Don’t have any emergency funds? Or perhaps, you can’t seem to save enough money no matter what you do? These are some common money problems that women face. We speak to finance experts on how you can work through these problems and better manage your money.
You know you ought to have an emergency fund, but just can’t seem to squirrel away the money for it every month.
Should an unexpected crisis occur, you’d be completely unprepared. But don’t panic.
Anna Haotanto, CEO of online financial guide The New Savvy, says the first thing to do is assess what your needs in an emergency would be and how much money you’d need for it. “Distinguish between your needs
– that is, your living expenses – and your wants,” says Anna.
Next, use a goal-based investment approach. Bhaskar Prabhakara, co-founder and CEO of WeInvest, an online wealth management platform, says, “Divide your savings goals into investment pots for each of your potential emergency expenses.”
You’ll want to save enough to cover at least six months of living expenses. This gives you a buffer to pick yourself up, especially if you’ve lost your source of income.
“Don’t make excuses for not saving, like telling yourself that you just aren’t disciplined. Make your emergency fund a priority, no matter what,” says Anna. “The anxiety and stress that come with an unforeseen crisis can be minimised by this small effort.”
If something unforeseen does happen, and you don’t have enough stowed away, the first thing you should do is approach family and friends for financial assistance. Your pride may take a beating, but this option could keep you from falling further into debt.
However, from your loved ones’ perspective, lending you money may be a big risk, so make sure you go in with a clear timeline with an action plan on how you will repay them – and stick to it. If that option fails, Anna says you might have to take a personal loan or a cashline.
Whatever you do, don’t reach for your credit card. “Credit card loans are the worst, with an interest of 24 per cent per annum,” warns Anna. Using your credit card alleviates your money troubles in the short-term, but will only exacerbate the problem in the long run.
In the meantime, find a way to earn a side income. “Be open to the option of freelancing or doing consulting work. Be prepared to work part-time as well,” says Anna.
You are living from pay cheque to pay cheque, earning just enough to pay the bills, feed the family and pay for your kids’ enrichment classes.
“Often, a person cannot save because they have little visibility of their expenses and everything seems necessary,” says Sim Weiping, a financial coach at Executive Coach International.
To turn things around, start tracking exactly where your money is going, and how much you’re spending on each item.
Cut down on indulgences you can live without. Weiping recommends this exercise: list all the items you spend on each month and identify one to remove from the list. Consider what effect removing it will have on your lifestyle. Repeat this with every item on the list until you’ve figured out which expenses you can do without.
If this process is too tedious, you may want to engage a financial advisor to help you. Bhaskar suggests using an expense analysis tool to better understand your fund outlooks and expenditure patterns so that you can allocate your money wisely. The tool also keeps track of your bank account transactions, so you see where your money is going, as well as your total in investments, loans or credit at a glance.
Another way is to simply force yourself to save, says Anna.
“Automate your savings and have 20 per cent of your income credited to a savings account you cannot debit.”
Weiping adds that you can also reduce the credit limit on your credit cards. It’s painful but effective.
After making these adjustments, you’ll be surprised to find that it is possible to make do with the remaining funds you have. Then, all that’s left for you to do is to remind yourself frequently of your ultimate goal – be it a comfortable retirement or simply having enough savings for big-ticket expenses, such as your child’s university education.
You have credit card bills stacking up and an emerging cycle of debt threatening to take over your life.
But you need the money to pay off your mortgage loans or to keep a domestic helper around. The key is to develop new healthy spending habits by re-allocating resources.
For each expense, search for cheaper substitutes, says Weiping. “For example, instead of hiring a live-in domestic helper, why not enlist the help of an on-demand part-time cleaner?” asks Anna. As for your child’s tuition classes, look for alternatives, like online classroom resources and after-school programmes.
You are someone with savings, but you’re not sure what to do with it. Why not grow that amount? Keep in mind that the following will set the basis for all your investment decisions.
Your Age. If you are young and have a good salary, you might have higher risk tolerance. In other words, you might be more willing to invest in high-growth stocks that pose a higher risk.
Your Temperament. If you feel a lot of additional stress from the high risk involved, then the investment does not suit you on an emotional level. “Investors who are under stress are more likely to make bad investment decisions,” says Anna.
Your income and spending. Review your expenses, income, assets and liabilities. “Your personal balance sheet will help determine how much you can allocate to investments each month,” says Anna.
Next, determine your risk profile, or how willing you are to take on a financial risk given your phase of life. With any kind of investment comes a certain degree of risk. Compare the expected returns of each investment to the amount of risk undertaken to figure out what you’re comfortable with.
Called the risk-to-reward ratio, divide the amount of money you’d stand to lose if the price falls by the amount of profit you expect to make when the investment is closed out, explains Anna.
If you get a low number, you don’t like risk, and vice versa. Once you know your risk profile, you can then put together an investment portfolio that works for you.
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Text: Simply Her