What’s your New Year’s Resolution? Most people feel inspired to become fit and lose the holiday weight, while others plan their finances to make better life decisions. There’s likely no better time to manage your year-long finances than the first few weeks of January, especially for those who splurged on holiday purchases. Here’s a handy guide on how to save money in Singapore for 2020:
Look for Promotional Deals on Mortgage Refinancing
Banks often roll out promotional interest rates on mortgages during the first month of the year, so you should check the viability of refinancing your home loan with a bank. The best fixed interest rates for a $500,000 loan for 25 years range from 1.86% to 2%. The lock-in period varies between two and five years. Don’t forget to shop around for competitive rates with the help of a mortgage broker.
It’s recommended for homeowners who can’t decide on the best deal for them. Third-party advice also prevents them from miscalculating the supposed savings. An example of this happens when you don’t have to pay closing costs on the new mortgage, but the higher monthly installments over a certain lock-in period will be higher than the original monthly repayments.
Consolidate or Restructure Existing Debt
Debt consolidation or restructuring can save money in the long term. Take a $10,000 credit card balance with a 28% annual interest as an example. It would take 11.5 months to repay the entire payable amount of around $11,520 if you only pay $1,000 every month. If you sign up for a 0% balance transfer with another card, you would only have to pay the principal amount over a 10-month period.
You should check with your bank or credit card issuer about certain fees that may apply for balance transfers. This process will only save money when there are no fees involved for their offers. Otherwise, you should consider a personal loan with a 10% effective interest rate per year. You would only pay around $550 for 12 months, which means you get to save around $600 on interest charges if you didn’t restructure your credit card debt.
Conquer Your Doubts and Fears About Investing
“The best time to plant a tree was 20 years ago. The second-best time is now.” This Chinese proverb also applies to a stock market investment account. The earlier you start, the better the chances of reaping the benefits from your investments. A monthly deposit of $200 for 20 years can grow to more than $150,000 at a 10% annual rate of return.
If 20 years is too long, you can try to invest $500 every month for 10 years with the same rate of return per annum. The projected investment returns can reach up to $105,000. Most people believe that they will only lose the money they put in the stock market, but this generally applies to stock traders. Investors typically hold on to their money for the long term to weather the economic cycle and buck market volatility, instead of attempting to time the market for a lucrative cash-out of their money.
The Old-Fashioned Money Challenge
Social media trends have sparked novel money-saving concepts including the weekly money Bingo. The long-time game works just as how you would play Bingo: take a sheet and cross-out the numbers that you save every week. You can put increments of $100 on the sheet (e.g, $100, $200, $300) and try to save your chosen amount every week. You can try increments of $10 and do a random selection of numbers.
Make Your Budget Simpler
Have you heard about the 50-30-20 rule? This budget method requires you to save 50% of your monthly disposable income for basic expenses such as mortgage payments, groceries and utility bills. The 30% will be for discretionary spending like eating out or going on a movie night every weekend, while the remaining 20% should be spent on emergencies, investments and savings.
Other basic expenses include annual life insurance, car insurance premiums, housing society bills and transportation expenses. Discretionary costs fall on the “want” category, as you don’t need to spend on them to continue with daily life. They can, however, improve the quality of life. Strike a balance between dining out and going on a movie date, which can be twice a month instead of the usual weekly habit. You need to track your discretionary expenses to avoid taking up more than 30% of your income.
A good way to limit your miscellaneous costs involves a higher allocation for investments. Once you already allotted more than 20% of your monthly disposable income to your emergency or investment fund, it’s easier to control your urge to spend on lifestyle expenses. You need to be disciplined, though, particularly if you have easy access to the funds.
Let’s say you earn $7,000 per month. The half of that (i.e. $3,500) will be spent on essential items and expenses. Discretionary expenses and savings will take up $2,100 and $1,400 of your income, respectively. Based on these figures, you could set a higher percentage to your savings and investments by more than 10%. If it seems possible to save money on a certain month, then you should at least cut back on your lifestyle expenses.
As another new year rolls out, you’ll have a chance once again to improve your state of finances and avoid making the same mistakes. If you plan to apply for a new loan to consolidate to restructure your debt, you should consider borrowing money from a licensed money lender when applying for a bank loan seems futile. Visit A1 Credit now and learn more about our New Year’s offers. Click here to find out more about our services.