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The secret to avoiding financial ruin.

Monday, July 1, 2013

We hear these two lines all the time:

"It is so easy to spend money."


"It is hard to make money."

Perhaps, we should also remember these two lines:

"If we are not careful, it is easy to get into debt."


"It might be really hard to get out of debt."

So, what is the secret here? Don't get into debt!

When I was a secondary school boy almost 30 years ago, $1m was a lot of money and during a class discussion, I asked how was it possible to spend all that money? The teacher looked at me like I was some alien and my classmates laughed at me.

Well, a HDB 3 room flat in D4 in those days cost only S$50,000 or so. Cars were much cheaper too. Of course, prices have shot through the roof by now. However, back then, I seriously could not think of how anyone could spend all that money with ease.

I remember always tracking the interest rates offered by the banks on our savings in those days and how I would shift my savings from one bank account to another to get the highest interest rates possible. 

Now, when I look back, my efforts were pitiful since my savings were so little but an extra S$50.00 a year in interest collected mattered so much to me then. Those were hard times.

Some will again say that I have a peasant mentality to wealth building, but I know myself and I rather be a happy peasant.

Increase our income, reduce our expenses and don't get into debt. 

Do all these and we might not become filthy rich, of course. Do the opposite, however, and we are in for financial ruin.

Related posts:
1. To be a happy peasant.
2. From rich to broke?
3. If we are not rich, don't act rich.
4. Today's millionaires.
5. Not enough money to be married.


SGYI said...

"Increase income, reduce expenses and don't get into debt". Isn't that what the rich do? Haha.. Most of the millionaires I've known practice that and the reason they are millionaires is because they practice prudence financial management. Aren't you one of them? :p

AK71 said...

Hi SG Young Investment,

My income has been reducing in the last couple of years actually as I powered down at work.

My expenses have been increasing as I have become less tight fisted with money.

Early last year, I took on a new mortgage. So, I am once again carrying debt.

OMG! I am going against all the stuff I just blogged about! :(

EY said...

Hi AK,

You have it in you since young! Did you compare which noodle stall in your primary school gave a bigger serving at the same price before you patronised them? :P

Peasant or pheasant, birds of the same feather flock together. Those who don't appreciate what you do/did are just a different species. Chicken talking to duck? Yah, just fowl talk. Haha. I'm speaking jibberish too.

I'm of the view that we don't spend money that we don't have on expense items. That's the first rule to keep to avoid financial ruin. Also being mindful of taking too much risk on investments would be the second one. The third one would probably be not lending out money unless we are running a loan shark business. :P

Sometimes, I think money management is kinda intuitive. It's like either we have it in us or we don't. But of course, it can a learnt behaviour too. Otherwise, the visitorship of your blog won't possibly be so high if not for the many of us who come here to 'learn' something?


AK71 said...

Hi Endrene,

Unfortunately, there was only one noodle store in my primary school, iirc. It was 20c a portion. Too costly for me since I was given only 20c a day in pocket money.

However, I remember going hungry and using the money to buy erasers. 10c each. A foolish boy, I was. ;p

I agree with your 3 points to avoid financial ruin. I think I blogged about all three points before at some point in time.

I don't think I am teaching anyone anything because I believe that what I have blogged about is intuitive like you have said. However, we sometimes need to be reminded of the obvious. :)

FoodieFC said...

All I know is Money No Enough. haha

EY said...

Hi AK,

Not silly! Just intuitively knowing what opportunity cost is. That prevented you from turning into a fat kid too. :P

I was just like you. I saved all my money to buy stationery and new school bags. Erasers was my weakness too and I later progressed to collecting hankerchieves, and subsequently, watches. :D

And of course, I think because we hoard certain things, that helped develop our habit of 'accumulation'. Seems like you are always one step ahead! Haha.


AK71 said...

Hi Foodie FC,

You know what I will say to that, I am sure. ;)

Look to increasing income and reducing expenses. :)

AK71 said...

Hi Endrene,

Your wit is unparalleled! I had a good laugh. Thank you. :D

I feel so much better about wasting all that money in those days now. ;p

SGYI said...

