Random Finance Tips #1

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I’ve been wanting to have a section which will go something like ‘Finance Tip of the Day’ or ‘Finance Tip of the Week’, but as each title implies an action that will be carried out on an consistent basis (everyday or everyweek), which is one that I cannot guarantee, I decided a ‘Random Finance Tips’ would be suffice.

So welcome to the inaugural edition!

The first tip in this series is

“Don’t spend more than you can earn.“

Yes I can probably hear a few people going, “yeah but this is common sense!”

Precisely! It is common sense but yet many people continue to commit this same mistake.

In fact, if your spending is almost equivalent to your income, you are already standing dangerously at the edge. Needless to say, once your spending exceed what you earn, your financial picture is definitely not going to look pretty.

If you are one of those that spend much more than you earn, you probably need to take a look hard look at yourself and ask some questions:

1. Are these spendings just needs or wants?

2. Are they absolutely necessary?

3. Will I survive in one year time if I continue spending the way I’m doing now?

It’s not uncommon to get people complaining that they don’t earn enough, and they barely have enough money to spend. While some of these concerns are indeed valid, quite a fair bit of them are facing such problems because they are just spending on some stuffs that are unnecessarily putting a burden on their net income.

Let me give you an example. In Singapore, it is notoriously expensive to buy and maintain a car. Settling the downpayment and certificate of entitlement (COE) of the car is probably the easiest part of the process, but the upkeeping of the car is the KILLER.

If we ignore the monthly installment plus interest that car owners have to pay, they still have to pay for the road tax, car insurance, parking fees, weekly petrol top up not to mention, workshop maintenance as well. These expenses can accumulate to quite a fair bit.

Fair enough if you earn adequately or a car is really a necessity in your line of work, but quite often, I see people buying car for the sake of ‘face’, and then struggling to pay the bills. They then end up being neck deep in water. With no extra cash, there won’t even be savings to speak of, or money to invest for the future. Precarious outlook if you ask me.

There are also many people that overspend using credit just because they don’t really feel the pinch since it is on credit, not cold hard cash. However at the end of the day, you cannot escape the fact that you still have to pay the bank back. If you don’t pay by the due date, you will end up forking out even more as there will be interest charged. And don’t let me get started on credit card interest rates. Sky high if you ask me! Of course, the banks will be happily awaiting all the extra income for them.

Though that is not to say that credit cards are entirely bad. It has its benefits as well and can be a great saving tool if utilized well. I’ll save that for another day.

I’m sure you have often heard your mum nagging at you to spend within your means. Mum knows best indeed! If you are not earning much, then don’t spend so much on things you can do without!

Try this today. Record every single expenses you have, as detailed as possible, and tally it at the end of the month.This will serve as a reality check for you, on whether you are spending within your means or going over the edge. I warn you - you might be in for a shock!

Unless you are a student of course :)

Hi there,

Sorry, I don’t quite understand that bit. Student can overspend?

I to agree with the fact of student overspend.

The Fact that “Don’t Spend More Then You Earn” is to followed strictly

Jag,

You hit it on the head - it is not that most people do not earn enough money to stay out of financial trouble - it is that most people spend more money than they earn and hence financial trouble. (outside of non earning students of course ;)
So, what about some practical advice for making sure you do not overspend? Your readers may want to consider envelope budgeting as it takes all of the guesswork out of the universal question “am I over or under budget?”

Student having over spend more than they earn.