How to Save a Little Fortune

How

to

Save

a

Little

Fortune

How to Save a Little Fortune

Illustrated and written by

Yow Chuan

How

to

Save

a

Little

Fortune

How often have you heard of the phrase “Pay Yourself First”? It has beenwritten in so many personal finance books and preached by so many financialplanners out there that the act of “paying yourself first” is no longer a secret.If it’s no longer a secret, why is it still so hard to save a single sen after gettingyour monthly paycheck?That, my friend, I cannot answer for you, as everyone’s situation is very unique.Here are a few possible reasons why you are not able to pay yourself first:(i) You are spending more than you earn.(ii) You did not automate the process of paying yourself first. David Bach haswritten a convincing book- The Automatic Millionaire, on why you mustautomate the process of accumulating wealth.(iii) Leeching friends who likes to borrow money from you. Trust me; it’s a badidea to borrow money to your friends. Refer them to a friend who works in abank’s personal loan department. You will thank me for this advice.

The Percentage Allocation System

I am going to explain in detail why it’s effective and why you should give thissystem a shot.Let’s start with your intention of keeping track of your incoming ringgit andoutgoing ringgit. What’s the whole idea of keeping track of it? Yeah, close youreyes for a few seconds and ask yourself deep down inside.

How

to

Save

a

Little

Fortune

If your answer is to ensure that you donot overspend and hoping that you willbe able to save a portion of that moneyto work for you (either as an emergencyfund or for the sheer purpose of seeingit accumulate), then this might just bethe system meant for you.Okie, so what do you normally do whenyour January paycheck arrives into your savings account? If you are going tojust leave it there and hope that at the end of the month, you will have somesavings to bring forward to the next month, then I can assure you that it’s verylikely not going to happen.So what are you going to do to prevent the account from drying up?Here are a few possibilities you can choose from (The following proceduresmust be executed, if possible, automatically, once the paycheck is in theaccount)

a) if you will be needing the money in case of a sudden emergency

Channel X% of the money using auto-debit/standing instruction to a bank thatyou do not have an ATM card, with the least branches around and the one thatwill give you the most trouble accessing to, for e.g. Bank of China (so far, I’veonly know of one branch in Jln Ampang). Preferably a fixed deposit account.

b) you already have about 3 months worth of monthly salary to buffer forany emergencies in a saving account and might be needing the cashflow inthe next 5-6 months

Setup a conservative mutual fund account where the objective of the fund iscapital-guaranteed or with emphasis on capital preservation, I suggest thateither a fixed income fund or a dividend fund. Transfer

X%

of your total