In 2015, Credit Counselling Singapore counselled 4,675 people who had large unsecured debts. Almost half were aged under 40: in fact, 11 percent had yet to reach 30 years of age, while 38 percent who sought counselling were aged 31 to 40.
If you feel you are just scraping by month to month despite bringing home a decent salary, then you are living on the edge financially, which may make it difficult for you to deal with unexpected expenses.
Here are some signs that you may be part of this group, and tips on how to pull yourself away from the edge:
1. You don’t “pay” yourself first
The moment you receive your monthly salary, put a portion of it into a savings account. This is your emergency fund: liquid savings that can be readily used to tide you over in difficult times.
Alternatively, if doing this every month is too difficult, consider saving the whole of your yearly bonus instead. While it may seem painful, the good news about emergency funds is that once you reach your target, you don’t need to increase it unless you foresee major life changes ahead such as a new baby or a sabbatical while looking for your dream job.
Having an emergency fund is not a luxury but a necessity. Ask yourself what would happen if your next pay cheque didn’t arrive — would you be able to pay your monthly utility bills, put food on the table for your family or even shop for basics? According to financial experts, you should have a cash reserve of at least six months to cover your monthly expenses including food and utility bills, car loans and mortgage payments.
2. You have no idea where your money’s gone
If you find yourself wondering where all your money disappears to at the end of each month, then it’s time to create a spreadsheet to monitor your monthly spending — Google spreadsheets are a good option. This will help you evaluate your cash flow, allowing you to make sounder financial decisions.
If you would like to monitor your expenses even more efficiently, there are many apps that can help. A local app to try is Seedly — a free expense tracker designed to help Singaporeans save and budget better.
Once you know how you’re spending your money, you may then see obvious ways to save, for example, catching the MRT to work instead of a taxi or skipping that daily takeaway latte from your favourite café and making your own coffee at work instead.
3. You view needs and wants in the same way
Understanding and separating your needs from your wants is important. For example, you might need a car for your job in sales but do you really need a luxury model? Knowing what you really need based on how much you earn and how much you spend each month will help you prioritise your spending.
Remember, the ability to stay on the positive side of your balance sheet is achievable once you start saving money for the secure financial future that you and your loved ones deserve.