Saturday, December 31, 2016

How To Survive On A Budget While Learning A New Skill

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Re-skilling lets you develop knowledge and experience for higher-paying jobs, but you need to sacrifice time and money in the meantime. Singapore has seen a surge in the number of disruptive business models, from ride-sharing apps like Uber to do-it-yourself property sites like Oh My Home. While this is all well and good for the consumer, this has resulted in several traditional jobs being threatened. On top of this, the slump in the shipping and oil and gas sectors have left many Singaporeans retrenched. With the current economic climate, it may be wise for Singaporeans to invest time and money in re-skilling, to become qualified for more opportunities.
 
What Does Re-Skilling Mean and What Will It Cost?
To “re-skill” is to develop new knowledge and experience to get another job. It is quite different from just upgrading your existing skills. In general, re-skilling becomes necessary when the industry you work in is no longer lucrative. For example, assembly line workers are now learning construction or computer coding skills, as it is now common for robotics to replace their former jobs. It can also involve expanding the scope of a job. Many web developers are also digital marketers these days, as DIY website makers like WordPress and Wix have lessened demand for scratch-built websites. The true cost of re-skilling is not the price of the education courses or SkillsFuture courses. The cost is often time. Depending on what you are learning, you might require anywhere from weeks to three years (a typical degree course) to pick up your new skills. After that, you may still have to accept a lower salary than what you previously had, at least for a few years. You might get only entry level pay, as you would be considered inexperienced. Here’s how to manage on a tight budget while you re-skill for another job:
 
Calculate Your New Expense Ratio
Your expense ratio is the measure of your monthly bills to your monthly income. If you need to pay S$2,000 a month (for your mortgage, education loan, children’s needs, and so forth), and you earn S$5,000 per month, you have an expense ratio of 50%. Odds are, your financial situation has changed. You may be working part-time while you study, or recently retrenched. Recalculate your expense ratios against your new income. An ideal expense ratio is 30% (but this may not be possible). Still, your first step should be to cut out expenses – such as gym memberships or club fees – until you get to an expense ratio that is around 50%, If you cannot do this, you may have to consider more drastic action such as getting rid of your car. It is dangerous to have an expense ratio above 50%, as this normally means you will not have enough to save and invest on top of covering your basic needs. Note that you do not have to make drastic cuts to lower your expense ration right away; you can gradually reduce costs over the months until it reaches an acceptable level.
 
Talk to Your Financial Advisor About Revising Insurance Premiums
Given the interruption in your financial situation, you may not be able to maintain the old premiums (remember your expense ratio?). Speak to your financial advisor about reducing your premiums, rather than risk allowing your policies to lapse. Some insurance policies may allow you a “premium holiday”, or your advisor can help you switch to a more manageable plan. If you have started to work on a contract basis, such as being a freelancer, you may also want to change the payment methods for your premiums. For example, if your monthly pay fluctuates, you may want to pay a lump sum at the start of the year, thus avoiding high premiums during dry spells.
 
Record Your Daily Expenditures
You will have to be more disciplined in the coming months, and the best way to do that is to record your daily transactions. If you don’t take note of how much you spend, you won’t be able to plan accordingly. There are many personal finance apps, such as Mint and Toshl, that help you do this for free. You don’t need to keep tight tabs on your spending forever. Just do it for at least a month, in order to get a clear sense of how much (or how little) you should be spending on a daily basis.
 
Consolidate Your Debts
Get a low-interest personal loan and use it to pay off all your existing credit cards and credit lines. For example, you could get a personal instalment loan at 4% per annum, and use it to pay off your various credit cards which cost 24% per annum. After you have done this, cancel your previous credit lines. You can have them back once you have repaid your personal instalment loan in full. When asked for the loan tenure, have the bank work out how much the personal loan will cost every month. The longer the loan tenure, the more interest you ultimately pay; but the lower the monthly repayments become. So when picking the loan tenure, consider your expense ratio. Do not rush to repay the loan, and accept a monthly repayment rate that you cannot cope with. If you cannot deal with unexpected emergencies, you will just end up using more credit again, thus undoing your efforts to lower your debt. Currently, HSBC Personal Loan has one of the lowest interest rates in Singapore at 4.5% p.a. (EIR 8.5% p.a.). They also offer a loan tenor of up to 7 years, which is longer than the 5-year tenor available at most banks.
 
Spend Time With the Right Friends
Our friends influence our spending. If you hang around people who eat at pricey restaurants or go to town every weekend, you will end up spending just as much. It can be tricky dining out with friends who earn more, but the key is to limit your exposure. Don’t hang around them if you know you may be obliged to eat somewhere expensive. It can feel awkward when you have to pressure them to go somewhere cheaper, especially if they don’t enjoy it. Likewise, hobbies and lifestyle activities are infectious. When you are with people who enjoy the same things you do, be it scuba diving or golf, you will empower each other to spend on these things. The sooner you get back on your feet, the sooner you can resume your old lifestyle.
 
Do Groceries Online to Avoid Impulse Purchases
In order to save money on groceries, do not browse. Especially do not set foot in the supermarket, which is designed to cause you to spend impulsively. Instead, make your grocery list while looking inside your refrigerator, or in a quiet corner. Once the list is done, go online and order it, via sites like HonestBee or RedMart. Do not spend time browsing other products (that’s as bad as shopping). Order what’s on the list and be done with it.   

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