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.

17 things debt-free, financially happy people do

  • Debt-free people keep close track of personal finances. They monitor how much they earn, how much they save and how much they invest.
  • Those without debt live on less than they make. This, in turn, enables them to put money aside for buying a house, retirement or emergencies.
  • Debt-free people think twice before buying something, which allows them to make smarter decisions. Long-term thinking about spending can also prevent impulse purchases.
  • To get rid of debt, ask for help whether it is lower interest rates or forgiveness for late payment. If you know someone who has met a financial milestone you admire, don't be afraid to ask how.
  • Another common trait debt-free people have is saving money. Make it a habit to put some money into the bank account on a regular basis, just like you pay the rent every month. Adding even small amounts will give you more financial freedom later.
  • Setting a specific goal for saving money is also important as this helps you know what you are striving for.
  • You should learn how to say no to avoid sitting on a mountain of debt. Saying no to smaller expenses can add up to big savings. Host a potluck dinner instead of eating out at posh restaurant.
  • To free yourself from debt, value experiences more than snatching stuff only to catch up with the latest trend. Think about whether you would be better off working late and buying stuff by sacrificing valuable time with your family.
  • Financially-independent people plan each step carefully. They also tackle the problems along the way rationally and systematically before moving on to the next step in their game plan.
  • Financial freedom comes to those who know their limits, and choose not to overspend on things they cannot afford. They avoid debt at all costs and ensure they always have enough money for their long-term financial plan at the end of the month.
  • Not only do they ensure all their credit debts are paid for on time, financially happy people also refrain from spending on credit at all.
  • One can be rich one day and bankrupt the next.

    Financial problems can occur overnight and debt-free people are aware of it. To prevent themselves from sinking into quick sand when troubles arise, they plan for unforeseen circumstances with savings, insurance and other cash reserves.

    This way, they can also have peace of mind over their financial situation as they know they are always prepared for a crisis to hit.
  • Greed can be a dangerous thing, especially if it causes you to aim for greater fortunes in spite of what you already have.

    Financially-happy people count their blessings and don't complain about not having more.
  • Rational shopping is hard for many people who are not financially happy. When you have clear financial goals in mind, you will be less likely to spend on impulse.
  • Before signing up for a loan, deal or purchase, financially savvy people read up on all the alternatives and consequences of the contract first. By doing this, they ensure they get the best deal there is and mimimise their debt risk.
  • Although life might not turn out exactly the way you planned, planning for your retirement ensures you have enough for the later years.

    Retirement planning needs to start as early as possible so you can work towards your goals one step at a time.
  • Financially-free people are not put down by setbacks. By being optimistic, they manage to plan rationally to find their way out of every financially-trying situation.

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.

5 things young Singaporeans waste money on without realising it

  • Out of the Top 10 most common Facebook messages that pops up on my timeline is the exhortation to please buy the remaining 6 months of someone's gym membership since they never use it/they are leaving the country/their significant other has quit the gym.
  • But seriously, the real reason people are always trying to offload their memberships is that most of them signed up due to predatory sales tactics of gym salespeople.
  • Only to later discover that they just didn't have the time/energy/will to drag themselves to a work out.
  • I even know someone who purchased a lifetime membership for, well, more than what some Singaporeans earn in a year. He hardly goes.
  • If you're an avid online shopper, you already know for a fact that when you buy clothes online, you can expect at least 10 per cent to 20 per cent of your buys to look significantly worse than you thought they would.
  • A friend of mine who spent the whole of last year addicted to Taobao has reportedly thrown away every single one of her buys, including two Prada bags she paid $500 for that turned out to be fakes when the handle got ripped off of one of them.
  • Despite the relatively low price of some online clothing stores, be aware that you might end up spending a lot more in the long run due to clothes that look way worse than you predicted.
  • Dining as a group can be tricky. When someone wants to share a few appetizers, nobody wants to be a wet blanket by saying they'll stick to their mains. And most of the time, if the bill is shared equally amongst you, you'll end up paying for their share even if you didn't eat or explicitly agree to adding additional items.
  • This one is for the ladies (mostly). In most of my office jobs, I couldn't help but notice how so many of the ladies-interns included, had perfectly manicured nails.
  • Okay, I can understand how examining your nails throughout the MRT ride to work can help to take your mind off the crowds, I guess.
  • But the main thing is that manicures are actually insanely expensive when you consider the fact that they only last 2-3 weeks max and are a rather non-essential embellishment that you can easily DIY.
  • Bringing lunch to work just doesn't happen anymore, and with the CBD area becoming more and more of a nightlife and entertainment district these days, lunchtime can feel like a high-stakes social game.

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