Landing a high-paying job might sound like a cure for all financial worries. However, having less free time and more money to spend can result in increased spending. In this article, we examine 7 habits that can eat your earnings and how to keep these costs manageable.
Not Booking Travel in Advance
Having a busy schedule can get in the way of planning your next trip and it can even cost you hundreds of dollars. According to our research, last minute airfare can cost more than twice as much as flights booked well in advance. This can amount to hundreds of dollars of excess costs per trip and even more on an annual basis. With that said, we strongly recommend that consumers plan their trips in advance to save money. If your schedule at work is too hectic to plan in advance, using an air miles credit card will allow you to accrue miles and other special travel privileges, which can offset the total cost of your trip.
Habitually Using Laundry Services
Wash and fold laundry services can be a great way to save time when you are busy, but they can also get expensive. We estimate that the average cost of wash and fold laundry is more than 5 times as expensive as at a self-service laundromat. Still, if you don't have the time or energy to wash your own laundry, there are ways to make these services less expensive. For example, since many services offer free delivery for large orders, it is possible to save money by scheduling your laundry and dry cleaning services so that your bill meets this minimum.
Treating Friends to Drinks
It can be a nice feeling to be able to buy your friends a round of drinks without having to think twice about the cost. However, even this small gesture can get expensive. Our research indicates that the average cost of a pint of beer in Singapore is S$11.37. Therefore, if you were to buy a beer for yourself and 3 friends every other week for a year it would cost about S$1,182. There's nothing wrong with being generous, but this is another cost that some individuals will have to consider as they develop their budget.
Accidentally Accruing Credit Card Debt
Credit cards can be a great tool for earning rewards, but can become a financial headache if used incorrectly. This is because rollover balances, or the amount left unpaid each month, accrue interest at rates annualised rates of 25-30% (in contrast, personal loans typically charge 10-12%). Therefore, even high income earners should make sure to always pay their full bill each month to reduce unnecessary credit card costs.
For those that already have credit card debt and want to get their finances in order, it is worth checking out debt consolidation plans. These loans allow borrowers to combine multiple sources existing debt into one loan that comes with a much cheaper interest rate (typically 7-9% p.a.). On the other hand, individuals that have enough funds to repay all of their debt within a few months, balance transfer loans are a good option. These loans charge higher rates than debt consolidation plans, but offer interest-free periods of up to 18 months, during which borrowers can repay their debt without incurring any additional interest costs.
Hiring Expensive Financial Advisors
As your salary grows, it is smart to look for ways to invest for the future. Many wealthy individuals enlist the help of financial advisor. While many financial advisors are capable and trustworthy, some charge exorbitant fees and a recent study found that only 47% of individuals in Singapore trust their financial advisor. Therefore, it's worth at least understanding the alternatives. First, those that have conducted thorough analysis and are skilled at investing can consider investing on their own. Others, that require some assistance, might want to check out Robo Advisors. These automated platforms invest money at a fraction of the cost of financial advisors and are accessible to individuals of all income levels.
Attending Fitness Classes
Fitness classes can be a great way to reduce stress after a long day of work. These gyms plan and coach exercises and members just need to show up. This makes these classes very popular in many major cities around the world.
However, belonging to a gym can cost a fraction of the cost of a fitness class. For example, the average monthly rate of chain fitness centres is approximately S$132.67, which means that those that work out frequently will pay much less at one of these fitness centers. Those that prefer classes can save by getting a monthly membership rather than paying per class.
Purchasing a Home in a More Expensive Neighbourhood
It's a natural feeling to want to upgrade your home once you get a new job or a raise. Many of us even consider moving to a new area. This can be very costly depending on your preferred location. For example, the median resale price of a 4-room HDB flat varies by hundreds of thousands of dollars by neighbourhood.