Save more in 2020: 5 tips to set better goals
A new year - and a brand new decade is almost here. It's the season for giving, year-end gatherings and Instagram top nines. As you take stock of the year's past, some questions you might ask yourself include: What did I learn? How did I conquer that challenge? And a not-so-popular but absolutely imperative question: Where did my money go?
As you set your new year's resolutions, here's a look at five common ones that may not yield the kind of results (read: more savings) you are looking for - as well as five goals you should be setting instead.
1. "I want to save more this year."
Perhaps you peeked at your bank balance after completing your Christmas shopping and returning home from a dinner with old friends. Or maybe you think there will be some big purchases in the coming year - a wedding, a parents' 60th birthday bash, or new furniture for your home. You have a savings goal in mind and have every intention to get there. But year after year you find yourself falling short, or even giving up after a few unexpected purchases.
Here's what could be more helpful: Work out how much extra you can save and come up with a Specific figure. This will train your brain to commit to it, and set aside an amount as close to this number as possible every month.
You've most likely heard that goals need to be SMART: Specific, Measurable, Attainable, Relevant and Time-bound.
In this instance, you would benefit from Specific and Attainable goals.
First: Take a deep breath, and look over your bank statements. You are looking specifically for items you pay for and hardly use, and anything that could save you money in the long-term. Perhaps you've been paying for a music streaming service but hardly use it. Or you realise you could save on your electricity bill by moving to another service provider. Attainable goal, unlocked.
Second: Whip out your phones, and calculate your rainy day fund. Sometimes the need to look for a new job arises but the hunt takes longer than expected. Or perhaps you are thinking of taking a sabbatical. The general rule of thumb is to set aside about three to six months of expenses as emergency funds - this will give you the flexibility to make certain choices should you need to do so. If you are self-employed, it will be prudent to have at least 12 months of emergency cash set aside.
- So if you spend about S$2,000 a month on bills, home repayments, everyday necessities and more? You would need to set aside between S$6,000 to S$12,000. If you are self-employed, it works out to at least S$24,000 of emergency cash.
- You may also want to work backwards - how much do you have saved up? What is the shortfall? What is the Specific amount you need to set aside every month so you can reach your savings goal? Then commit to putting aside that amount every month once you receive your pay, that is, pay yourself first.
2. "I want to track my daily expenses this year."
After checking that you are not paying too much for electricity and other online services you don't need, it's time to take stock of your everyday purchases.
It is all too easy to shell out S$2 for coffee, S$4 for a cup bubble tea and S$10 for lunch. And it can be confronting, too, to see these purchases add up.
Hence our question to you is: What are you tracking your expenses for? Tracking your expenses with no goal in mind simply means... you have a lot of information about your spending habits. More information isn't always better.
Here's what could be more helpful: Make a goal to spend less on one particular item or activity in 2020.
Make tracking easy on yourself with an app that links to your credit card or bank account. Better still, use an all-in-one dashboard like the Money-In-Money-Out feature in DBS' digibank to get a clear view on how much you are putting into your bank account, and how much you are spending.
Be it bubble tea, nights out, shopping or other indulgences, remember life is not meant to be miserable. Celebrate the small wins - once you've hit a savings goal, treat yourself! Now you'll know you budgeted for that, and can feel less guilty about the occasional treat.
3. "I want to manage my credit card debt better"
Again, wanting to manage credit card debt is a great start.
Here's what could be helpful in 2020: Decide to make your credit card work smarter for you.
While the word "debt" may bring gloom and doom to mind, it may not necessarily be a bad thing. Managed properly, it allows you to furnish a new home, purchase a car, or collect reward points for little indulgences.
Credit cards are perfect for accruing rewards points and cashback rewards to offset your credit card bills. Just remember to spend within what you have budgeted (aka after putting aside the Specific amount we mentioned earlier, and remember to cut back on what we discussed in point two), and pay off your outstanding balances on time. On top of that, why not key a reminder into your Calendar app to do so? Credit cards are a tool to help you get the most out of your spending. Master it, and don't let it master you.
4. "I want to invest better this year."
After setting aside a specific amount of money every month and spending less on nights out with friends, you hopefully have a nice nest egg tucked away - sans the funds you have set aside for a rainy day.
With that nest egg, you finally feel ready to delve into the world of investing. By wanting to "invest better", do you feel that you lack an understanding or knowledge about the investments you have made so far? Or do you want to start investing? Perhaps it's on your to-do list but somehow it ends up being on the backburner?
How about: Set a target to understand investments better.
They say knowledge is power. If you would like to know more about investments, pick a few books, commit to reading a few chapters a week, and review what you have learned. (Pro-tip: You can now even borrow eBooks from the National Library Board mobile app and read them on the go. Beef up your knowledge of investments while on the way to work for free - now that's a win-win)
Reading books not your thing? Simply jump onto DBS Learn to get up to speed with the basics of investments. Financial jargon can seem intimidating, but DBS Learn quickly breaks it all down into what you need to know and make the entire process easier.
Got the basics of investments down pat? Then this should be your resolution for 2020: Start investing.
Sometimes it really is as simple as making time to sit down and start on the goal you have set. Armed with basic investment knowledge, you can use platforms like DBS' digiPortfolio to kickstart your investment journey.
Forget to actually invest, or monitoring your investments often slips your mind? Then make this your goal: Automate your investments.
Consider regular savings plans like DBS Invest-Saver, where you can start investing in Exchange Traded Funds (ETFs) and/or Unit Trusts with as little as S$100 a month, on repeat mode. You will not be locked in to a certain time period, and getting started just takes five steps.
And if you're ready for a more hands-on approach? You can do any of these with digibank: buy unit trusts, trade in equities and ETFs, invest in a short-term endowment, or invest in Singapore Savings Bonds (SSBs). Then, you truly will be on your way to growing your savings.
5. "I want to have enough insurance"
Insurance is very good to have - especially when you never know when life will throw you a curveball. It's also best to buy policies when you are young and relatively healthy as it's cheaper - policies typically get more expensive as one grows older.
Think of insurance like this – it is transferring risk from the individual to the community. In times of old, whole villages were obliged to help an unfortunate fellow member of the community if, say, his/her house was burnt down in a fire, or other ill fortune befell his/her family.
This can be seen as an ancient form of "insurance premiums" paid by members of the village, so they will receive a "pay-off" should misfortune strike them. Of course, insurance works on the basis that "bad stuff" does not happen to everybody at the same time.
But what is considered "enough insurance"?
Here's the resolution that could be more helpful, as you move into 2020: Re-evaluate your life insurance coverage.
Here are some questions you can use as a reference:
- Are your policies still in force?
- How much premiums have you paid so far?
- What kind of coverage do you have right now?
- What is the cash value of your policies?
- Is your family covered by any policies?
Aside from ensuring that your existing policies are in order, it would also be helpful to review your life insurance needs as a whole. As you move into different stages of life, the coverage you need could dramatically change - for instance, you may need to account for outstanding home loan repayments, children’s education, parents’ medical expenses. Take a look at what is important to you, and what you would like to prioritise as not everything needs to be covered at once.
These steps are often tedious and are better dealt with by a professional. Make it a priority to set aside time for discussions with a financial advisor and set your mind at ease, knowing your life insurance coverage is adequate for your needs right now.
Making new year's resolutions may be daunting as there is always the risk of breaking them. But part of making goals is also giving yourself the grace to fall short - and then picking yourself back up to get back on track.
Which of these resolutions are you planning to make this year? If Jan 1 has passed and you feel like you have missed the boat, don't fret - the best time to start, as they say, is now.