The Worst Money Mistakes Professionals Make
Being a professional in Singapore means having a stable income. It gives you the freedom to live wherever you want, travel and see the world, provide for your family or occasionally indulge your preferred luxuries. While this stability is comforting, it’s important to keep in mind that a series of financial mistakes can easily change that.
The best way to guard yourself against these mistakes is figure out what they are. Learn from the worst financial decisions other professionals in Singapore make, and ensure you’re not sabotaging your own financial situation. Here are some of them.
Buying a Home Before You’re Ready
The property market in Singapore is expensive. Buying and owning one is a massive financial commitment. Yes, in most instances it’s better than renting, but taking it on requires significant financial leverage. You need to be ready to take that financial burden in case you incur other debts, get laid off or other unforeseen events happen.
On top of the cost of the property and the possible interest, your own home means you have to pay for security, maintenance and other everyday expenses. Unless you have enough cash flow to cover all that and still maintain your lifestyle, it’s better to wait until you do. If not, you could end with a bad credit score and up defaulting on your property.
Sudden, Luxury Expenses
Many young professionals in Singapore have lived with their parents their whole lives. Landing a stable job is usually what prompts them to leave the nest and try living on their own. All the freedom, a relatively generous cash flow and credit cards usually result in a lifestyle inflation, with professionals living larger than what they can afford. This is one of the major contributors for consumer debt in Singapore.
While these expenses – a luxury car, constant dining out and closet full of new clothes – may gratify you in the short run, spending too much money on them will hurt you in the future. There’s nothing wrong with indulging yourself every now and then, but you need to set a limit and stick to it, especially when it involves items that depreciate or have no long-term value.
Spending Without a Budget
There’s one surefire way to ensure that you don’t overspend: have a budget. Go through all your usual and reasonable expenses, like rent, groceries, transportation, meals and even entertainment. Think of your monthly budget as your guide towards better spending habits and a happier bank account.
It’s also a lot easier to monitor if you’re overspending and how you’re doing it. Maybe it’s all the unplanned dinners at expensive restaurants along Orchard Road or paying for subscriptions you don’t even use. Professionals like you are often busy, and it’s easy to lose track of all these. A budget will make tracking and holding yourself accountable much simpler.
Not Having a Savings Account
While you’re earning, make sure you’re setting aside money for a rainy day. It’s true, the job market in Singapore is still strong. You will most likely keep your job and climb the corporate ladder. However, it’s always a good idea to have a savings account and an emergency fund.
One of the most effective ways to save is to set aside a specific amount of money that goes into your savings before you start budgeting. That way, you are not tempted to spend it because it’s readily available to you. You can use this money to invest, buy property in the future or keep it as an emergency fund.
If you haven’t heard of an emergency fund before, it’s because it’s not as common in Singapore. However, with the rise of personal finance management apps, podcasts and blogs, it’s becoming more and more mainstream. Basically, an emergency fund is your stash in case of any financial difficulty. Most money gurus will tell you to have at least 6 months’ worth of salary saved up to make sure you’ve got your bases covered.
Overusing Credit Cards
When you’re working a corporate or a professional job in Singapore, it’s near impossible not to have a credit card. There are even companies that issue multiple cards to cover their employee’s different expenses.
It’s easy to go overboard because you’re not physically seeing the money you’re spending, but regardless of how you pay, you’re incurring that expense. This is especially true for online, large and expensive purchases. Often, you comfort yourself with paying the item in increments which seems bearable, but add all that up, plus interest, and you have yourself an unwise financial decision.
While there’s nothing wrong with using a credit card, make sure you’re smart about it. Use them for necessary purchases, like home appliances or gadgets you need for work, rather than indulgent items. Also, make sure the you pay your bills regularly and completely. The interest can really rack up and, in some extreme cases, can go over the actual cost of the item.
What can you do to avoid these money mistakes?
The first step is to recognize that you’re either making these financial mistakes or have a tendency to because everyone does.
Once you’ve done that, perceive money as a professional your age would, not a 20-something who just graduated college. You may have a steady income, but you also have responsibilities and growing expenses. Professionals in Singapore have to worry about rent or mortgage, utilities, transport, food and if they have a families, all their expenses too.
For someone like you, money is a limited resource that can either be used to further grow it or reduce it to nothing.
Broaden your knowledge on personal finance – read more articles like this one, do your research and invest in seminars and workshops. Try out different strategies to handle your money better and assess which one fits best for you. There is no cookie cutter way to avoid making the worst financial mistakes but knowing what they are and arming yourself against them is your best bet.