Changing your spending habits

“Where did all the money go?”, “How to get richer?”, “When is the best time to save for my
retirement?”, “Do I have enough money for my children’s education in the future?”, “How am I
going to pay off my credit card, hire purchase and easy payment debts?”………..

Are you one of these people who have ever asked yourself these questions? Are you

worried about falling into the common pitfalls in money matters? If your answer is “yes”, then this

is the article, which is going to help you to learn the tricks of breaking away the cycle of falling into

the debt trap again and again and also to learn how to create your own spending plan.

Everybody surely wants to manage their own money and survive. Once people receive their

income, if they start to spend and somehow, without realizing they are in debt again. This habit has

to be changed as soon as possible or else it will lead you into further financial problems.

“His Majesty hoped the additional income would be used prudently and the

workers concerned would be able to save through financial planning”.

(from BruneiDirect.Com on July 16, 2006)

Retrieved from: www.brudirect.com/DailyInfo/News/Archive/July06/160706/nite01.htm

His Majesty the Sultan of Brunei had mentioned this statement during his 60 th Birthday,

which is used to convey to the people of Brunei to spend their income wisely through proper

financial planning.

Many consumers in Brunei do not plan ahead before spending, and eventhough if they do,

they may not follow it most of the times due to uncontrolled spending habits or unforeseen

circumstances. Hence, they will end up with no or little saving each month, which is not sufficient

for their future retirement, children education as well as future emergency fund, a sum of money

readily available, just in case you need cash in a hurry. To achieve future secure, it is necessary for

the people to budget their income by creating their own monthly spending plan.

Budgeting is not an easy or fun thing to carry out but it is very useful as it forces a person to

take a good look at his/her spending habit. Most people realised that their main problem lies in

their living a B$50,000 lifestyle on a B$25,000 annual income. Hence, it is very crucial for a person

to know what he/she wants. For example, do you want in a year’s time to be out of debt and to
have no financial worries or in five years’ time, make a down payment for a house or pay for your

children’s further education?

List out your goals and estimate how much you will have to save each year to achieve them.

However, you are only to set the goals which you think you are able to accomplish. This is because

if you set your aims too high, you will end up very disappointed and may give up altogether. To

reach your goals, it does not mean that you will have to give up everything but it means that you

will have to budget wisely and shop smartly. You are to shop around for the best bargain so as to

trim your expenses particularly on unnecessary items.

There are 3 steps which you need to take into consideration before creating your own

budget plan. Here are the guidelines given by the Consumers Association of Penang (2004) for you

to follow:

STEP ONE

You will have to know where you stand financially. To do that you have to know for a start how

much money you earn each month. For most people, they are able to estimate it quite accurately

with their fixed monthly income. However, for those who have unstable income, they will have to

make estimates based on the past and adjust accordingly as they go along.

STEP TWO

You are to list out all the expenditure that you have spent per month. It is easier if you group them

into day-to-day spending, regular lump sums and occasional lump sums. Day-to-day spending

includes all essential items like food, drinks, and frequently bought items like household supplies,

newspapers, petrol etc. Regular lump sums should cover monthly payments, for example, house

rent, electricity bills and loan repayments, car and personal insurance etc. Occasional lump sums

will include car repairs and household maintenance.

STEP THREE

You are to review your budget regularly. This is particularly very important as some of the

estimated figures may change due to some circumstances. For example, if you lose your job, you

will need to draw up a new budget, or to modify the old ones. But if there are no changes, then you

will need to keep your budget up to date.

Table 1 shows a sample of Mr. X’s spending plan. Mr. X is a supervisor, who has to support
his wife and son.

Jan Feb Mar

Income
Balance from previous month
1,800 1,470 443
Salary
3,000 3,000 3,000
TOTAL INCOME 4,800 4,470 3,443
Day-to-day spending
Food – daily marketing, meals at work,
occasional meals out 600 700 600
Newspaper 31 28 31
Car petrol 120 120 120
Pocket money (for child) 10 10 10
Personal allowance 400 400 400
Personal allowance (for wife) 200 200 200
Regular lump sums (monthly & annual)
Housing loan 600 600 600
Electricity & water (estimated) 180 180 180
Telephone phones
- House phone (estimated) 70 70 70
- Mobile phone (estimated) 90 90 90
Savings 200 200 200
Car insurance - - 440
Car loan 400 400 400
Life insurance 139 139 139
School & tuition fees for children 190 190 190
Miscellaneous (medical/dental care, 100 100 100
haircuts, occasional treats, car repairs, etc)
Occasional lump sums (estimates)
Clothes - 300 -
Chinese New Year expenses - 300 -
Birthdays, anniversaries - - -
TOTAL SPENDING 3,330 4,027 3,770
BALANCE 1,470 443 327
Table 2 shows a sample of a Mr. Y’s spending plan. Mr. Y had retired from Brunei Shell
Petroleum Company since 1995 and since then, he starts to receive his income from his
children as well as the Government Old Age Pension Fund.

