Amal is three years into her first job after graduating. While she still lives with her parents, she puts a lot of effort into keeping up with appearances. She drinks oat milk latte from her favourite cafe and only buys clothes and accessories from designer brands.
Wafiy and his wife both have stable jobs in the public sector, and they have two kids who attend private schools. They also spare no expense in dressing the kids well and ensuring their kids have everything they need. They’re still paying off the mortgage on their first home, and Wafiy is thinking of trading in his current car for the latest luxury car model in Brunei.
To Amal and Wafiy, their spending and lifestyle habits are signs that they have arrived – they’re doing well and have reached a certain financial status. This may be true on the surface. However, in the long run, they’re probably not spending within their means to try and keep up with their current lifestyles.
This is the biggest mistake many people make: they forget the fundamentals of saving and budgeting and find themselves in the depths of debt.
Wafiy and his wife both have stable jobs in the public sector, and they have two kids who attend private schools. They also spare no expense in dressing the kids well and ensuring their kids have everything they need. They’re still paying off the mortgage on their first home, and Wafiy is thinking of trading in his current car for the latest luxury car model in Brunei.
To Amal and Wafiy, their spending and lifestyle habits are signs that they have arrived – they’re doing well and have reached a certain financial status. This may be true on the surface. However, in the long run, they’re probably not spending within their means to try and keep up with their current lifestyles.
This is the biggest mistake many people make: they forget the fundamentals of saving and budgeting and find themselves in the depths of debt.
If debt accumulates and becomes overwhelming, the negative impact goes beyond your financial health. The stress and anxiety over repaying that debt impacts your mental, physical and social well-being as well. This can manifest itself in sleepless nights or ailments like headaches, fatigue and trouble breathing.
The number one rule is not to spend more money than you earn and avoid being in debt altogether. However, if there is a genuine need, incurring debt is not a problem so long as you can manage it responsibly and make regular payments.
Managing debt is an important part of maintaining your financial health. Positive thinking, unfortunately, isn’t enough to work a debt situation out. Here are five tips to ensure that you’re financially prepared:
1. Track your expenses and develop a budget
This is starting point of every financial journey. It is essential to track your expenses and monitor how much you’re earning and spending. From there, you will be able to assess whether these are necessities or nice-to-haves. Becoming more aware of your income and expenses can help you to eliminate or reduce unnecessary costs.
Once you have established this, work out how much you can save every month, how much to allocate to your necessities and having an emergency fund for those “just-in-case” situations. Establishing a fallback fund creates a financial buffer to cover any unexpected circumstances like losing your job or a serious injury.
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2. Prioritise your debt
3. Don't take on more debt
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While you’re in debt reduction mode, it is important to work towards paying off what you currently owe before taking on any new debt. A good rule of thumb is if you can’t pay for something in cash, don’t buy it! If you’re still using your credit card to pay for purchases to earn rewards, make sure you pay off your balances promptly.
4. Consider consolidation
If you’re deep in debt, look into consolidating them into a single, lower interest rate loan. This can help you make your monthly repayments and outstanding balances more easily, and potentially save you money. At the same time, make it a habit to track your spending and be on top of your outstanding debts.
5. Stay disciplined
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Summary
The stresses of today do require a certain degree of self-care, and it may be tempting to purchase a little something special to treat yourself, indulge in gourmet dining experiences or taking a beach holiday for some rest and relaxation. However, be honest about your spending and make sure you stick to the rule of not spending more than you earn. Budgeting and staying disciplined is crucial to maintaining your financial health.
Working out your debt can be a stressful affair. If you have more questions on managing debt and maintaining your financial health, book a consultation with our financial planners.
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