The lack of an adequate emergency fund is a common reason why someone gets a personal loan in Singapore. When a financial storm strikes, an average Singaporean does not have enough money to get by without borrowing.
An emergency fund is intended to stay afloat in case you encounter an unexpected significant expense. It should able to support you for three to six months in the event you lose your primary source of income. In other words, it should be big enough to cover your regular financial needs for at least 90 days.
Building an emergency fund is easier said than done. Here are the reasons why some people struggle to save for it:
Frivolous Spending
Living beyond your means is not only an effective way to keep you profoundly indebted; it is also undesirable behavior. This is something many millennials inherited from their parents.
Singaporeans usually feel the strong need to show off and tell the world they have made it. There is nothing wrong about celebrating your life accomplishments; what is bad is doing it to keep up with your friends.
If you take a step back and knock some sense into yourself, you will realize that you do not have to drain your finances to feel good about yourself. It is not easy to go against the current culture, but real financial freedom starts with mindful spending.
You do not have to live a frugal life. If your budget permits you to indulge yourself in an expensive dinner every once and a while, go ahead as long as you can set aside enough money regularly in your bank account.
The point is that you should not feel pressured to branded goods constantly, nor should you have to take an overseas trip every 12 months. If you are as guilty as sin, take steps to reform yourself and be a more responsible manager of your finances.
Reckless Investing
Speaking of responsible financial management, be mindful about your investments. They are not without danger, but successful investors know how to calculate the risks.
Building your wealth passively has no shortcuts. Avoid get-rich-quick schemes because, in all probability, they are fraudulent.
Liquid investment vehicles can help you build a sufficient emergency fund more quickly. After all, they grow your money on their own. However, you should understand where you put your money in, so you can tap ample funds in case of an emergency.
Excessive Outsourcing
Do you have a habit of hiring professionals for practically everything? Learn how to DIY so that you can minimize your expenses.
The digital age makes it hard to fight the urge to pay others to do the tasks you can do yourself, but you must have a strong will. Unless you use your spare time to increase your income, outsourcing certain chores allows you to help others build their emergency funds while yours stay stagnant.
Building an emergency fund is simple but not easy. If you are struggling to increase your savings, identify what you are doing wrong. The sooner you can be honest with yourself, the faster you can put yourself on the right track towards financial freedom.