Hi AK71,

Its time for you to enjoy life now since you're much better off then many many years ago. Well, everyone starts out tough and save every bit we have. Its when we have achieved financial freedom in later days that we can enjoy a little bit more. More or less when your assets/passive income are paying most of your expenses, you don't really have to work for a living anymore.

AK71 said...

Hi SG Young Investment,

That is what I am trying to do now.

I got a wake up call from a very close friend a few years ago when I went shopping with him after lunch one day.

I saw a watch I liked. It was a Swatch Irony and cost $189.00. I looked at it, decided that I liked it but I didn't need it and put it back.

My friend suddenly turned me around and asked me why was I like that? "You make so much money. It is only $189.00!"

I had never had a reaction like that from him before and I had known him since our NS days.

Anyway, I bought the watch, wore it a few times and, a year or so later, I gave it away in exchange for a lunch treat. Hahaha... ;p

SnOOpy168 said...

but in those days, the $50 extra is like a windfall.

Perhaps, when one reaches a point where the pay cheque more than meets the basic expenses (phone/PUB/income tax/mortgages/food/transport), then it is a matter of whether it should be the same lifestyle (and expenses) or upgraded (aka more expensive) lifestyle to match that better pay cheque ? In short, why stay in an atas condo where a "subsidized" 4/5 rm HDB will do ? Facilities ? Unless it is 100% privately yours exclusively, what is the difference between using the public pool vs the club house. It is only a short distance away.

one blogger said something about savings any pay increment instead of spending it.

A rich HK uncle of mine, while having a BIG million $ house in Canada, sleeps in the office and will make 3 -7 trips to various shops the check prices for a $50 DVD player. Naturally, the MTR rides and the time spend, is not computed into this savings of a few dollars. Like the mastercard advert, the experience of getting a good deal is priceless.

AK71 said...

Hi SnOOpy168,

Oh, yes. S$50 was a BIG deal 30 years ago. Would have felt like a prince with S$50 in my wallet. Unfortunately, most of the time, I had less than S$10 then. :(

As for lifestyle, I just make sure that I live way below my means. The only possession I cannot give up is my car which is my one major expense in life.

coconut said...

the safest way to avoid financial ruin is...

don't have financial!

how to ruin if you have no money to start with (haha)?

if you have money, then there always a chance of ruin, no matter how small the chance is.

coconut said...

is like a trader saying, how i wish i can lose a million dollar?

what? are you nuts?

no i'm not, becos i don't have the million to lose in the beginning haha...

Dividend Tech Warrior said...

Hi AK,

I spent a lot on comic books as a teenager. Even though it was rather wasteful, but I felt happy reading them. Nowadays, I still read my collections again during my free time.

We only live once. We are only young once. Sometimes, it is perfectly fine to pamper ourselves. But dun overdo it.

Cheers! ^^

Matt said...


6 years ago, a close relative was diagnosed with pancreatic cancer. My wife decided to stop work to help out. Under normal circumstances, I would not suggest she buy a car once she stopped working. But it would be very inconvenient for her without a car to help the relative and we can afford a second car. I made the decision to buy her the car.

That incident made me realise that you should spend some of your money for that bit of comfort. We should save for retirement but will we live to enjoy it later? That is not within our hands to decide. So live your life once in a while.

AK71 said...

Hi DW,

I collected comics for a few months of my life as a teenager too after visiting a shop with a friend. The shopkeeper and my friend convinced me that comics are investments! -.-"

Anyway, the craze lasted only a few months and I was a few hundred dollars poorer. I still have the comics stored nicely in my study. Don't know what they are worth now. ;p

AK71 said...

Hi Matt,

I agree. Now that I can afford to be a bit less tight fisted with money, I am happy to be able to improve the lives of people around me. I also feel less guilty about buying myself the occasional toy. ;)

Cory said...

One of my leader, 38, just found he has later stage NPC(Cancer).This kind of hit me hard in my thinking did i overly save. Habit die hard.

AK71 said...

Hi Cory,

I know what you mean. Life is very fragile.

This doesn't mean that we stop planning for retirement. Whether we live to enjoy retirement or not, we have to plan for it. :)

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