Save Money with 5 Simple Steps

Save Money with 5 Simple Steps

Being financially independent feels great, doesn’t it? You get to treat yo’self to an expensive meal, splurge on that one really cute (but really expensive) top, or even uber everywhere you need to be! As tempting as it may be on a regular basis, being financially secure is equally, if not more, important. You wouldn’t want to end up with a zero balance in your bank account.

Here are 5 simple steps to get you on top of your personal finance game:

Step 1: Cut your monthly expenses

Download your latest bank statements and identify your top 5 expenses for the past month. Think of creative ways to cut at least one of them by the following month. If it’s shopping, ask yourself if it’s a need or simply a want. As for your fixed expenses (i.e. phone bills and utility bills), look out for the best deals and ways to optimise your utility consumption.

Step 2: Clear your debts

Always pay your bills on time and avoid getting into credit card debts. Credit card companies prey on late fees and interest rates which tend to compound. For your student loans, aim to clear them within two years.

There are two ways to clear your debts:

  • Debt Snowball Method: Clear your smallest debts first before moving on to larger amounts
  • Debt Avalanche Method: Clear your debt with the highest interest rate first before moving on to debts with subsequently high interest rates

Step 3: Get protected with basic insurance

The key insurance policies you should have are health and life. If you’re looking to start off with basic insurance policies, avoid buying investment-linked insurance (ILP) or endowment funds as there are no guarantees on basic returns.

Step 4: Build up your savings and rainy day funds

Your 20’s is the best time to start building up your wealth and getting into a routine saving habit. If you’re ambitious, aim to save $10-15k in a year. There are two components to building your savings: voluntarily (refer to step 1) and forced (through CPF).

Here’s how the forced component works:
Your total monthly salary = Take home salary + 20% CPF (your own contribution) + 17% CPF (your employer’s contribution)

Step 5: Grow your passive income

 

Make your money work for you. Start simple and know your financial basics first before jumping into the deep end. Avoid dabbling in Multi-Level Marketing (MLM) especially when they claim to be some sort of investment. Instead, start with regular bank savings plans, Exchange Traded Funds (ETFs) and Singapore Saving Bonds (SSBs).

The key to success in saving money is setting a monthly budget ratio and diligently tracking your expenses. Start small and simple, but aim for the long-term and stay focused!

Source: Seedly