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10 Steps To Reach Financial Wellness

Financial wellness refers to effectively managing your economic life. This concept surrounds many factors such as spending within one’s means, being financially prepared for emergencies, having a concrete plan, and having access to tools necessary to make good money decisions.

Financial security is the underlying concept of financial wellness. To help you reach financial wellness, you may start by following these steps.

STEP 1: COMMIT TO CHANGE

The first step in developing a financial plan is to determine your attitudes and beliefs about money. Be honest with yourself. Are you ready to accept the responsibility of improving your financial situation? Do you believe that you can change the way you behave towards money?

STEP 2: EXAMINE YOUR FINANCES

Examine your finances by looking at your previous statements and tracking your spending. This will give you an overview of how you are doing financially. Identify your strengths and weaknesses when it comes to managing your money. Write down your findings and feelings.

STEP 3: SET YOURSELF UP FOR SUCCESS

Choose a trusted person to conduct the day-to-day financial tasks to stay on top of things. The appointed person must be a good communicator and an organized individual. Give him or her uninterrupted time to do financial tasks effectively.

STEP 4: GET COPIES OF YOUR CREDIT REPORTS

A credit report is a compilation of your credit payment history collected across all your banks. It includes valuable information such as basic personal profile, closed credit accounts, aggregated credit limits, and aggregated outstanding balances. Credit reports provide a snapshot of your overall situation.

For licensed moneylenders, the Moneylenders Credit Bureau is the central repository of data on borrowers’ loans and repayment records. For banks and finance companies, only two credit bureaus are allowed to obtain such information in Singapore. These are Credit Bureau Singapore and Experian Credit Bureau Singapore.

Credit reports are issued by a credit bureau to banks and finance companies when they make inquiries about the client. These companies assess your creditworthiness by looking at the credit score. You can also request a copy of your report from the bureaus. Reviewing your credit reports can help you identify errors or fraudulent activities.

STEP 5: KNOW YOUR STARTING POINT

Know your starting point by calculating your net worth. Compare what you owe (liabilities) with what you own (assets). Do seek professional help when necessary.

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STEP 6: IDENTIFY YOUR INCOME

To have an accurate picture of what you can earn in the future, you can observe your previous income. Decide whether you are going to expand your income by using different streams or if you are going to stick with your current income source.

STEP 7: REVIEW YOUR DEBTS

Freedom from debt is an achievable goal. The first step to regaining control is to take a transparent look at your existing obligations. Regardless of which financial method you use, be patient and persistent when paying your debts.

STEP 8: SET YOUR PRIORITIES

Create a list of your needs and wants to help you establish your financial priorities. Financial priorities may include saving three months’ worth of expenses or saving S$3,000 for a year to fund your family vacation.

STEP 9: HAVE SMART FINANCIAL GOALS

By setting your financial goals, you are providing yourself with something to aim for. Simply remember that financial goals need to be SMART.

S – pecific
M – easurable
A – chievable
R – ealistic
T – imely

STEP 10: SECURE YOUR FINANCIAL FUTURE

Look at your retirement plan and make some necessary changes. Do not despair if you are behind on your retirement goals. You are not alone! Studies show that many households are not prepared for retirement. Fortunately for you, you can improve your situation.

Image Credits: unsplash.com

Start now!

Sources: 1, 2, & 3

4 Tips to Deal with Debt When Married

“Home life ceases to be free and beautiful as soon as it is founded on borrowing and debt.” – Henrik Isben

One of the most common issues that individuals bring into a marriage is debt. Money is high on the list of topics that couples fight about, and it is the among the top reasons why couples get divorced. Financial issues increase marital discord and stress.

If you are worried about marrying someone with debt, you must realize that you can help each other out. You are a team!

#1: BE TRANSPARENT ABOUT YOUR DEBT

Be honest about your debt situation. Hiding debt from your spouse before the wedding is simply a horrible idea. Your partner needs to know your economic situation and vice versa. You can only make shared decisions after talking about money.

#2: CREATE DECISIONS AS A TEAM

Married individuals have many financial arrangements to make. After discussing your pre-existing debt, decide how you will move forward together. Consider the following questions:

a. How will each partner contribute to the household bank balance?
b. Are you going to combine assets by opening a joint account?
c. What kind of investments will you make?
d. How do you plan to tackle previous debt?

#3: SET A MONEY DISCUSSION NIGHT

The key to surviving marriage and debt is to set a budget as a team. Find a quiet place and sit down for a discussion before next month begins. It may seem like a simple solution, but it is the answer to many money issues in marriage.

