From The Straits Times    |

Credit: 123rf

While plenty has been written about how not to overspend in 2023, there’s good reason to continue being vigilant about our budget throughout the rest of the year.

Between the GST hike, elevated home mortgage rates and continued uncertainties surrounding the greater macroeconomic environment, not overspending should be the year’s mantra and not just the season.

Watch out for these ways you could potentially overspend this year.

Taking on an unnecessarily large mortgage

There are two ways you could overspend on your accommodations. Firstly, by purchasing a private property or HDB resale flat from the open market, instead of waiting to ballot for new BTO developments – provided you’re not urgently in need of your own residence, that is. 

This is because more mortgage rates will likely stay inflated in 2023 (and possibly beyond) due to the stubbornly high inflation in the US economy. Indeed, a recent report by the World Economic Forum warns not to expect any interest rate cuts this year and instead to brace for additional rounds of rate hikes. 

This means that homeowners should expect mortgage interest rates to rise in tandem while the 3-month SORA enters the 3% to 3.5% range.

Don’t underestimate the difference a few percentage points can make in a home mortgage. With a principal sum of hundreds of thousands of dollars, even a slightly higher interest rate can translate to several hundred dollars more you need to pay each month.

This, incidentally, brings us to the second way you could overspend on the cost of housing – by not comparing home mortgage packages to find the absolute best deal, which results in you spending more than you need for that same roof over your head.

The takeaway here is that if you’re planning to get your own property this year, you should check your budget carefully, right-size your property, and – wherever possible – default to the lowest-cost option, even if it means delaying the start of your home ownership journey.

Going overboard when booking trips abroad

Having banked up a healthy amount of air miles and spare cash, it can be tempting to blow it all on a holiday trip with all the bells and whistles. Luxury hotels, breakfast buffets, heck, even extra legroom on your budget flight – these can all seem like necessities after having been kept away from your favourite overseas destinations for so long.

However, spending frivolously on unnecessary things is essentially what “overspending” means, so even though it may seem like you’ve “earned it”, splurging all your banked-up miles and currency at one go isn’t necessarily the best idea.

Instead, book your holiday as you normally would – ok, perhaps you can throw in an extra Michelin-starred meal this time – and spread what you saved up over the next few trips. That way, you can look forward to cheaper holidays or maybe even squeeze in a bonus weekend getaway.

Remember, even despite multi-year lockdowns, your favourite holiday destinations are still standing by, ready and waiting to welcome you back. Whether sooner or later, leisure travel will recover, so there’s really no need to rush.

Over-reliance on services

Singapore’s core inflation remained at 5.1% in November, signalling that cost-of-living will remain worryingly high. Even more troubling, prices are set to stay elevated over the next few quarters, which means we’re in for a belt-tightening year.

Amidst this backdrop, it is crucial to wean ourselves off from being overly reliant on services, including some common ones we’ve come to take for granted.

The problem isn’t with food deliveryride-hailinghousehold cleaning or any of the modern-day services we’ve become accustomed to per se. Rather, it is because, in an environment of high inflation, everything down the line becomes more expensive to source or produce. All these piles up into additional expenses that eat into your budget.

Take food delivery, for example. Your order now has to accommodate costlier food and ingredients but also increased costs of fuel, transportation and labour. All these mean that inevitably, food delivery becomes more expensive, making it easy to overspend if you’re not careful.

If you can opt for pick-up instead of delivery. Or better yet, order food from the hawkers and eateries within walking distance of you. You can also start cooking at home, which can be a huge money saver if you employ a few time-tested meal prep tips – such as buying in bulk, using frozen ingredients instead of fresh, and keeping recipes simple.

And as for the other services you’ve unwittingly come to rely on? Chances are, with a little planning, some effort and a little help from the whole family, you can easily cut back on ride-hailing, home cleaning services, and the like.

If you still rely on such services, remember to charge them to the right credit card to reap some benefits – such as rewards and miles. Our recommendation is the Citi Rewards credit card, which allows you to earn 4 miles per dollar on all online transactions.

Not setting a budget 

This is probably the most common tip regarding reigning in spending, and that’s simply because it works. Think about it: how do you know you are overspending if you don’t know how much you can afford to spend in the first place?

That is what having a budget means at its most basic – working out how much is available for you to spend and tracking your expenses so you can stop before you cross the threshold. Keep this up month after month, and you won’t ever run the risk of overspending.

Oftentimes, overspending happens without our conscious awareness, and we may only realise we’ve overspent when the credit card bill comes or when the money runs out faster than expected.

Hence, the solution is to start keeping track of our expenses – many handy apps can help you do this – so we can better understand our spending patterns and habits and take appropriate steps in response.

This article was originally published in SingSaver.

SingSaver is a personal finance comparison platform that allows users to easily compare credit cards, personal loans, and insurance for free, while helping empower people to lead healthier financial lives through increased financial literacy.