PRUDENCE

 

Prudence comes from the Latin "prudentia," meaning foresight and sagacity; in Old French, "prudence" means wisdom to see what is virtuous, suitable, and profitable. Prudence is knowing when to hold them and when to fold them. In working with leaders, prudence applies in at least three areas: wisdom, insight/foresight and knowledge.

·         Wisdom clearly affects decision-making. Do we look at what is working (bright spots) or only at what is not working? What do we focus on first - strengths and passions or weaknesses? Do we truly care and manage our people like we do our other “resources”? Do we have a shared and aligned sense of purpose and goals? Is our decision-making process understandable and grounded?

·         Insight/foresight requires balancing competing interests, like the short and long term. Are we willing to make some sacrifices today for a better, even great, tomorrow? Can we quickly assess the situation and understand potential outcomes, not just outputs? Are we able to mitigate risk as well as plan for rescue? Do we apply our lessons from the past without imposing them on the future?

·         Knowledge ties to how we learn and apply. Do we test our hypotheses (assumptions), learn, apply and iterate? Can we unlearn? Do we give our people the education and experiences they need? Can we shift our lens, look at things differently and reframe opportunities and challenges? Are we capable of paradoxical thinking?

 

Below is a list of financially prudent habits that should be adopted to ensure financial stability:-

Create a monthly budget: Live within your means by creating a budget at the beginning of every month. Stick to this budget and avoid overspending on unnecessary items. From whatever amount you take home each month, save at least one-third of your monthly take-home salary. To ensure that you do not overspend, practice self-control and ponder if you really need to buy that expensive phone or the latest party dresses. 

Make buying decisions on the VALUE you get: If you are planning to buy a house or a car or a motorcycle, your decision should be based on the value you get for the same over its entire lifecycle. It is ideal to plan the amount you are comfortable spending on the purchase and then look for options that fit into your budget. When making a buying decision, do take into account the residual value that you will get when you sell the house or vehicle. Opt for an asset that gives a higher residual value. This allows you to enjoy the asset and get a healthy return when you decide to dispose of it.

Automated monthly transfer to a dedicated savings/ contingency account: This is the real trick behind saving. Set a particular amount aside and opt for automated transfer that will help you save for your big buy or for your next holiday or simply for retirement. Whenever you begin to earn, this is the first step towards forced saving. A contingency account helps you when there is an emergency or a sudden need for money. This way, you will not have to ask your family or friends for help. 

Avoiding impulse purchases: Do not indulge in an impulsive buy or try to curb extravagant habits as much as possible. Compare products from different shops and see what they have to offer. Also, do not think that buying in bulk is buying cheaper. You might be lured by the various offers by different supermarkets that tend to motivate you towards bulk buying. Impulse purchases will leave you regretting it in a couple of days when you see better offers and the same product available at a cheaper rate. 

Not missing monthly credit card payments: If you are using a credit card for your purchases, one of the most important tasks is to not miss out on the monthly credit card payments. In the case of credit cards, it is important to remain punctual and maintain a positive credit score. To be financially prudent is to be aware of the payments you are expected to make during the coming month and to do it on time.

Planning for the long term: Financial planning means planning for the long term. Be it for a month, year or for your long-term goals. Set aside certain financial goals for the long term and plan for the same. Maintain a budget and set aside a particular amount to achieve the financial goal. Planning for the long term should begin now. You will have to work towards your goals and save and spend accordingly. 

Take advantage of festive offers/ seasonal discounts: When purchasing daily necessities or for big buys, the ideal thing is to wait for festive offers and make the most of them. Festival offers usually help you purchase at a cheaper rate. For instance, the Hari Raya festivity offers huge discounts on every product. You can make the most of your purchase and save from the budgeted amount as well. Scout through different shops or online shopping websites to find the best deals and offers available for your purchase. It is ideal to wait for an offer than to make an impulsive purchase.

Undertake periodic maintenance to avoid higher bills at a later stage: What you neglect now, will ask for your attention at a later stage. Financially prudent individuals never neglect periodic maintenance requirements as and when they arise. If you neglect it now, it will pile up and hit you harder at a later stage. Periodic maintenance should be taken care of on time. This will save you from a large amount of spending in a couple of years. 

As usual, we remind you to take your Memo Plus Gold daily. It will help to keep you alert and mentally sharp. For more information or to order for Memo Plus Gold, please visit : https://oze.my.