By Yanyong Thammatucharee is Senior Vice President for Accounting and Finance at Central Marketing Group
Published on September 16, 2009 The NATION newspaper
Every day we have to spend money on normal household expenses such as food, transportation, supplies, and so on.
During weekend we may go shopping for special items such as clothes, cosmetics or sport shoes. Financially, these are decided based on our estimate of the available cash on hand.
However, it is possible that one day we may need to make difficult decision to buy high value items such as a house, a car or an electrical appliance.
For most people with average income, say 30,000 Baht per month, this definitely involves monthly cash flow status and requires careful consideration, especially for those with some debt burden on hand. Many times we buy high price items solely based on personal preference.
We try to find reasons to support why we need to buy it rather than not to buy it.
A recent survey showed that around 50% of Thai people have personal debt, which accounted for 10 times of monthly income.
Under the tough economic situation, a systematic financial decision can help avoid debt settlement that can result in the bad credit record.
The following steps can be considered before acquiring high value assets or incurring big spending.
- Understanding of regular income - this can be your monthly salary or average income from your personal business. Let’s assume a person has salary of 50,000 Baht per month net from personal income tax.
- The next step is to review your regular household spending that you need for daytoday living.
Let’s say this represents 20,000 Baht per month (consisting of food 6,000 Baht for 3 meals, utilities 2,000 Baht, transportation 2,000 Baht, residence rental 5,000 Baht and others 5,000 Baht).
- If this person already has to pay for the car loan at 15,000 Baht a month.
- He normally gives some money to his parents totally 10,000 Baht a month.
- Now the saving 5,000 Baht per month.
Apparently the 5,000 Baht left each month is not sufficient to pay for additional longterm debt from a buying a house.
Without some saving at comfortable level, this person should not incur large ontime spending - overseas travel during a long holiday.
But if he has a saving of 100,000 Baht, he may be able to buy a new note book at 35,000 Baht and still have some saving left.
This thought process may sound simple. Nevertheless many people fail to follow the justification by themselves due to temptation around them that arouse the fast decision making.
How much we can afford to pay is equally as important as how much we can save. First of all, make sure that the saving money is sufficient to keep you in the comfort zone.
Finally don’t forget to take emerging risks into account before the final decision is made.
Today we have a risk of pay check reduction. We have a risk of losing the job. We have a risk of higher cost of living. We have a risk of unexpected illness.
And most importantly we have the risk of not realizing that we are entering a new risky economic era. Save some money to guarantee your survival or at least alleviate hardship in difficult time.
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