From The Straits Times    |

It’s all about balance

Think about this for a minute: If you give up your daily cup of latte worth $5, in 20 years, that tiny amount will be able to buy you a fancy BMW car. Unbelievable? Hardly. The only way you can find out what your spending is like is when you draw up a personal budget to keep track of expenses.

Every one of us could learn a thing or two from the way companies are run – they all have operating costs, revenue and profit. To keep everything in place and on track, they have budgets. While your personal budget doesn’t have to be as complicated as a Fortune 500 company’s, it should at least allow you to keep track of how much money you are spending.
 
Cutting back on credit
Credit cards are great for big-ticket purchases, for travel and for all the dining and shopping privileges that come with them. But without careful control, credit card debt can be crippling because of high interest rates (up to 24 per cent per annum).
 
If you do have spiralling credit card debt, stop purchases on the card and start paying off on the principal sum. Of all the debts you have to clear, you should focus on the credit card debt first. Use savings from your reduced spending to pay off credit card debt as soon as possible.
 
Dealing with debt
We all make money mistakes. Some of us enjoy gambling while others might like a little too much retail therapy. Sometimes though, these habits can go out of control – that’s when debt rears its ugly head. Once you’ve recognised what your weakness is, it becomes easier to reverse your mindset from spending to saving. Get help from organisations like Credit Counselling Singapore, which offer talks on money management as well as private counselling.
 
Most people live within their means but someone in debt should try to live beneath his means. Use annual increments and bonuses to pay off loans or better yet, place some of them in your savings. If you don’t have the discipline to put aside money (and not touch it!), have your money automatically deducted from your pay cheque into your savings account. This will come in handy when you draw up a monthly repayment plan to clear your debt. Try not to have an ATM card for this account, to curb the temptation of making withdrawals.
 
Making sense of insurance
Make sure you’re adequately insured. There are generally three broad types of insurance: life insurance, health insurance and personal accident insurance. The general rule of thumb is to be insured 10 times of your annual income. Also, ask your insurance advisor about additional coverage and benefits. For example, you can consider a family income benefit rider that ensures your family will continue to receive your monthly income if you die.
 
Meet your financial adviser at least once a year to review your policies so that they are aligned with your needs. Ask questions to clear your doubts. Find out if any charges, penalties or exclusions are properly disclosed and explained.

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