This post is on 4 different types of money skills that we can see from the people around us.
Four different money skills
All of us know how to earn money either through employment or entrepreneurship. But, how many of us know how to save or grow money?
From what I see, there are a few types of money skills people which I categorized as below:
1. Earn $2,000 and spend $2,000
Those who just earn their first few incomes, tend to belong to this group. Because they feel like they deserved to spend their first hard-earned money.
Many who just received their first paycheque especially graduate students who had been living in limited cash most probably spend most part of their first few paycheques.
Other than young graduates who just joined the workforce, there are also some who feel like there is no need to worry about tomorrow. To these people, tomorrow will take care of themselves.
So, they will just spend all they have.
2. Earn $2,000, spend $5,00 and save $1,500
Not many people manage to save 75% of their paycheque. And it is not easy to do that in the current economic situation.
For those who managed to do it, most of them are practising frugal living. They are very cautious in their spending and most of the time, they are very good at planning for their spending.
3. Earn $2,000 and spend $2,500
For this type of people, they are spending their future money.
If they are lucky enough, they are getting the extra money to spend from someone else such as their parents, spouse or other sources. For those who are not so lucky, their extra spending is paid by credit cards, personal loans or worse, a money lender.
And usually, they end up in bad debts.
After a certain period of time or some tough and hard learning, some of them might be able to drag themselves out from this harmful spending pattern.
4. Earn $2,000, spend $1,500 and save $5,00
I believe most of us belong to this group. Maybe not saving exactly 25% of our income but more or less around 25%. Which I consider is quite healthy money skills.
To some of us, maybe 25% is not good enough. But if this 25% is properly managed such as to put into an investment, within a period of time, it can grow into a huge sum of money.
A final thought on money skills
In summary, the above money skills seem a simple concept. But this simple concept can have a great impact on personal financial life.
In order for us to lead a healthy lifestyle, money skills are important. We should save some of our income while practising smart spending.
Which money skills do you belong to? Feel free to share your opinions.
Yeah. A lot of people are not frugal especially young people. They don't understand that it is direct albeit slow path to financial freedom.
But i do know some young people that saves up alot to invest 😛 I guess it boils down to a person's mindset for the future.
I think 25% savings (excluding EPF) is quite okey. With car,house loan commitments, it is hard to save more than that.
Hi Kris, you are absolutely right. It boils down to a person's mindset and also the exposure he/she receives + the willingness to think and plan ahead for their future.
25% from net income (exclude EPF) is good enough. With proper and smart investment, will generate a money growing tree 🙂
People should understand that being rich is not the matter of how much you earn but how much you save and invest. If a high earner who lives in a big house and drives a big car but have no money leave at the end of the day, a low income worker who manage to save, say 25% of take home income, is richer.
hi LSC, absolutely agree with you. looking at the current trend, many are willing to use their future money just because their neigbhours have it, so they must also have it. it's like a never ending catching game. at the end, these people will suffer due to unsettled debts or no fund for emergency matter.