25 Oct 2024
SOURCE: CPF Board
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It’s easy to get caught up in the excitement of a great deal during the holiday season, but are you in danger of overspending?
Every purchase, no matter how small, adds up. Do make sure you plan your expenses wisely and enjoy the holidays without breaking the bank. Here are some tips to ensure you stay within budget at the end of the year.
Avoid the temptation of impulsive purchases
A joint survey by the Institute of Policy Studies (IPS) and CNA found that nearly seven in ten young Singaporeans have used a Buy Now, Pay Later (BNPL) plan, with high-income earners or those with credit cards more likely to have used at least one.
The idea of an expensive item being ‘affordable’ is an attractive one. But while it sounds (and feels) nice at first, paying for something via instalments still requires you to pay the full amount eventually. With such easy access to credit, it’s vital to budget carefully and avoid taking on future debt.
Using a BNPL plan can be risky. While it may be convenient for those with sufficient funds, it can easily lead to overspending for those without. BNPL providers also charge a penalty fee when you miss payments. That could lead to a scenario where these costs snowball, leaving you with a pile of debt.
Understand what drives your impulses
Loving to shop doesn’t mean you’re an "impulsive spender" by nature.
While you may feel like you are in charge of your purchasing decisions, there are times when things are beyond your control. Internal triggers, such as stress, boredom, and loneliness, can prompt impulsive spending as a distraction, serving as a “soothing balm” for these feelings. External triggers, like eye-catching advertisements, and social influence – be it from your friends or a celebrity – also play a role.
The brain consists of two parts: the impulsive (fast) and the analytical (slow). When the impulsive part overrides the analytical, it results in impulsive decisions. Unfortunately, you can’t switch that part of the brain off. Just like our breathing, it is a reflex.
This means we need to limit exposure to our triggers. You could avoid casually browsing retail websites, and people who are always asking you to join group deals together.
Remember, it's easier to limit exposure to the trigger than to resist it later.
However, if you find yourself giving in to impulsive spending, a simple strategy is to transfer a percentage of your monthly salary to a savings account automatically.
Be mindful about your spending
On the other hand, the analytical part of the brain requires more effort. The good news is that it leads to more rational decisions.
Start by establishing a budget for your holiday spending. For gifting, you can allocate a budget for each person on the list, include the first-choice gift idea and alternatives, and the best (most affordable) places to purchase the gift.
When you’re ready to shop, follow these steps:
- Stick to your list: Sales offers can be tempting, but sticking to your list helps prevent overspending and ensures you get what you actually need
- Compare prices: A sale doesn't always mean the best deal. Check prices at other stores or online to see if you can find a lower price
- Maximise your savings: You can combine coupons and promo codes, find deals that include perks like free shipping, or use cashback sites to get more savings
Plan first, buy later
While planning for holiday shopping, look ahead and set goals for the upcoming year. Instead of focusing only on saving for short-term needs, why not map out your goals for the future? Whether it's planning for your retirement or your home, CPF offers helpful resources:
- Home Purchase Planner: See the impact of your housing decisions on your retirement income
- Retirement Payout Planner: Set goals, create projections, and make plans to grow your CPF
You can also check out your personalised dashboards on the CPF website to access your CPF matters, along with digital services to guide your decisions.
As the year comes to an end, an important part of financial planning is to plan for your taxes. Explore ways to reduce your taxable income* by learning about tax reliefs you may qualify for, including CPF-related tax reliefs.
Find out more about CPF top-ups and other tax reliefs for working Singaporeans
*Do note that a personal income tax relief cap of $80,000 applies each year
Find your team
Don’t do this alone! Discuss your shopping (and financial) plans with family or a close friend. When others know your goals, they can offer support, guidance, and even a fresh perspective on managing your finances.
Having someone to check in with regularly can help you stay focused and motivated, keeping you accountable and committed to healthy financial habits.
With these tips, you can do your shopping with confidence, knowing you've set yourself up for a joyful holiday season and an exciting year ahead!
Information in this article is accurate as at the date of publication.
