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27 Sep 2022
SOURCE: Credit Bureau Singapore
Being prudent is more than just cutting down on your daily expenses like buying less bubble tea. It starts with taking a deeper look at how you manage your spending. A good start is to sort out your essential and non-essential expenses. Essential expenses are mandatory expenses that are important in your day-to-day life or necessities to maintain the daily operation of a household. Non-essential expenses are usually things that you can either substitute or live without. Read on to find out how to identify and manage the two set of expenses:
1. Household utilities
Make a habit of consuming less power at home. For instance, switching off the power of your electronic appliances when not in use. Small things that you can do such as using the fan over the air-conditioner and doing your laundry only when it’s full can lead to substantial savings in the long run. You can also look towards energy-saving appliances or products that have been proven to be more durable, so you do not have to spend more in the near future to replace or repair them.
2. Food & groceries
Are you guilty of getting food delivery when you have multiple food options just a stone’s throw away? Apart from the delivery fees, the food prices that we are paying through food delivery services are marked-up compared to buying it directly from the vendor.
When you’re shopping for groceries, compare prices between the neighbourhood wet market and supermarkets and choose the one that best suit your budgetary (and dietary) needs. If you are paying with a credit card, use one that awards you more cash rebates/savings/rewards. Some supermarkets might even have membership programmes that allow you to earn loyalty points in exchange for special perks or grocery vouchers.
Another option to consider is to prep your own meals. Not only does it help you to save money, you can also play a part in protecting the environment by reducing your carbon footprint, compared to when you order food delivery.
Insurance plans are like safety nets which will help you pay for future medical or hospitalisation expenses. Do a review on all your current insurance policies and make sure that you are not over-covered. This also reduces the chances of you overpaying for similar insurance policies and will prevent you from paying high premiums in the future for something you might not need.
Constantly chasing the newest fashion trends comes at a hefty price. Not budgeting well for non-essential items will cause you to compromise on your budget for essential expenses, and even worse, leading you to accumulate debt. Where possible, avoid buying luxury items and have a limit for your planned expenditure on clothing or fashion accessories for each month. Consider pursuing more financially (and environmentally!) sustainable choices to represent your style rather than chasing after trends month after month.
2. Entertainment & recreation
Another way to manage your finances is to do a regular review of your subscriptions for entertainment streaming platforms (such as Netflix or Spotify) as these can also add up. While streaming platforms sell you a monthly subscription that might seem affordable at first glance, all these expenses will add up in the longer term. Consider if you really use these platforms on a regular basis and if it this warrants a continuation of your subscription. Beyond such entertainment options, there are also other recreational activities such as outdoor hikes, having a picnic or free museums that you can explore without having to worry about blowing your budget.
As a general guide, even as you have taken steps to cut down on both your essential and non-essential expenses, it is also important to pay your credit card bills on time, so they do not accumulate interest and end up becoming bad debts. Failing to pay your credit card bills on time and regularly does affect your credit score - a figure used by lenders as an indicator of how likely will one be able to repay his debts - and which might affect your ability to take a loan for big ticket items in the future.
Aside from settling your debts and bills, it is also important to also save a part of your monthly income so you can have a sum of money to fall back on should something unexpected happen. All these require having a realistic financial plan for yourself. Start small with these tips and you might find yourself on the way to cultivating good financial habits and saving more for your future goals as well.
Information in this article is accurate as at the date of publication.