1 Oct 2024
SOURCE: CPF Board
"YOLO" and "go big or go home" are phrases that encourage living in the moment. On top of that, when we’re constantly juggling work, family, and other commitments, giving in to instant gratifications can be tempting. This makes it important to adopt saving habits that can help keep your finances on track.
Taking control of your finances might be easier than you think. A simple shift in perspective can make a significant difference. This involves viewing your financial situation not as a series of restrictions, but as an opportunity for growth.
The power of journaling to manage your finances
Journaling is a powerful habit for staying ahead of your finances. It helps document where your money goes and serves as a useful point of reference.
Here’s how you can get started with journaling:
Habit 1: Establish short- and long-term financial goals
It’s easy to feel overwhelmed when starting a saving habit. One way to kick-start this is to create financial goals that can help give a defined sense of direction and purpose.
When setting financial goals, list down both short- and long-term objectives. This approach keeps you motivated and ensures you remain focused.
- For example, a short-term goal could be setting aside $1,500 for a vacation within six months.
- Your long-term goal could be having $1,200 for your CPF monthly payouts, from age 65. To achieve this payout level, you would need about $230,000* in your Retirement Account (RA) by the time you are 65 years old. Use the Retirement Payout Planner to estimate your desired payouts in retirement and how you can optimise your CPF to achieve it.
*This monthly payout estimate is based on CPF LIFE Standard Plan, for members who turn 65 in 2034, computed as of 2024.
When you have a clear idea of your goals, each dollar saved becomes a step towards meeting your aspirations. Ultimately, the process becomes both meaningful and motivating!
Habit 2: Define the steps needed to achieve your objectives
Now that you’ve clearly outlined your goals, it’s time to break them into smaller actionable steps.
Turning your goals into concrete tasks makes the journey towards your objectives more manageable. If your financial goal is to save $50,000 for a downpayment for your home in the next five years, you could start by listing down the amount that you are able to set aside every month to meet the downpayment and think about ways to grow that pot of money.
Here are some tips that can help achieve your financial goals:
- Pay yourself first by automating your savings: Set up instructions for money to be transferred automatically every month to a dedicated savings account.
- Limit impulsive purchases: Before making a purchase, wait 72 hours (or three days) before purchasing the item. This "cooling-off period" lets you think whether you really need it.
One effective way to boost your long-term savings is to make cash top-ups to your CPF Special Account (SA).
Your SA is there to support your retirement savings. Making regular contributions can help you gradually build a stable financial foundation for the future.
Furthermore, contributing to your CPF early allows you to take full advantage of the power of compound interest. It works by accumulating interest on both your initial contributions and the interest already earned, leading to growth over time.
With the savings in your SA earning up to 5% p.a.*, take advantage of the CPF interest to grow your savings steadily.
*Based on the current 4% p.a. interest rate floor on Special, MediSave and Retirement Account monies.
Habit 3: Check in on your goals periodically and make time for self-care
Whether you do this daily or at the end of the month, journaling is a small investment of time. With consistency, it becomes a natural habit that gives you a better overview of your finances.
Reviewing your journal entries regularly allows you to determine early if your plans are off track. For example, if you notice that you’ve spent more than expected on expensive coffee this month, it might be wise to cut back next month by opting for free coffee from the coffee machine in your office pantry, or by making your own!
Additionally, seeing your pool of money grow can give you a dopamine hit. This could just be the motivation that helps keep you on track to meet your long-term goals!
But stashing all your money away isn't just for bills and savings. You may also want to use some of it to enjoy life now. Set aside some cash for things that make you happy, whether that's a gym membership, art supplies, or just a nice meal once in a while to balance things out.
As you work on these habits, jot down your progress. It doesn't have to be fancy, even quick notes in your phone can help. You might be surprised how much you've learned when you look back!
The information provided in this article is accurate as of the date of publication.
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