Using Cash to Keep Spending Under Control

If you are struggling to stay within your budget or seem to spend more money than you should, it might be a good idea to go back to using cash for daily purchases.

It is no surprise that most of us are beginning to move away from cash for everyday spending; the convenience of debit and credit cards is very tempting. Some cards actually offer rewards or cash back that makes the use of cash even less appealing.

The problem with this convenience is that you can begin to forget the true value of the money you are spending and end up having trouble staying within your limits.

How Cash is Different

This is where using cash can help. When your everyday transactions are done by swiping a card you don’t physically see the money change hands. I’m sure everyone knows what spending RM2.00 on a cup of coffee feels like but the fact you only see this number in the form of a receipt or on the cash register display doesn’t have the same effect has reaching into your wallet or purse and physically handing the money to someone else.

The problem lies within the way we think about money in each scenario. When you use an electronic form of payment you are only restricted by the amount of money in the bank or the available credit on the card. So throughout the week when you are spending money on groceries, gas, the morning coffee or lunch out with co-workers you don’t realize how much each small purchase is adding up unless you are balancing your checkbook immediately after each purchase.

On the other hand if you were to use cash for these same purchases you would have a clear idea of the consequences of this spending without even thinking about it. If you started the week with RM40 in your wallet and began to use that for all of your purchases you would see this RM40 turn into RM35, RM25, RM10 and so on. You are reminded of how much you have spent and how much money you have left every time you look in your wallet. This alone can make you think twice before making a purchase.



Try it for Yourself

I encourage you to take a week or two and give this a try to see what effect it has on your everyday spending. Before your regular routine on Monday create a budget for how much money you will need throughout the week. If you regularly buy lunch out, count that, or if you stop for coffee on the way to work be sure to include that as well.

Once you have a pretty good idea of how much money you will spend throughout the week you should have that much cash on you at the start of the week. Whether this is $20 or $100, only have the amount of cash that you have budgeted with you and use this cash for all of those everyday expenses.

After one week how did you do? Did you find that you had money left over or did you have to pack a sack lunch on Friday because you spent your last dollar on Thursday? Regardless of the outcome you have a very real sense of where your money is going throughout the week and because of this you can now put together a realistic and meaningful budget. Convenience can be costly but cash can help you regain control of spending.

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Investment Return - Using the Rule of 72

Compound interest is an amazing thing, and the Rule of 72 is a simple way to quickly estimate how long it will take your investment to double. The only piece of information you need for this calculation is the annual rate of return. While most investments don’t have a fixed rate of return over a long period of time, you can use an average estimate to get a pretty good idea.

How to Use the Rule of 72

To estimate how long it takes for your money to double, simply divide 72 by the interest rate. The result is how many years it will take for your money to double at that rate. For example, let’s assume you can earn a 6% rate of return. How long will it take $1,000 to grow into $2,000?
--> 72 / 6 percent = 12 years

In this example, if you invested $1,000 into an account that earned a flat 6% annual rate of return, after 12 years, your investment would be worth around $2,000. To save a little time, here are some interest rates and the corresponding amount of time to double:

1% - 72 years
2% - 36 years
3% - 24 years
4% - 18 years
5% - 14 years
6% - 12 years
7% - 10.3 years
8% - 9.0 years
9% - 8.0 years
10% - 7.2 years
11% - 6.5 years
12% - 6.0 years

Remember, It’s Just an Estimate

Keep in mind that this is just a quick estimate. Depending on changes in the rate of return over time, what you’re invested in, how you invest it, how interest is applied, and possible tax implications, the actual amount of time needed to double your money will vary. Even so, the rule of 72 can be helpful when you quickly want to compare the rate of growth of two investments.

The rule of 72 also works in reverse and can be helpful in understanding the power of inflation. If you consider the average long-term rate of inflation is between 3 and 4 percent, you’ll notice that something worth $100 today will cost $200 in about 20 years. This can help illustrate the power of inflation and the importance of realizing a rate of return over time that can not only overcome inflation, but also taxes.

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Warning Signs of Too Much Debt

Do you have debt that is bogging you down and keeping you from reaching your financial goals?

Using credit and debt can be a powerful tool that allows you to buy a home, a vehicle, send children to college, and even provide leverage for other purchases, but when you accumulate too much debt, it can pose a serious problem.

Keeping up with your debt payments is only part of the problem. Just because you can afford to fit these payments into your budget, you’re still putting added strain on your finances. Money that is used towards paying down debt can’t be used elsewhere. That means if you’re spending money each month on credit card or other unnecessary debt, you’re taking money away from other areas of your budget that can be used to build wealth and plan for the future.

It can be difficult to actually realize when you’ve reached a critical point with your debt situation, but there are some warning signs that can help you identify the problem before it becomes too serious to address. Here are a series of statements to compare to your situation. If any of these apply to you, it is time to stop and take action to remedy the problem.


