Budgeting

Why Less is More When it Comes to Managing Your Money

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Joanne Poh

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As a tiny country where what’s normal elsewhere doesn’t apply, we tend to go overboard with certain things.

We’re some of the world’s most frequent travellers, with an average of 5.2 overseas trips taken in the last year. There are those top PISA scores that have ranked our students as the world’s best in reading, math and science. Then there are the infamous surveys which have named us the most expensive city in the world.

But more isn’t always better—at least not when it comes to personal finance. Here’s why:

 

Wanting to have it all can lead to bad financial choices

The Singaporean dream is one in which big money is made. And where there’s big money, there must be big spending. Ordinary people look at tycoons driving past in their Ferraris and wish that one day, that could be them. After all, what’s wrong with dreaming big?

But that’s exactly the problem many Singaporeans face. They might be earning decent salaries, but they remain in poor financial health due to excessive spending habits and extravagant tastes.

Take all those news reports about people earning good salaries but ending up in five or six figures of credit card debt, for instance. The government has even had to take steps to curb household debt by placing limits in the form of the Total Debt Servicing Ratio and reducing the amounts people can borrow through housing loans.

What’s more troubling is that, of the unsecured credit (eg. credit card) borrowers whose debt is more than what they earn in a year, 65% are actually earning above the median income, and more than 50% have tertiary education qualifications.

 

Simple living is the key to spending less

One of the keys to spending less, especially when you are earning an above-average salary, is to simplify your life.

Instead of focusing on accumulating more and more belongings—clothes, shoes, handbags, cars—someone who lives a simple life aims to buy only what he needs. If your shoes ain’t broke, there’s no reason to buy new ones.

Living simply also means finding small, inexpensive ways to enjoy life, rather than always chasing after the latest fads.

 

Downsize your life

Downsizing your life is a powerful reminder of how consuming less can be beneficial. Selling your car and travelling by bicycle and public transport can actually make your life less stressful if it means you no longer have to worry about being in debt.

When it comes to downsizing, it’s easier to do it earlier on in life than later, since humans are more adaptable at an earlier age when they’re in good health.

What is more, by downsizing earlier, you’ll be able to build up your retirement nest egg at an earlier age, and thanks to the power of compound interest that also means you’ll have to make less of an effort than those who start later.

 

Invest only in what works for you

When it comes to growing our wealth and investing our hard-earned cash, many people throw their money at investment vehicles without doing proper research, or knowing how a particular investment fits into their long-term strategy.

For instance, every so often, we heard about Singaporeans losing millions in some dodgy investment scam like the infamous gold buyback schemes which, believe it or not, some people actually fell for twice.

Then there are those people who’re always ready to experiment with new types of investments, be it gold, forex, peer-to-peer lending, micro-investments or whatever, mistakenly thinking that they’re diversifying their portfolios.

For the vast majority of us, what works in the long term is to focus on just a few key types of investments that work for us and that are suitable given the stage of life we’re at.

For instance, as a young 20- or 30-something Singaporean with decades of work ahead of you before retirement, a decent investment portfolio might consist of some choice stocks or ETFs, and maybe a small amount of bonds for security. Short and simple.

Have you ever experienced having more with less? Tell us in the comments!

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Joanne Poh

In my previous life, I was a property lawyer who spent most of my time struggling to get out of bed or stuck in peak hour traffic. These days, as a freelance commercial writer, I work in bed, on the beach, in parks and at cafes, all while being really frugal. I like helping other people save money so they can stop living lives they don't like.