Saving : Monitoring your Expenses or Behavioral

  Personal Cash Flow Management

I have seen many blogs have written about monitoring the expenses and some blogger's recommendation of apps which could monitor our expenses in detail.

Frankly, I didn’t monitor my expenses in such manner and for me “ agak-agak”  know how much I spent monthly on those fix items and some major items yearly such as holidays & staycations, insurance , home appliance ( like recently changing my TV and refrigerator after using it for many years ), no tax since no active income etc…

From my yearly dividend & interest collected, I know roughly my cash flow situation which is of course still  in +ve after minus out all those expenses.  Sometime I think it might be too extreme to ban or reduce the frequency of drinking “ Starbucks “ just to save few dollars (just kidding !! ), such extreme and tight control of our expenses may end up with deteriorating lifestyle situation.  I think occasionally we should “pampered” ourselves with cups of “Starbucks” and it should be fine J  and would opine that monitoring the “big ticket “ items would be sufficed in keeping our expenses in control.

LOL :  😃

Well, no doubt, understanding our cash flow is very important as part of the equation in our financial planning and wealth accumulation.

This article from InvestmentMoats will give you the great detail and analysis of “Your Personal Cash Flow Statement” (click )

While this is another interesting blog from SG Wealth Builder on “ Three Things about Growing Wealth: i.e  Stop tracking your expenses, Start tracking your income and Focusing on Growing (your income). ( click )

Behavioural vs Monitoring

Shaping and understanding our “behavioural “ on our spending pattern is rather important as compared to rigorous and tedious tracking and monitoring of our expenses.

Saving money has little to do with personal finance or how well you do the budgeting. You can have the best intentions and the most sophisticated budget in the world and still overspend.

Saving money is about changing spending habits into saving habits.

Remember the “lifestyle inflation” and removing the “temptation” of keeping up with “peer pressure “which may end up over-spending.  Keeping a simple lifestyle and spend within our mean is key to successful personal financial planning.

Happy Money: Smart Spending by Elizabeth Dunn & Michael Norton

Monitoring our expenses are important but at the same time “ maximizing our utilities “of spending money is also other factors to ensure that we are buying “happiness “ while spending.

Abstract from Harvard Business Review :

If you think money can't buy happiness, you're not spending it right. Two rising stars in behavioural science explain how money can buy happiness—if you follow five core principles of smarter spending. Happy Money offers a tour of new research on the science of spending. Most people recognize that they need professional advice on how to earn, save, and invest their money. When it comes to spending that money, most people just follow their intuitions. But scientific research shows that those intuitions are often wrong. 

Happy Money explains why you can get more happiness for your money by following five principles, from choosing experiences over stuff to spending money on others. And the five principles can be used not only by individuals but by companies seeking to create happier employees and provide "happier products" to their customers. 

Dunn and Norton show how companies from Google to Pepsi to Charmin have put these ideas into action. Along the way, the authors describe new research that reveals luxury cars often provide no more pleasure than economy models, that commercials can enhance the enjoyment of watching television, and that residents of many cities frequently miss out on inexpensive pleasures in their hometowns. By the end of this book, readers will ask themselves one simple question whenever they reach for their wallets: Am I getting the biggest happiness bang for my buck?

Dunn (Associate Professor of Psychology at University of British Columbia) and Norton ( Associate Professor of Marketing at Harvard Business School)  claim that people admit that they need assistance with earning, saving and investing money, but few people seek out the same help in how to spend their money. The authors take us on a journey of behavioural science on how to spend the money, we have better for our emotional well-being.

They propose five principles for smarter spending for happier people:

1) Buy Experiences (large and small).

2) Make it a treat (limiting things to enhance pleasure).

3) Buy Time (e.g., outsourcing our most disliked tasks).

4) Pay Now, Consume Later.

5) Invest in others, by choice, to make a connection with impact.

Remember I have mentioned in my earlier post about “ Money Management “ and danger of Lifestyle Inflation ( here ) and “ Buying Experience Not Things “ …

What do you think? do you monitor your expenses in detail or “agak-agak” same like me? and which is more important “ detail monitoring or behavioural change “  in spending?

Cheers !!

Quote Of The Day :

“Balancing your money is the key to having enough.” 
― By Elizbeth Warren

“The SECRET to financial security is not to have more money, but having MORE CONTROL over the money we presently have.” 

- By Auliq Ice

“When the purse becomes empty, the mind becomes full of issues.” 

-By Ernest Agyemang Yeboah