A small economic story of a salaryman writer who has been writing a house account book for 8 years. I would like to share my money management concerns and opinions with many readers, especially those in their 40s who read my articles the most, especially those like me who live on an average salary. We welcome communications via comments, emails, etc.
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[이데일리 김형욱 기자] Have you set an income-expenditure goal for this year? I’ve been writing an 8-year family account book since 2015 and setting rough goals for monthly and yearly income-expenses, but I don’t think I’ve ever felt so uncertain as I did earlier this year. The increase in money for children who will soon turn 3 is great, but I feel the shadow of the recession as I watch the economic performance every day. The phenomenon of “three peaks” of prices, exchange rates and interest rates has already become a reality for individuals, not for articles. As everyone thinks, 100,000 to 200,000 won is an instant when looking at a week’s worth of goods. The rise in heating costs this winter is also particularly noticeable.
This year’s goal is “as much as last year”
This year’s revenue-expenditure target was set to remain “as much as last year” or “a little more than last year.” In fact, it hasn’t been good since last year. The profit rate (income-expenditure) fell to its lowest level excluding the holiday period. I was only able to save and invest about a fifth (20%) of the money I made. This year, the goal is to save a quarter more (25%). Realistically, I don’t think it’s as bad as last year.
Personal matters aside, prices that have already started to rise since last year look set to rise further this year. The consumer price index rose by 5.1% last year, but this year it is expected to increase further by 3.5%. Considering it was around 1% up until the previous year, the feeling is pretty broad. The rate of increase is said to decrease this year, but from an individual point of view it is 8-9% cumulatively for 2 years.
There is no guarantee that inflation this year will stay within the government’s 3.5% target. The Russo-Ukrainian war, which raised world prices, has entered a long-term unorganized battle. There is also a limit to savings. At home, a 2-year-old is growing up and the interest and principal are clearly going into debt to buy a house. You too will have a thing or two that will increase your expenses.
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Personally, I am lucky that the fixed interest rate period is still maintained. It would have been better if there were no debts. The problem is, I don’t think interest rates will go down easily until my fixed rate period ends and the floating rate period begins. The Federal Reserve System (Fed), the central bank of the United States, is said to be raising its key interest rate again this year. It is also said that it will not come down for a while. When the Fed raises interest rates, the Bank of Korea and commercial banks have no choice but to raise interest rates. If a recession comes, we will cut interest rates, but neither side is welcome. If the economic downturn deepens, the foundations of my own economic life, paid for in writing, will be shaken. At that point, even if interest rates go down, you won’t have the money to pay. I’m also concerned about the “youngsters” who have been buying houses, stocks and coins with debt over the past 1-2 years.
Do I use the family account book?
To achieve the goal of “as much as last year” between the social burden of high prices and the personal burden of raising children, we need to save more. If you are a business, you can earn more and leave more. If you’re an employee of a successful IT conglomerate, you can increase your annual salary by hundreds or thousands by focusing on performance. However, it is not easy for an ordinary employee like me to significantly increase his income. Aggressive investing also carries risks.
At this point, saving is the safest investment. First, I need to figure out where I’m spending my money and what I can save the most. Only in this way will we be able to understand what can and cannot be further reduced and rationally change the structure of consumption.
In my experience, making a house account book isn’t bad either. I can see the flow of money at a glance after organizing my expenses for a long time and counting them by item. A certain degree of prediction is possible. In my case, child and household expenses, which have grown to half of total expenses, would have increased if they had increased, but not decreased. Taxes, communication expenses and small donations are practically fixed. Within the other half, you have to save, especially in some items.
I decided to cut back on the food delivery I used to order 1-2 times a week. It’s not easy as a person with two incomes. However, cooking and eating at home saves more money than expected. These days, convenience food is also good, so I use it when I’m in a hurry. I rarely eat out, except for special or work-related occasions. Favorite food and hobby/leisure expenses should also be managed within a certain percentage. We know that individual consumption must be stimulated to stimulate the economy as a whole. However, in an uncertain environment, people have no choice but to cut costs that seem unnecessary.
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Everyone needs an understanding of reality
Each person’s situation is different. For low-income small businesses or the unemployed with no income, making an income is the priority. Spend management is also important, but there’s no answer without revenue. In other words, it may be better for a high income with excellent skills or a wealthy person with a large amount of money to increase their income or use their money well by managing their expenses.
However, understanding an individual’s income and expense history is meaningful to most people. You can tell if you are financially viable if you know how much you earned and how much you spent this month or this year. It’s not that you have to save money, it’s that you understand whether you have to save money or not. People with lots of money seem to work harder at this type of work. Most governments, companies and institutions do this too. Listed companies and public institutions are audited and evaluated.
Individuals can do this easier than you think. There are many apps out there that take care of that for you. Related vlogs like ‘no spending challenge’ are also popular among YouTubers. Once you think about it, it’s easy to find the way that works for you. For your reference, the entire household account book is organized in Excel 1-3 times a month by referencing the check card expense details. Also, make plans by reading business newsletters like Business News and Afiti. The goal is to frequently understand what the rate of profit is after subtracting expenses from my income and verify the sustainability of my economic activities. Since it’s the beginning of the year, I would suggest you start too.
If you know your situation, you can make an objective comparison with others. The National Statistical Office publishes the national average on a quarterly basis through household trend surveys. As of the third quarter of last year, each household was earning 4.87 million won a month and spending 3.72 million won. Since this is an average that covers both low and high income groups, it is difficult to attach much importance to numbers above or below this. But if you look at the details, it’s a detailed enough comparison for my level and needs. Rather than bragging about money around me, celebrities or Instagram, meaningful analysis is possible.
