money management Archives | Page 7 of 17

Four Financial Mistakes And How To Beat Them

Recognizing these wrongful money decisions is a vital step to improving your financial health:

#1: NOT SAVING FOR EMERGENCIES

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Skipping an emergency fund can be one of your deadliest money moves. You see, our lives are full of pleasant and unpleasant surprises. Can you fork out a sufficient amount of money to cushion the urgent costs due to unemployment or loss?

Building a fund for these types of events shall be one of your financial priorities to avoid getting into debt or even into bankruptcy.

Solution: Having an emergency fund allows you to build a breathing space to deal with life’s highs and lows. It is recommended to keep about 6 months’ worth of salary inside your emergency fund. Start gradually by aiming for S$400 in the first month. Increase this amount as months pass by.

#2: EATING OUT CONSTANTLY

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It is no secret that Singaporeans love to munch! We are blessed with a myriad of cuisines that one cannot resist the temptation of eating out. As with everything that is good, too much can be a sin too. You may feel that eating out during lunch or dinner daily does not make a difference. But, all your costs add up.

Solution: The cost of one restaurant meal may be equivalent to three home-cooked meals. Consider packing lunch from home as it is almost always cheaper.

#3: PURCHASING UNNECESSARY THINGS

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Many shoppers in Singapore experience mindless sprees when the Great Singapore Sale is on. People purchase unnecessary items just because they are on sale! However, you must not bury yourself in a pile of debt due to the irrational thought that you cannot live without a discounted Prada bag.

Solution: Examine if you are willing to purchase the item in its full price. If not, you probably do not need it after all. Saving up for a new designer bag is better than having to loan money for it. Seek a balance between your debts and your savings.

#4: NOT SAVING FOR RETIREMENT

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The “HSBC’s Future Of Retirement: Generations And Journeys” report found that the average Singaporean begins saving for retirement at age 32 and continues it for another 29 years. Despite having the advantage of saving for a longer period of time than their ancestors, 41% of the participants wished that they had started to save earlier. The perceived insufficient fund may be influenced by the higher cost of living in the recent years.

Solution: You must save a fraction of your salary for retirement while you are employed. There will come a time when you will not be earning money, but you still need to support yourself. Read about building an efficient retirement plan. Seek the help of a financial adviser if necessary.

When Shall You Ask Your Parents For Financial Help?

I cannot deny the fact that there is a wealth of financial information available in the Internet. However, the most underused financial support may be located at the comfort of your own home. Admitting you need the financial help of your beloved parents is not a simple task, but it is crucial in specific cases.

Know when to ask your parents for financial help and when not to.

DO’S: DO ASK FOR MONEY WHEN YOU ONLY NEED A RELATIVELY SMALL AMOUNT.

You are days away from receiving your coveted paycheck. The only problem is, you end up spending more than you meant. It happens! If you are lacking a few bucks to get through the days, you can call your parents to ask for a small loan. An extra S$50-S$100 can make all the difference at the end of the pay period.

This relatively small amount will be easy to return. Furthermore, it will not pose too much strain to the finances of your parents.

DON’TS: DO NOT ASK MONEY FOR A VACATION.

It is totally acceptable to ask your parents for pocket-money in order to fund your school excursions. However, it is not appropriate to ask your parents for travel fund if you are employed on a full-time basis. Reaching your dream vacation comes with a bag of determination and a realistic budget. Like a mature adult, plan to save the necessary amount and earn extra money if you have to.

DO’S: DO ASK FOR MONEY WHEN YOUR EMERGENCY FUND ISN’T ENOUGH.

Unforeseen events can spiral at any moment and you will not be able to handle every situation on your own. No one can predict that a vehicular accident may strike even if an individual safely cruises his or her car everyday. This may entail a significant medical procedure that the insurance company cannot cover. When your emergency fund and your back-up financial plan cannot cover all your expenses, it is acceptable to ask your parents for support.

DON’TS: DO NOT ASK THE IGNORANT FOR ADVICE.

