I've observed a prevalent trend among many young individuals in my social circle—they often find themselves ensnared in the paycheck-to-paycheck cycle. The escalating living costs in Hong Kong, encompassing rent, food, and transportation, contribute to this unfortunate circumstance. Young adults unintentionally become part of this cycle.
However, each life stage comes with distinct goals, and financial stability is pivotal to achieving them. This is the key to pursuing our heartfelt desires. Therefore, cultivating healthy savings habits and breaking free from the paycheck-to-paycheck cycle is a vital topic for every young adults.
The importance of saving
Emergency preparedness: Savings form the financial backbone to handle emergencies, whether it's medical bills, home repairs, or unexpected expenses. Having a nest egg reduces financial stress and brings stability to life.
Achieving dream goals: Savings can turn aspirations into reality, be it travel, further education, starting a business, or homeownership. Developing sound savings habits helps young people reach important milestones in their lives.
Coping with uncertainties: Future uncertainties like job market changes, inflation, or shifts in family dynamics can be challenging. A substantial savings cushion acts as financial support to navigate these changes, reducing stress.
Enhancing financial management skills: Savings enable young people to develop effective financial management habits, including budgeting, planning expenditures, and understanding investments. These skills contribute to long-term financial stability.
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Bid farewell to the paycheck-to-paycheck mentality
As individuals approach 25, having spent several years in the workforce and gearing up for the 30-year milestone, young adults face more intricate financial challenges. Breaking free from the paycheck-to-paycheck cycle requires shedding the consumer mentality of desiring everything.
Distinguish between 'wants' and 'needs'
When shopping, clearly differentiate between ‘wants’ and ‘needs’. ‘Wants’ are temporary impulses, while ‘needs’ are essential for life. Repeatedly asking if an item is genuinely needed can curb unnecessary spending.
Overcome the temptation of low prices
Low-priced items are tempting but can trap young adults. When chasing deals, evaluate if items are truly needed and fit within your budget. Stay rational to avoid falling for promotional tactics and gain control over spending.
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Young adults’ guide to saving: The first step to escape from living paycheck-to-paycheck
Allocate salary wisely: Divide your salary for various purposes, including living expenses, savings, and investments. This ensures every pound is spent wisely.
Deduct necessary expenses to determine savings: Deduct fixed life expenses like rent, utilities, etc., and calculate the remaining amount for savings. This builds a robust savings plan.
Maintain accounting habits for spending control: Use apps or traditional methods to record expenses, understand where the money goes and avoid unnecessary spending.
Review financial status regularly: Regularly check records to ensure proper account usage, offering insights for personal financial reviews and prompt plan adjustments.
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Money-saving tips: Employ the multi-account management method
The multi-account approach is a powerful financial strategy for efficient fund allocation and smarter savings goals. Through automatic transfers and scheduled deposits, young people achieve ‘painless saving’ without realizing it.
Clear classification: Set up different accounts for fund purposes like daily expenses, emergency reserves, and investments. This provides clarity on fund allocation, aiding orderly financial planning.
Risk control: Diversifying funds across different accounts reduces overall financial risks, ensuring safety even if issues arise in one area.
Goal achievement: Each account can be designated for a specific goal, such as short-term travel or long-term investment, aiding better understanding and accomplishment of financial goals.
Young adults should embrace 'flexibility’ in saving
In conclusion, I suggest every young person establish the habit of saving early and break free from the paycheck-to-paycheck cycle. Even saving just $100 per month can accumulate into a significant amount over the long term. By saving consistently, you gain financial freedom and more choices, making it easier to achieve life's dreams and goals.
Whether planning to live abroad, pursue further education, or explore long-term development or if your goals are not entirely clear yet, adding flexibility to your savings approach is wise. AXA's ‘FortuneXtra Savings Plan’ allows you to choose local or foreign currency as the policy currency, offering the flexibility to exercise the currency conversion option. It's ideal for young individuals who have a passion for globetrotting or even want to plan ahead for themselves and their little ones.
For more information on comprehensive protection and savings plans suitable for you and your family, please reach out to AXA’s professional financial consultants.
Watch the clip and learn more about the tips on comprehensive financial management.
All of the product contents mentioned above are subject to terms and conditions. For detailed information on the terms and conditions, as well as exclusions, please refer to the relevant product brochure and policy contract.
The above content is reviewed by Mr Daniel Lau - Head of Wealth Management Training of AXA Hong Kong and Macau.
No warranty or responsibility is assumed by AXA Hong Kong and our related or holding companies regarding non-infringement, security, accuracy, completeness, adequacy, reasonableness, fitness for a purpose or free from computer viruses in connection with the information and materials provided. AXA Hong Kong and our related companies and holding companies do not accept any liability for any loss, damage, cost or other expense, whether wholly or partially, directly or indirectly, arising from any error, inaccuracy or omission of the information and materials to the extent that such liability is not excluded by law.
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