Saving on a regular basis
You all know that there are many different means of saving money on a regular
basis, whether it be offshore investments, onshore schemes in your home country,
in a bank or even under the bed. My previous articles
have referred to various
types of plan that offer a solution to a financial requirement. In this article
I hope to have demonstrated how you should assess your own savings, but more
importantly, to encourage you to do something about it.
I have met many people over the years who against my advice have not started
saving, the reasons generally given are "It's not the right time now", "I
can't afford it". "The markets are too risky", "I want to think about it". They
all accept that they need to save, but find reasons not to. Some are genuine,
such as repaying a student loan or credit card, which is fine, but I do not
believe there is anything else to prevent you from accumulating capital for the
future.
Some people believe that you need to work hard to earn a lot of money to become
financially secure. I believe this to be inaccurate, as some of the most
financially secure people I know, have jobs that are considered very ordinary.
They work hard, but they save even harder.
I strongly believe that saving is down to you as the individual and not down to
the financial planner, who merely provides the medium in which you can do it. I
think the key is to organize your money more effectively, but before you do
that, you need the motivation.
When you receive your salary each month, you pay the rent, pay the keitai bill
and other utilities, judge what you will spend on travel, going out, and if
there is anything left, this will determine whether you want to start saving or
not. Invariably, because this last portion is different every month, you do not
save because you believe that you will not be able to afford the payments on a
regular basis.
I believe that this is the wrong way round, you should count the savings
portion as an essential part of your budget, and as such it should be counted after rent
and bills, and anything left goes on living costs. Do you do this?
Let me pose a question, if somebody said that, for every US$ 300 you saved each
month, they would match it, would you be able to afford your US$ 300 part of
the deal? Clearly the answer is yes, because you would make yourself afford it.
This is the point that I am trying to get across, you have to get to the point
where you make yourself afford it, and this comes down to motivation. Now don't
get me wrong, there is nothing more powerful as somebody wanting to give you
money to get you motivated to do something, like an employer who is willing to
pay into your plan on top of your own contributions. The problem we have is
that very few companies or institutions here in Japan that have any kind of
employer pension/ savings scheme, so these employer contributions generally do
not exist. So where is the motivation to save?
Before you decide how much you should save, you need to determine what you want
out of life as far as standard of living is concerned. Really think hard, is it
a Condo in New Zealand, Manhattan apartment or to retire on the golf course at
45, all three? Once you decide what you want, think about the timescale in
which you want to achieve it, and be realistic. Once done, you are halfway
there, now you need to know how much you will need.
After you have thought of a realistic goal, and you know how much it will
cost...now what? This is where your financial planner will be able to help,
as not only will he or she be able to calculate how much you need to save to
achieve this goal, but they will be able to offer a suitable medium to enable
all this to happen.
If only it were that straightforward! As an expatriate, life changes far
faster than perhaps your friendsf at home. Things seemed so certain then, but
now these unknown factors of life create an uncertainty, albeit exciting, it is
uncertain. Who knows where you will be in five years time let alone 10 years.
This is a fundamental underlying factor that influences whether people save or
not.
My view is that you should save wherever you are in the world, in order to
create a 'certainty'. By this I mean that you may not know where you will be
in 'x' years from now, but you do know that you will have money in the bank.
It is vital to remember that for each 5 years you delay your retirement
planning for example, you will have to double the amount you save each month to
achieve the same fund. It is never too early to start planning for a specific
goal at a specific time in the future.
Whether you are motivated by money or not is irrelevant, the feeling of
security is generally the over-riding factor, and that is what most of us are
looking to create. Does money make you happy? Certainly not, but it does create
security, opportunity and choice.
So what ARE you saving for?
Ivan Doherty
ipd@ifg-asia.com
Ivan Dohety MLIA (dip) is Chief Operating Officer of IFG Asia.
Part of The IFG Group PLC and registered with the Ministry
of Finance in Japan to give investment advice.
12/2001
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