Money worries are often the cause of most other stresses, especially around personal or family finances. Retirement planning, children and education, caring for elderly relatives and purchasing a property all have the potential to be a source of arguments and sleepless nights. It doesn’t have be stressful, though. Author and financial blogger Lionel Yeo gives his step-by-step advice to ease those money worries.
How can we ensure that money doesn’t become a worry?
From my experience, some of the major money worries are being able to afford a house; paying medical bills – especially for their older parents; and raising a young family in an expensive city. My advice is to start saving and investing while you’re young – as soon as you have money to spare (even if it’s only a dollar!).
Look at your income (this could be allowances, salary, hongbaos or bonuses) and decide upfront what percentage you want to save and what percentage you want to invest. For example, you might wish to commit to saving 20 per cent and investing 10 per cent of whatever you bring in. Don’t be afraid to refine and reassess how much you are saving and investing. Financial situations change and you need to be practical and not invest more than you can afford.
What are common mistakes when people get into debt?
Sometimes, when people get into debt, they respond by cutting back on everything – even the tiny, insignificant expenditures. This is unsustainable in the long run. It’s like going on a crash diet – you’re not going to be able to stick with it after a few weeks or months. I’ve seen other people live in denial by refusing to acknowledge their financial situation. For example, they might rack up huge credit card debt, but only pay the minimum on their bills and ignore their statements.
If you’re in credit card debt, or any debt with a high interest rate, concentrate on paying that off first. For a mortgage, you can still save while paying off your mortgage because those rates are usually lower. Estimate how much your expenses are. The You Need a Budget app (free on iTunes and Android is a free app that allows you to enter, track and manage all of your income and outgoings. Then work backwards: how much do you have to save every month to pay off your debt? Once you figure that out, arrange to automatically save a part of your salary every month towards this.
What is your advice for people facing money issues and the stresses this brings?
Take it step-by-step – you don’t have to create the perfect financial plan overnight. Instead, start small. Is there a way you can pay off S$100 more towards your debt, or save S$100 more every month? How about S$50? How about S$10? Then adjust your lifestyle and arrange to save that extra bit every month.
If you save any set amount for a few months, you’ll start to create a saving habit. Soon, you’ll get used to saving this amount. Then, repeat the exercise and increase your monthly savings amount slightly. Don’t worry too much about how long it’s going to take. Then focus on creating a saving habit, so that it becomes second nature.
What inspires you to save?
I’ve been saving since I was a kid, with my parents putting away hongbao money in a savings account. But it’s only when I started to work that I realised just how important money is and how hard it is to earn it. I learnt to appreciate it more and took steps to make sure that I saved as much as possible.
My ambition is to be able to afford a house in a couple of years while taking on minimal debt. Then, I’d like to be able to retire comfortably in 20-30 years without worrying about money.
What advice would you have for parents who are trying to get their children to adopt good saving habits?
Walk them through the process of saving up for something that they really want. If they want a toy that costs S$50, break that down into how much they’ll have to save out of their pocket money every day. Then describe it to them in real items. For example, you might tell your child, “Okay, you have S$5 for pocket money today. S$4 is for lunch. With the remaining S$1, you can either buy an ice cream, or you can save for your toy. So which would you prefer?”
If they choose the ice cream, you can let them have it, but be firm with them and don’t buy them the toy if they didn’t earn it. This will help to teach them the lesson that if they want to enjoy themselves tomorrow, they’ll have to sacrifice something small today. In my opinion, that’s the most important personal finance lesson that anyone can learn.
While money can be a major cause of worry for most households, having a savings and investing plan – irrespective of how modest these may be – is an important step towards building future financial security. Furthermore, educating your kids about the importance of saving money is a must. Not only will this ensure that they are financially secure, but it will also allow you to relax with the peace of mind that they are taken care of.
If you’re keen to learn more about protection and retirement solutions from Great Eastern, drop an email to our Great Eastern Life Planning Advisor at firstname.lastname@example.org for more personal advice!
Lionel Yeo is the founder of cheerfulegg.com, a personal finance blog for young executives. His material has been featured in The Sunday Times, Yahoo Finance, MoneySmart, and Wordpress’ Freshly Pressed. For more information about Lionel, visit www.cheerfulegg.com.