We probably inherit most of our money habits from our parents or peers. Whether you are in your 20s or 40s, it’s always a good idea to cultivate good financial habits which you will be thankful for in the long term.
If you feel that your finances can do with a little tidying up, start with baby steps so you do not get overwhelmed. Here are 8 things you can do to get your finances in order starting today!
Pay your bills on time
Paying your bills on time is one of the simplest way to ensure your finances are on track. These bills include utility bills, telco bills and credit card bills. Not only is this an easy way to ensure you are not charged any late fees, you potentially save on interest payments from late credit card bills.
Prioritize your debt
Your mother’s wheelchair is faulty and you’ve got an outstanding debt to pay. Do you spend the money on a new wheelchair or try to pay off some of your debt? Paying off an existing debt can be a long and painful process and it’s too easy to lose the motivation. But the freedom of being debt-free is definitely worth it!
How can you get the best of both worlds? Taking up an interest-free payment plan to purchase your wheelchair and at the same time paying off your debt in small amounts will propel you towards financial freedom.
But what happens if you have more than 1 debt? You can use these 2 simple methods to start clearing them slowly:
Debt Avalanche Method
We all know that the devil is in the interest rate. There are alternative credit providers charging crazy high interest rates. You should focus on paying off the debt with the highest interest rate first.
You may have heard about paying the minimum sum for your credit cards and rolling over the balance. Starting to pay off your debt with the smallest amount first will give you a head start. By making your debts a priority, you’d find yourself to be debt-free soon enough!
Preserve your cashflow
The concept of cashflow may seem a little elusive to many people, since it is something that’s more often associated with businesses. Cashflow simply means the movement of cash. More importantly, a cash inflow is where you receive a salary, dividends from stocks or cash gifts. Cash outflow refers to money you’ve spent or lent to others. Finally, the net cashflow refers to the aggregate of your cash inflow minus cash outflow. A positive net cash flow is a good situation and a negative cash flow may mean you can better manage your money.
Sometimes, a little help such as paying your purchases through interest free pay-later plans can help you remain in positive cash flow. Take for instance the situation above – do you really need to choose between paying your debt and getting a replacement Wheelchair? What if you can split up the payment of your Wheelchair into 6 months so that you can continue paying your debt on time? Wouldn’t that be a wonderful situation?
Automate your finances
If managing your finances mean tracking your spending, savings and ensuring you pay your bills on time, it can seem overwhelming for someone who may be busy with other things going on in their lives. The best way to circumvent this? Automate it!
Simply set up Giro or Debit card deductions for automatic payments of all your telco and utility bills, set up an automatic transfer of your monthly salary to a savings account and Viola! You no longer have to set aside time every month for such administrative tasks anymore!
Start an emergency fund
If you haven’t saved up for an emergency fund yet, it’s time to do that. Life can sometimes throw you curveballs you do not expect – retrenchment, a large medical bill or perhaps, some essential home reparation you totally did not foresee. These items usually cost up to a few thousand dollars and will definitely take a huge chunk out of your savings account. The best thing you can do is to be prepared for it.
Consciously set up an account for emergency where you do not make any withdrawals until a real emergency occurs. This will at least cushion some of that shock as you know that your emergency fund can at least buy you some time in case you need more money urgently.
Lead a Frugal life
Being frugal does not mean leading a miserable life. It means choosing a local Kopi over Starbucks everyday, eating at the hawker rather than a restaurant most of the time and taking the MRT instead of taxi. It’s about being conscious about the money you spend and saving when you can. In fact, do you know that a person who saves $1,000 out of his $3,000 salary is richer than one who saves $500 from his $5,000 salary? It’s about how much you save, not how much you earn!
Avoid Unnecessary Fees
Do you know that sometimes, we go around life paying additional fees, abit at a time which can accumulate to a substantial amount? Think about all the 10% service charge you pay at a restaurant that hardly comes with much of a service, the administrative fees you pay when you sign up at a new gym or express shipping fees you’ve paid for an online purchase even if you didn’t need the item urgently?
The next time you receive a bill or pay for a purchase online, be sure to check out the little extras you are paying and see if you can either reduce the amount or find an alternative.
Lastly, being in control of your finances doesn’t need you to be a boring person obsessed with tracking and saving every cent. Life can be fun too and when you reap the rewards of your financial prudence, don’t forget to reward yourself from time to time!