6 Money Lessons To Avoid Being Broke

Nobody ever wakes up one morning and thinks, “I want to be broke.” A hefty loan here, a bad investment there, and a long credit card statement later – you have no idea how you landed in this state. You are living paycheck to paycheck without savings intact.

What can you do to turn the tide? Start by reading this article and applying these lessons into your life.

#1: THE POWER OF SETTING CLEAR FINANCIAL GOALS

Goals mark your direction in life. If you do not have a clear destination to work towards, it can be difficult to find the passion or motivation to save. Whether you are eyeing on purchasing a flat or figuring out how to pay off your debts, crafting a plan can get you there.

As you set your financial goals, consider making them SMART. Financial goals need to be specific, measurable, attainable, realistic, and time bound. Creating goals using the SMART method can help you ensure that you are working on an achievable goal within the timeline that you set. Stay on course!

#2: DON’T BUY WHAT YOU CAN’T AFFORD

Spending less than you make and buying what you can afford seem like simple personal finance rules. However, these are easier said than done. You can get distracted with the consumer-driven society that tempts you to live beyond your means. When this happens, a good rule of thumb is to save at least 15% of your income.

If you find it hard to save money, try paying for groceries and clothes with cash instead of a credit card. Take it one step further by using a budget per month. Withdrawing a fixed amount every month can help you to become more aware of your spending choices.

#3: EMBRACE THE FINANCIAL WORLD

The majority of personal finance lessons do not center around financial education, but on financial behavior. If you can modify your behavior with money, you can alter your financial future. Remember that you do not need to be a financial expert to prepare an emergency fund or to save for retirement. Start by building a solid financial plan and committing to it.

#4: THE IMPORTANCE OF INCREASING YOUR INCOME

Search for part-time jobs such as freelancing or dog walking to grow your income. You can take on other positions in the same company too. If you feel like you have reached the glass ceiling in your field, consider looking for new career paths to generate more income. Increasing your income can help your financial future.

#5: INVEST SMARTLY, AND NOT IMPULSIVELY

Investing is a good way to protect and grow your assets. However, the talent of wise investing does not come to us all. You may be succumbing to emotions and invest impulsively, hence you win big or lose big.

As a precaution, have an advisor who is trustworthy and credible. Research on your part is vital as well. It will give you the knowledge and confidence you need to make smart investments.

#6: BUDGET YOUR MONEY

It is understood that budgeting plays an essential role in controlling your spending, paying off debts, and staying on track with your financial goals. Creating a budget starts with adding up all your expenses for the month and subtracting that amount from your total income.

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Set monthly and daily spending limits to adjust and make up for any oversights. You can create a budget using a notebook, a spreadsheet, or a budgeting app. Use a tool with which you are most comfortable.

Sources: 1 & 2

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Make A Personal Budget In 6 Easy Steps

A personal budget is a financial summary that tracks your income and expenses for a certain period, which is typically a month. The word “budget” is often associated with limited spending, but a budget does not have to be restrictive to be effective.

Having a personal budget that you can review on a regular basis enables you to prevent overspending. Start with these six simple steps.

#1: GATHER ALL YOUR FINANCIAL STATEMENTS

Get a bird’s-eye view of your financial situation by gathering all your financial statements. Include your bank statements, investment accounts, recent utility bills, credit card statements, receipts from the previous months, loan statements, and other receipts. The more information you can retrieve, the better.

#2: DETERMINE YOUR MONTHLY INCOME

Determine how much you make in a month. If you have a fixed salary, you will find information in your pay slip. If you get paid bi-monthly, you simply need to multiply your pay slip into two.

If you have more than one job or you are self-employed, you must determine your net income differently. Calculate your net income by examining your two most recently filed tax accounts. Add the two figures of your net profit together. Then, divide the total by twenty-four. The definitive answer is your average monthly income.

#3: CREATE A LIST OF YOUR MONTHLY EXPENSES

There are two types of monthly expenses – fixed and variable expenses. Fixed expenses are expenses that you encounter every month such as rent, car payments, and utility bills. While variable expenses change from month to month. Variable expenses include groceries, gifts, and shopping.

Write down a list of all the expenses you expect to have during a month. Do not forget about the childcare, transportation, and entertainment costs.

#4: TOTAL YOUR MONTHLY INCOME AND EXPENSES

Get the total of your monthly income and monthly expenses. If your income is higher than your expenses, you are off to a good start. You will have extra funds that you can put aside for retirement savings or debt repayments.

If your expenses are higher than your income, you need to make some changes. Find out which categories you are overspending on.

#5: EVALUATE YOUR SPENDING HABITS

Add up your total spending per expense category. Which category do you overspend on? You can get the percentages per category to understand how much of your income is going where.

