Seven financial tips to avoid getting into debt in your 20s

By ShopBack.sg
Debt is an unnecessary stress that most Singaporeans will have to deal with throughout their lives. Yet, there has been a growing concern regarding the level of debt amongst Singaporean youths in recent years. Only 5 out of 10 millennials in Singapore, surveyed as part of the Manulife Investor Sentiment Index (MISI), believe that they are on track to achieving their financial goals – one of the lowest proportions in Asia.
As you venture into your 20s, here are some financial tips to keep you on the right track to achieving your financial goals and to avoid sinking too deep into the dreaded debt trap.
1. Abide by the “Save-Half” rule

It might not be easy to adhere to but the “Save-Half” rule is a fast and easy way to save money. A true test of your self control, the “Save-Half” rule simply requires you to save half the portion of your monthly income, whether it is your allowance from your parents, your monthly internship stipend or even income from your part-time work.
Lock it in a fixed deposit at a bank, endowment insurance plans or any other method that prevents you from touching that sum of money completely. Not only will this help you to ease your debt in future, it will also help you tide over any unforeseen emergency crises.
2. Have a (rough) budget

It is always a good idea to have a budget, even if it is just an estimated one. A rough approximation of how much you spend monthly on bills, food and other miscellaneous expenses will help you to budget your monthly income and ensure that you always have sufficient cash on hand.
3. Avoid having multiple credit cards

Sure, it might be justifiable to have credit cards for ‘emergencies’ or for enjoying additional savings and rebates. However, with credit cards comes the increased temptation to spend.
Many young adults fall into the trap of racking up hefty credit card bills, simply because the draw of using one is so high. Credit card companies are great at marketing and one can be easily drawn to the promise of extra rebates with minimum spending and no credit limits.
However, it is easy to overspend beyond your means and lose track of the minimum payments and compounding interests. The best way to avoid getting a nasty sky-high bill at the end of the month? Spend prudently or simply avoid getting a credit card!
4. Pay debts and bills on time

If you have debts and bills to pay, always ensure that they are paid on time. Often, late or missing payments lead to monetary penalties and incur high interest rates.
Avoid this by arranging for standing orders or recurring direct debits with your bank provider to ensure punctual payments on your debts and bills. Be sure to keep track when the payments are due and check that you have set aside sufficient funds.
5. Know the difference between wants and needs

Before buying that thousand-dollar bag from Prada, have a long hard think about whether you really need it. Luxury items are, well, a luxury that few can afford. They may bring fleeting happiness and instant gratification, but that hole in your pocket is likely to leave you unhappy for quite some time.
There is no need to limit yourself to a ‘bare essentials’ lifestyle, however, a $5 cup of coffee everyday adds up to quite a fair bit. Cut back on your expenditure on unnecessary items and invest in items and activities that can add value to your life.
6. Scour for discounts and promotions

Other than simply cutting back on your spending, knowing the tricks to stretching your dollar can help you save quite a bit in the long run. Keep your eyes wide open for discounts and deals, credit card rebates, and even cashback websites like ShopBack if you’re a regular online shopper.
These small savings here and there can amount to a lot in the long run, especially on recurring and necessary expenditure.
7. Take more risks and invest more in equities

As the saying goes, ‘not taking risk at all is the biggest risk’. While it has been the trend to purchase real estate for investment purposes, the prospects are no longer as bright as in the past. The changing demographics and economics in Singapore means that real estate markets are dampening and millennials must start looking for alternative investment options, and fast.
Investing in equities is one of the best ways to see your finances grow in the long term.
Your younger years should be spent enjoying the simple and fun things in life, rather than being bogged down by financial worries. However, it’s never too early to start planning your finances for future loans and expenses, and especially your retirement.
A little financial planning early on in your life goes a long way, and can ensure that you still have an enjoyable and fulfilling life in your 20s.