Just thought that I would share some thoughts about my own personal experience regarding the first topic of managing my cashflow. Based on the checklist provided at the IMSavvy site (http://www.cpf.gov.sg/imsavvy/ayr_list.asp?catid=1), there were a few questions and I hope to answer these questions as honestly as I can. So here I go:
I Spend Less Than What I Earn Monthly
Yes, I do spend less than what I earn monthly most of the time. The only times that I ever spent more than I earn was when I was either going on a holiday or spending on my wedding preparations/home renovations. Otherwise, as a whole, I would like to think that for a typical month, I make a pretty conscious effort to spend less than what I earn monthly. This discipline I guess was instilled in me since young - you never want to spend your pocket money before the week is over. So likewise, when you are working, your monthly cash outflows should not exceed your monthly cash inflows unless for very good reasons (e.g. once-off big ticket items).
I Save At Least 10% of My Income
Generally, I would like to think that this is a YES for me too. It really depends what is the definition of saving. My definition of saving is basically income that is not spent on consumption. So saving to me includes putting money in the bank, putting it in a regular savings plan or investing in stocks. Well, some people will include their CPF contributions as part of their savings (and that isn't entirely wrong). So different people probably have very different ideas about what actually constitutes savings. For me, I do save >10% of my income over and above my CPF contributions.
Again, I must qualify that there are some months when I am a little less disciplined and splurge a little. But with a regular savings plan that I have set up through an ILP bought years ago, more than 10% of my income does go into saving (at least based on my own definition).
I Have At Least 6 Months Worth of My Income as Emergency Funds
A big YES to this question too! This was really something that I put off in the past and it was advice that I did not heed which I regret. During then, I was young and rash. I decided that the bank was paying me too little interest and decided to invest the majority of my money in stocks. I had less than 6 months worth of my income in emergency funds even though I originally had set aside that sum of money. Then came the time when I had to pay for some big ticket items and I was left with little choice but to liquidate some of my investments at a loss. So if this is not good enough warning for you, please do set aside 6 months of your income as emergency funds first before you even start investing. The last thing you want to do is to be liquidating your investments at a loss when a certain crisis (e.g. job loss) hits you.
I Pay My Credit Card Bills and Other Debt Obligations, in Full and On Time Each Month
Generally yes. All my debt obligations are paid through GIRO so I do not lapse on it. I do pay my credit card bills in full at the end of each month though not always on time. This is simply because I forget to pay them or miss the due date as the credit card bill was lost in my stack of letters. I usually call up the bank to waive the late charges since it is basically an oversight. I must have done that more than 5 times but they have always been more than willing to waive it.
I Have Adequate Financial Protection
Well, this is perhaps the toughest question to answer. And my answer to this is probably a "MAYBE". I know that I ought to be insured to certain levels (e.g. 10 times my annual pay for death coverage). But all these are really rule of thumb calculations. My protection level is slightly below those levels. I would like to think that I am adequately insured with coverage for death, TPD, critical illness, hospitalisation and personal accident.
This is perhaps a good time for me to dust off the dust on my insurance plans and see whether it is time to review the insurance coverage for myself as well as my family members.
So how did you fare in answering these questions? Any action you need to take if you have answered a "No" to any of the questions above? Are you ready to manage your cashflow?