Bad Money Habits That Are Leaving You in the Red

Do you find yourself running low on funds days or even weeks before your next payday? Spending money is so easy that it makes saving money seem hard. Taking a step back to assess your money habits can help identify and eradicate the bad ones that are causing you to have too much month at the end of your money.

Not Keeping Track of Your Spending and Expenses

Today, we spend money without even blinking an eye to the amount that we are paying. Just swipe your card or automate your payments to have fewer worries – instead, get one big surprise any time you check your bank balance. Small purchases will accumulate over time, so it’s best practice to keep track of all your spending either in writing or electronically – as long as it is an easily accessible and tangible record. This will help you plan your spending and ensure that it doesn’t get out of hand and take you by surprise at the end of the month.

Ignoring Your Budget

To successfully set a budget, you need to compare how much you earn with how much you spend. Setting a wild budget that doesn’t realistically cover your expenses will only set yourself up to fail and eventually ignore your budget completely. Firstly, set money aside to take care of your essential expenses – such as rent, transport, food – and then set aside savings for your retirement and emergency fund. From there, you can – and should – earmark a reasonable amount for the fun extras, such as the movies, shopping, or any other indulgences. Allocating for these three areas will give you a realistic budget to work with.

Relying on Your Credit Card

Credit cards are a good way to spend money, considering the merchant discounts, miles, points and rebates you earn. Many local banks even provide better interest rates to the savings account that is linked to your credit card. Despite the perks, it is important not to rely on your credit cards and overspend. If you find yourself using the credit cards to cover the last one or two weeks of the month to tide you over until the next paycheck, then we have a problem. Tapping your credit card is so easy and seamless that you accumulate debt faster than ever before. Hence, it is up to you to act quickly in your payments to avoid the high interest rates and killer late fees. There is nothing wrong with using credit cards but be sure to use them wisely.

Accumulating Excessive Debt

After you set money aside for your expenses, savings and fun extras, you need to look into your debt-to-income ratio: the ratio is achieved by dividing the total of all monthly debt payments by gross monthly income, giving you a percentage called the debt-to-income ratio. Find out how much your debt-to-income ratio is by clicking here & booking an appointment to speak with me.

Credit card bills and loans can be incredibly daunting and many of us do not want to face the truth. Dedicate some time to sort out all the debt you have – be thorough in noting down the amount, the terms of payment, and the incurred fees. Have a full understanding of the penalties if you put off paying your credit card debts or loans. Having the complete picture of your obligations will help you make wiser financial decisions.

Falling Behind on Your Payments

Falling behind on your credit card or loan payments can lead to a debt cycle that is difficult to get out of. For one thing, you are incurring late fees and other charges when you don’t make payment in time or in the minimum amount needed, hence, increasing your debt. Again, it’s daunting to look at the amount you owe every month, but fully understanding the consequences of late payments are key to kicking the bad habit. Tackle the late payments first, then address any spending, budgeting or income issues that have caused you to fall behind with your payments. Keep a reminder on your phone for important payment dates, and keep in mind the exact costs of late payments.

Not Setting Long-Term Financial Goals

Financial goals give you something to work towards. They should be attainable long-term goals such as home ownership, retirement fund, starting your own business, taking a course to upgrade your skills, or even an expensive vacation. Setting goals help you determine the necessary or unnecessary expenditures that take you further away from your desired goals.

Take time to make a financial plan to achieve these goals and review them each year so you can be sure that your spending matches your priorities. Book your appointment with me and I’ll be happy to work this out together with you.

Making Financial Decisions Out of Pressure

There may be social pressures beyond our control that affect our spending choices. It could range from purchasing a luxury item to keep up with trends and fashion, or making life decisions such as having a wedding or starting a family due to the behest of the parents.

When you feel cornered, you may not be considering all the options available to you and end up making a mistake or spending more than you should. You may not be ready to purchase big-ticket items or make life-changing decisions, so giving into pressure will not benefit you financially.

Make sure you make decisions based on your own timing, goals and needs.

Finding a good financial planner with the professional pre-requisites is not easy. Thankfully, you’re reading the blog which belongs to one.

