No one, not even the best financial advisors, could have predicted the uncertain global climate that 2020 has landed us in. In fact, uncertainty might be an understatement, with everything from a global pandemic to world-changing protests shaking things up.
As a result, it comes as no surprise that many — if not most of us feel the impact on our wallets. While we’re dealing with threatened jobs and mounting bills, we’re still expected to keep food on the table and at the same time, prepare for a recession.
Well, it sounds daunting, but fret not! You can cut down on your daily expenditure, such as by finding a good electricity supplier with rates that suit your current income. What’s more, we’ve got five personal finance tips to help you tide through these hard times safe and sound financially.
1. Refinance your HDB housing loan
Without a doubt, mortgage loans are one of the heaviest financial burdens. With monthly fixed payments that can take decades to clear, getting a good rate is essential to saving in the long run.
So how does one get the best rates available? Contrary to popular belief, it’s not too difficult — simply keep your eyes open for the banks with the lowest interest rates. This is especially true if you currently have a fixed HDB loan, one with a slightly higher interest rate of 2.6%. On the other hand, the interest rate for bank loans can be as low as 1.38%. As such, choosing to refinance with a bank can help you save a lot on the amount of interest in the long run. And the less you spend on interest, the more you have to save or spend.
Do note that there are fees to account for when you refinance. These include valuation fees, legal fees, and admin fees that can be quite sizable in the short-term. That said, the savings you get in the long-term are well worth it as long as you plan ahead! As long as you are financially able to handle the upfront fees, you’re all set to save big time.
2. Make sure you have solid insurance plans
Getting properly insured is a step in the right direction to provide both you and your family with much-needed financial stability. What most people don’t know, however, is that there are two kinds of insurance we should consider.
The first kind of insurance is those for protection. Health insurance, critical illness insurance, and life insurance are musts. These make sure that if anything were to happen to you, be it an accident or a sickness, you can focus on recovering with a peace of mind without being burdened by the heavy medical costs. In the tragic event of loss of life, your family will also receive money to help them through.
A tip when buying these kinds of insurance policies is to look closely at what each of them covers. Avoid buying policies that overlap in terms of coverage, as you’ll end up paying more premiums each month for the same payout.
The second kind of insurance is those that help you grow your wealth. These come in investment-linked policies or even endowment plans — both of which help you to save and grow your savings. Note that the tenure for these policies tend to be very long, spanning decades, so do ensure that you have enough cash flow before committing to one.
3. Use your savings for investments
So you’ve got a lump sum of money sitting in your bank account, ready for any rainy day. You’re safe, right?
Well, while you might be inclined to say yes, the fact is that inflation will probably erode much of your money’s value over time. The bank’s interest rate is usually far below that of inflation, so keeping it stagnant there really isn’t the most financially savvy move.
Instead, what you can do is to find avenues to grow your money beyond the low-interest rates offered by the bank. One way to do this is to choose to put your money in a fixed deposit account that will give you slightly higher interest rates. This is often touted as the safest way to grow your money as there is little to no risk involved. There’s no way you’ll lose your money in this case.
However, if you want to see more monetary growth, some risk has to be involved. This is where investment banking comes in and you can choose to invest in different stock markets. If you don’t have an eye for numbers, not to worry as well, as there are many robo-advisors and even bank services that will do the investment decisions for you for a small fee. These can be rather profitable.
4. Clear your credit debt ASAP
One of the most staggering financial heavyweights you might face is that of credit debt. In fact, it’s good advice to totally avoid incurring debt as much as possible. However, even if you’re in a sticky situation with debt, there’s light at the end of the tunnel — if you make the right moves.
A protip is to clear the debt with the highest interest rates first. This prevents it from snowballing even further at ridiculously high rates. By prioritizing the debt with higher interest rates first, you’ll find that you’ll save much more in the long run.
Another tip is to prioritize clearing the debt over saving money at the moment. It’s a tough call to make, but you’ll save so much more on interest in the long-run, even if you have to forgo saving now to clear your debt. Putting any money you have to spare into your monthly payments can also add up to big savings in the future. You’ll be able to pay off your debt faster and save on interest.
5. Use personal finance apps to track spending
Ultimately, making good financial decisions isn’t just about the big things like insurance or debt. In fact, your day-to-day spending habits might be cause for worry, especially if you find yourself constantly buying unnecessary items or making unwise purchases.
As such, keep your daily spending in check by using personal finance apps. These often come with a spend tracker function, which helps ensure you keep within your monthly budget. It takes time to build a habit of tracking every single purchase, but it certainly helps you be more aware and intentional with each purchase. It helps you spend less on things you don’t need, leading to more money to save up for the future. Setting a weekly or monthly budget is also a simple yet effective idea to manage your personal finances.
In conclusion, these five simple tips will help you make decisions with good financial sense. Ultimately, financial stability is less about earning money, but more about planning ahead. With solid plans, you can rest easy knowing you’ll survive even in uncertain times.