Many Singaporeans assume that people who have trouble saving on a monthly basis are low-income earners without any room to buffer their expenditures. Unfortunately, that is rather far from the truth, according to Credit Counselling Singapore.
These days, many young working Singaporeans are finding themselves having to deal with accrued debt from month to month, and this is obviously eroding their ability to save money.
Some might argue that this is fine since they are not eating into anything beyond their monthly earnings, and that they're financially secure.
Here are a few things to consider that might change your perspective on living from paycheck to paycheck:
1. Increased Pressure to Keep Your Job
One of the things many people might not realise - at least not until their day-to-day spending exceeds their means - is the fact that living paycheck to paycheck actually requires them to be earning a paycheck in the first place.
This added pressure on your job security is obviously unnecessary and not only can it cause a lot of unwanted stress, it might also affect your work performance.
The last thing you would want is to become so stressed with keeping your job intact that, in an ironic turn of events, you end up losing it. This could come about from a multitude of things, ranging from a change in behaviour, to trying to stay under the radar, to not taking risks and learning new things because you're too scared to rock the boat.
A change in mindset from growing in your job to staying set in your ways can be especially damaging today, where having the bare minimum of skills to carry out your duties may just not be good enough for you to keep your job.
Nowadays, many employers are interested in employees who can contribute to the overall strategic growth of the company, and more often than not, this involves being able to look outside of your own job scope and see how you can benefit the wider company.
An overly-narrow focus on keeping your job can sometimes affect that and, ultimately, it's not going to allow you to see beyond your own desk - figuratively speaking, of course.
2. Lack of an Emergency Fund
You'll be surprised at how many Singaporeans either do not have an emergency fund, or don't know why it's important.
If that's you, well - you should definitely read this. Living from month to month and having to constantly rely on your next payday means that you probably won't have any savings at all, let alone the ability to build up an emergency fund.
The point of an emergency fund is to accommodate any financial emergencies, and this fund must be separate from your savings as it is used for a different purpose. The last thing you want is for your savings to be completely wiped out by unforeseen circumstances, and that is where an emergency fund comes in handy.
This point really doesn't need to be belaboured, but the very real danger of living from month to month without building up any buffer is having whatever little savings you have wiped out unexpectedly, and falling into a spiral of debt.
3. No Discipline in Budgeting Your Savings and Expenditure
When it comes to budgeting, any good adviser will tell you that budgeting your expenditure is just as important as budgeting how much you want to save.
Spending is as much a discipline as saving is, and building up that rhythm and discipline early on in your working life will stand you in good stead during your retirement years.
Ever wondered why CPF is paid out only upon retirement, and on a monthly basis? Well, if you look at the spending habits of many Singaporeans, you can probably understand why.
The last thing you want to do is to blow all your retirement savings in one shot and leave yourself in a predicament when you are no longer employed.
If you are worried about not being disciplined in your spending, that's fine. It's more important to recognise and take steps to prevent potential problems, compared to ignoring them.
To secure your spending in your retirement years, you can actually consider insurance plans that structure their payouts for you on a monthly basis upon your retirement, and this will help to supplement your retirement income.
Plans like Tokio Marine's TM Retirement PaycheckLife are modelled to give you that consistent flow of payouts for life, and can even ensure that constant income for your spouse when you pass on.
Such plans can help you to get some insurance coverage, as well as ensure that you stay disciplined in the years when you aren't earning a regular salary anymore.
The article first appeared on MoneySmart.
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