#6: MAKE NECESSARY ADJUSTMENTS

After covering steps one to five, you will be able to highlight the spending areas that you need to eliminate or reduce. For instance, you can cancel your gym membership or lower your handphone’s postpaid plan.

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Amend your budget and align these changes to your financial goals.

Sources: 1 & 2

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4 Challenges of Budgeting in 2021

Stating that “2020 has been a tough year” is an understatement. Words cannot describe how much we have been affected by the past year. I, for one, was tasked to let go of employees due to financial constraints. It was not easy! It was one of the hardest decisions that I had to tackle because I have seen these people grow. Moreover, I felt responsible for their well-beings too. However, downsizing was essential for the company to survive.

Our stories may vary, but one thing remains the same. We have all endured the physical, mental, and financial toll that came with the pandemic. As we adapt to the “new normal”, we come to realize how challenging it is to keep a budget. You not only have to fight the urge of spending money, but you also must follow the budget despite unforeseen hurdles.

On that note, here are some of the common challenges that you may experience as you establish your budget.

#1: HIGH COST OF LIVING IN SINGAPORE

The cost of living in Singapore is one of the external factors that you have consider when making your budget. According to the Economist Intelligence Unit’s Worldwide Cost of Living (WCOL) survey conducted in 2020, Singapore ranked fourth in the global list of the most expensive cities. The WCOL is a bi-annual survey that compares more than 400 individual prices across 138 products and services in over 130 cities worldwide. Zurich, Paris, and Hong Kong preceded Singapore.

Whether you are a young working adult or a foreign migrant worker, you must set a realistic amount for your spending each month. Take each financial category into consideration. For instance, you should have at least S$700 to S$1,500 a month if you are renting a space. If you are eligible to purchase an HDB property, you should set aside at least S$1,500 to S$3,000 a month. Your daily expenses and your overall lifestyle may change to fit your budget.

#2: LABOR-INTENSIVE TRACKING SYSTEM

Many people are afraid of establishing a budget due to the labor-intensive tracking system. Tracking your spending and income may seem like a chore at first, but you will be more comfortable as time passes. Start by tracking your receipts and other spending through a notebook or a spreadsheet. The rise of apps paved way for computer programs that are dedicated to tracking your spending. Find an app that works for you!

Being diligent with noting down your expenses takes practice. If you forget to write down important receipts, inaccuracies in your budget may occur. You may notice that your savings account depleted without knowing where your money went.

#3: DIFFERENCES IN CASH FLOW MANAGEMENT

The means of getting your income can affect your budget. What is the frequency of your paycheck? The first company I worked for paid us every end of the month. In contrast, the last company I worked for paid its employees every two weeks. Getting your paycheck once a month can entail different issues.

For some people, they experience stress as they wait for the next paycheck to come. It is hard for them to make ends meet because they see their money disappear in the first two weeks alone. These scenarios highlight an issue of cash flow management.

Waiting for your next paycheck can cause stress and anxiety. If you are paid once a month, consider dividing your income per week. Allocate enough money for the remaining weeks by keeping them in your savings account. Doing this will enable you to create a system that resembles being paid on a weekly basis.

#4: EXPENSES EXCEED INCOME

Many families have been painfully affected with job loss, reduced income, and prolonged unemployment in the past year. Recovery takes time. However, our bills remain the same. The effects of pandemic and the limitations in our income will greatly affect how we budget our money in the year 2021.

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As I leave my full-time job this month, I will need to take serious lifestyle changes at heart. The first step is to eliminate all unnecessary spending. It is important to focus on the necessary expenses such as rent, food, healthcare, and transportation. The next step is to carefully track my expenses with budgeting tools. Lastly, it is important to become flexible when it comes to budgeting and to adjust my spending depending on my needs and income streams.

Cutting down one’s expenses is a sensible solution for the time being. Finding a permanent solution to this…is the challenge.

Sources: 1, 2, & 3

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Fundamental Rules Of Budgeting

As you gloss over the pages of old personal finance books, you will realize that they stress on the importance of creating a budget and sticking to it. Poof! All your financial problems will be solved in a snap. However, life is not as simple as that.

Budgeting is the process of creating a financial plan based on your estimated revenue and expenses over a period. It is a complex task that takes your entire financial profile into account. It is up to you to embrace the process!

On that note, here are the fundamental rules of budgeting.

#1: BE HONEST WITH YOURSELF

Awareness of how much money comes in and how much you spend will enable you to pinpoint your spending habits. Be honest with yourself! You will be surprised that everything adds up, once you keep track of your money on a regular basis. Start by writing down your expenses for a week and continue. Include your daily coffee runs and Netflix subscription. You can use online budgeting tools to help you monitor your money.

