In five years, I was debt-free and had some money saved. I’d be even further ahead if I knew all of this at the start.
Do you often feel there is no money left long before the end of the month? Do you dread unexpected expenses like a medical bills, broken taps or fridge?
For a long time, I did. I was regularly surprised by the state of my bank account. I constantly juggled which bills to pay first. I maxed out my credit cards and spiraled into more and more debt.
When I was around the age of 12, Housing Development Board (HDB), the statutory board that is in charge of public housing in Singapore repossessed my parent’s flat in Jurong East as we were 9 months behind in mortgage payments as my father didn’t earn enough from his selling of scrap metals, while my wife is a housewife, with no income. Luckily, my father managed to borrow a sum of money from his brother to pay HDB and we got back our flat.
That led me to a scarcity mindset about money. There was never enough money. But on the positive side, I learned to be frugal from my parents.
Limiting Beliefs and Misconceptions About Money
If you’re thinking: “ I really have no money, there is no way I can invest anything or start planning for the future” Or, “I’m too young to worry about having money later in life”? I was the same.
I believed I would have lots of time later to bother about finances, saving, or investing. Worst of all, I thought worrying about money was for people who do not earn enough.
I learned the hard way: where money is involved, emotions are not useful.
You have to take a look at your belief systems and reassess your relationship with money.
I’m sure you’ve heard people say things like:
- You shouldn’t talk about money.
- Money can’t buy happiness.
- I can either focus on money or my passions.
- Money is the root of all evil.
These are some of the views I internalized as a child. I developed the notion that not thinking about money made me a better person.
In reality, it just makes you a poorer person.
These beliefs stopped me from taking charge of my finances and developing better spending habits for a long time.
Luckily, I came to a point where my investments vaporized – not once, but twice. First time in 2008-2009, being margin called and my shares were being liquidated (force sell) and second time for buying speculative stocks which I “felt” that the share price should be higher, a.k.a. commodity Noble Group in 2014-2015. I ended up with no money and a load of debt. I had to devise a way to get back out of the hole I had dug for myself.
This was a good thing because it made me reassess what I was doing and change the way I handled my finances.
It wasn’t big changes. I took little steps and cultivated new habits to get me on a better path.
If you’re looking for a way to regain control of your finances, I recommend starting with the following five steps. They helped me immensely on my path to financial stability.
1. Take a Close Look at Your Monthly Expenses
The first step to understanding why I was broke was understanding where my money went.
I never kept a budget, so I had no clue how much I was spending on what. I only knew about the big batches like rent or credit payments.
When I started analyzing, I was amazed to see the amount of little monthly payments draining my account.
Subscriptions to apps, NetFlix, newspapers, gym, or online small purchases can sum up to a surprisingly big lump.
If your bank or credit card issuer offers a tool to categorize payments automatically, use it. It will allow you to see into which categories your money goes very quickly. One look at my spending in 2012-2013 showed me that I spent more money car (back then) — than I paid on mortgage payments and utilities.
This is something I will have to look at more closely. It’s surprisingly easy to fall back into bad habits. Buying into consumption goods (a.k.a. online shopping), or liabilities (such as car) is one of mine.
To get more detail on what goes into each category, I tracked my expenses in an app over a couple of months. This helped me zoom in on the money-draining habits.
I logged all my expenses religiously for 2 years. Yes, it was tedious. However, I found it eye-opening to see how little expenses turned into large sums.
Snacks, coffees, bottles of water, ice cream, cinema tickets, all the little conveniences added up to hundreds of dollars.
The app I used was Spendee. It made logging my spending as convenient as possible. It’s easy to use and has predefined categories for everything. You can log into different accounts for joint account (family) and personal cash spendings.
The free version had everything I needed to get a good idea of what I was spending money on.
I’m not saying you shouldn’t splurge on yourself. I love ice cream way too much to stop buying it. But I ditched a lot of wasteful habits. i.e., I stopped buying coffee (from Starbucks) and budgeted how much I could spend on certain things per month.
“Look everywhere you can to cut a little bit from your expenses. It will all add up to a meaningful sum.” – Suze Orman
2. Buy Used Instead of New
Unlike younger me, lots of people have enough money to buy new stuff constantly. This means they need to get rid of their old stuff.
I started utilizing the huge second-hand marketplace. I went on apps like Carousell, where you can get barely used sports equipment like bicycles, toys, appliances, or furniture for a fraction of the cost or for free.
I warmly recommend using your local community through facebook groups: swapping, buying second-hand, investing a little time instead of money. Pick up stuff from someone across your blocks. Not only is it cheap, but you also get to meet a lot of lovely neighbors and people. Revive our Singaporean “Kampong spirit” of the past!