10 Warning Signs of too Much Debt

1. You don’t have any savings.

2. You only make the minimum payment on your credit cards each month.

3. You continue to make more purchases on your credit cards while trying to pay it off.

4. You have at least one credit card that is near, at, or over the credit limit.

5. You are occasionally late in making payments on bills, credit cards, or other expenses.

6. You don’t even know how much total debt you actually have.

7. You use cash advances from your credit cards to pay other bills.

8. You bounce checks or overdraw your bank accounts.

9. You’ve been denied credit.

10. You lie to friends or family about your spending and debt.

Take Action Now

Sometimes we know deep down inside that we have a debt problem, but it is easier to deny the problem than to address it. It can be painful and require hard work, but the sooner you realize that you are in over your head, you can begin to make positive changes.

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Increase Your Financial IQ

(True or ) Your house is your greatest asset
For over 10 years I've been telling people that true assets put money in your pocket. For most everyone I know, their house takes money out of their pockets every month. The recent spike in foreclosures in the US only further proves that your house is not an asset.

( or False) Mutual funds are one of the easiest ways to save money
The reason people love mutual funds is because they are so easy. In my opinion they are also one of the worst ways to get rich because they require little or no financial intelligence. The results they provide enrich the fund more than they do you.

( or False) The US dollar is worthless
Since the US abandoned the gold standard in 1971, the US dollar has consistently been able to buy less and less. It is definitely worth less. This is why savers are losers-their dollars lose value every year. To get ahead, you need to be an investor, not a saver.

( and ) Real Estate and Gold are risky investments
Always remember that you can make or lose money in anything. Ultimately, it is not gold, stocks, real estate, or any investment that makes you rich-it is what you know about gold, stocks, real estate, and money that makes you rich. Ultimately, it is your financial intelligence, your financial IQ that makes you rich.

By : Robert Kiyosaki

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How To Create a Budget

Creating a budget may not sound like the most exciting thing in the world to do, but it is vital in keeping your financial house in order. Before you begin to create your budget it is important to realize that in order to be successful you have to provide as much detailed information as possible.

Ultimately, the end result will be able to show where your money is coming from, how much is there and where it is all going.

Here's How:

Gather every financial statement you can. This includes bank statements, investment accounts, recent utility bills and any information regarding a source of income or expense. The key for this process is to create a monthly average so the more information you can dig up the better.

Record all of your sources of income. If you are self-employed or have any outside sources of income be sure to record these as well. If your income is in the form of a regular paycheck where taxes are automatically deducted then using the net income, or take home pay, amount is fine. Record this total income as a monthly amount.

Create a list of monthly expenses. Write down a list of all the expected expenses you plan on incurring over the course of a month. This includes a mortgage payment, car payments, auto insurance, groceries, utilities, entertainment, dry cleaning, auto insurance, retirement or college savings and essentially everything you spend money on.

Break expenses into two categories: fixed and variable. Fixed expenses are those that stay relatively the same each month and are required parts of your way of living. They included expenses such as your mortgage or rent, car payments, cable and/or internet service, trash pickup, credit card payments and so on.
These expenses for the most part are essential yet not likely to change in the budget.
Variable expenses are the type that will change from month to month and include items such as groceries, gasoline, entertainment, eating out and gifts to name a few. This category will be important when making adjustments.

Total your monthly income and monthly expenses. If your end result shows more income than expenses you are off to a good start. This means you can prioritize this excess to areas of your budget such as retirement savings or paying more on credit cards to eliminate that debt faster. If you are showing a higher expense column than income it means some changes will have to be made.


Make adjustments to expenses. If you have accurately identified and listed all of your expenses the ultimate goal would be to have your income and expense columns to be equal. This means all of your income is accounted for and budgeted for a specific expense.

If you are in a situation where expenses are higher than income you should look at your variable expenses to find areas to cut. Since these expenses are typically essential it should be easy to shave a few dollars in a few areas to bring you closer to your income.


Review your budget monthly. It is important to review your budget on a regular basis to make sure you are staying on track. After the first month take a minute to sit down and compare the actual expenses versus what you had created in the budget. This will show you where you did well and where you may need to improve.

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What Is Your BEST Investment ?

What is the best investment for us? Many of us would answer stock, properties, unit trust, takaful, investment-linked, and so on.

But in fact the best investment would be to invest in ourself. We can get so focused on investing in other things - our possessions, our financial investments, our properties, our businesses, etc. - that we can forget to invest in our greatest long-term asset, ourselves. My point here is to educate ourself. We invest in ourself because we live the life of continuous education.

This self-investment could be reading books, e-books, magazines, listening to audio books, attending workshops, surfing info blogs & websites or any number of possibilities that focus on improving yourself in every way. The reality is, the more you can invest in yourself, the more you will contribute to your own future. We can also guide ourself to differentiate which is good or bad, and which is halal or haram for us, when we educate ourself.

And this is the best investment that we can ever make in our life.

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