#4: NEVER PLAY THE BLAME GAME

Once you are married, you must work together to eliminate your debt. “My” debt turns to “our” debt. Having this perspective creates a significant difference.

Image Credits: Asia Wedding Network

#5: CONSIDER PERSONAL LOAN TO RELIEVE SOME FINANCIAL BURDEN

Prudent use of personal loans can save you more in the long run, especially if you’re currently saddled with severe credit card debt or are facing a financial emergency that could wipe out your savings. Ultimately, the only way to prevent bad debt from snowballing is to have the discipline to control your spending until your loan is repaid. If you find yourself in any of the above situations and are looking for a personal loan to help relieve some of your financial burden, be one of the first 2 applicants daily to have your 1st year’s interest (up to S$550) covered by SingSaver. Click here to learn more. Offer until 21st Mar 2022. T&Cs apply.

Stick to the plan and motivate each other. Living without debt is not easy, but it is worth it.

Sources: 1 & 2

Have You Heard About the Debt Snowball Strategy?

WHAT IS THE DEBT SNOWBALL STRATEGY?

Popularized by personal finance author Dave Ramsey, Debt Snowball is a strategy used for paying down debts. It focuses on paying off your smallest balance first before moving to the larger ones. The person lists down all his or her debts and categorizes these debts from smallest to largest. Money will then be allocated to pay off the smallest debt first, while making only minimum monthly payments on the other debts.

This strategy would not save you as much interest as the Debt Avalanche, but it can help you stay on track in your debt repayment journey.

HOW CAN YOU GET STARTED?

List down all your debts to get started. Then, gain momentum as you knock out each remaining balance. When the smallest debt is paid in full, you will move your efforts toward the next smallest debt on the list. To illustrate, here are the steps:

Step 1: Write down all your debts from smallest to largest, regardless of its interest rate

Step 2: Make minimum payments on all your debts except for the smallest debt on your list.

Step 3: Pay as much money as you can on your smallest debt. This is going to be your priority.

Step 4: Repeat the process until each debt is paid in full.

HOW CAN I APPLY THIS STRATEGY?

Let us imagine that you can afford to put aside S$1,000 every month to pay off your three sources of debt: S$30,000 worth of student loan debt (minimum monthly payment of S$500), S$5,000 worth of car loan debt (minimum monthly payment of S$100), and S$2,000 worth of credit card debt (minimum monthly payment of S$50).

Using the Debt Snowball strategy, you would spend a total of S$650 to cover each debt’s minimum monthly payment. You would then put the remaining S$350 toward the credit card debt because it is the smallest on your list.

Once the credit card debt has been fully paid, the extra payment will go towards your second-smallest debt. At some point, you will be able to clear up your car loan and focus all your money on eliminating your student loan. Like a snowball, each paid-off debt frees more cash to get rid of the remaining ones.

WHAT ARE ITS ADVANTAGES AND DISADVANTAGES?

Its advantages include increasing your motivation and easing your implementation. Paying off three or more debts can seem more manageable if you break it down into smaller pieces. You see, you can get frustrated with the repayment plan if you focus all your efforts on the largest debts. Furthermore, this strategy is easy to implement. You do not need to compare the annual percentage rates (APRs) for all your debts or to tackle deeper into the terms and conditions. You simply need to know the balance owed and its minimum monthly payment to categorize each debt.

On the other hand, its disadvantages include issues in time and interest. Since this strategy focuses on repaying debts according to the balance, it may take you longer to pay off your debts. Interest can be another factor because you are prioritizing balances over APRs. Remember, you could end up paying more money in interest over time.

WHAT ARE THE KEY TAKEAWAYS?

The Debt Snowball Strategy helps you pay off debts by focusing on your smallest balance before moving on to the remaining ones. You will always pay the minimum on each of your debts, except on your smallest debt. This strategy cannot save you as much interest as the Debt Avalanche, but it can help you stay motivated.

Image Credits: ramseysolutions.com

If you need professional help when it comes to managing your debt, you can seek assistance from a credit card counselling organization such as the non-profit organization called Credit Counselling Singapore (CCS).

Sources: 1, 2, & 3

6 Overlooked Perks Of Using Credit Cards In Singapore

From ease of purchasing items to fraud protection, credit cards offer the several benefits. Just please use your plastic card responsibly!

#1: RECEIVE ONE-TIME BONUSES

Signing up for new credit cards will qualify you for the initial bonuses or sign-up rewards. You can new items or reward points that can be redeemed for travel, gift cards, and more.

In contrast, a debit card that comes with a bank account generally offers no initial bonus or ongoing opportunity to earn rewards.

