Ten Financial Tips for the Common People (Part 1)

Next, we will introduce five of these methods in detail.

1. Budget Planning and Tracking

Budget planning and tracking is the cornerstone of managing personal or family finances. It allows you to clearly understand your income, expenses, and savings goals, and act according to this plan. This process can help you better control your financial situation, avoid overspending, and accumulate funds for future financial goals.

Budget Planning and Tracking Methods:

• Income Assessment: First, clearly list all monthly fixed income, including salary, bonuses, investment returns, etc.
• Expense Classification: Divide expenses into fixed expenses (such as rent, utilities, insurance, etc.) and variable expenses (such as dining and entertainment, shopping, etc.).
• Budget Setting: Based on income and expenses, set a practical monthly or annual budget plan. Ensure expenses do not exceed income and leave room for savings and investment.
• Tracking and Evaluation: Use a notebook, spreadsheet, or financial management software to track actual expenses. Regularly (e.g., monthly) compare with the budget plan and evaluate if adjustments are needed.

Budget Planning and Tracking Example:

Suppose Jane has a net monthly income of 40,000. Her monthly budget is set as follows:

• Fixed expenses: Rent 10,000, utilities 1,500, transportation 2,000, insurance 1,500, totaling 15,000.
• Variable expenses: Food and groceries 6,000, dining and entertainment 4,000, personal items and services 2,000, totaling 12,000.
• Savings and investments: Reserve 13,000 for savings or investments.

To effectively track expenses, Jane uses a financial management app to record every expenditure immediately and sets monthly spending limit reminders. This way, she can always understand her financial situation and ensure not to overspend.

Benefits of Budget Planning and Tracking:

• Increased sense of financial freedom: Through budget planning and tracking, Jane can enjoy life without increasing debt while preparing for the future.
• Reduced financial stress: Clear financial planning helps reduce stress and anxiety caused by financial issues.
• Goal Achievement: Helps achieve long-term and short-term financial goals, such as buying a property, traveling, or retirement planning.

Budget planning and tracking is an ongoing process that requires regular review and adjustment to accommodate changes in income, lifestyle habits, or unforeseen expenses. This method helps individuals build financial discipline, gradually achieving financial independence and wealth accumulation.

2. Efficient Savings

Efficient savings refer to not only depositing money into banks or other saving instruments but also ensuring that these savings operate at the highest efficiency, i.e., achieving relatively higher returns. This often involves finding savings accounts with high interest rates, fixed deposits, or other yielding saving instruments like endowment insurance, money market funds, etc.

Methods of efficient savings:

• Compare saving instruments: Research and compare the interest rates and conditions of different saving tools available in the market, including bank savings accounts, fixed deposits, money market funds, etc.
• Assess risks and returns: Understand the risk levels of different saving instruments and choose the products that suit your risk tolerance best. Generally, higher returns come with higher risks.
• Regularly review and adjust: Interest rates in the financial markets change with economic conditions. Regularly review your savings products and adjust them according to market changes to maintain efficiency.
• Utilize automatic transfer features: Set up automatic transfers from your checking account to your savings account to ensure regular savings and reduce human negligence.

Examples of efficient savings:

Suppose Albert wants to effectively save some of his idle funds. Through research, he finds a bank offering a high-yield savings account with an annual interest rate of 1.8%, significantly higher than the 0.3% annual rate of regular savings accounts. Additionally, he discovers a money market fund with an expected annual yield of 2.0%. After assessing the risks and returns, Albert decides to deposit half of his funds into the high-yield savings account and invest the other half in the money market fund to achieve efficient savings.

Benefits of efficient savings:

• Increase opportunities for capital appreciation: By choosing high-interest or high-return saving instruments, idle funds can gain more opportunities for appreciation.
• Enhance financial flexibility: Some saving instruments (like certain high-yield savings accounts) offer higher interest rates while still maintaining liquidity of funds, convenient for emergency use.
• Achieve financial goals: Efficient savings can help accumulate funds faster to achieve financial goals such as buying a house, education, retirement, etc.

Efficient savings require investors to continuously learn about market changes and choose the most suitable saving tools based on their financial situation and goals. Moreover, efficient savings should be part of an overall personal financial plan, coordinated with investment, consumption, and other financial activities to achieve optimal financial health.

3. Consumption and Shopping Strategies

In today's consumer-driven society, adopting wise consumption and shopping strategies is also important for maintaining financial health. These strategies can help individuals maximize their purchasing power while avoiding unnecessary expenses, thus achieving more effective financial management.

Strategies for consumption and shopping:

• Distinguish between needs and wants: Before making a purchase, carefully evaluate whether the item is truly needed or just a temporary desire. This helps avoid impulse buying.
• Comparison shopping: Use online tools or apps to compare prices and deals from different merchants to ensure the best benefits.
• Take advantage of discounts and promotions: Pay attention to discounts, coupons, promotional events, or holiday specials offered by retailers to reduce shopping costs.
• Points and cashback programs: Participate in credit card or retailer points and cashback programs, which can be used to deduct cash or exchange gifts in future shopping.
• Bulk buying and installment shopping: For frequently used items, consider bulk buying to get discounts; for large items, consider installment payments to avoid a high one-time expense.

