4 steps to improve your financial situation

You don’t have to be a finance expert to be able to improve your financial situation. Regardless of whether you are deep in debt or are doing well financially, gaining control over your money is important. You can start with uncovering and change factually incorrect money scripts. For instance, it is often wrongly believed that loans from a money lender in Singapore have high-interest rates. Read the 5 steps that can help improve your financial situation.

Calculate your net worth and develop a personal budget

Net worth is the difference between things you own and things you owe. Calculate this by making a list of your assets and liabilities. Subtract liabilities from assets and you will arrive at your net worth. This figure keeps fluctuating, so it is important to make this calculation regularly.

Develop a personal spending plan. Prioritising expenses based on sources of your income is useful. Common sources include rents and royalties, retirement benefits, social security and so on. Find avenues to invest in case you have a surplus. Having surplus is also essential in times of financial emergency.

Accommodate potential lifestyle inflation

Lifestyle inflation is a common phenomenon. This refers to the increase in the amount of money spent with higher incomes. However, lifestyle inflation can damage your chances of building wealth in the long term. Peer pressure can make you spend all the money that you earn.

You should instead save for retirement. However, you will progress at the workplace and take on added responsibilities. Therefore, some changes in your lifestyle and a corresponding increase in your spending habits are natural.

Differentiate between needs and wants

Needs are important for survival. These include food, housing, healthcare, conveyance and clothing. Savings are also classified as a need in some cases. Even if you have money left after addressing your needs, you need not spend it all.

However, there are times when it gets difficult to differentiate between needs and wants. This can be done by considering cost-effective options. For instance, if you need a car, it is better to buy an economical one and not a luxury edition vehicle.

Save while there is time

Saving early leverages, the power of compounding. Compounding helps reinvest your earnings and thus magnify the value of your investment. Have a definite figure in mind and start early. This way, you will need to save less on a monthly basis.

Settle any unforeseen expenses by taking a small loan from a moneylender. However, do take note of the things to know before borrowing from moneylenders. Debt consolidation, too, can be done by taking a personal loan from a licensed moneylender. These lenders are not concerned with credit score and offer quick loans.