sg-crest A Singapore Government Agency Website
Official website links end with
Secure websites use HTTPS
Look for a lock () or https:// as an added precaution. Share sensitive information only on official, secure websites.
workipedia logo white

4 minute read

Start Off the New Year With Good Money Management Habits!

Financial freedom or stability results from the steady compounding of small everyday habits. This article will share some simple habits you can adopt to improve your financial management. 

It’s a new year once again, and there’s no better time than now to set a new year’s resolution. If you have yet to decide on something or have already lost track of it, here’s an easy one to consider: Cultivate better money management habits. 

Here’s how you can get started.

1. The 4-3-2-1 approach

Budgeting is fundamental to good money management. It helps you curb overspending and have tighter control over your finances. The 4-3-2-1 approach is one simple way that you can budget your income:

40% of your income – Big ticket items are usually the reason why one would have loans, and it is nearly impossible for the average person to pay it off in a short amount of time. These include car loans, housing loans, credit card loans and education loans. The longer these are left unpaid, the bigger the amount gets due to compounding interest. Hence, a bulk of your income should be apportioned to pay off such goods. However, if you do not have loans to settle, then good news for you…you have more money to save!

30% of your income – Expenses should not exceed 30% of your income. Expenses here refer to your everyday spending on necessities and even splurging on yourself (take note not to confuse this with loans). Keeping to the 30% limit is recommended but staying below the limit is better as it means you’ll have more savings.

20% of your income – You should invest around 20% of your income on long-term financial goals such as marriage, children and retirement planning. 20% of your income may seem like a small amount as compared to your big financial goals but with the power of compounding interest, the small amount will eventually grow into a bigger pot. 

10% of your income – The remainder of your income should go to insurance coverage for yourself and your loved ones. Insurance is a powerful tool to protect yourself so don’t forget about this.

The 4-3-2-1 approach is a rough guideline for you to follow but do customise this method to better fit your financial situation. And as always, the best outcome would be to not use up 100% of your income so that you have savings in case of an emergency.

2. Distinguish needs from wants

The inability to segregate needs from wants often leads us to overspend or worse, accumulating credit card debt. Make a conscientious effort to spend on your needs first, before your wants. Another trap to beware of is spending “future money”. You should avoid spending first, with the mindset of financing this spending with an incoming salary or bonus. In times of uncertainty, especially during a pandemic, you can never be sure when your income will be cut off.

There are also instances where people mix their wants with their needs. For example, your old handbag is damaged and you need a new one for daily use. Instead of getting a regular handbag, you opt for a luxury one that costs you thousands of dollars. With that said, you should NOT feel guilty for spoiling yourself from time to time. As long as you do it within your budget, spending on your wants is completely fine. You can even plan in advance when to buy a luxury item and start saving up for it. 

3. Pay your bills and loans on time

Paying your bills and loan repayments on time is another way to manage your money wisely and it comes with great perks: avoid late fees and your loan interest accumulating. Furthermore, strong on-time payment history can lift your credit score and ultimately decrease your loan interest rates. 

Here are some suggestions you can employ to ensure timely payment:

  1. Mark down all your different payment dates on your calendar so you don’t miss out on any payments
  2. Set up a bank GIRO transfer for automatic bill payment
  3. Change all your bills/loan repayment dates to the same day to consolidate all your payments instead of making different payments on different days of the month.

Now that you know these three habits, do remember to practice them. If you need a reminder, here is a checklist for you to print out or screenshot! 

Lastly, where can I get a copy of my credit report?

As mentioned above, your credit score can increase with good payment history. To check your credit score, you can purchase a copy of your credit report or view a sample report with detailed explanation.

This article is contributed by Credit Bureau Singapore.

Related topics:

Find more jobs like these at
MyCareersFuture Job Portal