“Be generous, love others, be frugal.” – Nanang (Grandma) Eugenia Soriano

Love, loyalty and lots of money. That’s what the new blockbuster romantic comedy movie “Crazy Rich Asians” is all about. But not all Asians are crazy rich, so don’t be deceived by the movie.

Jen Olson

For instance, my two younger sisters and I were raised in the Philippines by our grandparents, who were farmers. When our Papa died when I was 7 years old, our young widowed Mama went thousands of miles away to Hong Kong to work so that she can financially support us. That was the only viable option for our family and we love our Mama for her sacrifices. It wasn’t a lot of money, and it wouldn’t have been enough if our grandma hadn’t been frugal. Both of our grandparents did not finish grade school, but they were full of wisdom and are great role models.

Now, the article title is just meant to get your attention. This article is not just for Asians; it is for everyone.

“Be generous, love others, be frugal.” That was my grandma’s mantra in life, and she modeled it throughout her 96 years on Earth until she passed a year ago. In this article, I would like to focus on frugality. For my grandma, who had to manage a very tight budget, frugal meant “simple and plain and costing little,” or “economical.” For my Xennial generation, it would mean being prudent, sensible, wise-spending, and able to enjoy now but showing care and thought for the future. (Xennial is a micro generation born between the Gen-X and Millennial generations, i.e., between 1977–1983, when the original Star Wars trilogy was released. We are known for having an analog childhood and a digital adulthood.)

One can do four things with money: spend, lend, give and grow. In the I-want-it-now world, spending money is what we are good at. Often, we enjoy it so much that we even spend what we don’t have! For example, my grandma taught me to pack my lunch the night before to save money. Even now, I still pack my lunches. But for most of my Xennial and Millennial peers, it can be very easy to spend five dollars for a coffee and another eight dollars for an avocado toast and charge it on the card. In fact, according to Acorns 2017 Money Matters Report, 34 percent of the U.S. spent more on coffee than they saved/invested. On average, Americans spend about $1,100/year on coffee.

Budget Allocation

The most basic and effective tool for frugal/prudent spending is having a budget. Yet, most people don’t have one because it requires additional work.

If you’re new to budgeting, here are some simple steps you can follow:

1. Start with finding out exactly how much you are spending each month using your credit card statements, bank statements, and receipts. Equally important is finding out where you are spending your money.

There are also free financial websites and apps that you can use to track your spending. I use Intuit Mint for our household spending.

2. Create a simple budget you can consistently follow. A good example is the 50-20-30 rule: 50 percent of your income goes to living expenses and essentials; 20 percent to financial goals, meaning your savings, investments, and debt-reduction payments; and 30 percent to flexible spending (giving, travel, entertainment, etc.).

Notice in the chart that I rearranged the 50-20-30 rule to 20-50-30 (savings/financials first, then essentials, and lastly flexible spending). The key here is identifying your spending priorities. Do you want to enjoy the present and cross any prospective bridge when you come to it? Or do you want long-term gains, so you’re willing to go through short-term pains? Do you want to pay for your kid’s college? In our household, our spending priorities are in this order: giving, saving/investments, essentials, and flexible spending.

Simple Budget

3. Track your progress and be realistic. Stay on top of it! By recording your expenses, you’ll be able to think twice before splurging. By tracking your progress, you can be motivated knowing that you’re meeting your savings/investment goals. But let’s be realistic, sometimes it is hard to stick to the budget because things happen. It is okay as long as you get right back on track.

Having a budget won’t guarantee that you’ll become crazy rich, but budgets do have a lot of benefits, such as giving you control over your finances, keeping you focused on your financial goals, keeping you in check with where your money is going, helping you prepare for unforeseen events, and aiding you in decision-making. At Apriem, we have different tools and programs that can help clients and their families get a head start on their budgets.

I enjoyed the movie “Crazy Rich Asians” so much that I had to watch it twice. (Yes, it was in our flexible spending budget!). And as passed on by my grandma: Be CRAZY generous, RICH in love, and learn (ASIAN) frugality. I wish everyone happy budgeting!

By Jennifer Olson, CFA, CIPM, CFP®, Senior Financial Analyst
Apriem Advisors