At the corporate level, the accounting concept of matching between income and expenses is applied to determine the profit or loss of a company. This can also be applied to personal financial projection and control.
Under this concept, the compaฌny needs to start with recognised revenue; for example, the monthly sales or service income. Then, any related expenses incurred within that period have to be included in the profitandloss statement to calculate the net operating result. Of course, the surplus of income over expenses means the profit for that particular period.
A recent survey showed that about 80 per cent of Thai civil serฌvants have high liabilities, both shortterm and longterm. Most of the longterm liability relates to house acquisition that obliges an individual to make instalment payฌments over several years. This may not be the problem at all as long as the future cashflow matching shows net positive balฌance.
This concept should also apply to a newly graduated employee when deciding on buyฌing a highvalue asset such as a house or a car. Even though a house can be considered a better longterm investment because its value tends to increase in the long run, the longrange obligation can limit the ability to use the earned money for unanticipated necesฌsities.
For a civil servant in the early years of employment, say at the position of level 1 or 2, he or she needs to be very cautious about the monthly cashflow position before making a big spending or getting into a huge debt. Let’s put forward an example. If the monthly income is Bt16,000 per month, the monthly expensฌes along the future period must be conฌtrolled below amount. The monthฌly consumption may nearly reach the ceiling of the cash income. The following are estimated monthly fixed costs:
l Daily food and beverages for three meals is Bt6,000 (Bt200 per day).
l Transportation costs are Bt1,000 (depending on distance and mode choฌsen).
l Residence rental is Bt5,000 (this can be hard to find in Bangkok today).
l Communication cost of Bt1,000 (includฌing Internet fee).
l Other household items like washing and cleaning products for Bt2,000.
This makes a monthฌly cost of living of Bt15,000. This person can only survive if he or she doesn’t incur unusual expenses such as going out for a party with friends. The Bt1,000 left is considฌered a monthly saving. The only way to increase the savฌing amount is to reduce fixed costs. Worse than that for those who had borrowed money from the education fund when they were students, they need to alloฌcate a portion of their income to pay off the debt over a long period up to seven or nine years (let alone the concern over retaining their credibility).
In order to improve the net cash position, some people seek additional income from a parttime job. This can increase the ability to spend more.
However, some people choose an easy way. It is dangerous to find cash or spend the money through credit cards exceeding the income threshold. That could lead to the jeopardy of being unable to settle the creditcard bills with additionฌal interest, and a penalty of more than 20 per cent from delayed payment.
So, thinking about the matchฌing concept before spending can be a secret to effective personal cashflow management.
YANYONG THAMMATUCHAREE is senior vice president for Accounting and Finance at Central Marketing Group.
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