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In this post, we explore 5 hacks & challenges to supercharge your finances for 2021!
#1: No-Spend Challenge
The No-spend challenge is just as it implies – you simply stop spending money. The challenge is usually done within a fixed timeframe – a month or even a year!
Some basic rules:
What is allowed: List out the essentials necessary for your daily needs. This includes food, electricity, phone bills as well as your mortgage.
What is not allowed: Anything that you can live without such as eating out, new clothes, online shopping, and generally other wants in your daily life.
How to achieve a no-spend month in Singapore:
One of the ways you can avoid spending money is to occupy your time with free activities!
Nature walks: Singapore has 21 hiking trails which should be more than enough to occupy your weekends for a month. Hiking also doubles as free exercise which means you can cancel/pause your gym membership during your No-Spend Challenge.
Simon, a Youtuber in Singapore, embarked on a journey to enjoy Sentosa without spending money and explored many of the free attractions. You just have to be creative!
Many of Singapore’s museums also provide a world-class experience and host many of the largest collections of South-east Asian artefacts. Singapore Citizens and Permanent Residents enjoy free admission to the National Heritage Board’s national museums and heritage institutions all year round.
How do you avoid temptation?
To stay on track and achieve a no-spend month, we can start by deleting the online shopping Apps on our phones to avoid being tempted by the endless notifications they send us. Also never save your card details into shopping websites/apps – make sure you to have to physically pull out your credit card and key in details to complete a purchase.
Put a Post-It on your credit card to remind you of your “NO-SPEND” challenge – you can even freeze your credit card 😉
Support from our family and friends in reminding us to avoid shopping can provide us with added motivation to adhere to the challenge.
Ultimately, it is important to get deep with our motivations in starting the challenge and remember the goals that you are fighting for!
#2: Dave Ramsey Method
Dave Ramsey is an American personal finance advisor and radio show host. We will cover the 2 most popular strategies recommended by Dave Ramsey.
- Debt Snowball method
The debt snowball method is a method for paying off non-mortgage debt. It involves paying off debt in the order of small to largest principal amount, regardless of the interest rate.
These are the basic rules to follow:
- List your debts from smallest to largest regardless of interest rate.
- Make minimum payments on all your debts except the smallest.
- Find extra income through side hustles.
- Pay as much as possible on your smallest debt.
- Repeat until each debt is paid in full.
Dave Ramsey asserts that this method works because of behaviour modification. In other words, the ability to pay off the smallest debt keeps us motivated to repay debts as we can observe the positive results and spurs us on to repay our larger debts.
- Envelope System
The envelope system is a system of keeping track exactly how much money you have in each budget category for the month. You do this by literally keeping the money in a physical envelope (not kidding). You are unable to overspend, since there is a physical limitation of cash which forces you to stick to your budget.
These are the basic steps to follow in using this system:
- Figuring out your budget categories
- Deciding your budget amount
- Create and fill cash envelopes for the categories.
- Take money out of the envelope for expenses (including online expenses)
The system is not meant to make you starve if you really run out of money in a certain envelope but serve as a physical reminder than you are spending more than you should or faster than you should.
In the Singapore context:
According to ValueChampion and working with statistics from the Government, Singapore’s average household debt stands at SGD$57,637 while the United States, which Dave Ramsey’s strategies are mainly targeted towards, stand at USD$145,000.
From these numbers, the average Singaporean household has significantly less debt compared to the average American household. Hence, the debt snowball method may not be as effective as we may not have as many small debts, unless we owe credit card debts.
The envelope method may remind us of what our grandparents did and sounds very old school, because it is. However, it will definitely help if you overspend easily, and find yourself struggling with signs of a shopping addiction.
It forces you to a “cash-only” system, so you feel the pain of spending every dollar, instead of just the usual PayWave or PayLah! – zapping away your $$$ without feeling the pinch.
#3: Retirement Planning Hacks
Retirement should be a milestone that one looks forward to. After slogging away in the office, you are finally able to bear the fruits of your labour and enjoy your silver years. However, in Singapore, retirement seems to be an event that people instead fear or try to avoid thinking about.
