Resist the urge to splurge

Standard Chartered Bank

All things brand new are always so bright and irresistibly shiny. From new mobile phones to shoes, handbags, even cars. Not to mention the bragging rights you get from showing your new acquisition off to friends or family. But is it all necessary?

How many times have you stood in front of your packed closet and thinking you didn’t have a thing to wear? How many times have you driven past a shiny Mercedes and wished you could have one too? How many times have you secretly eyed your best friend’s iPhone and thought you should get one too?

WHAT’S WRONG WITH WHAT YOU ALREADY HAVE?

Your current car services you just fine, the air-conditioning works and the only thing you had to do in the last six months was send it for servicing. It’s not exactly in tatters. So, do you really need to splurge on a brand-new car? Car purchasing here is now almost as easy as going grocery shopping, where you just decide which model you want and off you go driving it out of the showroom. But what happens when the first month’s loan instalment kicks in? Do you only then realise that you couldn’t afford the monthly payment but then it’s too late?

When you are in a position where you cannot afford to be taking out a loan for anything, much less entertaining the thought of buying something new, you must take a step back and analyse where your desire to own this new item is coming from. Keep asking yourself if the purchase is justifiable and if it is really worth the hardship that you will face from trying to find ways to service the loan and pay for the purchase.

If you are in the position where you do not need to turn to a loan or a line of credit to purchase a ‘want’ item and instead have well-saved cash which you can use for this purchase instead then by all means, you may well deserve the item. But if you don’t then you will have to think otherwise.

ARE YOU REALLY FINANCIALLY FREE OR ARE YOU FREE OF FINANCIAL DEBTS?

Being financially free means you can spend as you please on whatever you desire. However, if the purchasing is done on loans and credit cards, then next question is, are you free from bad financial debts? If you have debt, what were those debts for? Were they for a good reason?

Being honest with yourself and your current financial situation can sometimes be a hard truth to face but at the same time it can also be liberating in the sense that you can finally sit down and think hard about where you want to be financially and map out the steps that you need to take to get there.

Getting out of debt is by no means an easy feat, as it takes a considerable amount of discipline and commitment to stay on course and see your plans through. However, once you have started the rewards are long term and will benefit you in the future.

You must also have a strong sense of what is good debt and bad debt. If you are taking a loan for a house, which is important as you need a roof over your head, then the debt is considered good because at the end of the day the end result is that you will have your own home.

However, even on this point, one must exercise good sense when taking out a housing loan to ensure that you have the ability to service the monthly repayment comfortably and that the house you are planning to purchase suits your budget. It is not financially viable to over-leverage on yourself to pay for a large fancy home when a smaller home would have served just as well.

Unnecessary forms of debt could refer to loans taken to purchase mobile phones, TVs, laptops – luxury or ‘want’ items as opposed to ‘need’ items. This is where a sense of balance and also understanding the difference between a ‘need’ and a ‘want’ needs to be achieved.

Needs are items that we essentially cannot live without; like food, clothes and shelter. Wants are all the other items that we would like to have but can essentially continue living if we didn’t have them.

Gaining the knowledge and the skills or sensibility to spend money wisely is not an in-born trait in people. Instead it is a trait that needs to be nurtured from young. It is also never too late to start instilling good habits of savings and moderation. The key differentiator that contributes to your success of financial freedom is simply your desire and your drive to achieve it.

This article is for general information purposes only and while the information in it is believed to be reliable, it has not been independently verified by us. You are advised to exercise your own independent judgement with the contents in this article.