My friend grew up with a silver spoon. His family had multiple properties and threw multiple parties. Basically, they purchased whatever they wanted. His parents’ mindset was that their money will last forever. Since his parents highlighted on the short-term wants rather than the importance of the long-term financial goals, my friend copied their spending patterns.

No money management skills were shaped during his younger years. He carried this out as a young adult. His parents appeared to have everything in order. But if you look closely, you will realize that his parents did not handle their financial responsibilities well. Decades went by and my friend’s family lost everything they once owned.

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If your parents are clearly not displaying financial discipline, do not mimic them. Educate yourself about the importance of savings, investments, and retirements plans. Sometimes, it is better to do things on your own.

Sources: 1 & 2

How To Get Your Finances In Order After Bankruptcy

While experiencing bankruptcy is tragic and bouncing back is challenging, there are some strategies to get your monetary train on track.

1. COMMIT TO CHANGE

You are feeling isolated and helpless due to the recent loss of your assets, bank accounts, and primary source of income. Declaring bankruptcy can shake one’s confidence in many ways. However, you need to be reminded about the brighter things ahead. Is there any place to go to than up? The best thing that you can do now is to pick up the pieces and put them back together.

The first step is to make a strong commitment. Change your financial habits and be ready to perpetually follow through a plan.

2. ANALYZE THE CIRCUMSTANCE

You must analyze the overall financial circumstance that you are in, especially the events that led up to your downfall. Figure out the financial mistakes you made in the past and avoid repeating it in the future.

I have to admit that some setbacks are due to factors that are beyond your control (e.g., layoffs due to recession). While others are due to poor financial decisions. For instance, you became addicted to retail therapy and exhausted all your income on designer goods. You skipped out on emergency fund in favor of your fashion sprees. This is why you must come up with a plan to dig yourself out of the financial trap.

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3. FIX YOUR BUDGET

A new budget will help you rebuild your wealth by placing some constraints on your spending. Treat this as a map that will guide you to your financial goals. Now, let us start with the income. It is most likely that you are left with a single source of income that pays a minimum amount. Search for other part-time jobs or additional streams of income that can aid your journey. Face the uphill battle with a realistic budget.

Find ways to ensure that you are spending less than you are earning. I know it is not easy at first but, you have to endure the tides. Cut the unnecessary spending that you can spot in your previous budget. Rather than purchasing a smaller flat, ask your friends or family if you can crash their homes and pay a “rent” for the meantime. Lastly, sell your mint condition items to earn more money on the side.

4. PAY OUTSTANDING DEBTS

Contrary to popular belief, bankruptcy will not dissolve all your debts. You are not entirely safe yet! Although many of your unsecured debts were discharged, other forms of debts may still be on hold. This includes child support and student debt.

This is why you must gather and organize your financial documents. Determine all your obligations and list them down. Then, figure out various arrangements to pay off each one.

5. KEEP THE FAITH

The graceful bamboo stands firm in a beautiful sunny day. But, it is not always sunshine and rainbows. As strong winds gush through the forest, the graceful bamboo sways with the breeze. Be pliant like a bamboo. Embrace the strong winds of life much like this graceful creature does!

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No plan is entirely perfect and roadblocks are inevitable. Do your hardest to rebound from every setback and reverse the financial situation. The worst thing that you can do right now is to give up!

Sources: 1 & 2

Do Not Let Your Financial Problems Keep You Up At Night!

Is there anything worse than reaching home after a stressful day only to be kept up late because your brain keeps ruminating over your financial burdens?

If this happens to you constantly, it is a sign that you are either feeling helpless about your current situation or trying to exert too much control over your future. Stop right there! Thinking about all your financial problems before you fall asleep will not solve anything. It may even cause health issues such as headache, chest pain, and muscle tension on the next day.

The obvious move that you must take first is to solve the underlying problem. Set aside a portion of your day to contemplate about the solutions to your situation. Afterwards, work on your sleep hygiene. It involves healthy sleeping habits and maintaining a conducive sleeping environment.

If these two strategies are not enough, try my other suggestions:

a. ACCEPT EVERY CHALLENGE

You must accept the fact that you cannot accurately predict the future. No one can! Hence, it is always a good idea to be prepared for any money woes that life will throw at you. Make calculated strategies to shield yourself against unforeseen events such as unemployment and critical illness. For instance, you may save at least six months’ worth of your salary to cushion unemployment or apply for health insurance to fund your critical illness.

