When it comes to financial matters, not many people can claim to know its ins and outs. It’s why financial advisers and money lenders exist after all. But what if there could be some simple guidelines that everybody understood and could relate to? A recent study has shown that students and small business owners who use such guidelines tend to stick to them more easily and effectively.
Let us have a look at some of the basic guidelines that may we may apply in our routine borrowing and saving of money.
1. Start saving up for emergencies
Most financial advisers and money lenders would tell you that you need to save up three to six months of your expenses for emergency purposes. What they don’t tell you is how long it will take you. The question you ask yourself is how you are going to do so yet the expenses seem important and your income is fixed. The best advice would be to acquire cash or credit equal to your three months of expenses. This would be your emergency savings. It is also recommended that you have a fall back plan for real emergencies not attached to your savings.
2. Save up for Retirement
This is one advice you cannot ignore. At one point or another, you will want to retire or it will come calling. You must have a plan for this to ensure you can still enjoy your kind of lifestyle even in old age without becoming a financial burden to those close to you 15% inclusive of company match of your income should set you off in the right direction. There is no excuse for this because you can always start small as you build up your savings rate. Consistency is key here and time lost, cannot be recovered.
3. Exercise restraint
This is the tricky part. Most people who want to save up on something usually find themselves using the money on other things. The misconception being that the amount you will take out of your savings is small and will not make a difference. This is very wrong. You might not realize it at that time but you will in future. Let the savings be for what they are intended and nothing else.
4. Save up for college
College can be quite an expensive venture and if you are not prepared for it financially, it can be an uphill task. If you are able, you should take up a habit of setting aside at least $25 a month when your child is born. These small amounts will become significant in the long run and enable you to pay for the best schools instead of settling for those in the financial aid package. It is good to note that if you do not have enough income for both retirement and college savings, you should take the former as there are various financial aids for colleges like student loans and scholarships but none for retirement.
5. Plan and manage your student loans
The first rule of borrowing money is never to borrow what you cannot pay. Hence when getting a student loan, you should always ensure that you don’t borrow more than you expect to earn in your first year out of school. This will enable you to pay of your debt in less than ten years without you feeling much of the pinch when it comes out of your income.
6. Go for used cars and drive them for 10 years
It is well known that once you buy a brand new car and you try to sell it after, you will do so at a significant loss. This is because they lose their value at an unbelievably fast rate. You would rather go for a used one and take advantage of this fact over those who don’t mind the pinch of depreciation or are unaware. Or alternatively, you might want to switch it up to car rental services. There are quite a large varieties of car accordingly to your ideal and they offer both short term car rental and long term car rental. So if along the way you decide that you don’t need it anymore, or no longer have enough money to pay COE, this car rental service might be the one for you!
7. The 20/4/10 rule on car loans
What is this 20/4/10 rule you ask. It is a rule that guides you on what to do when taking out a car loan. To break it down, it states that you put down at least 20% of the value of the car which will limit your payment period to less than four years and finally keeping your monthly expenses at less than 10%.
8. Use your credit cards wisely
It is highly advisable to look for lower-rate cards especially if you have an outstanding balance. This facilitates faster debt clearance. If you must have a reward card, it should return at least 1.5% of what you spend and by regularly reviewing them you will ensure you are getting your moneys’ worth.
9. Square away your insurance
There is virtually no need to take an insurance cover on something you can pay out of your pocket. Let your insurance cover you for major things that would otherwise destroy you such as a serious medical issue or your house burning down. What you gain out of this is higher policy limits and higher deductibles.
10. Choose a reasonable mortgage amount
It is good to be realistic and know your limits. When you take out an over-budget mortgage, you could be setting yourself up for future financial disaster especially when all other home ownership costs are added up. Here’s the bottom line that you can take to the bank (pun intended) if you cannot afford a 30 year fixed mortgage, you cannot afford the house.
11. Choice of mortgage rate
When choosing the rate of a mortgageplan, always factor in the duration you intend to stay in the house. If you are sure of the duration and it’s less than 1o years, then a hybrid mortgage should be what you go for. But if more than 10 years, a 30 year fixed rate is your best option. This ensures you don’t lose your home over unexpected surges in payment.
12. Push back those mortgage prepayments
You have better and more important things to do with the money, like saving up for retirement, paying debts or building up that emergency fund. It will be wise to cover all these bases before going ahead and making extra payments to bring down your mortgage principal. This would be good but what is more important?
By following the above tips, you can succeed in being a good manager of your finances. However, we have to admit that you will need professional financial help from time to time. And should such kind of help be related to borrowing, then you might want to look out for EasyFind moneylenders. One of their strongest selling points is that they offer some of the most competitive interest rates in the whole of Singapore. They are also licensed so you know you are dealing with a legit entity. Last but not least, they have structured money lending services to meet the various needs of their clients.