With 2019 around the corner, it's time to reflect on what you accomplished this past year and start thinking about your New Year's resolutions. However, resolutions such as learning a new skill, travelling more often, or changing your appearance often require long-term financial commitment. Coupled with a low success rate, many resolutions end up being quite costly without much to show for them. Luckily, there are resolutions you can consider adopting that will not only help you save money over the long-term and increase your well-being, but are also quite easy to accomplish. Below, we explore 4 resolutions, how they can benefit your personal finances and what you should know to stay on track in 2019.
Set Aside One Day a Week to Actively De-Stress
Stress is an almost inevitable part of everyone's life, especially in Singapore where working hours are long and daily life seems unaffordable. However, not only is it unhealthy to be stressed out for long periods of time, but stress can also wreak havoc on your finances. Chronic stress leads to heart disease, high blood pressure and mood disorders such as depression, which also often become chronic and more severe over time. So how does stress affect your finances? First, as your stress manifests into physical ailments, you'll have to visit doctors more often for serious conditions. Second, stress-induced medical conditions may lead to higher insurance premiums for life, critical illness and health insurance because you are perceived as a higher risk to insurers. In some cases, your illness may not even be covered.
Chronic stress is hard to beat, making its reduction one of the harder resolutions on this list. As stress becomes a constant state in your body, your brain's chemistry changes to adapt to this constant state of vigilance. To start, exercising can be a good way to combat chronic stress. There are many different types of gyms in Singapore so finding one within your budget shouldn't be too difficult. However, you don't even have to spend money to exercise, as long as your get your heart pumping and muscles moving. For example, you can take a walk in a park once a week or sign up for an affordable dance class with your friends.
Another cheap way to de-stress is to spend time with friends and family who can offer you emotional support. This interaction releases the chemical oxytocin, which can reduce blood pressure and stress hormones. Lastly, you should build a habit of taking slow, deep exhales the moment you notice your stress levels rising. As you exhale, your parasympathetic nervous system kicks in and helps calm your body.
Re-organise Your Finances
Instead of making a resolution to "save more", you can start by reducing and simplifying your current expenses easier and lower. This can be done in as little as one week yet can save you hundreds of dollars over the long-term. You can start by looking over your annual insurance plans, as these are usually non-committal and can be swapped quite easily. For instance, the average cost of home insurance is S$154 for a 4-room HDB flat and the average cost of car insurance is around S$753 (50% NCD, middle-aged male). If you find that you are paying more than this amount for either of these policies, you can save anywhere between S$50-S$300 per year by finding more competitive rates. However, you need to be more careful about switching your life or health insurance plans, as they are lifelong commitments that can result in monetary loss and worse coverage.
Another way to organise your finances is to take a look at your outstanding debts. Paying off your debts is a pretty popular New Year's resolution, but it can often fail because it is a long-term and frustrating process. If you are unable to completely repay your debt, focus on making your debt more manageable. For paying off long-term debt, you can find a good debt consolidation loan. These loans charge lower interest rates compared to other types of debt and can help combine high interest debts into one easy repayment option. On the other hand, you can consider a balance transfer loan if your debts can be repaid over a shorter period of time. Balance transfer loans typically offer interest-free periods of between 3 and 18 months, making them good options to save on costly interest payments as you're paying off debt. For those with a mortgage, it might be worth refinancing their home loans, which can be helpful in reducing your interest burden, especially in a rising rate environment.
Cut Down on One Vice Instead of Trying to Quit All of Them
Quitting smoking, drinking and other vices is another fairly popular resolution. However, getting rid of a habit is incredibly hard. Instead, you can consider cutting on one vice that is bleeding your wallet dry. Not completely get rid of it—that's going to lead to a broken resolution very quickly—but make a goal of slowly cutting it back. For instance, say you want to cut down on drinking alcohol. Instead of trying to quit all in one go, try to cut down the number of times you go out to bars. Instead of going out once a week, you can cut down to going out twice a month instead. This type of goal is more realistic than cutting out drinking completely and you won't feel like you're punishing yourself in the hopes you'll see considerable reward sometime in the future. Cutting down on these vices can also help you to save money. In fact, we estimate that our drinking example leads to a spending reduction of S$1,500 per year.
Estimated Annual Savings By Reducing Bar Outings By 50%
Before Saving, Aim to Reduce Unnecessary Spending
As an alternative to the ambiguous "save more" resolution, you can weave elements of minimalism into your shopping habits to combat excessive spending. Say for instance, you spend hundreds of dollars per year on skincare or clothing. It is possible that you may be purchasing multiple items that are essentially the same thing, just packaged in a different box. You should find the product that works best and stick to it. If you find yourself wasting money by buying cheap items that break easily or don't work, you can buy fewer but higher quality items. This will reduce redundant spending and you'll be more likely to value them longer due to their cost. Reducing redundancy and "junk" will at the very least teach you to be more content with what you have and reduce spending and at most lead to considerable savings in the long-term.
How to Keep Your Resolutions
It is notoriously difficult to keep New Year's resolutions—in fact, studies show that there is over a 90% chance of failure for most resolutions. Stress, lack of self-control and unavoidable obligations can make it difficult for us to consistently repeat a behavior long enough for it to develop into a habit. However, knowing a little bit about how your brain works and your limitations can make it easier for you to keep to your resolutions.
First and foremost, the part of your brain that is responsible for making sure you keep to your resolutions is your prefrontal cortex. This is the area that is most activated when you are learning something new, making decisions or doing anything that will involve a "reward". After enough repetition, this action will require less mental energy and become more or less automatic. This explains why it's so difficult to keep to your resolution in the beginning—you may feel frustrated that this new action feels so exhausting. To make it feel easier, you can try rewarding yourself each time you act on a resolution, such as treating yourself to your favourite snack after putting money into your savings account.
Second, set a realistic and specific goal. If your goal is to work out every day in the morning at 6 am, but you have never worked out before, adjust your goal to something more reasonable. For instance, you can start by working out twice a week and then increase the number of days when you feel ready. If your resolution is to read more, but you work 12 hour days and are too tired by the time you get home, you can start by reading short stories or articles. Working on smaller goals can make you feel less overwhelmed and provide you with a sense of accomplishment faster a vague goal would. To make your goals seem even more realistic, plan for them in advance. Pre-planning can help you commit to your goals and help you budget for your resolutions since you are forced to see all your expenditures up front. future.
We'd love to know, what are your New Year's resolutions? And how well did you do in 2018?