Connect with us

Business

Finance: Securing your financial future

Published

 on 

PHUKET: It really doesn’t matter if you make a little money or tonnes. If you can’t master this very important step you will never achieve financial freedom. It sounds all too simple in theory, yet in practice so many people have trouble staying disciplined.

The step I am referring to is committing to setting aside a minimum of 10 per cent of all income you make and putting it into long term savings.

The following discussion is not about what you do with this money, but simply getting you to understand how crucial it is to your future and those of your loved ones. Most people have no idea how big the trade-off is when they squander money in ‘today’s currency’, or what an economist would call the opportunity cost of consuming non-essentials in lieu of investing. Because of the effects of compounding, an apple eaten today has cost you the equivalent of many apples in the future. This effect gets exponential, and over longer time frames the apples eaten today becomes holidays and luxury cars foregone in the future.

Let’s use coffee as an example since I don’t want you to go and skip that apple. It’s best to keep the doctor away, although that’s a discussion for another day. Let’s assume you have a 100 baht coffee at a fancy coffee shop on the way into work every day so you don’t have to wake up half an hour early to make your own at home.

If you buy a bag from the shop it might cost you 10 baht per cup, saving you 90 baht per working day. Let’s call this US$3. Multiply this by 20 working days and we can say it is US$60 per month or rounded off to US$700 per year. Now let’s assume a 5 per cent average annual return per year, which could be guaranteed if you were paying down debts like a mortgage or student loan at this rate.

If you skipped your fancy coffee and used the savings to pay down your mortgage over its 30-year term, we are talking about US$50,000 gained from a very small effort every day. Keep in mind less than half of this was the actual dollar amount of what you forewent in short term consumption; the rest is the magical effect of compounding.

Now you don’t need to skip luxuries like fancy coffee if you can be disciplined to save 10 per cent or more of your income every month, but the example just goes to show how very small changes in our daily habits can add up to significant chunks of cash. If you can save even more, what you get back in the future is even greater, or you can achieve financial freedom and stop working even sooner.

Now we shouldn’t live like paupers either, since we could be hit by a tuk-tuk and die tomorrow, so we need to find a balance that works for us in this trade-off. Most people err on the side of over-consuming now, so a systematic percentage followed with strict discipline is the best approach. This way, if your income goes up or down you just keep it in the same percentage and adjust your lifestyle accordingly.

Sadly, most people adjust their lifestyle to increase to 100 per cent of any additional income earned, despite the fact that we quickly adjust to new lifestyle levels and our overall happiness reverts to where it previously was.

We usually even increase our stress as the thought of going back to a previous lifestyle that we once were happy with creates a fear that didn’t exist when we were there in the first place. It’s much better to increase our means greatly first and then slowly increase our lifestyle. By committing to saving a fixed percentage of your income, you will do this automatically as long as you can stay disciplined. Do your future self a favor. Trust me, you will thank yourself.

David Mayes, MBA, lives in Phuket and provides health, wealth, and life coaching to expatriates around the globe. He has been involved in financial markets for 15 years and specializes in tax efficiency and UK pension transfers. He can be reached at lifeisamazingthailand@gmail.com

— David Mayes

 

Get more from The Thaiger

Join the conversation and have your say on Thailand news published on The Thaiger.

Thaiger Talk is our new Thaiger Community where you can join the discussion on everything happening in Thailand right now.

Please note that articles are not posted to the forum instantly and can take up to 20 min before being visible. Click for more information and the Thaiger Talk Guidelines.

Archiving articles from the Phuket Gazette circa 1998 - 2017. View the Phuket Gazette online archive and Digital Gazette PDF Prints.

Follow Thaiger by email:

Guides6 mins ago

5 best wine bars in Bangkok offering rich and quality wine

North East9 mins ago

Hip businesses in northeast Thai province offer tasty food and fun experiences

Crime27 mins ago

British CEO arrested at Bangkok Airport over 40 million baht fraud accusations

Sponsored6 hours ago

Segafredo Zanetti Coffee teamed up with Bangkok Airways and hosted “Bangkok Airways Surf Festival 2022”

Thailand30 mins ago

Thailand’s 5 national parks raise entry fees for foreigners by 100%

Bangkok42 mins ago

Ari around invites Ari people to share good deeds through the app.

Press Room52 mins ago

Where to order cannabis/weed in Thailand

Join the conversation on the Thaiger Talk forums today!
Chon Buri1 hour ago

Trouserless Chon Buri man crashes car into power pole

Entertainment1 hour ago

‘The Trapped 13’ lets Wild Boars speak for themselves

Thailand1 hour ago

Reported Bangkok VIP casino vanishes into thin air

World2 hours ago

Australia sets goal of preventing any more species from going extinct

Crime2 hours ago

Mass shooting in Thailand: 36 dead, including 24 children, 12 injured

Thailand2 hours ago

9 Thais arrested in South Korea for smuggling drugs

Drugs2 hours ago

Police snag 2.5 meth pills in checkpoint stings

Thailand2 hours ago

Nong Bua Lamphu Hospital needs urgent blood donations after mass shooting

Crime3 hours ago

BREAKING: Nursery mass shooter shoots dead wife and child before killing himself

Thailand1 year ago

Morning Top Stories Thailand | Police to end protests, Human Trafficking | September 14

Thailand2 years ago

Thailand News Today | Thai Airways in rehab, All go for Songkran | March 4

Tourism2 years ago

Phuket’s nightlife. Yes, bars and clubs are still open | VIDEO

Phuket2 years ago

Thailand News Today | Covid passport talks, Thai Airways heads to court | March 2

Tourism2 years ago

Phuket Thai food treats you need to try | VIDEO

Thailand2 years ago

Thailand News Today | Bars, pubs and restaurants ‘sort of’ back to normal | Feb 23

Tourism2 years ago

In search of Cat & Dog Cafés in Phuket Town | VIDEO

Thailand2 years ago

Thailand News Today | Gambling crackdown, Seafood market to reopen, Vlogger challenge | Jan 21

Thailand2 years ago

Thailand News Today | Covid testing for visas, Business impact, Vaccine approval | January 19

Thailand2 years ago

Thailand News Today | Weekend Bangkok bombs, Thailand fires, Covid update | January 18

Thailand2 years ago

Thailand News Today | Stray car on runway, Indonesian quake, 300 baht tourist fee | January 15

Thailand2 years ago

Thailand News Today | Governor off respirator, sex-trafficking arrest, condo prices falling | January 14

Thailand2 years ago

Thailand News Today | Chinese vaccine, Thailand ‘drug hub’, Covid update | January 13

Thailand2 years ago

Thailand News Today | Bangkok may ease restrictions, Phuket bar curfew, Vaccine roll out | January 12

Thailand2 years ago

Thailand News Today | Covid latest, Cockfights closed down, Bryde’s Whale beached | January 11

Trending