Ever wonder why some people seem to just go through life without a care in the world while others worry constantly about every penny they owe? The truth is our values play a surprisingly big role in how we approach borrowing money.
Our values help guide our decisions and shape our behavior. These are things we place a high premium on—honesty, responsibility, kindness, and other similar traits. They deeply influence how we live our lives, including how we approach money management, especially borrowing.
The Role of Responsibility
Folks from many different cultures—including Singapore—value responsibility highly. Responsible people are more likely to approach borrowing with care. They carefully consider whether they can truly afford to repay the money they borrow before anything else.
People with a greater sense of responsibility understand that borrowing is a serious commitment and they strive to make consistent on-time payments, taking ownership of their debts. They do not avoid repayment or find loopholes to escape their obligations.
The Importance of Frugality
Frugality—the wise use of resources—is hailed as important in many parts of the world. Frugal people often make saving their priority and borrowing a last resort. They understand loans should be used wisely and strive to live within their means to avoid unnecessary expenses, and ultimately, getting buried in debt.
The frugal ones are also more likely to carefully compare different borrowing options to find the best possible deals that won’t leave them in a bad situation. They actively seek ways to reduce spending to minimize the chances of borrowing from a bank or a money lender, even legitimate ones. They either do that or add to their income source. The bottom line is that they are more thoughtful about managing their finances.
The Drive for Achievement
Many people are driven by ambition, which influences their borrowing decisions in several ways. Some may borrow to invest in their future, such as funding their education, starting a business, or buying assets they believe will increase their earning potential.
On the other hand, it can also lead to taking unnecessary risks. Individuals may be more willing to take on debt if they believe the potential rewards outweigh the consequences.
The Need for Security
Financial security and stability is a fundamental human need. It is one of the things many people continually chase after and stress over in life.
People who value security are likely to prioritize long-term financial planning. They exercise caution with their borrowing decisions because they know the impact on their financial well-being.
They thoughtfully evaluate their present circumstances and make calculated decisions before taking out a loan. If they find they can’t afford to make repayments on a loan or if it compromises their other financial obligations, they are most likely to avoid it. Instead, they will simply find other ways.
Why Our Values Matter When It Comes to Our Finances
Understanding how these values shape borrowing habits is essential. Take some time to reflect on what truly matters to you. Ask yourself the following questions to find out how ready you are to take on a loan:
- Are you driven by a strong sense of responsibility?
- Do you value frugality and saving?
- Are you ambitious and willing to take calculated risks?
In addition to self-reflection, you can take the following steps so your borrowing habits and values align:
Step 1: Create a Budget.
Tracking your income and expenses can help you understand your spending habits and identify areas where you can cut back. Doing this empowers you to take control of your finances and not be left at the mercy of impulsiveness.
Never underestimate the power of having a well-crafted monthly budget. It gives you healthy boundaries when it comes to managing your finances. Contrary to what you think, it doesn’t restrain you; rather, it liberates you and leads you to greater financial freedom.
Step 2: Set Realistic Financial Goals.
Whether it’s saving for a down payment on a house or paying off your student loans, having clear goals can help you stay motivated. While being ambitious can be good in certain situations, make sure that you set SMART (specific, measurable, attainable, relevant, time-bound) goals so you don’t end up being frustrated that your goalposts seem to always be far from you despite your daily progress.
Having a clear set of realistic goals allows you to take baby steps toward your objectives and feel good about yourself.
Step 3: Develop a Debt Repayment Plan.
If you have existing debt, create a sound repayment plan to settle it in the shortest time possible. Consider strategies like the snowball or avalanche method. It doesn’t have to be complex; it just has to be doable, and you need to be consistent with it.
When you draw up a plan that you’re comfortable with, stick to it. Without commitment, the chances of your plans coming to fruition are very slim.
Step 4: Practice Mindful Spending.
Before buying anything, ask yourself if it aligns with your values and financial goals. One of the most practical ways of doing this is practicing delayed gratification. This means delaying purchasing for a few days.
For instance, you see something you like unexpectedly go on sale. While the deal might seem good, ask yourself first if it’s something you truly need and want or if it’s just a psychological thing pushing you to swipe your card or check out an item from your cart. Sleep on it for a few days. Typically, the hype dies down and the excitement goes away.
Another way of being mindful of your spending is prioritizing your needs over wants. Having a list of priorities enables you to be more thoughtful with how you spend your money.
Step 5: Ask for Help.
By help, we don’t mean financial aid. If you find yourself on a downward spiral and getting neck-deep in debt, seek professional help to get yourself out of that rut. In many cases, professional counsel can help you bounce back and get you on your way to a healthy financial recovery.
