The wallet or purse is basically just another form of ‘luggage’ that we carry around everyday. If you have the liberty to peep into your friends’ wallets, it can tell you a bit on how she manages her money. The wallet is such a personal accessory that the fashion industry has exploited very successfully- everyone has at least got one. Yet, the primary function of a wallet remains the same for the majority of the population- to store items that is crucial for day-to-day survival in our society. So, it’s almost ‘fatal’ to be carrying a wallet that is empty without cash or a working credit card. Most of us almost never leave the house without our wallets in the pocket. It is this very emotional attachment we have with our wallets that I had the chance to observe the relationship between these leather-made fashion accessories and our spending habits.

A few months back, I gave a personal finance workshop to a group of students who will be joining the work force in a few months time. I brought up the issue on controlling their expenditures and how they can limit it by a very simple trick. In my example, I told them how most of us would go to the ATM and withdraw a certain amount of cash that will be spent for the next couple of weeks. Some of us even withdraw as much as we can so that we don’t have to visit the ATM again until the next paycheck. Next, we will naturally insert all the cash which we’ve just withdrawn into the wallet. And it stays there until all of it is depleted. You might think there’s nothing wrong with that, but my observation tells me otherwise.

Let’s rewind to the scene where you were at the ATM machine, right before you press the figures on how much to withdraw. Now, just for a second, you force yourself only to withdraw only RM150 (this figure could vary according to your income size). RM150 would be a typical example for a fresh graduate, who has just got a new job with a monthly salary of RM2,000. Before this, you could have been withdrawing RM600 every time at the ATM, telling yourself it’s more convenient to withdraw RM600 once than to withdraw RM150 in four different sessions.

I have to agree that it does become an administrative burden if you had to visit the ATM machines more than 5 times a month. The trick here is to balance out the withdrawal figure (I would suggest not more than 8% of your monthly income, how many days it will last you (preferably 10 days), and how many ATM trips you have to make in a given month (preferable less than 3 times). From here onwards, I will refer to this specific figure you withdraw each time at the ATM as the ‘ATM-Limit‘.

By restricting the withdrawal amount to RM150, you will now have a maximum of RM150 in your wallet at any point of time. Now, here’s the interesting part: each time you decide to make a purchase with your cash, you will notice that you only have that much of cash in your wallet, which is going to make you think twice before splurging. By making a mental note of your ATM-limit, you will not be tempted to overspent. Since making trips to the ATM is going to be time-consuming, you can reduce the percentage of impulsive purchases too. Just look at how many ATM machines there are in the shopping malls catering to impulsive shoppers. In essence, you are giving more time for the logical part of your brain to process the buying decision, rather than allowing the emotional part of you to subconsciously open up your wallet and part with the cash inside.

Effectively, you will only be having RM450 cash in your wallet for the entire month. And if you manage to survive with that, you will would have a remaining RM1,550 left in the account to pay for the ‘fixed expenses’, such as your car loans, home loans and bills. There are times and emergency situations when you really need the extra cash to help out, but you must keep these extra cashing-out to the minimum. If you do this too often, it only means that you are not withdrawing a realistic figure each time at the ATM. So, practice a little logical budgeting when you set the ATM-Limit’s amount.

However, there can be a serious drawback to this strict cash management technique: the sudden increase in your credit card usage. This will happen if you don’t already have a strict rules for credit card usage. If you find yourself starting to use your credit card more often, then you should reevaluate if this technique is of any help to you at all. Hence, it is best to experiment with this technique only when you are not behind your credit card payments. Also, setting a realistic ATM-Limit will also help.

If you’ve been wondering why you just cannot see any money in the bank account at the end of the month, I really suggest that you try this method out and see if it works for you. If it doesn’t help at all, then there must be other loopholes that you must identify. Always refer to your cash flow spreadsheet. If you don’t already have one, I suggest you start one right now! You can’t be serious about managing your own finance without knowing your personal cash flow condition. You have to constantly monitor your expenditure and figure out ways to increase the income. Things can really get out of hand very quickly on the expenditure section, while growth in income might take a little longer.

Spending within your means takes a lot of will-power and discipline. It’s one of the toughest training for the mind. Imagine not being able to splurge like your friends and not being able to enjoy the lifestyles that you are constantly bombarded with by media. Online shopping is definitely not helping things either. If you are not careful, your money will slip away to places you don’t even know existed. Amassing money might not be your purpose in life, but mismanaging it will definitely leaves you without one.

• Changes in KWSP
• Pre-mature EPF Withdrawals
• EPF: More Money for Education
• Officially Souvenirs!
• Your Employees Provident Fund (EPF) Accounts
• EPF Introduces m-Akaun
• Electronic Payment Fees Reduced
• PayPal is Now Officially in Malaysia