#2: TAKE ADVANTAGE OF THE GRACE PERIOD

When you make a purchase using your debit card, your money disappears right away. When you make a purchase using your credit card, your money remains in your account until you pay for your bill.

There are two main benefits of having a grace period. Firstly, the time value of money will save you money. Delaying eventual payment will allow you to earn money during the grace period. Secondly, you will have a set period to pay for your purchase. You do not have to watch your bank account balance vigilantly.

#3: BE REWARDED WHEN YOU SHOP

Reward credit cards allow its users to earn points for every purchase. Many reward credit cards give bonus points for certain categories such as restaurants, groceries, or petrol.

When your earnings reach a threshold, points can be redeemed for travel or gift cards to shop at participating retailers and restaurants. All you need to do is to choose a card that suits your spending pattern and your lifestyle!

#4: INDULGE IN THE COMPLEMENTARY CASHBACK

You can get a percentage of the items you purchase refunded back into your account with the credit card’s cashback feature. How much you get back varies per bank or credit card. Nonetheless, rebates usually apply only to certain items.

For instance, Standard Chartered’s Unlimited Cashback credit card* lets you receive 1.5% cashback on your eligible purchases. No minimum spending is required. Another example of no minimum spending is the Citi Cash Back+ Card*. It offers 1.6% cashback on all spending.

Note: *Terms and Conditions apply.

#5: BUILDING OF CREDIT SCORE

When people assess whether you are qualified for a loan extension or not, banks do not just look at your annual income. These banks also examine your credit rating for indications of proper financial management.

By using your credit card sensibly and regularly, you can build reputable credit rating. Enjoy lower interest rates for your unsecured loans by having a better credit score. Be sure to pay off your balances each month and keep your spending to a minimum.

#6: EXTRA LAYER OF PROTECTION

Apart from the convenience that cashless shopping can bring, certain credit cards offer a range of purchase protection insurance. This type of insurance will help ensure your peace of mind as you shop. The following protections can be given by your issuer: a. price protection, b. purchase protection, and c. fraud protection.

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Price protection refers to getting back the difference or a percentage of the difference if an item you bought on your card drops in price within a timeframe. Purchase protection refers to the coverage against theft or accidental damage. This protection usually lasts until six months. Lastly, fraud protection refers to being refunded for purchases made using your stolen credit card or card details.

Sources: 1, 2, & 3

Personal Debt Among Young Singaporeans Soars During Pandemic

Personal debt among young Singaporeans have been rising during the COVID-19 pandemic and the situation could turn sour once the interest rates start to rise.

Recent Credit Bureau Singapore data showed that people in their twenties have been taking on increasing amounts of other debt since the second quarter of 2020. The data manifested that the average personal loans and overdraft balances for those under 30 elevated by about 23% in the first quarter of this year over the last three months of 2020.

To illustrate, the average personal loan and overdraft balances for borrowers aged 21 to 29 increased to S$49,689 in the first quarter of this year. This is about 42% higher than the average of S$34,941 in the first quarter of last year.

It is important to note that the borrowing limits in Singapore were capped in 2015 to help keep unsecured debt in check. Experts say that the higher debts observed recently could have been fueled by the low interest rates among other factors.

RISE OF UNEMPLOYMENT

Last March, the unemployment rate among residents below the age of 30 was 6.4 per cent. Unemployment and lower earnings could be the reasons why young adults take personal loans and overdrafts. They try to borrow their way out of the crisis.

“If it is due to youth unemployment, it is often transitory. And the Government already has the SGUnited Traineeships programme and other relief to help young people and help small firms hire young people.” – Singapore Management University’s Associate Professor of Finance, Mr. Song Changcheng

LACK OF PERMANENT JOB

Ms. Selena Ling, OCBC Bank Chief Economist, said that the impact from rising personal debt among younger people will depend on when things turn around in terms of their professional life.

She added: “If subsequently they can find permanent jobs, then they can pay off the debts. But if the duration is extended, then loan delinquency or default rates may rise.”

MANAGING YOUR DEBTS

Awareness of your overall debts and assets is the first step. Include every document, billing statements, loans, and mortgages you have. Take immediate action when you notice that your debts are getting harder to manage.

After seeing the bigger picture, it is time for you to reduce your expenses. Cut down unnecessary expenses such as designer bags or artisan coffee runs. Add the minimum payments of your debts and the cost of your necessities to your monthly budget. To aid your realistic budget, you may sell your unused or underused items online.

Image credits: unsplash.com

Lastly, you can seek professional help. Start by seeking help from your family and friends. Then, consider hiring a professional to reduce your interest rates and penalties at forgiving timeframe.

Source: 1

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