Save

So what have I been up to for the past 2 months? Sorting pieces of my life out, I would say. One of the things was reorganizing my cash flow. I stumbled across this book by David Bach, titled "The Automatic Millionaire". What I read in that book actually reminded me of my saving habits when I was still a kid and how I slowly deviated from those habits once I began my university years. And it got worse once I started working.

















As a kid, my ma always told me to save for a rainy day, and being the good boy I was, I did. And it was no surprise to her that I eventually saved up quite a large sum just by putting a small portion of my daily allowances away each day. Every 50 Ringgit I saved, I would deposit it into my bank account. When the total came to 500 Ringgit, my ma would get me a fixed deposit account. And this would go on and on. By the time I was 18, I was having at least 10k in my FD. Shhhhhhhh!!! Not too loud okay? Its just between me and you ;)

The concept of elaborated by David Bach in his book is similar. The earlier you save and the more you save in the early years, the more returns you get later on. Just take this case for example. I started saving at 8 when I started having my allowance of 50 cents a day. I took 20 cents as savings and the remainder would be used for break time or snacks. So in a week I would already have 1 Ringgit in savings (based on schooling days). Now multiply that by lets say 40 weeks and you have 40 Ringgit in a year. (Of course this amount is just for assumption, coz I definitely need more money for food at that time).

Savings in a week = 20 cents x 5 days = 1 Ringgit

Savings in 40 weeks = 1 Ringgit x 40 weeks = 40 Ringgit

Now assuming I deposited the 40 Ringgit yearly into FD with 4.5% interest per year. Heres a table summarizing the calculation.









If I had diligently saved up 40 Ringgit a year and put it in FD, until now I would have 1074 Ringgit. If I had continued that up to 40 years, I would have 4281 Ringgit. Imagine that. Total investment is 1600 Ringgit (40 Ringgit x 40 years), with a capital appreaciation of 166%. Did I hear you say WOW? Lets put in a little bit of reality. Lets say you start off at 1200 Ringgit and invest 100 Ringgit every month, which translates to roughly 1200 Ringgit a year.



Look at the results. The numbers alone tell the whole story. This is what our parents meant when they said, "Save for a rainy day".

Now go do your own math.

Amazed with the numbers yet?

Lesson learnt here is whatever you do for a living, no matter how old you are, it is never too late to save. It gets better if you invest the money in mutual funds or any other sort of investment schemes (not skim cepat kaya of course :P).

In fact, governments all over the world have enforced ruling for all companies to have an employees provident fund (EPF/KWSP for Malaysia, 401k for U.S.) where they take a cut off your pay to force you to save! My parents used to complain about that, but when they realised the company was contributing an additional percentage on top of the cut, they kept with that plan. In David Bach's book, it is even recommended for you to max out the contribution amount so that you save more!

I'm sure those who read this are saying, "I have no money left to save at the end of each month." I'm quite sure you do. Just take it slow. Start SMALL but start NOW. If you really are up to it, invest in a copy of The Automatic Millionaire now. I did and I can tell you its money well spent.

I believe it is important to be in control your own life. Being financial savvy is one of the ways I can achieve that. You can do so too ;) Trust me. Or better yet, trust yourself ;)