You will map your mental accounts and calculate what any mismatch costs you each year.
Hui Min thought her money was well organised. She had a buffer account, a wedding fund, a renovation loan she was paying down on schedule and a small pot of shares she played with. Each pot had a purpose and a rule, and she'd never missed a payment. When she drew them on one page with the interest on each, two of her rules turned out to be costing her nearly S$600 a year, and you're about to draw the same page for yourself.
Write down every place your money sits and every debt you owe. Include the obvious ones, like bank accounts and cards, and the ones that are easy to forget: e-wallet balances, fixed deposits, a savings plan, BNPL plans, a loan from a relative, investment accounts, cash at home. Note your CPF accounts too, but mark them separately, because you can't move CPF money around freely and it shouldn't be compared directly with cash.
For each pot, set up these columns: the pot's name, its balance, the interest rate it earns or charges, the interest in dollars per year, and the rule you apply to it in your own words.
Use the rates on your own statements or your bank's website. Many savings accounts pay a higher rate only if you meet conditions like crediting your salary or spending on a card, so write down the rate you actually get.
This is the step people rush, and it's where the useful material is. Write the rule as you'd say it out loud, not as you think it should be. "Never touch." "For the wedding only." "Fun money, can lose it." "Pay the minimum, it's on schedule."
If you did the activity in lesson 3.1, you already have most of these.
Go down the list and mark any pot where the rule costs money compared with another use of the same dollars. The common mismatches are a pot earning very little while a similar pot nearby earns more, savings well above your buffer while a debt charges more than those savings earn, and money labelled "safe" sitting where it earns almost nothing.
For each one, work out roughly the difference in dollars per year between what happens now and the better use. You want to know which mismatch is worth S$30 a year and which is worth S$300.
Here are her pots, with example rates.
Her salary account holds S$2,500 at 0.05%, earning about S$1 a year, under the rule "bills and daily spending". Her buffer sits in a high-interest savings account: S$25,000 at 2.5%, about S$625 a year, with the rule "never touch". Her wedding fund is S$12,000 in a basic savings account at 0.05%, about S$6 a year, under the rule "keep it separate and safe". Her renovation loan has S$8,000 left at an effective 7%, costing about S$560 a year, with the rule "on schedule, leave it". Her small-company shares, from lesson 3.2, are worth S$1,500 under the rule "house money".
She marked two mismatches.
The first was the wedding fund, where the rule "separate and safe" had never actually required a basic account. Moved to an account paying an example 2% with no lock-in, the same S$12,000 would earn about S$240 a year instead of S$6, a gain of about S$234.
The second was the renovation loan. Her buffer target, worked out in Money Foundations, is S$15,000, so S$10,000 of the buffer account is above target. Using S$8,000 of it to clear the loan would give up about S$200 a year of interest at 2.5% and save about S$560 a year of loan interest, a net gain of about S$360 a year. The buffer account would still hold S$17,000, above her target.
Together, that's about S$594 a year. The loan change is the bigger of the two. Before she acts, she needs to check one thing: some loans charge a fee for early repayment, and that fee has to come off the first year's saving.
The aim is not to tear up every mental account. Hui Min's buffer rule has kept her calm through two job changes, and keeping the wedding fund separate means she always knows where she stands, so both labels stay. What changes is where the wedding money sits, and one exception to "never touch" that lets the buffer clear expensive debt above her target.
The house money rule is different. It isn't costing interest, but it's the one rule she never actually chose, and she's added it to her list for module 6.
Build your own map in the same order, then look across the yearly costs to find the one change that would save you the most.
Build the map and write the single change that would save you the most each year.
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