Here's a question for you: What do you want to experience out of life?
Perhaps you'd like to travel the world, learn a new language, or get married and have a family of your own. These may not be events that you foresee happening any time soon, but there's no reason why you shouldn't plan for them now.
The fact that you've decided to manage your finances more effectively this year is a sign that you've got an eye on the future. However, instead of thinking about this subject merely in terms of saving more money, let's look at the bigger picture and see how having a proper financial plan will stand you in good stead.
Financial myth #1: You have to be rich to save
Let's be honest. Financial planning isn't exactly a topic that gets most people excited. Many regard it as something only the wealthy or those approaching retirement age think about. This couldn't be further from the truth. Discussing savings can sometimes be uncomfortable, but talking about it with friends and family can be both liberating and extremely helpful in terms of gaining valuable advice. Talk to your family and friends about how to go about saving – everyone loves to share a success story. The sooner you start the better because this means you'll have more time to save and accomplish your goals.
Financial myth #2: Credit card debt isn't real debt
With a financial plan, you get a clearer picture of your money situation, and this includes your spending habits, debts and investment opportunities. Over time, small changes can reap large dividends. A café-bought cup of coffee usually costs around S$5. Drinking one less cup a day or drinking instant coffee could save around save you more than S$1,200 a year!
Admittedly, saving is tough today, given the price of living is forever rising. But do resist the lure of credit cards if you find it easy to bust a budget. For many people, credit card debt is something that can easily spiral out of control. Having a budget holds you accountable to a goal. Studies show that people with a financial plan in place tend to save more money and pay off their credit card bills in full.
Financial myth #3: Emergency funds are for the paranoid
Life often throws the most unexpected curveballs when you least expect it. It's how you handle the crises or difficult situations that matters. Having an emergency fund factored into your plan ensures that you won't panic if you hit a bump in the road. Ideally, you should put aside around three to six months' of your salary as an emergency fund. Plan on this taking around two years to realise by putting aside $100 per month. Do make sure you're able to meet your monthly expenses too. If you've already started saving, good for you. If not, why not make it a goal for the year?
Financial myth #4: Retirement is all about hobbies and vacations
Even if retirement isn't on the horizon for you now, it's not too soon to start thinking about the golden years. The good news is that planning for the future isn't hard; it just needs a bit of time and thinking. Set long-term goals for yourself and your family: Do you want to retire in the same comfort you enjoy now? Take your family on a well-deserved holiday abroad? Create a college fund for your children, or own a second home? Now, decide which of these goals are non-negotiable, and which are luxuries. Look at your income and outgoings, and work out if you will be able to achieve these goals.
To sum up, it doesn't matter whether you're in your 20s or 40s, having a financial plan in place is one of the smartest resolutions you'll make. If you don't have one yet, why not take that first step today with these seven great ways to manage your money?