Lim Kopi Fridays Videos

Ep. 11 - Mastering Financial Wisdom: From Penny Pinching to True Prosperity


00:00 :

Have you been so focused on saving a small amount of money only to lose a substantial amount later on without realising it? This is commonly known as being penny wise but pound foolish. How will this affect our finances in the long term? Let’s dive right into it.

00:24 :

Hi, my name is Adrian and welcome to another episode of Lim Kopi Fridays with Adrian. How many times have you been there before that we thought that we are saving money by spending lesser on an item and it turns out that we are actually spending more over the long run because things break down too often? It’s an easy trap to fall into. After all, who doesn’t love to spend lesser money? These short sightedness approach sometimes disregards long term impact on our finances and from opting for cheaper lower quality goods that require more maintenance, more servicing and more parts replacement to skimping on essential services, this could only come back to bite us where we have to pay a higher cost later on.

01:13 :

Consider the scenario of buying a $1,000 dollars coffee machine as compared to going to Starbucks every day to buy the $5 coffee. It may seem that buying the $1,000 coffee is a little bit on the luxurious side. However, if you were to do the figures, you’ll realise that buying the coffee machine can help to save you costs over the long run as compared to you buying that coffee every day for the $5. The same can be said for buying shoes as well. Buying shoes that cost you not much but of a lower quality, lower grade and you may have to probably replace it after a few months as compared to buying a higher quality shoes where you have to pay a higher premium but it allows you to wear the shoe for a few years.

02:04 :

We’ve all done this before. Personally I have and I think over time I have learned my lesson and normally I would go for higher quality shoes instead of the cheaper ones that breaks down after a few months. The same for insurance as well, say for example health insurance or medical insurance. If you are someone that expects a basic healthcare and you go for the basic plan, I think that’s perfectly fine. However, if you’re someone that expects a premium healthcare, but you go for a basic plan, there may be a mismatch when the actual scenario happens. When it happens and you have a mismatch there, that means you may have to pay so much more for the additional that is not covered by your health insurance.

02:53 :

The same goes for income replacement insurance and because of the fact that for every one of us, our most important asset would be our ability to work. Because if we lose the ability to work, we are not able to earn an income for ourselves and for our family. And if that happens, we may have to depend on our family members or other people to support us in our livelihood. If we do not get a proper insurance coverage that covers for our income, then again, if it happens, then there is a mismatch. And when there’s a mismatch, the cost of this may be irreversible.

03:35 :

Which is why sometimes it might be good to review your coverage just to ensure that you are on the right track. Having known all this, what are some of the ways that we can do to really improve this situation or to really tweak our mindset a little bit? And I will say that the key to this would be to stretch our dollar further and make it work harder for us. What do I mean by this? Back to the coffee machine example. Instead of coming up with $1,000 for their coffee machine, we can buy probably a $700 or $600 coffee machine and that will serve as our daily coffee source.

04:20 :

The time that we’re outside, we are meeting friends, we are just chilling around, we can just go to Starbucks to enjoy their coffee, to enjoy the atmosphere, their space. In this way we are saving money every day from doing our own coffee with their coffee machine and on other occasions where we have to be outside and meeting friends, we can utilise Starbucks. It is about balancing both sides of the coin to ensure that we are not sacrificing too much for too little. The same for insurance as well. Optimising your insurance portfolio to ensure that there is minimal gap in your expectations versus what it is being covered, that’s very important because when your expectations and the coverage is aligned, most of the time you will not have any issues with forking out the additional cash because you know what you’re going into, you know what’s coming.

05:18 :

So this shift from being penny pinching to truly prosperity focus kind of money management can help to change your money habits and improve it to ensure that you do not get into unnecessary debts or you do not get into situations where you have no control over how you want it to be. At the end of the day, while it’s important to be mindful of small expenses, it’s equally crucial not to overlook the bigger picture of financial decision making.

05:53 :

I hope this helps and I’ll see you in the next episode.