As a certified Associate Wealth Planner gunning for her Certified Financial Planner (CFP) designation, I’m one of the youngest candidates for this prestigious recognition in the field of Financial Planning. 💪

💋 Kiss goodbye to those days of pushy insurance sales reps and arrogant know-it-none’s! Click here to book your appointment with me.

Work with what you have, and then some (more).

Plenty of us have a day job. On occasion, you chance upon this certain group of people who seem to have it all – time, happiness, money, and fulfilment in what they do. You begin to wonder why you aren’t in a similar position as they are, and how you could achieve the same.


Side note:
No matter what your circumstances are, and despite your circumstances, you have all the opportunities to become a happy and fulfilled person, too. Perhaps you’re not born with a silver spoon, served lunch on a silver platter every day, neither do you drive a fancy car, but that’s okay. Soon, you’ll realise life is more than fancy cars and houses. I’ll probably pen this down in a blog post later, for now, let’s focus on today’s topic on working with what you have, and then some (more).


Passive & Active Income: You Need Both.

When I first started freelancing at the age of 14, I honestly had no idea what personal finance was nor had I the slightest clue about financial planning and the importance of it. This led to a series of pretty stupid choices, from spending too freely and lending money too readily, ultimately destroying my financial stability. Picking myself up again wasn’t all that difficult, but it took some time getting used to.

I began to understand the kind of power time has on each and every one of us, and how it can be used to benefit or harm ourselves now and in the long run.

One of the key things I felt most strongly about was the ability to create both passive and active income streams. Perhaps this urgency is stronger due to my personal experiences and the fact that I’m a woman. Having both flexibility and a comfortable income was something incredibly important to me and thus urgent for me to establish.

Create Multiple Income Streams for Security and Wealth

Imagine losing your day job. Your family might have some emergency savings to cover for the next five to nine months. Now imagine having multiple income streams to give you the means to keep you afloat for an additional year or so, perhaps more. Neither will you nor your family feel the acute stress of having to find ways to unplug that stream of income. It will also provide much more time to clear your mind and figure out the next steps in your career, instead of jumping into just any job that would offer some semblance of an income and stability. You could even enjoy your period of unemployment and focus on building your side businesses.

Book your appointment for a financial review: https://calendly.com/cherietanjy

Having multiple income streams in today’s world is key to financial security, but for many of us, it could well be the first time you’ll have to rely on investments and business income.

Currently, I’m building out two sources of income plus my full time job as a financial planner – an education business and an online health and wellness store. I’m considering adding a few more in the next year, too.

With that, let’s explore some possible passive and active income streams you should start tapping into to grow your income and achieve more.


Side note: As I grappled with my first month in a new career, I also learnt the importance of protecting my ability to earn and my future net worth, two topics I will be sharing in future posts.


Active Income: The Definition

Active income is earned by trading your time for money. As long as you find yourself spending more than an hour or two of your time per week on it, it is considered an active income stream.

Examples:

  • A salaried full-time job, or hourly work
  • A side business or gig, commissioned income (i.e. sales), or side hustle income.

Active Income: The Definition

Active income is earned by trading your time for money. As long as you find yourself spending more than an hour or two of your time per week on it, it is considered an active income stream.

Book your appointment for a financial review: https://calendly.com/cherietanjy

Examples:

  • A salaried full-time job, or hourly work:

    There is tranquility in having a full-time, salaried job. From employer CPF contributions into your CPF account (think free money for your retirement) to a full range of medical benefits and even intangible benefits such as having coworkers to socialise with and an easier access to industry-specific networking, a full-time job always has its upsides.
  • A side business or gig, commissioned income (i.e. sales), or side hustle income:

    A side business earns you income differently than full-time workers in that not only do you pay yourself a salary, but you also get to pocket the profits, which makes it a pretty sweet deal.

    Side hustle income includes money earned from driving Grab or GoJek, freelancing in your area of specialty (e.g social media marketing) via Zomwork, or tutoring students by taking on additional tuition classes via tuition agencies such as A1 Tuition Academy.

Passive Income: The Definition

This is the sweet spot we all hope to achieve. Passive income is earned by investing either an upfront amount of time and/or money into investments, income-generating assets, and business ideas that pay you even if you’re not working.

It should be noted that no income stream is 100% passive. It simply requires significantly less amount of time to monitor and manage depending on their different levels of passivity.

