6 Money Mistakes Singaporeans in Their 20s Are Making

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Image of a young person looking worried about payments

Graduating from college, moving out of your family home, getting your first job, owning a credit card… These are some of the most valuable experiences that most of us journey through in our 20s. Everyone tells us that the perks of having your own money come attached with the freedom to do whatever we want with it. No pointing fingers, no disapproving nods from elders, it’s OUR MONEY.

So what happens if we make a mistake with managing that money? Or two mistakes, or a number that we can no longer keep a count of? If it’s our money, we can’t really detach ourselves from facing the consequences of our actions either, right?

Here are some money mistakes that Singaporeans in their 20s are making and the lessons learnt from those mistakes.

1. Living the life of the “working poor”

Meeting up at a club this weekend? A few drinks, a little bit of dancing – harmless, right? If you still think that, you haven’t really looked at the bill. Better yet, how much do you think you’re spending on your lifestyle? Try collecting every receipt from the bars, restaurants, clubs, cafes, etc. for a month and add up the total.

When you get your first job, it feels like you don’t need to have a care in the world anymore about saving in a piggy bank to last you the whole month. But living from payday to payday is worse. Because the one saving habit you had as a child vanishes and that’s no magic trick. You haven’t really transcended into a frugal adult but a working poor adult.

The lesson here: We’re not saying you should start making life-changing investments right off the bat, but what about opening a savings account or a fixed deposit that will give you returns with little or no risk?

Related: Living Paycheck to Paycheck? Steps to Break the Cycle and Pitfalls to Avoid

2. Spendthrifts have no budget

Image of a shopper looking amazedly at a shop window

Wait, what? There’s a sale at Zara? Of course, you want to try to outrun Usain Bolt just to get there before the sale ends. But here’s something you probably already know but need to hear regardless; sales aren’t a once-in-a-lifetime opportunity. They come and go every few months.

So, that’s no reason to throw your budget out of whack to buy the newest jacket off the rack. Didn’t you learn anything from Confessions of a Shopaholic? (And no, we’re not talking about winning the cute guy over).

The lesson here: Make a budget of everything you wish to spend on per month. You can even include your occasional impulsive shopping (let’s keep it reasonable here) and decide what is the most you’re allotting per category such as grocery, dining out, shopping, bills, etc. Make sure your budget doesn’t exceed 75% of your income after CPF deductions so you give some breathing space for emergencies.

Related: 11 Things You Shouldn’t Pay For But Probably Are

3. Student loans have been forgotten after graduation

You do realise that your college life might have ended, but that doesn’t mean your student loan payments have. In fact, many attractive student loans in Singapore require you to start making repayments after finishing your course.

So, right now, you are wondering, “If I miss a few payments or make late payments, the bank isn’t really going to take back my degree”. Oh, but they can do a lot worse. They’ll slap a late payment charge on your already not so minor payment amount.

The average interest rate on a student loan in Singapore is above 4%. And fresh graduates take home an average pay between S$3,000 and S$5,000 per month (Graduate Employment Survey, 2016).

If you’ve taken a student loan of say S$20,000 for a 5-year tenure at 4.5% p.a. that’s approx. S$350 per month just on your student loan payment. Subtract that from your rent, utilities and other expenses, it can be quite expensive as it is.

The lesson here: Student loan payments are not optional. Skipping payments, making late payments, etc. might not put your education in jeopardy but they are an easy way to dig you a debt hole.

Related: 5 Troubling Ways Millennials Are Mismanaging Their Money

4. “Winging it” instead of thinking it

What was your response to the last person who told you that they need to plan everything they’re doing? Did you call them a “siao” or having “OCD”?

Nah, they’re just those who think ahead. They know exactly what they want and they’ll never be the ones who wake up the next morning and go, “I can’t believe how much I spent last night!” They’re also the same ones who cover for you when you go out next.

The lesson here: It’s ok to “wing it” when you go out. It’s exciting to go with the flow and have your fun. But, at the same time, you should make it a habit to know how much you’re willing to spend each time you decide to go with the flow. “Lifestyle inflation” is a common phenomenon with early millennials. We want to live up to as much as our income will allow us. But the hard truth is that the only inflation we should accept is the one we have no control over.

Related: 6 Money Tips Millennials Can Learn from Their Parents

5. “Value” has no value

Image of a burger

We feel so proud of ourselves when we decide to “dine” at McDonald’s instead of Sushi Tei or Crystal Jade because we saved quite a lot at the end of the day. You might start off saving by skimping on a nutritious meal but this poisonous habit will spread to other dangerous saving hacks like buying cheap mattresses and appliances for your new flat.

These are long-term purchases that you can’t afford to skimp on. Buying an uncomfortable mattress can cause backache which you’ll later need to get checked out. Or when you buy a cheap appliance like a heavily discounted phone charger that stops working in a month, you’ll need to invest on it again to replace the defective purchase.

You’ll have to go out and make repeated purchases of the same things because you didn’t just skimp on the price here, but also on the quality.

The lesson here: Keep your heavily discounted buys and sales limited to your impulsive shopping sprees. Value quality when it comes to everyday living, down to toilet paper because no wants a rash at the end of the day.

Related: 7 Items You Should Never Skimp On, No Matter How Tight the Budget

6. Emergency fund = credit cards

When your parents ask you about your emergency funds savings, does your mind immediately throw up an image of your credit card? Yup, we’ve all been there.

But doesn’t the image of your credit card outstanding statement scare you? It definitely should. Frivolous use of credit cards does not just put your savings in jeopardy, but also your future ability to get another line of credit.

Does credit score ring any bell? This 4-digit number is enough to stop any lender from approving a future loan. Fooling around with your credit card bills will put your financial future at risk.

The lesson here: Cultivate smart credit habits such as making full payments on your credit card statements, ensuring you don’t miss payments or make late payments and use your card wisely. A credit card is not an emergency pot of gold (in this case, money). It doesn’t get you out of debt, in fact, it does the exact opposite. An emergency fund is savings that you cast aside every month from your salary for a rainy day.

Related: Here’s Why You Need an Emergency Fund and How to Get Started

The final lesson to take away here is not that everyone makes mistakes. The real lesson is that we need to learn from them so as to not repeat them in the future.

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