Each time you read about some hotshot young entrepreneur who’s created a billion dollar startup that cures cancer, all at the tender age of 12, the Internet brigade leave snide comments about how great it must be to come from a rich family and get a head start in life.
But guess what? How successful you are at managing your money depends on a variety of factors, some of which aren’t as obvious as a dad with deep pockets.
Here are three unexpected factors that can make you a lot better at doing the whole saving and investing thing.
An environment that’s supportive of spending less
It might surprise you to hear this, but kids from upper middle class backgrounds aren’t necessarily the best at managing their money. In fact, those who learn only how to live the high life and emulate the big-spending habits of their peers without disciplining themselves to save and invest can end up in trouble.
The people you hang around with can have a huge impact on your attitude towards money. There’s a lot to be said about having a supportive group of friends who aren’t always goading you to spend money, and are happy to find cheap ways to hang out.
On the other hand, if you hang around high maintenance people who’re constantly trying to keep up with the Joneses and flaunt their cash, don’t be surprised if it works against your financial goals.
Your choice of partner can also have a heavy impact on your finances. So pray that you end up with someone whose long-term goals are aligned with yours.
How much you can be bothered to improve your financial situation
No, this has nothing to do with meritocracy. Rather, for many middle income Singaporeans, the difference between being financially prudent and financially irresponsible really boils down to one simple factor—whether they can be bothered to put in the effort to manage their finances.
Any two people earning the exact same monthly salary can have very different financial situations. No matter how high your salary is, there are always some people in your income bracket living from paycheck to paycheck. And even with an average salary, there are some folks who save and invest assiduously.
Small and simple acts like downgrading your mobile phone plan, going for outdoor runs and workouts rather than joining a gym, having dinner at home most of the time instead of eating out constantly seem minor, but they go a long way towards lowering your spending.
What’s more, cancelling the newspaper subscription for that daily broadsheet you never read, checking if it’s time to refinance your home loan and searching for a savings account with a decent interest rate are all things people who are too lazy or apathetic about their financial state wouldn’t bother to do.
So don’t act like you have no power over your finances. Start bothering and you’re sure to see improvement.
Your capacity for patience and delaying gratification
Making prudent financial choices isn’t at all exciting (unless you’re prone to getting excited over that $0.50 discount on broccoli at FairPrice).
Most of the time, it’s just about waiting. Saving and investing is a waiting game, and in order to enjoy the fruits of compounding interest, you need patience.
You might be putting your money in ETFs, but it’s probably going to take years before you’ll really start to appreciate your investment.
Patience and the ability to postpone your present needs for future ones can help you reach your financial goals faster.
Those who only want quick returns are more prone to falling for get-rich-quick schemes, or spending all their cash on present desires. But if you find smart ways to hack your lifestyle such that you are able to build for the long term, and yet still benefit from the short term expenditures that are sometimes necessary, you will be able to reap benefits both in the medium and long term.
One simple example could be benefitting from existing expenditure by switching the mode of payment to credit card. Sounds strange? A new service called CardUp now allows you to pay for things like rent, condo management fees, school fees and more with your credit card. You previously couldn’t and as such, weren’t able to benefit from accruing air miles or cashback from these payments. Small changes like this can go some way to helping you deal with your need for some sort of instant gratification, without changing how much more you spend.
What other factors help you to manage your money well? Tell us in the comments!