Clueless about insurance? You're not alone. 60 women (in their 20s and 30s) told us their biggest quandaries about managing their insurance policies, and we spoke to the experts to find out what are some easy rules to follow. Turns out, once you get your head straight on the facts, it's more straightforward than you think.
Creating a financial plan that ensures that you spend less than you earn and also save some money every month should be simple enough. But for many people this is a difficult task.
Practically everybody realises that it is important to draw up a budget and monitor your spending according to it. In fact, most people start quite enthusiastically and make a note of every little expenditure that they make. But this zeal is usually short-lived. They soon revert to their old ways and spend without keeping track of how the expenditure that they are making fits into their overall plan.
How can you make a budget that is easy to follow and which you can stay with over an extended period?
Unfortunately, there is no simple answer to this question. You have to arrive at a set of techniques that you are comfortable with. The trick is to be flexible and to try out different methods till you find one which works for you.
Here are some points that could help you succeed in your budgeting exercise:
At the end of March 2017, the total credit card balances that Singaporeans had rolled overwas in excess of S$5 billion. Credit card debt carries very high interest rates. The standard interest rate for a DBS Bank credit card is 25.9% per year. OCBC charges a similar rate.
If you are carrying any credit card debt, the first step that you should take is to make a plan to pay it off. It may not be possible to do this in a single month. Draw up a repayment schedule that allows you to clear your credit card outstanding over the next three or six months.
During this period, you should not divert any of your income to savings. Your top priority is to liquidate the sum that you owe on your card.
Why shouldn’t you save during this period? Any financial instrument that you invest in will not give you a return that is even a fraction of the rate that you are paying your card issuer. Remember that the correct approach is to divert all your surplus cash to get to a “nil” credit card balance.
The first part of this question should be easy to answer, but calculating your expenditure could be more difficult. Most people underestimate the amount of discretionary expenditure that they make. Transportation costs, eating out, and expenses over the weekend can add up to a significant amount over the month.
Although it can be tedious to track every small expenditure that you make, you may want to do this for a week or a month to get an idea of where your money is going. To make your task easier, you may want to use a budget calculator.
There are also a number of apps that you can use to monitor your expenses. Seedly is simple to use and works by importing data from your bank and credit card issuer and aggregating it under various heads.
Once you have tracked your expenditure for some time, you can sit down and consider if all of it was really necessary. It is likely that you will be able to identify some areas that you can cut back on without much effort.
No budget is complete unless you plan to allocate a part of your income to fund your retirement expenditure. How much should you deploy in long-term savings every month? While the amount could vary depending on how much you earn and your expenses, you should save at least 20% of your income.
The mistake that many people make is to defer this activity till the end of the month. The idea is that by this time you will know the surplus amount that you have left over after all your commitments have been met. You could even have a situation where you would be able to save more than 20% of your income!
Unfortunately, in most instances, it doesn’t work like that. Your bank balance could be totally depleted by month-end. Even if you do have some cash left over, it could be less than the targeted 20%.
Thanks for the info! Self discipline is very important too