Recently one of my clients and also a personal friend called me up and wanted to meet to talk about her existing policies. Her intention was actually to reduce her premium to the minimum.
I met her subsequently over tea to talk about the matter. “Ryan, I feel very broke!” she exclaimed this statement at least 3 to 4 times during our conversation. Before providing her any advice, I took out a cash flow analysis sheet and fill it out for her.
20 minutes later and the analysis was done. I did a quick calculation and realize that she is running on a very low surplus every single month. Insurance premium commitment per month for her is $200. There are of course other items such as Entertainment, Food, Transport, Family, Utility and so forth. Right now you must be guessing that she is overspending right?
Not really. In my opinion, she is spending what an average 30 year old spends.
To most of us, in our beginning years of work, lunch and dinner are mostly settled at cheaper eating places like food courts and coffee shops. As years past and our friends progress in their career and earned income, outings are not constraint to these eating places only. We started to frequent restaurants more often where a plate of Char Siew (pork chop) rice can cost $8 and a drink at $7.
Now, here comes the problem.
If your income is not catching up with your expenses, you are going to feel the financial strain as you grow older. Furthermore, this increase in expense is due mainly to the changing social environment and not your poor money management.
I advise my friend to look for freelance work that she can do after her office hours to improve her income. Reducing the premium from $200 to $100 is not going to solve the problem for long term. More importantly, this $200 is the only money she saved for herself after all expenses and it should not be compromised. I am glad that she heeded my advice.
Make sure your income is always ahead of your lifestyle. If you are not getting that pay increment for the past few years, you got to be careful.
