Rule 1: Do not use credit cards for shopping.

Absolutely not! Financial schoolmates will probably agree with me about the asymmetry effect. The effect is that the market will tend to react more negatively to worse information than the magnitude of the market reaction for positive information. In terms of absolute value, the market change for what is negative is greater than the change in the market for what is positive.

And with personal finance, using a credit card is a way to bring negative information to yourself at the time you need to pay this consumer loan. It will make individual psychology focus on the cost of borrowing and all things that the individual has to do is pay the debt. In other words, the only motivation for an individual to make money is to pay the debt he or she has borrowed and spent. Moreover, the power of reward/discipline is extremely terrifying. If you pay the loan on time, no matter what happens, the bank will reward you by expanding your loan limit. But actually it’s much heavier than the previous because there will be times when you will not be able to repay the loan on time, the compounding interest and the penalty for late repayment will kill you. That is a nightmare.

So the safest way is to not use a credit card. Or if it is used, do not spend on anything beyond your ability to make money, and keep away items that lose value over time. As an example, you borrow money to buy phones. The payment period is usually ranged from 6 months to 1 year but I noticed that many phone firms within just 3 months have launched the new product, making the price of your just-bought phone has dropped more than 20%. So before we pay off the loan, the amount of money that can be repaid by selling the phone to a third party in the event of a loan default is reduced by 20% or more.

And if you miss a credit card, be sure to restore your credit balance to its original limit. At the very least you will not be under pressure to repay when your interest is paid and over your life.

Rule 2: The same product, but in other market will offer a lower price with the same quality.

Try to find the best supplier. A dumbbell would be a typical example. I have searched prices in the market, and the basic price of many suppliers to the unit price is VND 10,000/kg. So to buy a pair of 10-kg weight dumbbells you need to spend VND 200,000 in total. However, I found out a supplier in Lotte mart sold a pair of the-same-quality dumbbells is 150,000 VND, and another supplier in the suburbs sold on Lazada for the price of VND 129,000. Take a moment to look for a good supplier and you will be surprised when you will have a pretty large sum of money from the expenditure at the end of the month.

Rule 3: Never focus too much on the details without regard for the whole.

For example, you are looking for the cheapest on the market as a rule of 2 but forget that maybe among the tools you have bought there is one that helps you do the same function on your item you want to buy.

Today, the trend towards the production of versatile products is not uncommon and with relatively comparable quality. Some argue that many of these functions will soon break down. This is true under the condition that you use it very often. If the frequency of the use is not very high then you should consider the versatile gadgets instead of looking for specialized tools that are certainly more expensive. On the other hand, if it is a regular tool you use, try to invest in good-quality one because you should consider the time you use that tool instead of just considering the price. In the past, there was an advertisement on the multi-function blender, sponsored by Best Buy Group of America. Until the time frame for movie at 12 p.m on HTV7, it lasted for 10 minutes. The strength of the advertisement is very “creepy”. They make you believe what they say, like missionaries. After the time of self-reliance, I used that multi-function blender for about 6, 7 months and it was being go to sell the scraps because the plugged machine was fumigated. I was so panic because of fear of fire apartment :D And so, instead of buying fruit for self-preparation, I decided to spend more money to buy smoothies outside. Until then, a friend gave me the Phillips machine dedicated to grinding fruit, everything was different. I have used it for nearly 2 years without any failure.

Rule 4: As Ramit Sethi writes in his book, “I will teach you to be rich”: “live a rich life by spending extravagantly on the things you love, and cut costs mercilessly on the things you do not.”

Think about the item you want to buy before you actually pay for it. Think for at least 60 seconds for small items, and think for 1 day for larger items. Think about your feelings after 6 months and ask yourself: are you happy anymore? If not, do not buy this item, it does not make our life better.

##Savings

Similar to spending, to save more efficiently we should still follow some rules.

Rule 1: Savings only when the debt is paid off.

Loan interest will kill you gradually and you will never save on success. But if you save money after paying interest, you will benefit from compounding interest because saving is a simple way for you to lend to the bank. Of course I do not advise you to use piggy bank on the saving purpose, for at least two reasons. One is that money is a financial asset, which itself produces more value over time and if it is buried in a piggy bank, over the years, VND 1,000 is still VND 1,000, the value of time stored in that VND 1,000 will not be realized. Second, getting close to a large amount of unused money is like living near a time bomb. No matter when the devil inside you wakes up and our best solution is to stay away from the negative source of your desires. Like the way you want to go into monastery, go to the temple. If you do not want to go to the temple, make sure your mind is extremely stable and persistent.

Rule 2: Save as soon as possible.

If you start saving VND 100,000 per month when you are 18 years old and continue for next 10 years, then stop saving and let that money grow until you are 60 years old. The money amount will become VND 234,654,000. However, if you wait until you are 28 and start saving VND 132,000 per month, then you need to save for 32 years and achieve the amount of VND 234,654,000 when you are 60 years old.

Rule 3: Save up to 6-month living expenses.

That is, if you lose VND 96 million for living in one year, you must save at least VND 48 million a year. This will be the amount of money used in the unanticipated (unexpected) situations. Once you reach this level of savings, you may want to think about saving more or investing somewhere. A colleague told me that if I save at least 20% of my income every month, I would easily achieve that goal.

Rule 4: Always have a savings map by setting the budget.

Budgets are the expected savings in your annual or five-year plan and you will know where you are in the map to achieve your savings goals. You can apply the Jars method to set your budget. Although this is a recommended model for spending, you can still apply it for savings. According to this, long-term savings account for 10% of income, for your long-term goals, and saving 10% of income for travelling, take care of yourself, and so on.

Another method is simpler than the Jars model is:

\[\text{Monthly Savings} = \text{Monthly Income} - \text{Fixed Expenditure} - \text{Variable Expenditure}\]

Moreover, creating such a budget also tells you how much you need to save to meet your personal demands, even if you can use it to adjust your savings habits accordingly. For example, the savings target at the age of 25 for career would be preferred to the 45-year saving goal for enjoyment. It then creates the habit of saving during each stage of life in a more active way.