Seven (7) Essential Habits for Improving Your Financial Health Today

Small, consistent habits can have a powerful impact on our financial well-being. Positive habits can strengthen it, while negative ones can weaken it.

For example, if we don’t keep a close eye on our spending habits, such as making payments made using credit cards and digital wallets, we may not fully realise the impact on our finances and may inadvertently overextend our financial limits.

If we let bad habits persist, outstanding balances can quickly build up into debt that may be difficult to manage, potentially harming both your financial health and credit reputation.

Here are seven essential habits you can adopt today to strengthen your financial health for the long term.

1.   Make Payments in Full and On-Time

Always strive to pay off what you owe in full. If that’s not possible, aim to make at least the minimum payment allowed and do so regularly to avoid accumulating interest and late fees. Regular payments will help reduce your principal balance as much as possible by your next statement due date.

2.   Automate Payments

If you are juggling between many different credit and loan accounts, it can be difficult to keep track of all your payment dates. Consider scheduling advance payments by authorising your bank to deduct balances from your accounts automatically. This reduces the likelihood of missing due dates, ensuring timely payments for all your accounts.

3.   Use Credit Wisely

Remember that all credit card transactions are effectively on “borrowed” terms, which means that you’ll eventually have to repay in full, either with or without interest. One trick is to make a habit to check your account balances before you charge any new transactions on to your credit. However, you should always practice prudence in your spending.

4.   Manage Your Credit Limit

Adjust your credit limits to levels that you are comfortable with. You may request the bank to lower your credit limit to prevent overspending. You will be prevented from making any new transactions once you have reached your credit limit. This can help curb the urge to spend unnecessarily and reduce the reliance on paying on credit terms all the time.

5.   Pay Off High-Interest Debts First

Credit facilities with high interest rates, like credit cards and loans from licensed moneylenders, can build up very quickly, especially if you have been missing payments or only making the minimum payment each month. You will realise that future repayments are insufficient to reduce your principal debt as a large portion of your payment goes toward interest. Prioritise paying off these high-interest debts to prevent interest from overshadowing your efforts to pay down the principal balance.

6.   Track Your Spending

Start off with a simple budget sheet whereby you can closely monitor all of your spending and set clear financial goals. Split expenses into two major categories, ‘Needs’ and ‘Wants’, and keep track of all of your expenditure. You should reduce spending on your ‘Wants’ whenever cash is tight. It is also advisable to set aside an emergency fund to pay essential expenses and unexpected bills during an emergency. A good gauge is to have funds to cover at least 3 months of daily essential expenses.

7.   Monitor Your Credit Report

Your credit report is a comprehensive record of your credit payment history compiled from different retail banks, credit card providers and financial institutions in Singapore. The credit score presented in a credit report encapsulates a summary of your credit payment history compiled with other various data in your credit report.

Consider subscribing to a personal credit monitoring tool like CBS' My Credit Monitor (MCM). MCM offers the convenience of monitoring one's credit report, providing peace of mind no matter where you are. With subscription options of six (6) or twelve (12) months, along with complimentary credit reports, subscribers receive timely alerts via SMS or email for predetermined activities on their credit report. By reviewing your credit report regularly, it allows you to be aware of any information that is uploaded to your credit file and protects against possible fraudulent use of your personal details to obtain unauthorised credit.

Conclusion

This article shares seven essential habits to improve financial health, including making full or regular payments, automating payments, managing credit wisely, and prioritising high-interest debt. We cannot help but stress the importance of budgeting, tracking spending, and monitoring your credit reports to maintain long-term financial health.

Lastly, follow and like CBS Facebook and Linkedin page for more useful content and tips to maintain a good credit score or visit the CBS’ website to get a copy of your credit report.

Contributed by Credit Bureau Singapore

Published 15 November 2024.