; the other part was my reluctance to shop for items that could be bought in US for less. And even though I had notified one of my credit card issuing banks that I would be in Hong Kong from Dec 10 to 15, I found I did not need to whip out any plastic throughout that stay.
For many of us, a frequent source of commonplace post-holiday stress is the need to re-balance a stretched budget and paying off in full — or, much worse, in part — unanticipated credit card bills. For this trip, at least, there was no such unpleasantness because I had earlier focused on three strategies that might prove useful to you, too:
1. Remind yourself that you matter at least as much as everybody else;
The reason most of us never get serious about starting a savings programme is our deep-seated harboring of a mixed-up set of priorities. We often tell ourselves: “I’ll pay all my bills first, and then see what’s left at the end of the month to save.”
That approach leads to failure, frustration and long-term insufficiency.
What almost always happens is that our ‘month lasts longer than our money’. If nothing is changed, the months turn into years which grow into decades. The end result, then, is a potent recipe for lifelong impoverishment.
If you work for your money — as most of us do — then you deserve to pay yourself first, or pay yourself second, depending upon your religious convictions.
By deciding to first set aside a chunk of change for yourself, you’ll be sending a message out to the universe. One that’s bold, simple and clear: “I matter to myself. That’s why I pay myself ahead of others. This puts me in control of my economic destiny.”
2. Understand the true power of compound interest.
Many books suggest we set aside 10% of our earnings. However, in truth, economic heavy hitters set much, much higher targets for themselves.
In my own financial planning practice, I try to inspire my clients to expand their skill sets so they will be able to earn more and more money over time. Simultaneously, I urge them to set a personal goal of reaching a 40% to 50% net savings-cum-investment rate (excluding what flows into EPF) over the next 10 to 12 years. Most people find that extreme, and it is, at least by the lax savings and investment standards of today’s hyper consuming society.
As you read this, it makes sense, I believe, for you to simply decide today to get serious — or perhaps more serious — about becoming an entrenched saver-cum-investor.
Given sufficient time, even small sums parked in low-yielding financial instruments can grow to surprising magnitude. Let me give you an eye-opening example.
Right now Malaysian fixed deposits for periods of less than one-year yield just 2% per annual. Many of us yearn for the good old days when we could earn 5% or 6% on our FDs, with occasional spikes up to 8% or 9%.
Nonetheless, if you were to magically be able to put aside just one sen in a modest savings instrument that yields a steady 2% per annul from way back at the time of Jesus Christ’s birth in Bethlehem around 4 BC, you would have about RM2,000 trillion today.
The current Forbes ranking of the super-rich once again has Bill Gates at the top of the pile with an estimated wealth of US$ 5o billion. Well, your hypothetical RM2,000 trillion works out to about US$ 600 trillion in 2009 or 12,000 times Gates’ wealth, which is not bad for a one cent original investment.
The only two problems are you don’t have 2,015 years to save and you can’t find a steady money compounded that will yield 2% year in and year out over more than two millennial. But then again, you do have more than one cent to start with.