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Tuesday, 22 May 2012

MM : The 3 Buckets (Part 2)

Here's a recap on what I have covered earlier :
My 1st Post on Money Management
MM : The 3 Buckets (Part 1)
I'm moving forward and will now introduce to you the 2nd bucket i.e. the "WANTS" bucket.  What's the content of this bucket?  2 essential ingredients: Savings & Other Expenses.
This bucket, just like the 1st bucket i.e. the "NEEDS", do not conform to any standardize size.  Its size depends on your demand for gratification.  Gratification can be to satisfy oneself be it materialistically and/or emotionally.  I could not emphasize more on how important for you to understand the mighty-ness of this bucket.  This "WANTS" bucket could either MAKE you or BREAK you.  
MAKE because you choose to save the excess money your earn and build a coffer for future, seeking to secure a comfortable future.  AHA!! Secure = Protection!!  See where the insurance comes in?  Will emphasize more later. 
BREAK, it's like what most people says, its your hole on the ground.  You are digging your own grave when the hole gets deeper and deeper.  Immediate gratification often comes with satisfying materialistically.  Who would want to continue eating bread religiously everyday when you can now afford something more sumptuous?  With money, you now have a choice.  It is this choice that makes you to differ from your former self.  You may prefer branded as oppose to ordinaries.  You may eat better, live better and travel more from your previous daily routine.  You see, people evolve....... in hope for better life definitely.
So, as you can see, one is of the extreme of another, MAKE vs BREAK.  If you are asking the question why are you always short of money, well the answer is whether you have BALANCE these two elements.
(This is not the BN logo ya.  This is my balancing scale! Adopted from  Allow me to tell you a story:
There was once this lady who lived a carefree life and she thought all things were perfect.  There were no financial worries at all nor the need to save for rainy days.  She saved though, for one day she was aiming in purchasing a vehicle.  That day finally came where she had save enough for the downpayment (deposit), and with it the commitment to repay the hire purchase of RM400 per month for 6 years. 
Not for long, with her lifestyle, she realised there was tightness on her love for spending.  She was sad 'coz she sacrificed her love and was burdened with the loan. With the loan was the unending expenses on gas and maintenance.  Then one unexpected day, miracle came to her and she was given a credit card.  That magic card allowed her to again go about with her rendezvous.  She spent even more because she was only required a commitment to repay 5% of the total outstanding.  But her spending was more than her repayment, and soon even that 5% she was unable to service.  She felt depress, weak on her knees, and was desperate for help. 
Every month after toiling hard and was rewarded with salary, she could not enjoy her pay as it no longer belongs to her.  On top of the car loan and all its attachment, she needed to service the credit card debt.  That credit card debt was eating her alive with its horrendous interest rates.  She was getting tired.  Tiring of this monthly non progressive routine in her life.  Soon more expenses and commitment were needed from her, which she had not anticipated at all.  She finally realised that she was in a deep rut.  She was working for money and not passion.  She longed for the days she lived a carefree life.  Energy was draining as age catches up.  Suddenly, news of the company she worked with was facing financial turbulence & was on the verge of winding up. 
"Boo Hoo!" She cried.  "Why didn't I save for this rainy day??"
What do you think?  Does this sound familiar?  Even without the credit card, there will bound to be hidden and future commitments which you did not expect today. When the scale tips towards the BREAK i.e when expenses exceed savings, the outcome has been expressed in the above mentioned story.
HOWEVER, if you have more MAKE i.e savings is greater than expenses, you are at a better position with choices & there are more opportunities abound.  (Psst, for those who think they are having mediocre income, TADAH!!, here's another chance for you to run faster than the rest.  Remember the tortoise and the rabbit race?)
When your savings is so great that it fills and overflows the WANTS bucket, the next bucket will be waiting.  Guess what did I name this bucket?
It comes down to this: Either you control money, or it controls you.  
To control money, you must manage it. - T. Harv Eker
To be continued.....

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