Two of the most common resolutions seen year after year are fitness and financial stability. As far as fitness is concerned, we can only advise you to eat healthily, work out, and stick to your fitness plan. But, with regards to financial stability, we might be able to help you better!
If financial stability is on your list of resolutions, it means that you’re desperately reviewing your budget and searching for new ways to save more and spend less in the New Year. Are you? Don’t stress yourself now. We’ve identified a few simple steps that will keep your money resolutions on track.
Before you step into the New Year, you need to first figure out where you stand financially. Review the past year’s finances. Did you have a budget in place? Were you able to stick to it? Or did you end up spending more and saving less than what you had planned for? Doing a thorough review of your finances will help to identify the cracks in your current budget.
Look at your fixed expenditure and variable expenditure. Monthly fixed expenditures are the expenses that you can’t avoid such as insurance premiums, transport/fuel, HDB loan repayments, mobile bills, etc. Variable expenses are the expenses that you can control such as shopping, groceries, entertainment, etc.
Get a clear picture of your fixed expenses and variable expenses and create your budget accordingly.
Any goals (financial or not) that you set for the New Year should be realistic and specific with measurable results. For example, a number of people make a resolution to shed 10kg in two weeks. They crash diet, hit the gym, and do everything possible, but are still unable to achieve their goal. They then just give up and go back to their old lifestyle.
Any idea why their attempt failed? Yes, because their goal wasn’t realistic or manageable.
This applies to your budgeting goals as well. You shouldn’t be too harsh on yourself when you set your budget. Set different goals for each month, instead of setting a goal for the entire year.
For example, you can aim to save S$50 in the first month and then gradually increase to S$55 the next month. Or you can choose to cut down on any of your expenses in a month.
These small, manageable, and measurable goals are better than broad ones. If you set goals like saving S$5,000 in a year or avoiding eating out for the whole year, they will lose steam pretty quickly. You’ll probably even end up messing your finances again.
On the other hand, monthly goals will give you a new challenge every time and you’ll be motivated to achieve them.
Creating a budget to increase your savings doesn’t mean compromising on things that you love. Instead, you can still enjoy everything you love, but you just need to limit it.
For example, if you indulge in your favourite cup of coffee from Starbucks every day, you will be shelling out approximately S$150 in a month (assuming the coffee costs S$5). But, if you indulge just twice a week and stick to homemade coffee on other days, you can save up to S$100 in a month. You get your favourite coffee and you get to save at the same time. Plus, you won’t have to go cold turkey either!
These little savings add up. So, no matter how minimal a change might seem, you should trim your budget wherever you can.
Credit cards shouldn’t be a debt instrument. It should merely be a method of payment. Meaning that whatever you are buying, you already know that you can pay it back immediately if you have to. The credit card is simply more convenient.
To add to that, using your credit card for the right purpose can help you to get more rewards, cashback, or discounts. Just make sure that you always pay your bill on time, and in full, so that you never have to worry about interest payments.
Are you financially prepared for the unexpected? What if you lose your job tomorrow? How will you support yourself and your family in such situations?
This is where an emergency fund comes into the picture. An emergency fund should comprise of at least three to six months of your monthly expenses. We understand that this is a lot of money to save up, but it’s important that you save for a rainy day. So, if you haven’t set up an emergency fund yet, it’s time you put away a portion of your budget to start one.
You probably have quite a few long-term goals like clearing your student loans, buying your own house or car, or building a retirement fund, right? Why wait for another day to start saving for them?
When you’re setting your budget, try to integrate at least one of your long-term goals into it. It is not easy to achieve all of your goals simultaneously, especially when you’re struggling with savings. So, just stick to one goal for the year. Say, for example, you set a goal to clear all your debts by the end of 2019. Now that sounds like a plan, doesn’t it?
Follow the above tips diligently and you’ll soon be on the path towards financial freedom. Here’s hoping that 2019 turns out to be your most profitable year to date!
This article was originally published on bankbazaar.sg and re-published with permission.