“Always spend within your means” is the only sure way to accumulate wealth, but not everyone can do it. Due to many pressures in life, some people have sought psychological balance in lavish spending, constantly shopping and spending with credit cards. Given time, this becomes a sickness and leads to heavy debts. Then there is the recent investment fever and those who, eager to make a quick buck, borrow money to speculate on stocks and shares. Lacking in investment knowledge and blindly following others, they buy high and sell low, winding up deep in debt.
Actually it is not hard to spend within your means. Most importantly you must be determined and you must discard your bad habits. If you run into difficulties, you must also seek counselling to find a solution to your problem. Here are some useful tips for forming good financial management habits, although their application depends on your personal financial situation.
- Always keep a cash reserve equal to six months’ salary so as to meet unexpected needs.
- Keep an account of your monthly living expenses.
- Never let your non-essential spending exceed 30% of your total spending.
- If you need to take out a loan, find out the annual interest rate, monthly flat rate and actual interest outlay. They may look very different.
- Do not let your rent / instalment payment for your home exceed 40-50% of your income.
- Stick to the habit of paying your credit card bills in full every month.
- Keep your financial and living expenses papers in systematic order, and keep them for at least three years.
- Only make self-financed investments; never invest with borrowed money.
Information source:
Family Counseling Centre for Healthy Finance, Tung Wah Group of Hospitals
More information on financial management
Make plans
- Make spending plans and stick to them. Cut down on unnecessary spending, and draw up a budget.
- Distinguish between what you need and what you desire, and abide by the principle of spending only when you should.
- Avoid having too many credit cards at the same time.
- Do not stack debt upon debt. Do not borrow from financial companies or use credit cards to repay loans.
- Repay debts on schedule, and repay in full every time.
- Follow a daily routine and lead a healthy life.
- Be realistic about accepting changes. Try to alter your living habits and cut down on your expenses, eg by moving home.
- Review the reason you are in debt, and handle the problem accordingly. Remind yourself that you must not repeat the same mistakes.
- Do not blame yourself. Draw up a plan. When necessary, take direct action to solve your problem. You need to have a clear grasp of the situation and cut your losses decisively even though it might hurt.
Information source:
Caritas Family Crisis Support Center
Financial Crisis — a short documentary on The ins and outs of financial management
Available support services in financial and debt management
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