AIDAN BAILEY reveals simple strategies for reducing debt in the year of the Tiger.

As we usher in the year of the Tiger its good to recognise the start of a new year is an opportune time to make positive life changes. With the world economy slow to show strong signs of recovery, now would be a wise time to focus on “savings”.
          The first step to increasing your savings is to spend less than you earn. Which sounds simple, but when was the last time you actually totalled your expenditure and compared your spending to your income? Chances are if you did, you’d find – more likely than not – you spend more money than you earn.
          It’s extremely difficult to change your spending habits overnight, but the following steps will manoeuvre you in the right direction for long-term success.

Get real While you may be fully aware of how much your annual salary is, remember part of it will be subtracted as part of your CPF plan and you’ll also need to set aside a portion for income tax. The amount left is your disposable income – the sum available for spending and saving. So when you’re spending, keep your disposable income in mind – not your gross income. In this way you’ll immediately stop overspending.

Face facts It’s easy to kid yourself into believing you can afford something when you can’t. The only way to nip this in the bud is to picture yourself paying cash for everything. If you can’t afford to splash out on an exotic holiday or a new sofa using cash, you shouldn’t even entertain the thought of putting such a purchase on credit. Also, don’t play “Mr/Ms Bountiful” with your mates just to impress. It’s not them who’ll have to face the bank manager about increasing your credit card limit – yet again.

Look ahead While you may have been guilty of blowing your budget in previous years, assure yourself this year will be different – because you’ve gotten smarter! And now, since you have your actual monthly or weekly income firmly in mind, you can stick to spending within your means more easily. You’ll soon realise after paying your rent, mortgage, personal loan, other bills and five percent off your credit card, just how much is left to spend or save. And if you can put away even just $50 into your bank account each month, you’ll have something to show for your efforts this time next year.

Aidan Bailey BA (Hons) CertPFS AWP^CM 
General Manager Singapore, International Division