For example, a savings account that pays interest needs very little monitoring, while dividend stocks require a bit more attention. A rental unit may require an hour or two of your time per month, or several hours on some days going through legal or renovation works.

Examples:

  • Dividend income
    Dividend income is turning out to be one of my favorite income streams for the ease of administering and management on day-to-day (or sometimes, month-to-month). Moreover, income from dividends is far more predictable than market fluctuations.
  • Rental income
    As mentioned earlier, rental income is one of the most passive ways to earn a side income stream without having to do very much at all on a day to day basis. However, in order to have rental income, you would need a rather significant upfront capital to purchase properties (single or jointly).

    Side note:
    Most people turn to properties in Malaysia or United Kingdom for the affordability reason. However, don’t forget currency exchange risks and the additional management fees, plus air tickets or travel expenses should you need to visit your property for legal, management, or other purposes, all of which could add up pretty quickly in the long run and requiring much more of your time! Book your appointment for a financial review: https://calendly.com/cherietanjy

  • Royalties
    Artists, writers, and musicians can earn recurring passive income from royalties paid for the work they have created. This option does require effort upfront in creating these materials (e.g: a book or music album), but the effort pays off in the long run.
    Talent, level of success, recognition, and a sprinkle of luck are needed too, in determining how well this passive income option can be for you.
  • Investment products, investment-linked products, and various savings products from financial services companies
    Many financial products out there are designed to help you earn your income (in the long run) passively. Depending on your age and financial circumstances, there are products out there that would fit your needs and take that headache off your mind.

How many income streams is too much?

My advise would be to start with one and calibrate.

There are some of us who in many cases tend to overwhelm ourselves with too many options and too many side gigs. Take some time to analyze if that income stream is working out for you. Here are some questions to ask yourself:

  1. Am I turning a decent profit?
  2. Is this impacting my mental health in a good or bad way? Can my loved ones benefit or be harmed by this effect on my mental health?
  3. Is my physical health and emotional well-being positively or negatively impacted?
  4. Am I finding both financial and emotional fulfilment with this side income stream (passive or active)?
  5. Am I on the road to burning out, or will I just need to grind this one out for a couple of months and be able to minimize efforts while maintaining the income stream?
  6. How sustainable is this income stream in the long run?

Consider also the security, flexibility, and wealth creation opportunities this income stream would provide for you.

Book your appointment for a financial review: https://calendly.com/cherietanjy

Your family and financial outlook plays a lot into your decision. It would be good to review this with your spouse and a dedicated financial planner to help ascertain your readiness for taking on another income stream and the potential outcomes.


Secret to making it work? Accountability and Persistence.

The key to creating multiple income streams are two things: accountability and persistence. This is not a get rich quick scheme. In fact, most things in life are never a get rich quick scheme.

Getting started with the right mindset and approach is paramount. If you spend too much time ruminating or waiting, you’re losing out on time something you cannot earn back.

At a minimum, explore financial products with a dedicated financial planner and perhaps open a higher interest-bearing savings account, invest $100 in a stock ETF (Exchange Traded Fund), which are perfect for beginners and those who wish to get a head start in building passive income-generating assets.

Recalibrating your mindset and kicking old habits comes next. You’ll need to actively pull your brain away from being the typical consumer. Smarter money habits help you spend less and earn more. Think constantly about creating sustainable wealth, rather than what drinks you’ll be having next Friday night and the available hangover options the morning after.

When you begin to see each dollar and cent as an opportunity, a potential building block of your wealth, you’ll start to notice how you want to hold onto more of them and keep them safe.

“Earn more, spend less, invest the surplus, protect what you have and what you will own in the future.”

Use your primary source of income (for most of us, that’s our full time job) as the main driver while you slowly build supplemental income. Exceed expectations at your day job. Celebrate the bonuses, the raises, the commissions, but don’t spend them mindlessly or piss them away (literally 🍺🍺🍺)

More importantly, focus on one income stream at a time. Build something that is sustainable and works as either passive or secondary active stream, one at a time, instead of taking on too much at one go and burning out in the end.

Lastly, keep on building, creating, reinvesting, sustaining, and protecting what you have.

Book your appointment for a financial review: https://calendly.com/cherietanjy


Book your appointment for a financial review: https://calendly.com/cherietanjy