We all make mistakes, including financial ones. As the saying goes, to err is human.
Sometimes, these mistakes only become obvious with hindsight. We may regret not making an investment we had considered, only to watch its price rise significantly later. In Singapore, someone who decided not to buy a condominium or new launch 10 or 20 years ago, when prices were much lower, may similarly feel that they missed an opportunity.
These are normal mistakes. We make decisions based on the information, priorities and circumstances we have then. Not every financial decision that turns out poorly was necessarily a bad decision when we made it.
However, some financial mistakes are much more avoidable. These are decisions where the warning signs are often already there, or where a little more thought and objectivity upfront can save us from years of financial consequences.
Here are five bad financial decisions that we should try to avoid making in the first place.
#1 Making Financial Decisions Because Of A Friendship
A lot of money, and sometimes friendships, are lost when financial decisions become intertwined with personal relationships.
To be clear, this does not mean that we should not trust our friends. We can. But trusting someone as a friend is different from relying on that person to make a good financial decision on our behalf.
Problems can arise when we invest in something mainly because a friend recommends it, or put money into an opportunity without doing our own due diligence simply because the person introducing it is someone we know well.
The same applies when lending money to friends. We may be willing to lend because we want to help, but we should also consider what happens if the money cannot be repaid on time, or at all. A loan that starts as a favour can easily become a source of tension between two people.
A useful way to think about this is to separate the friendship from the financial decision. There is nothing wrong with giving our friend a chance to meet us and pitch whatever they are selling. However, we also have to be objective and ask ourselves whether we would say “yes” if the same investment or business opportunity came from someone we did not know.
If the answer is “no”, then that should not change just because a friend is pitching it to us.
If we know we find it difficult to say “no” to a friend, it may be better not to meet them for the discussion in the first place.
Read Also: Should You Lend Money To Friends Or Family? What To Consider Before Saying Yes
#2 Buying An Overseas Property Before Securing Your HDB Home
If we want to buy a BTO flat, subsidised resale flat or qualify for an HDB loan, we generally cannot own local or overseas private residential property. We must have disposed of it at least 30 months earlier. This can be a problem if we buy an overseas property in our 20s, then decide a few years later to settle down and apply for a BTO.
Since 27 July 2026, the rules are more flexible for some resale flat buyers. Private property owners can buy a non-subsidised HDB resale flat without serving the previous 15-month wait-out period. However, they must dispose of their private property within six months of the HDB purchase.
Thus, before buying an overseas property, we must first consider how it may affect our future housing options in Singapore.
Read Also: How The Removal Of The 15-Month Wait-Out Period Could Affect Singapore’s Property Market
#3 Mistaking Luck For Investing Skill
A common investing mistake is assuming that a good return means we made a good investment decision. Sometimes it does, but sometimes we simply took a lot of risk and got lucky.
This is especially easy to miss during a strong market. A stock that rises five or ten times may make us feel that we spotted something others did not. But if most of our money was concentrated in one company, the outcome could just as easily have gone the other way. That is very different from building a diversified portfolio across different companies, sectors and markets.
There is nothing wrong with taking higher-risk investments. The mistake is letting a few successful bets convince us we have more investing skill than we do, and then taking even higher risk (e.g., leverage) in the future.
We should ask ourselves whether we would still consider it a good investment decision if the outcome had gone against us. If the answer is no, then the strong return may have come more from luck than from a sound investment process.
#4 Mixing Up Your Insurance And Investment Needs
Insurance and investing serve different purposes. Insurance protects us against financial shocks, while investing grows our money over time. Problems can arise when we try to combine both without being clear about which need matters more.
An investment-linked policy (ILP), for example, may offer both insurance coverage and investment exposure. But someone who buys one mainly because it seems to provide both may later realise that the protection isn’t enough, while the investment portion comes with higher fees than they expected.
There is also the practical issue of what happens over time. The adviser who sold us the policy may leave the industry, but we could still be paying the premiums for many years. By then, switching out may also feel difficult because we have already committed money to the plan.
There may be situations where combining insurance and investment works for someone, but it also introduces trade-offs that can be difficult to assess upfront. Rather than untangling these issues later, it may be better to avoid them in the first place by treating our insurance and investment needs separately from the start.
#5 Buying Things To Impress Other People
There is nothing wrong with spending money on things we enjoy. If we genuinely want a nicer car, an expensive watch or a more luxurious holiday, and we can afford it, that is a personal choice.
The problem is spending mainly because we want other people to notice. That can push us toward a bigger wedding, a more expensive car, or a luxury purchase we would not otherwise have chosen. We may end up paying for years for something that gave us only a short period of satisfaction.
This is especially easy when we compare ourselves with friends, colleagues or what we see on social media. But other people don’t have to deal with our monthly instalments, depleted savings, or delayed financial goals.
A useful question is whether we would still buy the same thing if nobody else knew about it. If the answer is no, then we may be buying it more for other people than for ourselves. That is usually a poor reason to make a major financial commitment.
Read Also: What Does It Mean To Be Keeping Up With The Joneses In Singapore?
Photo Credit: iStock/Sorapop
