Inflation in Hong Kong, measured by Consumer Price Index (CPI) grew 2.7% in October 2023, a second straight month of acceleration and hitting a 13-month high.
With prices continue to rise, tax and holiday season kicking in soon, many are looking for more ways to save more money both for our short-term goals (such as that ski trip to Niseiko) or longer-term goal of FIRE (Financial Independence, Retire Early).
As the Chief Financial Officer (CFO) of our own wealth, let's look at five tips to help you be able to start saving more.
5 tips to help you save more money:
1. Set realistic timelines and targets
Identify your goals in terms of the outcome: This could be saving for an emergency fund, buying a nice watch, going on the perfect getaway or planning the purchase of your first property. Identifying these goals helps keep you motivated, as your discipline will be rewarded with something tangible.
Apart from immediate targets, consider longer term goals such as retirement and maybe legacy planning for your future generation. Clearly dividing these goals into short-term vs long-term goals makes it easier for you to to feel some sort of clarity, so that you can start moving onto tip 2.
2. Start planning — use a budget as guidance
Calculate how much you will need to save for to meet your different goals, then you will be able to work backwards to find out the maximum that you can spend to reach your goal.
After that, you can break down your expenses into different buckets for ease of monitoring and tracking. This will help ensure you do not overspend. For more tips on managing your personal budget, click here.
3. Automate to keep you disciplined
Let's keep it real — saving for longer-term goals such as retirement is not immediately gratifying nor something we prioritise daily over the next short-haul holiday to Bangkok.
Setting up automatic transfers and investment plans can help us remain focused on our goals and stay on track.
Rather than spending our money and then saving whatever that is left, we can save our money first before spending whatever that is left. This can be done by setting up a recurring transfer of your monthly salary to a monthly savings or investment plan. The remaining net sum can be used to pay for your expenses (salary minus savings), this way you are less likely to overspend.
You can decide how much to set aside each month based on your own saving goals. It will definitely involve some sort of prioritisation and trade-off between short-term instant gratification vs "delayed gratification" to save for long-term financial comfort.
4. Distinguish your wants from your needs
In a world where we are bombarded with advertisements daily, we may be tempted to get the latest, shiniest new gadget or product. This could be the latest smartphone, sneakers, or handbags.
Our thought process around saving is then often around getting the cheapest price out of this new product, rather than looking at getting the best value for our own needs.
Here are some questions to guide you to make the best-value purchase:
- Do I need this purchase? (Wants versus needs)
- Is there a cheaper alternative that can serve my needs or wants?
- Are there any recurring costs that I need to be aware of?
5. Review your goals and budgets periodically
Our income, expenses, and financial goals are likely to change at least annually. Similar to how CFOs review their company's annual budget, you should broadly track your spending against your planned budget. After identifying any significant deviations, you should be able to understand the cause of the deviation and consider ways to circumvent it.
While the impact of saving may not be immediately gratifying, the process of budgeting, understanding trade-offs in spending/saving, and reviewing your own cash flow in a disciplined manner is a habit that will help you in the long run. Much like exercising, it is easier to start small and early. It is less financially demanding to manage your personal finances well from the onset.
On Endowus Hong Kong, we have made personal investing seamlessly easy for you with our curated list of 200+ Best-In-Class funds and suite of core and satellite model portfolios.
Click here and spend a few mintues to onboard with Endowus to get started on your wealth journey today.
Read more:
- Financial planning for new parents in Hong Kong
- A rainy day fund: Why every Hong Konger should have one
- How to invest for passive income in Hong Kong
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