In this post, I’ll share how my perspective on money and wealth has evolved. I grew up in a small village in the heart of Kalimantan, where I noticed that many people around me wanted to appear rich and prove they were better than others—a mindset we call gengsi. Looking back, I realize that this behavior often did more harm than good, especially to those trying to maintain the illusion of wealth. After moving to another city (a story I might share in a future post), I began to see money differently. I learned that most people who truly have wealth tend to be more humble, they don’t need to prove anything to others.
One of the worst effects of this mindset is that we end up wasting our energy on things that don’t truly matter. This quote (I can’t find the origin) perfectly describes what I experienced during those days:
“We buy things we don’t need with money we don’t have to impress people we don’t like.”
Five years ago, The Psychology of Money was released and became a hit in the market. It’s an excellent book that is accessible to anyone, even those just beginning to understand personal finance. One of its key insights deeply resonated with my past experiences and also serves as valuable advice for my future self.
Less ego, more wealth. Saving money is the gap between your ego and your income, and wealth is what you don’t see. So wealth is created by suppressing what you could buy today in order to have more stuff or more options in the future. No matter how much you earn, you will never build wealth unless you can put a lid on how much fun you can have with your money right now, today.
If I had stayed in my hometown, I probably wouldn’t have developed a different perspective on money. I truly believe that our environment plays a significant role in shaping how we think about wealth, and, more broadly, how we see the world.
In the next section, I’ll share some basic tips to help you start understanding and improving your financial situation. These tips are based on my own experiences, so feel free to adapt them to your own circumstances.
Tracking Income and Expenses
More often than not, we underestimate our expenses, which leaves us unprepared for life’s unexpected events. The first step to solving this issue, one that is completely within our control, is understanding our cash flow by tracking our income and expenses.
As I mentioned in a previous post Building Habits, we can use an app like Money Manager to get started. Begin by listing all our wallets or accounts and calculating the current balance in each. Once we have a clear picture of our starting point, start tracking our expenses. Don’t just record the big purchases, every small expense counts, even the tiniest ones.
By developing this habit, we will gain better control over our finances and make more informed financial decisions.
Budgeting
Once we have tracked our expenses (in my experience, one month of tracking is enough to give us valuable budgeting insights), the next step is to analyze and break them down. Ask ourself these key questions:
- What do I spend the most money on?
- Can I reduce these expenses or find more cost-effective alternatives?
- Are there any unnecessary expenses I can eliminate?
After answering these questions, create a budget for each spending category and commit to sticking to it.
Beyond our regular expenses, it’s also important to plan for infrequent costs, such as buying a new phone, traveling, or building an emergency fund. For example, if we know we will need a new phone in the future, set aside a small amount each month. This way, when the time comes, we will be financially prepared rather than caught off guard.
By budgeting wisely, we gain better control over our finances and reduce financial stress.
Investment
Once we’ve broken down our budget and noticed that some spending categories exceed our expectations, the next step is to focus on increasing our income. The best way to start is by investing in ourself. Improve our knowledge through online courses, many excellent free courses are available online, and prioritize our health by eating well and exercising regularly. Taking care of our health now can help prevent costly medical expenses in the future.
Back in my school days, I was always told to save money, but the only saving method I knew was putting money in a bank. However, there are other financial instruments worth exploring. If you’re new to investing, consider low-risk options like gold or government bonds. These can help grow our wealth over time while keeping our risk low.
Needs vs Wants
Creating a budget is not just about limiting spending—it’s about making intentional financial decisions based on what we truly need. Once we set our budget, create a checklist to ensure our purchases align with our needs, not just our wants.
For example, if we’ve budgeted Rp 5,000,000 for a new phone, even though we can afford Rp 10,000,000, ask ourself: Do I really need the more expensive option, or is the budgeted amount enough for what I require? Sticking to our budget helps prevent unnecessary spending and keeps our financial goals on track.
Remember, budgeting isn’t about always choosing the cheapest option, it’s about maximizing value. Focus on what we gain from a purchase rather than just its price.
Car
In my hometown, having a car is even considered a key metric of success. However, while a car might boost social status, it can also be a major wealth killer if not carefully planned.
Before purchasing a car (or any other vehicle), don’t just ask ourself “Can I buy it?”—ask “Can I sustain it?” Let’s break down the estimated monthly and yearly costs of owning one of Indonesia’s most affordable cars in 2024, the Daihatsu Sigra, priced at around Rp 180,000,000:
- Tax: Rp 2,300,000/year
- Insurance: Rp 3,000,000/year
- Fuel: Rp 500,000/month
- Maintenance: Rp 1,500,000/year
- Parking & Toll Fees: Rp 500,000/year
- Car depreciation: Rp 18,000,000/year (this is often overlooked)
When averaged out, we will need to spend over Rp 2,566,666 per month just to keep the car running. This amount can be even higher depending on our usage.
Before making a decision, we need to review our budget carefully A car is not just a one-time purchase, it’s a long-term financial commitment.
I hope this post gives you new insights about wealth and helps you make better financial decisions in the future.