Examples of using consumption and shopping strategies wisely:

Suppose Rosa needs to buy a new washing machine. She first identifies her needs (e.g., capacity, features, energy efficiency rating) and then uses price comparison websites to find prices for different brands and retailers. After identifying the most suitable model, she waits for the appliance store's year-end sale and uses an additional coupon, ultimately buying the washing machine at 20% less than the regular price. Additionally, she pays with a credit card that offers cashback, further saving costs.

Benefits of using consumption and shopping strategies wisely:

• Save expenses: Through comparison shopping and taking advantage of offers, shopping costs can be significantly reduced.
• Avoid impulse buying: Distinguishing between needs and wants helps reduce unnecessary expenses and avoid financial stress.
• Maximize purchasing power: Fully utilizing points and cashback programs, as well as bulk buying strategies, can increase the ability to buy the same amount of goods, thus improving overall quality of life.
• Achieve financial goals: The money saved can be used for other financial goals, such as savings, investments, or debt repayment.

Adopting effective consumption and shopping strategies not only helps with immediate savings but also enhances an individual's or family's financial health in the long term. This requires individuals to maintain discipline while shopping and continuously look for ways to improve their consumption value.

4. Investing and Wealth Accumulation

Investing and wealth accumulation is the process of seeking capital growth or income by putting funds into various assets, such as stocks, bonds, real estate, or other investment vehicles. It is a key part of financial strategy, aiming to surpass the low returns of traditional savings and combat the effects of inflation. Investment requires wise planning and risk management to achieve the goal of long-term wealth accumulation.

Methods of Investing and Wealth Accumulation:

• Define investment goals: Start by targeting your investment goals (such as retirement, buying a house, education funds, etc.) and the level of risk you are willing to take.
• Asset allocation: Allocate your investments among different types of assets (such as stocks, bonds, real estate, etc.) based on your risk tolerance and investment goals to achieve diversification.
• Choose investment instruments: Understand and select suitable investment instruments for you, including direct investments (such as buying stocks or real estate) or indirect investments (such as mutual funds, ETFs, investment-grade bonds, etc.).
• Continuous monitoring and adjustment: Investment is not a one-time decision but an ongoing process. Regularly review your investment portfolio and adjust according to market conditions or your financial situation.

Examples of Investing and Wealth Accumulation:

Suppose Nelson wants to have enough funds to buy a new house in 10 years. He decides to use some of his savings for investments to achieve capital appreciation. After discussing with a financial advisor, he chooses a diversified investment strategy, including 60% in stocks and 40% in bonds. The stock portion aims to provide higher growth potential, while bonds offer steady income and risk balance to the investment portfolio. He also plans to rebalance his portfolio annually to maintain this asset allocation ratio.

Benefits of Investing and Wealth Accumulation:

• Capital Appreciation: Long-term investments in assets like stocks or real estate can often achieve capital appreciation and increase wealth.
• Income Source: Certain investments (such as dividend stocks, bonds, or rental real estate) can provide a steady income stream.
• Combat Inflation: A reasonable investment strategy can help your funds grow faster than the rate of inflation, preserving purchasing power.
• Achieving Financial Goals: Through investing, individuals can more quickly achieve financial goals, such as retirement planning, buying a new house, or funding children's education.

Investing and wealth accumulation is a complex process involving understanding the market, managing risks, and continuous learning. It's recommended to conduct thorough research before making investment decisions or consult a financial advisor to ensure that the investment strategy matches personal financial goals and risk tolerance.

5. Insurance Planning

Insurance planning is an important financial strategy designed to manage the risks and uncertainties faced by individuals or families through the purchase of insurance. It can help protect against significant financial loss, whether due to health issues, property damage, or other unforeseen events. Proper insurance planning can ensure that your and your family's economic security is not severely affected in times of adversity.

Methods of Insurance Planning:

• Assess risks and needs: First, assess the main risks you and your family may face, including health issues, property loss, accidental injury, etc.
• Understand insurance types: Familiarize yourself with different types of insurance products, including life insurance, health insurance, property insurance, accident insurance, etc., and their respective coverage.
• Choose appropriate insurance plans: Based on your risk assessment and financial situation, select suitable insurance plans for yourself. You may need to combine various insurance products for comprehensive coverage.
• Regularly review and adjust insurance plans: As your life circumstances (such as changes in family members, income, etc.) and market conditions change, regularly review and adjust your insurance plans to ensure they continue to meet your needs.

Examples of Insurance Planning:

William is a married man with two children. He has purchased a term life insurance policy to ensure that if he passes away unexpectedly, his family can receive sufficient financial support to cover living expenses and the children's education costs. Additionally, he has bought health insurance for the whole family to cope with potential medical expenses. As his children grow and his career situation changes, he regularly reviews his insurance plans to ensure the coverage and insurance amount still meet his needs.

Benefits of Insurance Planning:

• Financial Security: Compensation provided by insurance can help alleviate financial burdens in the event of serious illness, accidents, or property loss.
• Peace of Mind: Knowing that you and your family are protected in case of unforeseen events can bring psychological peace of mind.
• Asset Protection: Prevents depleting savings or assets due to unexpected events, ensuring personal and family financial stability.
• Supports Family and Business Planning: Insurance planning is part of long-term family and business planning, helping to ensure these plans can proceed smoothly even in adversity.

Insurance planning is an indispensable part of personal and family financial planning. Choosing and configuring the appropriate insurance products requires careful consideration of individual risk tolerance, financial situation, and long-term goals. It's advisable to conduct thorough market research before making decisions and, if possible, seek advice from professional financial advisors.