#2: BE PREPARED TO CHANGE

The only permanent thing in this world is change. Your efforts of controlling your environment will be put to waste because change is inevitable. If you reached the end of the month and noticed that you are struggling to pay bills, something needs to change. Alter your budgeting strategies and identify which categories you can cut down on. Fortunately for you, small changes can make a big difference.

Your income, expenses, and priorities will change over time. You must adjust your budget accordingly.

#3: LEARN SELF-CONTROL

Within my immediate social circles, my partner is the primary model for self-control. He steers away from luxury and focuses on strategies that make him a savvy spender. He practices delayed gratification too. Learning self-control can help you accomplish your realistic budget.

If you are lucky, your parents or teachers taught you this skill when you were a child. If not, you will learn the importance of delaying gratification. Despite the tempting nature of credit cards, it is better to wait until you have saved up the money for a purchase. You do not want to spend the rest of your years paying for your credit cards alone!

#4: USE CASH WHEN NEEDED

Notice your spending habits. If you are constantly overspending on a budget category, consider having an envelope system. Use the allocated cash from the envelop and stop spending once it runs out. It is the ultimate accountability strategy.

#5: CREATE GOALS

Be realistic when it comes to your budget and your priorities. Whether you are paying off student loans or building an emergency fund, you need to focus on the goal. Knowing the reasons behind why you are saving and why you are making sacrifices will help you sustain your budget.

#6: PROTECT YOUR WEALTH

Ensure that your hard-earned money does not vanish by taking some safety measures. IF you are renting a flat, consider getting an insurance to protect your belongings from fire or burglary. If you just bought a laptop, sign-up for the warranty. This will help you cushion the costs of repairs.

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You must educate yourself on budgeting and handling money. The more you learn about handling money wisely, the more concrete your reasons for budgeting will be. Good luck!

Sources: 1 & 2

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Stop Buying These “Essentials”!

I have to be honest! Since the Circuit Breaker (CB) period started, I have been purchasing essentials (such as sanitary napkin and coffee) and non-essentials (such as make-up and jade roller) online. Online shopping prevents me from being exposed to the possible dangers of the coronavirus. However, I felt that its convenience can trap me.

I had to become more aware of my spending patterns. I gave myself a maximum limit of twice a month to purchase my needs and wants online. This way, I will be able to track my parcels and spending more efficiently.

Two nights ago, Lazada had a Flash Sale on Apple Airpods. I had been eyeing this product for a long time and have been waiting for the perfect occasion to splurge on it. Despite its 20% drop, I decided to seek the advice of my partner. His opinion is of utmost importance to me. Thankfully, his voice of reason prevented me from purchasing the device that I will likely get tired of after several months. He helped me save S$200 that night.

There are many ways to save money. You can reduce your online shopping tendencies, expand your businesses, or invest in stocks. Every little bit counts when you are trying to save money during the CB period. If you have not realized it yet, here are some “essential” things that you should stop buying.

#1: AIR FRESHENER PLUG-INS

Ahhh air fresheners! Air freshener plug-ins have been all the rage in the 1990s. Those pine-shaped air fresheners may be doing more harm than good. According to the environmental testing company called IndoorDoctor, many air fresheners contain a type of chemical known as phthalates as well as formaldehyde. Phthalates are known to interfere with the body’s production of testosterone and have been associated to reproductive abnormalities, says the nonprofit National Resources Defense Council.

For Singaporeans who have pets, the use of air fresheners may feel essential. You need to find an alternative to keep your household fresh. Try creating scented candles by using natural essential oils. Start with this tutorial.

#2: BOTTLED WATER

Singapore’s tap water is generally safe for drinking. On some instances, you may encounter a poor-tasting water due to the chlorination or discolored water. Chlorination is necessary to keep the water safe from pathogens (i.e., bacteria and viruses).

Not only does plastic bottled water add up to the plastic waste, but it also adds up to your costs. Save more by refilling your tumbler or jug from the tap. Ensure that you bring this tumbler or jug while you are out of the house too.

#3: PLASTIC UTENSILS

Yes! Disposable utensils enable you to lessen the time spent on dish washing. However, this cheap and convenient item may add pollution to our environment. Help the future generation by reducing the plastic waste.

Use metal utensils and straws wherever you go. There is a metal utensils and straws set in Lazada, which will cost you about S$7.99.

#4: DISCOUNTED ITEMS

Just because an item is on sale does not mean that you really need it. I know how attractive a Flash Sale can be. In fact, I saved a lot of money from buying my Christmas gifts through Flash Sales. However, problem may start when you purchase several on-sale items without planning to do so.

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If you do not need and want the item, skip it. Are you willing to pay for it in full price? If so, then it highlights your essential need for it. Keep these in mind!

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