How are you coping with the increased costs of living? Are you getting closer to your financial goals or moving further away from them?
Here. we highlight 4 ways you can practice next months onwards to better your financial situation.
1 – A high savings rate, done consistently
This is probably the hardest part. CPF already took 20% off your paycheck. If you earn 2500 or below, this will seem very hard, but most of you can do it.
Save at least 30% of your take-home pay. It is ideal to put it in another account where you won’t touch it , except for emergencies. Do this consistently and you will start to feel your wealth is increasing. That is step one.
2 – Know exactly what you spend on
There will be some fixed expenses that don’t fluctuate much month to month. These are your transport fees, food expenses, telco bills, mortgage, utility bills, and other monthly bills of fixed amounts. You can note down all your expenses today. Compare them over 3 months and use the average figure to do your personal finance accounting.
3 – Invest
Portion a sizeable part of your savings (we recommend 30%) to invest.
Sometimes investment is really hard. Your best investment is finding a financial planner specialised in investments. Here’s how to test them – ask them for their best 5 investment funds now, and see if they can give you an answer on the spot. This filters out people who don’t really know the market. They don’t deserve to manage your money, so don’t throw it down the drain this way.
4 – Think twice before big purchases
In his book <The Psychology of Money>, Morgan Housel said ‘Wealth is what you don’t see’. What you see is whatever materials your money has already been spent on. That’s a splendid insight. We would like to paraphrase it into “Wealth is what you don’t spend.”
You don’t need to spend more just because you got a bonus or a pay rise. Poor people get poor because they spend all their money on what they want, and they want a lot. You can want what you want, but please do the calculations first. Consider this – if you lost your job tomorrow, would you still want to buy that? If that is a ‘no’, put it off in the near future when you are wealthier.