OCBC noted in this report, that most working adults are not ready for retirement, with 1 in 3 saying they do not invest.
According to Mercer’s rankings, Singapore is one of the most expensive cities to live in and a study by the Lee Kuan Yew School of Public Policy quotes a figure of $1,379 a month to meet basic needs in retirement. As such, the importance of planning for our retirement cannot be understated but it does not have to be so scary if we follow some basic steps.
- Figure out how much you need for the future
Arguably the most important step in planning for your retirement is to figure out the lifestyle you want + how much does it actually cost.
OCBC Financial Wellness Index gives you 3 sample lifestyles for you to estimate your costs:
- Save & Invest
The dangers of inflation mean that the value of money decreases over time with investments providing a buffer against that.
Financial Horse’s guide, How to start investing in Singapore, provides a good starting point to learn more.
The next step in retirement planning is to optimise your portfolio. One of the popular standard portfolios is the 60/40 portfolio, 60% in equities and 40% bonds.
Financial Horse’s How to build an All-Weather Portfolio in 2020 provides a good starting point to plan your portfolio.
Retirement can sometime be referred to as “The dreaded R word” but it does not have to be so scary.
Start planning now, so you can live worry-free in the future.
#4: $1,000 Project
Canna Campbell is a personal finance youtuber/personality who created the $1,000 project. The main idea is to continually save money in $1,000 blocks. The $1,000 is then invested into dividend-producing shares so that you can eventually build a sizeable passive income stream.
These are the guidelines to follow:
- Be creative in accumulating the $1,000 block
The goal is to find “extra” money in creative ways.
By packing your lunches to work, you may save an additional $50+ a week which is $200 – $300 a month.
By cycling to work, you can save transportation fees of up to $200 a month.
By picking some GrabHitch requests, you can save a little on your transportation fees.
Every little bit counts!
- Open a separate savings account
Opening a separate account allows you to keep track of your progress to each $1,000 goal easily.
You can nickname the account with “$1,000 project” to remind you of your goal.
The moment you get some “extra” income (this also means when you “save” because you choose not to do something), you have to transfer the “extra” money immediately into this specific account – so you won’t be tempted to spend it!
So for instance, if you ate at home for the weekend instead of going out, and you saved $30, you should immediately transfer that $30 into your special savings account.
- Side Hustle
Write down ideas that can help you earn money. This can most easily be done by identifying your strengths and passions and turning that into a side-hustle.
Some options for side hustles:
- Teaching Tuition (Many online agencies can match you to students)
- You can also teach Art, Abacus, Music, Dance or Languages if you have the skills.
- Grab/GoJek Driver or Food Delivery Rider
- Dog walking or Baby sitting
- Freelance work (Fiverr.com or Guidepoint or GLG for high skilled freelance work)
- This 28 year old earns over $300k a year on Fiverr
The most important step in this challenge is the investing stage. The point of this challenge is to invest the $1,000 to build a long-term passive income stream.
Of course, if you have high-interest debt, pay that off first.
For every $1,000 saved, you will invest it into high-yielding dividend stocks so that it can accumulate into a portfolio that pays you a passive income stream. Check out:
- Top 5 Singapore Dividend Stocks
- Best Singapore REITs to Invest
- Where to Invest $100,000 in Singapore Right Now?
#5: Smart Saving Hacks
These are fun hacks to help you save more and fast!
- 52-week Saving challenge
The idea is gradually increase your savings every week. Starting from:
- $1 in week 1
- $2 in week 2
- $3 in week 3
- and so on.
While the amount may seem small, by the end of the year, it totals up to $1,378 in accumulated savings.
- Weather Saving
While we may complain about the hot weather in Singapore, the high temperatures are useful beyond making us perspire.
Every Wednesday, save the amount of money equal to the highest temperature that day. So if it hits 30 degrees that day, we should save $30.
- $5 saving challenge
The idea is to save every $5 note that comes your way. You get a pretty jar of green $5 notes and a sizeable amount at the end of the year!