What Should I Prioritise First?
The key is not to prioritize what's on your schedule, but to schedule your priorities.
Very often, dealing with your own finances is a juggling act. While paying off your mortgage, car loan, saving up for something, paying for your mobile phone, electricity, and groceries, it can be difficult to prioritise which items should come first. Here are four quick tips that can help you balance out your loan payments while saving for something big.
Most people will have some form of debt. In a way, debt is a side effect of a good thing, allowing us to bring purchases forward — things that ordinarily we may need years or decades to save up for. However, there is a cost to taking on debt. Here are some things you can do to keep your debt in check:
If you have multiple loans, focus on knocking out the debts that carry the highest interest rates — even if you have other, smaller debts that look like they’d be easier to pay off and be done with. The longer you hold on to high interest debt, the more expensive it becomes.
Whenever interest rates go down and become favourable, refinance your loan with better terms.
If possible, try to pay more than the bare minimum on your debt each month.
Getting it out of the way sooner rather than later will reduce what you owe over time and free up more of your money for things that are more fun.
If you are self-employed, then you do not have the benefit of employer CPF contributions. The only thing that is compulsory for you will be to contribute to Medisave. However, you should consider contributing at least some funds to your CPF account. You earn an extra 1% on the combined balances of your CPF accounts (up to $60,000) which will be put into your special or retirement account. The extra interest will help in growing your capital through compounding returns, especially since it has to be kept in the accounts for the long-term.
The importance of emergency savings cannot be emphasised enough. It’s good to plan for at least 6 to 12 months worth of living expenses including your loan payments and necessary bills. Why? If you lose your job or something happens to you, it may take a while to get back on your feet. These savings will protect you from taking on more debt. It can be hard to put aside emergency money on top of trying to pay down your debts, but think of this as an investment toward greater peace of mind.
Remember that apart from your emergency funds, any cash that stays in the bank will slowly lose its buying power due to inflation. There are many good investment options to divert your money to, to help you save for your goals. But remember to choose something that is globally diversified, holds thousands of securities so that you take away the idiosyncratic risk of holding a handful of companies and prevent you from being invested in a particular country which could be doing poorly.
If you’re looking for more ways to help you maximise your savings over time, tackle debt, and check whether you are on the right track, financial advice can help. When you’re ready to take the plunge, we’ll be here for you.
