5 ways to save yourself from falling into financial ruin

This article was originally on GET.com at: 5 Ways To Save Yourself From Falling Into Financial Ruin

Losing sight of our financial goals is never a pleasant thing to deal with whether or not we're born rich or poor, Singaporean or foreigner.

Our finances undoubtedly can make or break us, so it's really up to us whether we want to take charge of our lives and save ourselves from getting buried under mountains of debt that can potentially destroy us.

Here, we at GET.com have for you 5 ways to prevent yourself from ruining your finances.

1. Know the difference between liabilities and assets

We may not be accountants or bankers who spend the bulk of their working hours crunching numbers but it definitely is beneficial for us to know what our liabilities and assets are.

Simply put, assets have the potential to make us richer while liabilities make us poorer.

Liabilities include things like loans, mortgages, income taxes and property taxes etc while assets comprises things like cash, real estate, stocks and bonds so on and so forth.

A great way to start taking charge of our finances and ensuring that we are on the right track is to always make sure that we have the ability to pay back our liabilities and not tip the balance the other way where we're spending so much with little to nothing left to save.

2. Do away with accumulating debt

We all know that debts can destabilize our finances and the fact that some debts like home loans, car loans and tuition fee loans are for the longer-term, it surely helps for us to consciously cut down on other expenditure that we could minimise without putting in too much effort.

In addition, always practise the good habit of paying your credit card bills in full and on time every month to avoid carrying over balances that will snowball into astronomical sums in no time due to the double-edged thing known as compound interest.

Here are 4 basic things we all ought to know about credit card debt.

If you're currently spiralling into debt, this checklist here may just be the thing you need to get rid of debt.

3. Get yourself insured

The monthly premiums for our life insurance, car insurance, health insurance and what have you may seem like a never ending burden just because they are long-term commitments that require us to cough out money month after month, whether or not we get to claim any payout.

Insurance isn't our typical idea of fun but it is a necessary component in our lives.

We never know when we'd get hit by accidents or illnesses, right? The thing with being insured is that it gives us a peace of mind - we all know how rapidly our finances can be wiped out when something bad happens when we least expect it!

4. Build your fortress of emergency funds

While it is commendable that we save regularly, it doesn't hurt to a split a portion of the amount that we are saving for emergency use.

The key is for us to be disciplined and never succumb to the temptation to dig into this pocket of emergency funds that are meant for, well, emergencies.

But of course, everybody has different perceptions of how much their emergency funds should ideally be, so it's entirely up to you how much you'd like to accumulate such that you feel "safe" and ready to tackle any adversity that may come your way.

A general rule of thumb would be to have about 6 months' worth of fixed expenses in it so that you wouldn't be at your wits' end just in case you or your spouse loses a job.

Going on a random shopping spree in the mall surely doesn't count as an emergency.

So, don't even think of using this portion of your savings to "sponsor" yourself after a long week at work!

For those who have trouble saving money, here are some money-saving tips that could possibly come in handy to help you get started.

5. Be proactice when it comes to budgeting

Learn how to manage your money whether you're married or single.

It is always a good idea to adopt good financial habits such as learning how to budget and to will yourself to stick to it, saving regularly, investing for the long run and to never spend beyond your means. The earlier we start to do something about our finances, the better.

Start by looking at your spending patterns, determine which are your fixed costs, where the bulk of your spending is and how much you tend to put aside as savings.

Ask yourself whether you really need that Chanel bag or whether you could set aside a fixed sum to be saved every month you get your salary first instead of saving whatever that is left after splashing out on frequent revelry, dining or drinking outside.

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