Jan Feb Mar

Income
Balance from previous month
500 627 224
- Income from children
1100 1100 1100
- Income from Government Old Age
200 200 200
Pension Fund
TOTAL INCOME 1,800 1,927 1,524
Day-to-day spending
Food – daily marketing, meals at work,
occasional meals out 510 660 450
Newspaper 23 23 23
Car petrol 100 100 100
Pocket money (for children) - - -
Personal allowance - - -
Personal allowance (for wife) - - -
Regular lump sums (monthly & annual)
Housing loan - - -
Electricity & water (estimated) - - -
Telephone phones
- House phone (estimated) - - -
- Mobile phone (estimated) 40 20 20
Savings 200 200 200
Car insurance - - -
Car loan - - -
Life insurance - - -
School & tuition fees for children - - -
Miscellaneous (medical/dental care, 300 100 100
haircuts, occasional treats, car repairs, etc)
Occasional lump sums (estimates)
Clothes - 200 -
Chinese New Year expenses - 400 -
Birthdays, anniversaries - - -
TOTAL SPENDING 1,173 1,703 893
BALANCE 627 224 631
 With a budget as shown in Table 1 and Table 2, you will know where your money goes and

you will be able to reduce your expenses on non-essential items and increase your savings for the

future.

“Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income
twenty pounds, annual expenditure twenty pounds, nought and six, result misery. – Charles Dickens

The concept of “Buy now, pay later” is becoming more popular nowadays. It enables

consumers to buy any goods that they wish on credit. With the constant use of credit cards, you

will eventually end up in debts. However, falling into debts is sometimes unavoidable if, for

example, you want to buy a house or start a business. But still, such debts should be manageable

debts.

To ensure that you never fall into the debt trap, you will have to learn to manage you

finances. There are certain guidelines which you need to bear in mind so that you can be free from

debts. Take note of the do’s and don’ts below:

THE DON’TS

1. Don’t ignore your debt problems as this can only make the situation worse.
2. Don’t live a B$50,000 lifestyle on a B$25,000 salary as you will find it hard to live within your
means.

3. There are always opportunities for special occasion spending. For example, consumers tend to feel
guilty if they do not give presents to their loved ones. The more guilty they are, the higher the

cost on the presents. To avoid this, it is necessary for consumers not to do their shopping last

minute, so they will not end up making expensive decisions. In other words, you should plan

ahead so that you can set aside the money for the presents in your budget.

4. Don’t be influenced by advertisements. It is better for you not to get hooked by the advertisements
because they make you spend more by falling into the trap “Buy now, pay later” concept.

5. Don’t use the credit card for borrowing. A person buying on credit increases the cost of the
purchases. The interest that accumulates each month adds to the cost of the purchase. As the

interest continues to accumulate, the person will eventually find it difficult to keep up with the

payments.
6. Don’t buy on hire-purchase if you can afford to pay in cash. If not, you should save until you are able
to purchase it.

7. Don’t buy a house when you just can’t afford to scrape together the monthly instalments.
8. Think carefully first before signing on as a guarantor for someone else’s loan as this is a risk which you
may or may not ended up settling the debts.

9. Don’t postpone paying your bills as this would accumulate more debts.

THE DO’S

1. Do make a budget. Many people dislike making a budget as it takes up a lot of time and the
person has to be very committed and disciplined. The basic rule of budgeting is that your

income must exceed your expenditure. A person must have a positive and challenging attitude

in order to succeed in creating as well as following the budget plan.

2. Do give yourself a treat every month. This means that you should put away some money every
month. You might find it difficult at the beginning but you will soon be motivated once you see

the accumulated money in your saving account.

3. Do avoid costly necessities. For example, a person will definitely feel happier by driving a
B$50,000 car on the road rather than a second-hand B$20,000 car but the happiness could be of a

short term one if you fall back on your monthly instalments and your car is repossessed.

4. Do memorize the golden rule of borrowing. “Borrow as little as possible and at the lowest rates
that you can find for the shortest possible period”.

References

1) BruneiDirect.Com (July 16, 2006). Retrieved from:

www.brudirect.com/DailyInfo/News/Archive/July06/160706/nite01.htm

2) Consumers Association of Penang (2004). The Money Book. Pulau Pinang. pp12 – 13, pp18 – 19
& pp 90 – 94.
3) Samples of spending plan from Jan – Mar 2006 - given by Mr. X & Mr. Y.

Done by:
Winnie Tan