Why Personal Financial Management in Hong Kong Sucks!

Over the years I've read a lot about personal finance and have, with varying degrees of success, made inroads into looking after our money, saving diligently to grow our retirement savings and living a debt-free life (consumer debt anyway).

But I'm still annoyed at the lack of decent tools to help manage the weekly and monthly tracking of my spending; with a lack of online banking features that help automate the allocation of money through various accounts; and most importantly access to a good range of low-fee index funds for a long-term passive investment approach.

Set Our Data Free

As a tech-savvy thirty-something who spends a lot of time online (it is my job...ok, I also love it!) I often read about great tools like Wesabe or Mint.com and lament the fact that we can't use them and don't have decent alternatives.

If you don't know what these tools do, they basically hook into your bank account (securely of course), suck all the transaction data from it and then allow you to categorise and track your spending so that you can see exactly where your money goes. Once you've tagged a transaction once, their systems remember this and will automatically categorise it correctly the next time, meaning the longer you use it,  the less work you have to do and you'll have a clear picture that 50% of your paycheck is being donated to the nice folks at Carlsberg and you're not putting away enough to pay your tax bill.

This is an important first step in any personal financial plan - knowing how and where you're spending your money - but these options are generally closed to us here, making that initial leap into personal money management a mess of excel spreadsheets, data entry and an iron will to get through it all. Let's face it - who wants to spend a lot of their precious free time categorizing their spending?

The alternative is to use desktop software - which I currently do (Quicken 2006:Mac) - but even this is tedious as it still requires entering all your transactions in order to build up a picture of your expenses.  At the very least the banks should be offering the ability to download monthly statements in a format that is easily importable into any one of these softwares. BANKS: ARE YOU LISTENING?

They hold so much data about us that could be useful if it were given back, but as far as I can tell is used to, inexplicably, send me free Hello Kitty tissue box covers if I would only be so kind as to lend them HK$1,000,000 which could sit in a bank account earning 0% interest. Thanks for the help!

You Want To Do What?

What brought all this on was my attempt to start to automate more of my cash flow so that money ends up in the right place at the right time without me having to login and manually move the money. Some things are already doable: automatic withdrawls into investment accounts; 100% of credit card bill paid off every month from the right account and various text/email alerts to keep an eye on certain things. But...

Say, I want to set up an automatic transfer from my current account to my savings account each month? Cannot (this is with HSBC). Seems I would have to go into a branch, fill out some form and then wait as they send it on some round trip to be processed by some operations centre in India six weeks later. FAIL! And that's just the simple stuff that they haven't done.

Streamlining Your Personal Finances

I've now managed to get the weekly time spent tracking this stuff down to about 30 minutes - which is about 25 minutes longer than I'd like but in the grand scheme of things is not unmanageable nor a huge burden for me. However, it's taken quite some time to get this discipline in place and the initial set up was also tedious.

What I'd like to see are better tools to help more people take control over their personal finances if and when they decide to do that. Over the next few weeks I'll be writing a series of posts covering how to automate as much of your finances as is possible in Hong Kong and with an HSBC account, as well as provide some reviews on various online tools that are available to us here, but may not be widely known.

In the meantime, if you've got any tips on how you track your expenses or look after your money, drop a note in the comments.

Warren Buffet Says 99% Of People Should Invest In Index Funds

(Talks about index funds around the 1:20 mark)

This is good advice. Pick up any personal finance book and they'll all tell you the same thing and quote any number of studies that basically say: 75-80% of actively managed funds will underperform the market over a longer period of time - in large part due to their fees. With a 30+ year investing horizon, even a 1% difference in performance can translate into huge differences in the final value of your savings.

So if you're just getting started in thinking about your long term savings - you should consider low-fee index funds as part of your strategy or if you're currently ploughing money into high-fee mutual funds, you might consider redirecting it and lowering your long term expenses.

I'll write a longer post about this in the future.

Disclaimer: I'm not qualified to give anyone investment advice. This is just my personal opinion and outlook. You should always do your own research.

Obssesive: Soda Pop

Food website chow.com have a wonderful series of videos about people who are masters of their trades. Niche players who focus on quality and customer service and are passionate about their chosen fields.

Their latest video is about a store in LA which focuses on sodas and...well, you just have to watch it - it's brilliant and for so many reasons. It's great to hear plain old common sense in business and I dare say much of what the guy in the video has to say can be applied to life too.

Check it out - and if you like this video, then let me know in the comments.

If you want to see more - you can check out all their videos here.

Average is Not Normal

Most personal finance literature will tell you that the average lifetime returns of the stock market (like the S&P 500) are somewhere between 8-11% (depending if it's calculated with or without inflation).

This slideshow from behaviorgap.com challenges that view with the idea that average is not normal and that yes, it does matter when you start investing.

Average Is Not Normal

View more documents from Carl Richards.

While this may help to set expectations - the presentation, taken on its own, suggests that your timing on entering the market is important. My personal take - you should be investing, steadily and regularly for the long term as early as possible. Trying to time the market is a fool's game.

To be fair - if you visit the site and download their white paper called "Behaviour Gap: A Snapshot View", it does a better job of explaining what they really mean (buy AND hold) and is worth a read.

A Private Portfolio (blog review)

Earlier this week, while researching MPF Schemes  I found a Hong Kong blog called A Private Portfolio which, as far as I can tell, must be one of the few, if not only, blogs in Hong Kong on personal finance (aside, of course, from my humble start).

Written by the mysterious "traineeinvestor", the blog covers retirement, investing, real estate, asset allocation and more, from a uniquely Hong Kong perspective and from someone who's open about what they're doing and why.

It's well written and despite the "traineeinvestor" moniker, covers slightly more advanced topics (equity put options anyone?) but from what appears to be a balanced, long-term approach to building savings rather than the latest hot stock tips that you just gotta buy!

The blog also dates back to April 2006 - so there's a wealth of information to be found and it's regularly updated.

Got any other personal finance blogs to recommend?