Tip 226: Live on 50% of income

I previously blogged about ensuring a cash pile of 1 year's income is available in today's volatile economic environment. I do watch The Suze Orman Show, a show about managing money. Suze like me says that she did not grow up with money. The key to managing money is to not let money manage our lives. One method is to only live on 50% of our income. This is a safety net in case one of the spouse loses his/her job, the other spouse's income will be sufficient to cover family expenses.

It is neccessary to build a strong foundation of savings and then only start spending and enjoying money after that. This can possibly go against preferences and philosophies of certain people who believe in living for the moment. But reality is that you cannot be envious of others, but build your own wealth yourself. It really is not that difficult. It just takes some determination to live within your means, or rather 50% of your means.

Be determined to settle all your existing debts with high interest rates. Also, be determined to cut all unnecessary wants and delay them till you have sufficient savings. This can be done with any amount of income. Only invest when you have sufficient savings and the investment money set aside is not for emergency use.

I still remember saving my scholarship allowances every month during my 1 year MBA stint in Hawaii. I cooked meals every day and even volunteered for events to enjoy proper meals and trips. Every month, I will set an unrealistically high target of savings and put all my income into a step up savings account, and be determined to delay my wants till the next income cheque and not withdraw from my savings account. Towards the end, I saved enough for a trip to all the islands of Hawaii and also a cash pile of savings together with a flight ticket to Japan for my next job.

Then, during my job in Tokyo, I saved enough to buy an apartment in central Tokyo within 2 years. I saved enough to get married and now being able to support a family of a wife and 2 kids. All the experiences represented in the photos on this blog are through the most optimised way of spending. I only travel when it is free or through the cheapest available means. None of my wealth is inherited either from my parents or from my spouse. I am the only one working in the family and support my wife's and kid's expenses. Anyone can do it. It is through living within your means - or rather 50% of your income.

(Photos show Haruka goldfish scooping, a traditional Japanese game and playing water at her alma mater, a Japanese playcenter near our previous home in Tokyo).