Due to a wide variety of factors, staying within a monthly budget has grown increasingly difficult in today’s economy. And while borrowers are grateful that they can go to a trusted money lender Singapore, it doesn’t make this kind of financial trouble any easier.
While it’s understandable to have trouble sticking to your budget, it not impossible to do so. But in order to do that, you need to first find out why you’re failing in the first place. Here are the most common reasons:
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Rising Living Costs
The cost of living has been rising steadily in the last few years, especially in big cities. Prices of housing, transportation, and other daily needs have increased, and for many, wages have stagnated. As the cost of living has continued to rise, it has become more challenging to afford essential needs without going into debt. While loans can be effective short-term solutions, changing one’s financial habits is still more beneficial in the long run.
Now is the best time to make saving a part of your financial habits. By learning how to avoid spending, you’ll find it easier to stick to your budget. To do this, the first step is to take an honest look at your expenses. List down all expenses you had in a month, whether big or small. This will give you a clear picture of where your money goes. Hopefully, by doing so, you’ll be able to spend more mindfully. This will also give you the information you need to adjust your budget and weigh out your options accordingly.
Another crucial step is to stop lifestyle creep. Avoid buying things just because you feel like your financial status has improved or simply because you saw it on social media. When you think you want something that is not part of your budget, take some time to pause and wait for at least a few days before purchasing it. This will not only give you time to reflect but also save up on it if you really want it.
Remember that the boat can sink from little holes. The small expenses that you think are negligible might be the reason why you do not have enough money for bills and living expenses. This does not mean avoiding takeout food or coffee forever; it’s just that you just need to be mindful of your spending.
Unforeseen Expenses
It’s almost impossible to have money for the unexpected, which is why borrowing has become the go-to solution to address urgent needs.
However, while loans might get you instant cash, they hardly do so for free. Interest accrues over time, and if you’re not financially stable, it can be hard to pay back that debt, as the principal and interest pile up. The more you borrow, the less financially stable you become, making it counterintuitively more difficult to adhere to a budget or invest toward long-term goals.
Easy Access to Credit
In Singapore, over the past few years, low interest rates have made the price of borrowing seem cheap. Policies such as Zero Interest Rate Policy (ZIRP), make it feel as though borrowing is near risk-free. You might be tempted to take on even more debt for things such as a new apartment, a new car, or day-to-day purchases. But have you really thought through the long-term consequences of piling on more debt?
The allure of low-interest loans is blinding, as it can make you think you can take on much debt since you can pay anyway. On top of that, the growth of digital lending has made borrowing more convenient. A few taps on your smartphone get you access to credit for both major purchases and minor, day-to-day expenses. But when it’s too easy to borrow money, there’s a tendency to overestimate your ability to pay your debt. Before you know it, your budget could be stretched beyond its limit, making it harder to afford necessary expenses and achieve financial goals.
Though credit can be valuable, it’s important to know how it will affect your immediate financial situation. Don’t take out loans for things you don’t need.
Instant Gratification
For many, borrowing money feels like the fastest way to get their wants right away. Loans and credit cards allow you to pay for things, services, and activities you otherwise wouldn’t be able to afford. But after the initial elation from those purchases fades, the pain of repayments begins. This is especially true if the expense was something you thought you can afford but turned out to be way out-of-pocket.
Regularly buying things using credit just to instantly satisfy your wants is a bad idea. This problem eats away at your ability to save, invest, and strategize for the future. What might seem like innocent spending today could lead you to have difficulty with your finances tomorrow.
So instead, be cautious about borrowing and be conservative on how much you can afford to pay using credit. Loans and revolving credit should not be for wants,
Relying Solely on Gig Economy Jobs
While gig economy and freelance work offer people more flexibility, it can certainly be challenging if it comprises all or most of your income streams. Due to the nature of their work, freelancers, part-time, and gig economy workers don’t have secure employment, which could mean irregular income. This complicates their ability to foresee and plan for living expenses.
For some of them, borrowing money can be a patch to meet their daily needs This, however, can be a problem if you don’t know when the next paycheck will be. One way for freelancers to get by during leaner weeks or even months is to save money whenever they have at least one high-paying project or multiple projects.
Conclusion
Sticking to your budget is all about exercising self-discipline and often making the best decision at a particular moment. Because while loans can be temporary financial solutions, they’re also long-term commitments that may hinder you from achieving financial independence. At the end of the day, there’s simply no alternative to being prudent with your income. Alternatively, it’s also a good idea to find ways to earn more.