Let go of all the worries once you have planned for the situation. Unfortunate events may test you but, you will be alright.

b. BE ASSERTIVE

If you keep on lending your hard-earned cash to friends and family, financial issues can rise. Your money belongs to you and you are accountable for it. If you do not feel comfortable in lending money to a friend or a family member then, be assertive. Genuinely say that you cannot loan the money at the moment due to your financial responsibilities. Discuss the matter in a mature manner. People who care about you will understand.

c. CREATE A RELATIONSHIP

For your relationship with money to flourish, you must understand that it involves the two of you. Do not let the power of spending govern you! When things go badly, it is partly because of what you brought to the situation and partly because of what the money brought.

d. BE ACTIVE

Redirect your cognitive energy to productive matters such as catching up with your friends or updating your C.V. or resume. If you have more time in your hands because you were recently unemployed, improve your relatively low mood by exercising. You do not have to exhaust your savings to stay health. Be active by following the free online tutorials or by registering at the “Places To Find The Cheapest Gym Memberships In Singapore“.

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No matter how much you dream about achieving an indestructible body like Incredible Hulk’s, it is still impossible. This is why you need quality sleep to combat the daily challenges. Constantly worrying about your finances is not only draining your body but also straining your relationships. Remember to value your well-being as much as you value your bank account.

Sources: 1 & 2

6 Strategies To Control Your Urges To Spend

Self-control is one of the virtues that a savvy Singaporean can cultivate. Having a sense of self-control helps you to manage the seemingly irresistible urge to spend money. While, people who lack it have a tendency to instantly gratify their “itch” to splurge.

Combat this dilemma against your willpower by employing these strategies:

TRACK YOUR SPENDING

I know how cliché this sounds but, awareness is the key. You must note down how much money comes in and goes out. Previous literature displayed that this act of tracking your spending is an efficient tool to control one’s urges to spend. Start by keeping a daily list of your expenses.

IMPOSE LIMITS

To prevent accidents and to maintain order in the streets, authorities impose speed limits. Apply the same idea to your finances by imposing monetary limits.

It easy to create tangible boundaries to some services such as postpaid and bundle plans. However, this is not always the case. This is why Professor and TED Speaker Dan Ariely highlighted that it is important to dictate your own boundaries. Doing so was proven to help increase self-control. Furthermore, sharing your self-determined limitations to other people urges you to stick to it more.

MAKE ONE DECISION AT A TIME

The shiny distractions all over the shopping mall are designed to confuse your mind and to open your wallets. You see, findings showed that strain in cognition (thinking) depletes self-control. This is why shops are graced with flashy signs, vibrant colors, loud songs, and bright wall decor.

Conquer the distractions by making one financial decision at a time. This strategy is not only limited to shopping. Divide your financial decisions instead of overwhelming your mind.

SAVE AUTOMATICALLY

Avoid committing much of your willpower toward deciding whether to save or to spend by automatic your finances. Some institutions allow the employer to automate your salary in a bank account that is solely for your savings. Patronizing this method will lessen the temptation of immediate spending.

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TAKE TIME TO DECIDE

With my background in Psychology, I can attest to the idea that the emotional states affect the way you spend. Anxiety was shown to decrease the likelihood of taking risks and sadness was shown to increase spending. Emotions influence your self-control in complex ways.

This is why I encourage you to take sufficient time for contemplation before buying something. Wait for a few hours or a few days, especially for huge and expensive purchases. Many people have submitted to this efficient strategy. Be one of them!

PREVENT TEMPTATION

A surefire way to stay on top of finances is to avoid temptation at all costs. Reduce your time spent on shopping malls and invest it in more productive matters. Alternatively, you may leave your plastic cards (i.e., credit and debit) at home. Simply carry the amount of cash that you can confidently afford.

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These six strategies share one goal and that is to take control of your finances again. May these aforementioned help you to reclaim what was rightfully yours.

Sources: 1 & 2

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