If you always find yourself in financial hell, check if you're guilty of these habits that are sabotaging your own finances.
We don't mean to be glib, but personal finance is a lot like religion. You have to believe in it to be able to enjoy it. However, unlike going to heaven, putting your affairs in order lets you enjoy paradise right here and now.
So if you constantly find yourself in financial hell, here are 15 ways you might unknowingly create (what seems like) eternal torment with your personal finances.
1. Not Having an Emergency Fund
You've probably heard this countless times by now, so we won't beat you over the head with why building an emergency fund is so important.
Instead, we'll just point out that while saving 6 months of living expenses is good to have, it is also quite the feat to achieve. That means you should start an emergency fund with however much you can spare each month.
Build up your emergency fund to the 6-month mark as you go along, and if you encounter any mishaps along the way, you'll have some funds to fall back on. And when it comes to money, having some is always better than having none.
2. Not Saving for Retirement
The whole point of working and earning money is so that you can look after yourself in your old age. So, not saving for retirement while you can is one of the worst ways you're sabotaging your finances.
It's never too early to start saving for retirement in Singapore, as your needs and wants could change as you get older. Luckily, it is also never too late to start saving for retirement, as you may be able to save more during a more advanced stage of your career.
The point is, you can (and should) start saving for your retirement, so why not start today?
3. Not Knowing When to Stop Using Your Credit Cards
With the sheer convenience and attractive rewards offered by credit cards, it can be tempting to keep on spending. However, when you find you cannot pay your credit card balances in full, you should stop using your cards for the time being.
Having rollover balances will cause you to incur high credit card interest charges that will be added to your outstanding debt. Continued use of your credit cards will cause you to go deeper into debt, which could take you a long time to clear. Because of this, you may have to delay or even forego other important financial goals.
4. Not Delaying Gratification
Whether you'll be successful or not can be determined by how well you can delay gratification, and in personal finance, this goes doubly so.
If you find yourself with a larger-than-expected credit card bill each month – thanks to buying stuff that you don't need – you're likely giving in to instant gratification way too often. Cultivate self-control with mindfulness exercises that help you identify the triggers that make you spend, and learn some techniques for delaying gratification.
Not only will your bank account thank you for it, you could find yourself experiencing success in other areas of your life too.
5. Not Reading the Fine Print
We know what you are thinking: "Terms and conditions? Ain't nobody got time for that!" But if you want to avoid painful (and unnecessary) admin charges and fees, homeboy better make time for the fine print.
Otherwise, you could find yourself stuck with a financial obligation you can ill afford, or having to put up with less-than-satisfactory service or memberships. This goes double if you are considering something that would require a long commitment (such as insurance plans) or high payment upfront.
6. Not Using a Shopping List
Sometimes, the smallest things can make all the difference. The next time you go shopping for groceries, try using a shopping list to help you focus on what you need to get. Supermarkets and grocery stores employ an entire trolley's worth of tricks to loosen your grip on your wallet and make you spend more than you intend. Using a shopping list can stop your "milk, eggs and bread' pickup trip turning into a Masterchef pantry re-stocking exercise (yet again).
Another way to get your money's worth? Put your spending on a credit card that gives you rebates at supermarkets.
7. Not Lowering Your Interest Rates
Simply having debt is not a problem per se; having high interest is. Compounding interest makes it difficult to clear your debt, especially if held over the long term. That's because interest charges are added to what you owe, and the whole amount is charged interest again during the next billing cycle.
If paying your debt feels like bailing water out of a leaky boat, you need to lower your interest rates. You can do this by restructuring your debt using a balance transfer, personal instalment loan or a debt consolidation plan.
8. Not Keeping a Discretionary Fund
Here's a personal finance task that you might find a little more enjoyable. Set aside a discretionary fund, which you can spend on anything you like. Dip into it when you need a little perk-me-up, when you have unplanned celebrations (like a baby shower for your best friend's chihuahua), or when you are simply in the mood to be generous. The only rule is to limit your splurges to how much is in your discretionary fund.
Do this and you will cut down your risk of ruining your monthly budget, while giving yourself the leeway to enjoy your hard-earned money.
9. Not Automating Your Savings
Saving money is like lifting a dumbbell: until you actually get down and do it, nothing is happening and you'll have nothing to show for it. Take 2 minutes today to a) work out how much you can set aside each month and b) set up an automated recurring transfer for that amount. Then sit back and watch the magic happen.
10. Not Educating Yourself About Money
Not learning how to manage your money is probably the most surefire way to ruin your personal finances. You'll not only likely miss out on good money-making opportunities, but you could also fall prey to bad schemes or scams.
Even if you decide to play it safe and never go near an investment product (or a banker), you're not off the hook. Not bothering to learn how financial products really works means you're apt to take on erroneous beliefs about money – because you "know a friend who frequently uses multiple credit cards but never pays them in full and he seems to be doing just fine".
11. Not Getting Enough Sleep
Here's another good reason to get your nightly 8 hours: lack of sleep makes you as reckless as a gambling addict. A 2011 Duke University study showed that "sleep loss affected impulse control, judgment, emotional response and complex decision-making." This is due to the way loss of sleep affects the areas of the brain involved in rewards and positive outcomes.
12. Not Topping Up Your CPF Special Account
If you find yourself having leftover cash in your CPF Ordinary Account, don't just let it sit there. Transfer it to your Special Account so you can take advantage of the higher returns. Your money will grow faster, which will help you achieve a larger monthly payout under CPF Life from age 65 onwards.
Don't forget you can also make cash top-ups to your Special Account. Consider this option during market downturns.
13. Not Paying Your Own Way
Taking up your friends' offer to pay for you first, with you paying them back when you have the money, is ok once in awhile. However, doing this repeatedly will prevent you from developing the right financial habits.
The problem here is when you finally get your paycheck and pay off your friends, you're left with an even thinner budget to work with. This then increases the chance of you not making ends meet this month, which continues the cycle (until you run out of friends).
Instead, learn how to manage your budget. Sitting out an outing or two is perfectly acceptable if it means not having to worry about money further down the road.
14. Not Having Appropriate Insurance Coverage
When you're dealing with an illness or injury serious enough to warrant a hospital stay, the last thing you need is to worry about paying the bills.
If you haven't already, upgrade your basic Medishield so that you get 100% coverage – that means you won't have to pay anything out of your own pocket for hospital stays. Next, you'll want a policy that pays out in the case of critical illnesses, permanent disability, or death. This will compensate you for the loss of income and allow you to continue looking after yourself and/or your family.
Speak with a qualified Financial Advisor to ask about Term or Whole-life plans that can help you with this.
15. Not Taking Control of Your Finances… TODAY
All the finance tips in the world won't do a thing to help you if you don't act on them. After all, you are the only one who can change your financial situation… that's why it's called "personal finance", we guess?
So, pick one thing from this list you can do today and do it now, and pretty soon you'll be in control of your finances, like a boss. As you ought to be.
This article first appeared on SingSaver.com.sg.