DollarsAndSense.sg shares 4 simple financial resolutions that could change your life from 2015 onwards.
Over the years, how many times have we made new financial resolutions only to have them fail miserably within approximately 72 hours of the new year?
Similar to our physical well-being, good financial health requires a conscientious long-term commitment rather than a one-time wide-sweeping transformation. People often fail to keep up with their financial resolutions because they don’t realize the long-term sacrifices of achieving financial health.
Choose only ONE Financial Resolution
We will give you 4 financial resolutions, but we urge you to only select ONE that you would like to keep for 2015.
There is no point in having 3 to 4 resolutions only to approach each one half-heartedly and fail again within 72 hours of 2015. So just have a go at one, put in your best effort, and strive to stay true to that resolution for your own financial well-being.
#1 Clear Your Debt
This is the easiest and most straightforward resolution for anyone.
Instead of spending thousands of dollars on an investment course (which may or may not help you) and I’m leaning towards it not helping you (I’ll cover that in another article), why not “earn some money” by reducing some of your high interest loans?
There are many options to choose from. Credit card debt, illegal loan sharks debt, car loans, renovation loans, loans from friends (yes, there may be no interest but friendship has a cost too), education loans and even property loans.
Always start with the debt that has the highest interest rate. Don’t spend $10,000 paying down your property loan (2.6% interest) when you have a credit card debt (24% interest).
Getting out of bad debt is always the first step to financial freedom.
#2 Use Cash More
The benefits of abusing your credit cards for its air miles, discounts and cash rebates are attractive. Unfortunately, the cost of being abused by your credit cards far outweighs the benefits of abusing them.
The main reason why some people end up with tens of thousands of dollars of debt on their credit cards is due to the absence of feeling a pinch when they swipe their cards. It is far more painful to hand over $300 (six notes of $50s) to pay for a 2-hour restaurant meal as compared to just swiping a card.
For those of you who know just how vulnerable you are to overspending, most likely because of past experiences, leave your credit card at home. If you need to spend, withdraw in cash to pay for your purchase. If you do not have enough cash in your bank at that moment, then you really shouldn’t be spending that money.
#3 Save Up Your 1st $10,000
Not all of us can be a fund manager, but we can all still have “fun” managing our own investment portfolio.
The problem most people in Singapore have is that they do not even have $10,000 to start off with. Aim to save $10,000 by the end of 2015 solely for the purpose of making investments in 2016.
It is not as difficult as you might think. If your monthly pay is $3000, the year-end 13th month bonus will get you 30% there. If you and your spouse are aiming for it together, that’s already $6000 you have. To save up for the remaining $4000, you just need to put aside $340 a month, which is the equivalent of two meals at a restaurant or foregoing your second holiday for the year or not going to a night club for the next 12 months. There are many ways you could scrimp that additional money; you just have to choose the ones that are less painful to you.
Once you have that $10,000, you can start thinking about how you want to invest and grow the money.
#4 Invest In Just One Thing
Investing can be a very complex subject. Unfortunately, for the layperson, having the options to invest in stocks, ETFs, currency, commodities, bonds, property, unit trusts and even insurances, scares them off the topic completely. Hell, we’re scared and second-thinking our investment decisions just writing that last sentence! So we understand that laypeople have to take it slow.
For 2015, why not just keep it simple and fun for yourself? You can start off by going into one type of instrument only. Research it, understand it and think about it.
Our suggestion would be to go with Exchange Traded Funds (ETFs). In this financial vehicle, you are immediately diversifying your portfolio if you buy into the market index. If you prefer a regular income in the form of dividends, go into REITS or blue chip counters that pay good dividends. The dividends you get can easily go into your next $10,000 investment portfolio.
Do the resolutions sound too simple? If so, have you actually done any before today? We reckon they are not as easy as you may think. We challenge you to pick one of these resolutions and share your journey with us, or ask us
questions you may have.
Or if you have a different resolution from ours, Share it with us on Facebook.
DollarsAndSense.sg aims to provide interesting, bite-sized financial articles that are relevant to all Singaporeans. Subscribe to our free e-newsletter to receive exclusive content not available anywhere else. Also follow us on Instagram to get your dose of finance knowledge visually.