Different people have different financial goals; hence, not everyone should follow the same money rules. However, some rules of the thumb come handy for most people. Irrespective of how much you earn and what your financial obligations are, you should save a portion of your income for the future. Financial emergencies are unpredictable, but they are a common factor in everyone’s life. Ideally, everyone should build an emergency fund to tackle unforeseen financial requirements. If that is not possible, you should borrow from a licensed moneylender rather than shelling out your savings on a financial emergency. There are some simple yet effective advices that can help you to take control of your financial future. Here are the five money rules every person should live by.
Most people confuse their wants with their needs. You need food, shelter, and clothes. But making financial decisions depending on your capability is important. You should have complete control over your wants. If you cannot afford to buy a car now, consider using public transport until you save enough or raise your income level.
If you want to buy an asset, for instance, your first house or first car, consider following the 20/4/10 rule. It says your initial down payment should be at least 20 percent of the total price. Then you should make sure your monthly repayment amount is not more than 10 percent of your monthly income. Finally, the tenure for repayment should not be more than four years.
Some sudden expenses can undo your years of savings. Get insurance covers to guard against any such possibility. For instance, you should get medical insurance, home insurance, and car insurance. Just because you have insurance policy does not mean you should make a claim at every opportunity. Not making small claims may help you use the insurance policy later for a larger expense, when you will need the assistance most.
Nowadays you can easily get a personal loan from licensed moneylenders in Singapore. This type of loan helps you deal smartly with small monetary requirements. They usually have short repayment tenure, so you are more likely to repay your loan in time. Some lenders even offer payday loan, which allows you tackle sudden expenses in the middle of a month.
The earlier you start saving for retirement, the better it is. Ideally, you should start saving from your 20s. If you retire by age 60, you get around 40 years to accumulate wealth for your retirement days. One rule of the thumb says you should save 10 percent of your income for this purpose. However, if you start late, you should save more.
Another golden money rule says you should learn how to cut your spending. Remember a penny saved is a penny earned. With a little planning, you can save hundreds simply by controlling your daily or regular expenses.