With some patience and time, you can furnish your entire flat with beautiful, free second hand furniture or toys for your children to play, completely for free. The children just outgrow their clothes and toys too fast to buy new ones.
Buying second-hand not only saves tons of money, but you’re also helping to conserve resources and protect the environment.
3. Learn How to Cook
Eating out with friends is one of my favorite activities. And take-away is super convenient after a long workday. Unfortunately, both habits contributed to a rather big amount of my spending.
I’m not willing to completely stop going out with friends. Mental health is just as important as financial health. But I know how to cook, so I ate home more regularly.
Take a look at the balance sheet. A take-away for a family of 4 from our favorite chinese restaurant costs about S$80 without drinks.
Apart from saving loads of money, cooking with my wife is a great way to wind down after a long day and spend some quality time together.
If on top of that, you and your friends replace some of the dinners out with joint dinner parties at home (which we used to do before Covid), you will be amazed at how much money is left at the end of the month.
Cook your own food. It’s cheaper, and as an added value, you know exactly what you’re putting in your body.
There are great channels on YouTube to teach you how to cook. Tasty and Kitchen Stories have apps to give you ideas and make sure you never run out of recipes.
4. Say No To Buying Borrowed Money
The short version is: Don’t spend money you don’t have. It will come back to haunt you.
Banks and credit card institutes will come to you and offer you “cheap” money. There are lots of incentives to buy things you can’t immediately afford on a payment plan. Even Courts will try to make you “treat yourself” with a splurge for yourself to buy a bigger TV or a faster computer.
The problem with living on credit is that you need a constant income stream. As long as more money is coming in than you’re spending, you’re good. If you lose your job, get ill, or if there is a pandemic (like now), your income stream can dry up abruptly.
While you can cut all kinds of individual spendings to save money, you have to keep paying off your debt at the same rate as before. If you can’t, you have to default, things will be re-appropriated, and your credit score goes bust. Or worse, you have to take on additional debt to cover for the old ones.
This is a vicious cycle leading into a deep financial hole you may never recover from. Taking on debt should be a last resort.
There are exceptions like investing in real estate.
But even if you invest in a home, take an honest look at your income. Calculate exactly how much you can pay back each month. Have a contingency plan in place for situations where your income dries up.
Use a credit card but pay it off fully every month.
Most importantly, if you have money left over, pay your debts before investing or saving. It doesn’t matter how much “cheap” money the bank wants to give you.
I found it’s so much easier to leave a job, switch careers, and say no to things you don’t want if you have no fixed installments to pay every month.
Not having debts is incredible freedom.
5. Save Some Money Every Month
I always thought there was no point in saving only S$100 because it’s such a small amount. And compared to my irrational spending, it probably was.
The thing is that saving little amounts of money every month will add up in the long run.
In combination with a healthy budget, putting away small amounts of money makes a lot of sense. Especially when you’re younger, time is on your side. Interest on the money you save will accumulate over the years.
Unfortunately, putting money in a normal savings account doesn’t make financial sense anymore. The interest rates are so low you will lose money over the years.
My recommendation is to look into ETFs that contain collections of stocks. They are a low-risk way to invest in the stock market. If you have the time and interest, the stocks will be my best bet. This is after I’ve attended Value Investing Academy (VIA) and regained my confidence in assessing the intrinsic value of public companies and investing in the good and profitable ones. No longer just pure gut feel.
ETFs are the best way to benefit from the gains possible on the stock market and diversify your risks instead of a single stock. But not all ETFs are the same and that will be another blog post and another topic on itself.
I buy ETFs on MooMoo, a trading platform by Futu Holdings (listed on NASDAQ). If you sign up now, you can get also get 1x free APPL share (worth about US$139 at the time of writing).
You can even set up a regular savings plan (RSP) that will automatically put your savings in the ETFs of your choice. The investment volume starts at S$100. There are similar apps out there that make trading ETFs affordable. Look around for the one that suits you and has the best price point.
Little Habits Accumulate and Lead to Big Changes
The biggest change I made was a mindset shift.
I acknowledged that my finances needed attention. Money is a necessity. There is nothing wrong with wanting a sustainable amount of it.
Like physical and mental health, financial health should be something that you focus on early in life. But it’s never too late. Like you can turn your lifestyle around and get fit later in life, you can start working on your financial fitness at any age.
It might need a little more effort if you’re older, just like building muscles is harder later in life, but it’ll always pay off.
For me, it took about five years. After that, I was debt-free and had some money saved. I now have a grip on how much money is going in and out of my accounts. I’m able to save money every month while enjoying my life. I’m no longer anxious about unexpected events.
Having a clear idea of your income and spending — and a financial cushion — gives you freedom. You can concentrate on and invest more energy in your other life goals.