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Budgeting 101

5 Money Fears That Can Be Conquered Easily

Stop losing sleep over scenarios that are out of your control – do what you can to strengthen your position today.

 

Fearing is part of human nature. When we were young, we feared monsters under our bed, then bullies at the playground and then grades at university. Now however, most of us are kept awake by an even more frightening foe – money.

Most of the time, our fears may be irrational. This happens when we do not have proper plans and contingencies in place. No matter how much (or how little) you earn, you will always have a money-related fear. We look at five of the most common fears and consider ways you can conquer them.

1. My savings equate to nothing. I need to be scrimping and stinging on everything in life from here on out.

Why we are scared:

Whenever we see our account balance at the end of each month, we are reminded of the harsh realities of living in Singapore. A wave of emotions and thoughts consume us – I can never retire if I continue spending like this; my job pays too low; I spend too much and should really cut back; maybe I shouldn’t have bought that $1,000 handbag.

We are scared because we envision a future that is bleak.

How we overcome this:

We should have a concrete plan for our future. The most concrete plan we can have is a retirement plan. When we plan for a retirement (that itself is a frightening scenario!), we plan to have a future we can envision ourselves living. And this plan will naturally require you to set aside funds today to achieve a better future tomorrow.

This way, you do not have to constantly go into panic-mode every time you see your credit card bill or bring your loved one on a dinner date. You’re already working diligently to put aside money you plan for your future.

With some money set aside already, whatever we have left can be used on the little indulgence that makes us happy in life.

2. What happens if I lose money in my investments? I’ll have to collect cardboard boxes forever?

Why we are scared:

This is a real fear every investor has. For the majority of us, this money in our investment is meant for a future use – a child’s education, a home to live in or a means to retire. Most of us are not professional fund managers and we have difficulty dealing with the stress of losing money in our investments.

We live in this fear because of what happened in 2008 – where we saw the stock market crash, property prices crash, some of the biggest banks go into financial difficulties with Lehman Brother collapsing. During this financial crisis, we would know of people, even retirees, who got into financial ruin, and we do not want that to happen to us.

How we overcome this:

Avoid putting all of our eggs into one basket. In Singapore, we’re quite spread out. There’s money in our CPF, we put a huge chunk in our flats (that the government call investments), we can also invest in the stock market, another property, the Singapore Savings Bonds and other diverse investments depending on how savvy you are.

Some of our money will at risk during a financial crisis. But having a diversified portfolio will keep you from total financial ruin.

3. My wife/ husband earns more than me. I’m worthless.

Why we are scared:

This is a fear that men usually have. Often, this is associated with confidence levels, masculinity and ego. But women can feel undervalued too, especially when they work part-time and bring home significantly less money or are a stay-home mom who are reliant on the income their husband brings in.

How we overcome this:

This is not necessarily a financial situation. What needs to happen here is a joint plan by both the husband and wife about their future money goals and how they intend to reach there.

In addition, there should also be a concerted effort on both parties to communicate spending habits and potential ways for career progression if money is an important issue.

What is important here is open communication, rather than sweeping this situation under the rug only for it to fester over time and cause irreparable damage, to both financial well being and marriage.

4. What if one of my family members falls ill? How will we ever cope with the costs?

Why we are scared:

We are afraid of this because we do not think we have the ability to pay for such horrible scenarios in life. And we still have to consider up keeping the lives of the rest of the family members when this happens. It’s a scary thought.

How we overcome this:

This is easily rectified if we utilize insurance properly. There are many kinds of insurance and we need to understand for ourselves what they are so that we can buy the right insurance that will keep us well hedged against such scenarios in life.

If we have dependents, we may want to get term insurance and hospitalization policies. We may also want to buy these for our spouse. We can also consider buying life insurance for our babies.

In addition, we should understand how we could utilize government schemes, such as Medisave, to ease our financial distress.

5. What happens if I lose my job? My kids will beg in the streets and I will die poor.

Why we are scared:

Most of us have financial responsibilities that we cannot escape from. We have housing loans, household expenses and children who are reliant on our income. We can’t stop buying milk for our babies and we can’t stop paying for our children’s education.

Losing our job will put all this expenditure at risk – that is why we are so afraid of this scenario. Although we live in Singapore, a stable country with low unemployment, we see rampant job cuts in other countries and must be ready if this befalls us. Our loved ones rely on us for this.

How we overcome this:

We need to budget our lifestyles. In the good years, when we get pay increments or big bonuses, we should not drastically increase our expenditure.

We need to create a 6- to 9-month employment buffer in savings. This will relieve short-term stress and still allow us to live our lives normally while we look for new jobs or find ways to cut expenses. Our prudence today may make a big difference down the road in 20 years or 25 years. Young people should understand this.

We should also constantly increase our employability even if we already have a cushy full-time job. In today’s fast changing world, standing still and not learning new things is not an option if we want to continue staying relevant to our employers.

If you can spend a few hours each week watching Suits or The Walking Dead, we are sure you can find time to learn useful things.

Professional certification that may not translate to better pay today may save your job in downturns or get you re-employed quickly.

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