Train your Brain to be Money-Smart
It’s empowering when you act on tips and advice and then see the fruits of your good money-management efforts. But it can also be tedious, figuring out in a store if you’ve got the money to buy that red dress, calculating net value on a car hire contract or deciding between a holiday in Bali or the latest iPhone upgrade. Lighten your load by internalising some general behaviours vis-à-vis your money. You won’t have to think about every single penny you turn over if you make some savvy habits second nature.
Living in Singapore can be very expensive. In fact, the Economist Intelligence Unit lists Singapore as the most expensive city in the world: . So it’s crucial for Singaporeans to make smart financial decisions. Here are some psychological tricks that can help you spend less and save more.
- Spend on experiences.
To maximise your personal value of money, spend on activities that make you happy. Invest in experiential purchases that increase your own self-value like an additional educational degree, music lessons or a gym membership, as well as purchases that nurture your relationships, like a family outing. Spending on selected material items can fulfill the same purpose. For example, you can choose to buy books, a musical instrument, a treadmill or a family pet.
To help you determine whether you should spend on an experiential purchase or not, Money Smart suggests asking yourself three simple questions. Are you personally interested in this experience? Is the price reasonable? Are there cheaper ways to do it? These questions can help you make sure that a particular expenditure is worth it for you.
- Think positively.
Rather than thinking about what you need to abstain from to save your money, put a positive shine on the task and focus on all that you’ll be able to afford once you reach your financial goals. Remind yourself of the reasons why you want to save. Do you dream of purchasing your own home in two or three years? Do you hope to make a European trip next summer? Keep these aspirations in mind and you may find it easier to save more and spend less.
- Assign a working-time value to your “want” purchases.
Whenever you’re tempted to spend on something that is not on your planned shopping list, try to convert the item’s cost into the amount of time you had to work to pay for it. For example, if you are paid SGD 22 per hour, then that SGD 1100 iPad Air 2 would “cost” you 50 hours of your life. Is that iPad worth so much of your time to you? If not, then don’t buy it.
This strategy may be especially helpful for Singaporeans because a large percentage of the employees in the country are dissatisfied with their jobs. According to Today Online, 75% of 5,670 employees surveyed say they view their job merely as a way to make a living and nothing more. By thinking of how much time you need to work in order to afford the things you want to buy, you’ll put your spending into perspective and avoid spur-of-the-moment buying.
- Look at your potential losses.
On the other hand, converting an item’s cost into work-hours may not work so well if you love your job. An alternative is to look at other goodies you may potentially need to pass up if you decide to buy a non-essential item. For example, if you are tempted to buy a SGD 3000 Prada bag, then calculate how many SGD 30 meals at your favourite restaurant you would have to give up in order to pay for the bag. This can discourage you from buying non-essential items that are out of your price range.
- Try the “stranger test”.
Business Insider recommends trying the “stranger test” whenever you are about to make a purchase: . Much like the previous strategies, the “stranger test” forces your mind to focus on what is happening at the moment, and to visualise exactly how much you’re paying for that item you want. Picture a stranger holding the item you are about to buy in one hand, and the cash of its purchase price in the other hand. If you would rather take the money, then you might as well not buy the item.
- Make it a habit to track every single expense.
Another way you can train your brain to make smarter money moves is to indoctrinate yourself to jot down every expenditure you make. You can use an expense diary, or a mobile money application. Either way, the knowledge that you must account for every purchase can help dissuade you from making an impulsive spending decision.
She was nominated and selected for FORTUNE Most Powerful Women conference in 2016 (Asia) and 2015 (San Francisco, Next Gen).
Anna has 10 years of experience in the financial sector and is currently a Director in Tera Capital. Her previous work experience includes positions at Citigroup, United Overseas Bank, a regional role in Business Monitor and a boutique private equity firm based in Shanghai. She graduated from Singapore Management University (Finance and Quantitative Finance).
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